Snippets 2, Episode 8
|Jun 9|| 8|
Hello everyone! I have some exiting news that I’ve hinted to some of you for the past few months. It is…
First: I am writing a book. The book will be called Scarcity in the Software Century, and if you’ve enjoyed subscribing to Snippets or reading alexdanco.com then I think you’re going to like it. It’s my attempt to articulate a complete thought about software, the internet, that innovation economy, and how they’ve changed how we build the future - and, as the book explores, the nature of scarcity itself.
Second: I don’t want this book-writing process to be a solitary affair. I want you to participate! This book-writing process is an opportunity to create something sort of new: a “fun size social network”. Here’s what I mean:
Starting in the next few weeks (timing depending - we’re expecting our first kid very soon!), I’m going to start serially publishing the first draft of the book, chapter by chapter, once a week. This will be in addition to the regular Snippets newsletter; those will still continue on like normal.
You can subscribe here:
or, if it’s easier to remember, ScarcityInTheSoftwareCentury.com.
Then, we’ll get to talk about it! With each chapter we’ll have a Community Discussion forum, powered by Substack, where we can talk as a group, between me, anyone helping to edit, and all of you as readers, how to make the book even better. What works? What could be better? What examples could we add? What people would be good to talk to? I’ll obviously do the work of actually writing the book, I’m not outsourcing that. But I do think we’ll be able to do a great job as a group in figuring out how to take it from good to great. I also have a few additional partnerships in mind that hopefully I’ll get to share in the coming weeks.
In addition to the discussion forum, I will set up a Google Sheet where we can figure out and facilitate who would be good people to talk to for this book. There are a lot of people who aren’t in my network I’d love to reach out and interview as a part of writing, and I’m sure many of them are in yours. I think we can have a fun time coordinating this together.
Finally, I have a hunch here that there’s an opportunity to create something special: a new kind of small-sized social network that’s bigger and more structured than a group chat, but smaller and more intimate than Twitter. If we get a critical mass of people to join, I think we could have something really fun going. I’d love to schedule a few in-person meetups a year, for instance, and I’m open to any suggestions of what might be fun for this group together. I suspect everyone who reads this newsletter has a lot to talk about with each other!
Now here’s the ask: I’m setting it as a paid subscription, $10 a month or $80 for the year. I’m setting it as paid rather than free for a few reasons. First of all, I’ll have some expenses writing this (hiring an editor, for instance, plus I’ll have a kid to feed soon). Second, I don’t want this to be a completely open group. For one, I don’t want it to become a free for all where I have to spend my time admin moderating; second of all, it’s good to ask for a bit of commitment on the part of anyone who wants to help out and participate. Regular Snippets will remain free, of course, as promised. I’ll also make sure that anyone who subscribes from the early days will get a signed copy of the finished book plus your name in the Thank Yous.
So, what’s this book about? Here is the synopsis, along with a week-by-week idea of how I’d like to write it.
Scarcity in the Software Century
Silicon Valley’s great landgrab to reinvent scarcity and own the new economy
Since the beginning of human history, our world has revolved around scarcity: the constraints, frictions, and limiting resources that hold us back, and which we strive to overcome. We beat scarcity with technology: occasionally through isolated heroic genius or carefully coordinated national effort, but mostly through a complicated emergent collective of people, technology, capital and momentum that we call the innovation economy.
The innovation economy is the “machine that makes the machine” when it comes to building the future. There’s a funny paradox to the innovation economy, which is that it does two things simultaneously to the world’s friction and scarcity. On the one hand, by trial and error, we progressively conquer scarcity with innovative technology that helps us do more with less. But on the other hand, entrepreneurial capitalism is all about creating new kinds of scarcity that earn you money. The people who successfully build the future can become the richest of all by creating and owning access to a new kind of emergent scarcity. Think how a hundred years ago the railroads and the telegraph eliminated so much friction associated with distance, but then in turn created new kinds of scarcity like network access that made their owners wealthy.
In essence, the “future building machine” of the innovation economy is the unpredictable but unstoppable execution of an arbitrage opportunity between yesterday’s scarcity and tomorrow’s. People see a window of opportunity open up, and they move to take advantage. Everybody approaches this arbitrage in their own way: some invent; some invest; some write laws, some run scams. It is quintessential capitalism, warts and all, and it works.
The world’s innovation economy has jerked forward in fits and starts over the last few centuries, as we’ve been pulled through progressive cycles of scarcity to abundance, with new scarcity emerging in its wake: around communication, transportation, energy, materials, and other transformations. But then software and the internet happened. And they introduced something new to the world’s innovation economy that we haven’t quite learned how to articulate yet. We've upgraded the machine that builds the machine, and transformed our relationship with scarcity itself.
Software is different from other technologies. Software itself does not do anything; it is not a literally productive technology like the wheel or the steam engine or even the printing press. It’s more like finance: a layer that wraps itself around everything that already exists in the world, grants it superpowers in exchange for its dependence, and then governs it thereafter.
Software is a bit of a Devil’s Bargain. On the one hand, software-powered tools and resources can accomplish incredible things that were never before possible, using only the magic of freely copyable information and logic. Software really is the ultimate form of technology empowering us to do more with less, and it’s done some pretty incredible things for people around the world by democratizing these superpowers.
The danger is that software makes itself essential. It increasingly governs our access to our world, and our world’s access to us. “Software is eating the world,” and it’s creating conflict zones:
-The Gig Economy: If software gives you income-earning powers, is it your boss? What are your rights to employment and ownership of your work?
-Property Rights: Do we really have ownership over our own possessions if we don’t own the software they depend on?
-Permissionless Innovation: Can the “long tail of innovation”, especially in developing countries, continue to flourish in a world of hardware that’s useless without the proprietary software it depends on?
-Net Neutrality: In developed and especially in developing countries, how are internet providers selectively shaping our access to the world?
-Privacy: What information is open to the world, what information should be closed to the world, and how do we keep the two separate?
-Security: How to we make sure that other people don’t have access to us in ways we don’t want? Are we safer trusting third parties to do this for us?
-Cryptocurrency: What are the true benefits and costs of cryptographically secure digital scarcity? How will people use this?
All of these questions are fundamentally about access, and there’s a common thread between them all that reveals something important about software and what it’s doing to the world. Technology used to increase our access to scarce resources; in a software world, access itself is the scarce resource. Everything becomes dependent on the software that governs its access, as if a railroad became dependent on the tickets we bought to ride it. This may seem like a nonsensical example, but I assure you it’s not: try starting your phone without the software that controls it; or, for that matter, try starting your car without the software that controls your ignition and your engine. I’ll bet you can’t.
Software is eating the world, and it is transforming our economy into an access economy. As in innovation eras past, the modern tech industry recognizes the enormous arbitrage potential between yesterday’s scarcity and tomorrow’s. We’ve codified this arbitrage in the Silicon Valley playbook: rearrange the world’s industries and ecosystems with software, grind away all of the existing friction, and then recreate that friction in a new form of digital scarcity that’s poorly understood and poorly regulated. The future that’s getting built today is our collective execution of this opportunity: it’s an enormous landgrab to redefine and own the nature of scarcity itself, headquartered in California. Don’t get me wrong, it’s productive - it’s creating incredible new superpowers and opportunities for people everywhere - but it’s definitely a land grab.
This is not a new realization, of course. Ever since the beginning of software, people have fought bitterly over these questions around access and scarcity: what does it mean to own software? What are our rights as owners and users? What does it mean for digital access to be scarce? The arguments we’ve had since the 70s over information, copyright and digital serfdom have recently become a lot less theoretical. The future of scarcity is already here; it’s just unevenly distributed, but not for long. If we’re going to get it right, which we’d better, then the first step is understanding this new innovation economy: the new machine that builds the machine.
The good news is that there are steps we can take to get the future right. There is such a thing as “good software” that is overwhelmingly net beneficial to the world; it shares a few common characteristics we can seek out and demand from our products and our leaders. Software and the internet are creating paths to prosperity for more people on our planet than ever before, and the innovation economy remains by far our best shot at solving challenges like climate change and health care. We need to choose technology that frees us from scarcity, rather than traps us in it. This book will show you how to look for it.
I’ve parcelled out writing this book week by week over a year. I probably won’t stick to this schedule exactly; I may skip some weeks or double up on others to fit with reading, interview schedules, and life with a newborn. But this should give you a general sense of how I’ve paced the topics in here.
Part 1: The Innovation Economy, and the quest to conquer scarcity
Week 1. What is scarcity? Harnessing scarcity through entrepreneurial capitalism
Week 2. More with Less: moving from scarcity to abundance with technology
Week 3. Consumption: as friction goes away, our consumer behaviour changes meaningfully
Week 4. Emergent scarcity: positional goods, relative scarcity, brands, distribution, and the business of fashion
Week 5. Permissionless Innovation: the long tail of ingenuity as old technology gets repurposed around new scarcity
Week 6. Intellectual property: can ideas have value? Or is the value only in their expression?
Week 7. Exploratory inefficiency: building the future by trial and error, and error, and error
Week 8. The Innovation Economy has three distinct arbitrage phases: speculative, application, and repurpose arbitrage
Week 9. Entrepreneurship: Schumpeter & the entrepreneur as focal point between capital and customers
Week 10. Default Dead: the challenge of rationally financing entrepreneurial endeavours
Week 11. Why Bubbles can be Useful: Bubbles as environments of excess credibility and unlocked capital
Week 12. Bubbles, Part 2: historical bubbles and the innovation economy.
Week 13. The entrepreneurial state: the government as funder of first resort and lender of last resort
Week 14. The Innovation Economy as a System: Carlota Perez & cycles of innovation, finance, scarcity and abundance, and new scarcity.
Week 15. More examples of the Innovation Economy as an arbitrage system: from speculation to application to repurpose
Part 2: Software and the redefinition of scarcity
Week 16. What is software? Abstractions as the fundamental innovation of computer science
Week 17. Abstractions, Part 2. Moore’s Law and the virtuous cycle of abstractions creating abundance
Week 18. Software is Access: the Devil’s Bargain we make when things become “smart"
Week 19. Early funding: the DoD, Bell Labs, and how the government funded the birth of the digital era
Week 20. California: how Silicon Valley and the Bay Area understood the new scarcity before anyone else
Week 21. Property rights in a world of reproducible bits: can ideas really be scarce?
Week 22. What should software cost? "Selling wine without bottles” and the problem of free versus costly ideas.
Week 23. Open Source Software: the community ethos of abundance, and The Cathedral and the Bazaar
Week 24. Venture capital: betting on wild ideas, differentiated teams, and the unbounded upside of "zero marginal cost".
Week 25. The Internet: frictionless distribution. What does scarcity mean on the internet?
Week 26. 1999: the bubble that built the internet.
Week 27. The founding murder of Silicon Valley: The dot com crash as the moment that founded the “modern" tech industry
Part 3: Silicon Valley and the landgrab for the new scarcity
Week 28. Reinventing Scarcity, part 1. Software and the new Access Economy. Digital scarcity as a verb, instead of a noun.
Week 29. Reinventing Scarcity, part 2. The customer as renter, not owner, of the product. Rethinking economic scarcity away from (Revenue - Cost) and (ROIC - CoC) and towards (LTV - CAC).
Week 30. The three business models of the internet: advertising, subscriptions, and shared value transactions. The “securitization of access to the user"
Week 31. The Virtuous Cycle of software platform ecosystems: they’ll rapidly become cheaper and better than anything else, and outcompete everything else
Week 32. Supernetworks and the Everything-as-a-Service Economy
Week 33. Modern Venture Capital: credibility as a service
Week 34. Modern Venture Capital, part 2: capital, dilution, and the economics of “grand slam or nothing”
Week 35. The Founder-Industrial Complex. The death of the “inventor” and the rise of the “founder”.
Week 36. Silicon Valley and conformity: startups as loosely organized, interchangeable hunting packs built to seize the moment
Week 37. Growth: redefining the startup as first and foremost a Growth Engine
Week 38. The Red Queen’s Race: the accelerating treadmill of user acquisition and platform tax
Week 39. Softbank, Uber, and Silicon Valley as a multi-decade arbitrage between old scarcity and new
Part 4: The Future of scarcity
Week 40. “Digital Enclosure”: Platformization and battle between open versus closed. Facebook learns Microsoft’s lessons.
Week 41. The Gig Economy: the future of work behind the API
Week 42. Smart Cities, IoT, tech as public infrastructure, and “as-a-service” essential services
Week 43. Leapfrogging: developing countries going digital-first as they build modern infrastructure
Week 44. The day 1984 went missing: right-to-repair, digital censorship, the DMCA and the new politics of digital scarcity
Week 45. Trusted third parties are security holes, but so are you: hacking and security in a world of digital renting
Week 46. Crypto, Part 1. The origins of Bitcoin and the crypto community.
Week 47. Crypto, Part 2. ICO Summer: a perfect hallucination around a future that was almost right, but not quite
Week 48. Crypto, Part 3. Open Source State and the future of internet platforms
Week 49. AI as a transformative technological step, or a continuation of what’s already happening?
Week 50. The politics of digital scarcity: tech doesn’t conform to the usual political sides
Week 51. “The Medium is the Message”: Marshall McLuhan, revisited
Conclusion: The future of scarcity is here, it’s just unevenly distributed. (But not for long)
Conclusion, part 2: Getting the new Innovation Economy right: if we want to get the future right, we need to understand the machine that’s making the future, and appreciate the Good Software that’s improving the world and empowering its people.
So, that’s the plan! I’d love to have as many of you on board as possible. If you subscribe, please invite a few friends too; not just because I’d like the extra subscription but also because it’ll make for a real community with some critical mass. If you have any questions, email me. I’d love to hear from you about how we can make this great.
Have a great week! I’m excited for what’s to come and I hope you are too.