Physical vs. Digital Gold

I reprint the free portion of this Substack post by Ted Gioia. Emphasis in bold and my comments in red. The reliance on physical products reflects the market economics of controlling the supply and thus the price and profit margins. This is what the branding industry has flourished on. Digital content (music, blogs, books, videos) are given away virtually free in order to build an audience (peer network) that one can then sell higher margin goods and services to.

This makes perfect sense, given the economics of the digital world and how it augments the physical world. This is what Google and Facebook and LinkedIn and Apple and Amazon all do. The question then is how does the individual creator build, own, control, service, and monetize their peer networks? It’s kind of like a very valuable Rolodex file.

tuka is designed exactly for this need for users to create and monetize digital data value. It’s all about the data networks and the value they represent. The online world is slowly moving in tuka‘s direction, but to decentralize value creation will still require a blockchain platform.

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Half the people buying vinyl albums don’t own record players. They treat their albums like holy relics—too precious to use and merely for display among other true believers. [Yes, but that’s collecting, not listening.]

Readers were shocked when I recently reported that statistic. I was a little stunned myself. But those are the facts.

Of course, there’s a lot about the vinyl revival that defies logic. What other business relies on a 60-year-old storage technology? That would be like running my writing career with a teletype unit and mimeograph machine.

And it’s not just vinyl. Cassette tapes—a cursed format that always unraveled at the worst possible time—are hot again. Even 8-track tapes, a longtime target of ridicule and abuse, are selling for thousands of dollars.

Why are people buying this stuff?

A new research report from Andrew Thompson at Components, released earlier today, helps us understand the bigger picture. Thompson analyzed 47,703,022 Bandcamp sales—involving almost five million items. And what he learned was startling.

Success in the music business is all about selling physical objects.

This is an unexpected situation—and runs counter to everything we’ve been told.

The Internet supposedly killed physical music media more than two decades ago. After iTunes was launched in 2001, there was no looking back. At first the music industry pivoted to digital downloads, and then everybody in the business jumped on the streaming bandwagon.

But it’s now 2023, and streaming platforms still aren’t profitable. [They never will be unless they can find a way to monetize those user networks.] However, Bandcamp is—and now we know why.

It’s all about tangible items.

Consider this chart—which looks at the correlation between revenues on Bandcamp and an artist’s reliance on physical merchandise.

Source: Components

Vinyl helps drive this. But it is only just part of a larger story. Artists can sell everything from clothing to compact discs on Bandcamp. And, of course, they can sell digital tracks too.

But the numbers make clear that physical merchandise is the smart business model.

According to Andrew Thompson:

Why is Bandcamp profitable and Spotify not? The answer we arrived at was that Bandcamp provides a simple platform for complex transactions, while Spotify is a technically complicated platform for facilitating a single transaction in the form of the one-size-fits-all subscription.

How To Fix Social Media (Facebook!)

How to Fix Social Media.

The Wall Street Journal has published a series of articles they call The Facebook Files. One article recently queried a dozen “experts” to discuss their ideas of how to fix social media. We at tuka have been focused on this challenge from the beginning, several years ago, and what these commentators reveal is a converging consensus that the problem with social media is scale and emotional triggering based on the speed of information flow. As Winston Churchill was said to quip, “A lie gets halfway around the world before the truth has a chance to get its pants on.” Social media connections have just made this pathology worse.

Our take has always been summed up with one line: A global gossip network makes no sense. So large, centralized networks of 3 billion users make no sense (i.e, FB). Social networking is person-to-person sharing based on mutual trust. So smaller newworks focused on shared interests make sense. This is what tuka is. Technology can then be harnessed to coordinate these networks in ways that reduce the siloing effect so we can all end up sharing more information based on our trusted networks. So what is needed are policies that break down the network effects of scale to open up the social media space to thousands of competitors, all focused on different community interests. Then the interactions across networks help bring us together willingly.

The other problem we at tuka have cited is the centralization and control of information networks and the immense value they create. Data is gold, and we cannot have a handful of private companies own and control the personal data users create. This is akin to giving your labor away, or slavery. The required changes are to decentralize the network using blockchain technologies so that value created can be measured and distributed accordingly to users.

Several of the experts have accurately recognized the problem and what to do about it. The better ideas have been cut and pasted below.

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Clay Shirky: Slow It Down and Make It Smaller

We know how to fix social media. We’ve always known. We were complaining about it when it got worse, so we remember what it was like when it was better. We need to make it smaller and slow it down.

The spread of social media vastly increased how many people any of us can reach with a single photo, video or bit of writing. When we look at who people connect to on social networks—mostly friends, unsurprisingly—the scale of immediate connections seems manageable. But the imperative to turn individual offerings, mostly shared with friends, into viral sensations creates an incentive for social media platforms, and especially Facebook, to amplify bits of content well beyond any friend group.

We’re all potential celebrities now, where anything we say could spread well beyond the group we said it to, an effect that the social media scholar Danah Boyd has called “context collapse.” And once we’re all potential celebrities, some people will respond to the incentives to reach that audience—hot takes, dangerous stunts, fake news, miracle cures, the whole panoply of lies and grift we now behold.

The faster content moves, the likelier it is to be borne on the winds of emotional reaction.

The inhuman scale at which the internet assembles audiences for casually produced material is made worse by the rising speed of viral content. As the behavioral economist Daniel Kahneman observed, human thinking comes in two flavors: fast and slow. Emotions are fast, and deliberation is slow.

The obvious corollary is that the faster content moves, the likelier it is to be borne on the winds of emotional reaction, with any deliberation coming after it has spread, if at all. The spread of smartphones and push notifications has created a whole ecosystem of URGENT! messages, things we are exhorted to amplify by passing them along: Like if you agree, share if you very much agree.

Social media is better, for individuals and for the social fabric, if the groups it assembles are smaller, and if the speed at which content moves through it is slower. Some of this is already happening, as people vote with their feet (well, fingers) to join various group chats, whether via SMS, Slack or Discord.

We know that scale and speed make people crazy. We’ve known this since before the web was invented. Users are increasingly aware that our largest social media platforms are harmful and that their addictive nature makes some sort of coordinated action imperative.

It’s just not clear where that action might come from. Self-regulation is ineffective, and the political arena is too polarized to agree on any such restrictions. There are only two remaining scenarios: regulation from the executive branch or a continuation of the status quo, with only minor changes. Neither of those responses is ideal, but given that even a global pandemic does not seem to have galvanized bipartisanship, it’s hard to see any other set of practical options.

Mr. Shirky is Vice Provost for Educational Technologies at New York University and the author of “Cognitive Surplus: Creativity and Generosity in a Connected Age.”

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Jaron Lanier: Topple the New Gods of Data

When we speak of social media, what are we talking about? Is it the broad idea of people connecting over the internet, keeping track of old friends, or sharing funny videos? Or is it the business model that has come to dominate those activities, as implemented by Facebook and a few other companies?

Tech companies have dominated the definition because of the phenomenon known as network effects: The more connected a system is, the more likely it is to produce winner-take-all outcomes. Facebook took all.

The domination is so great that we forget alternatives are possible. There is a wonderful new generation of researchers and critics concerned with problems like damage to teen girls and incitement of racist violence, and their work is indispensable. If all we had to talk about was the more general idea of possible forms of social media, then their work would be what’s needed to improve things.

Unfortunately, what we need to talk about is the dominant business model. This model spews out horrible incentives to make people meaner and crazier. Incentives run the world more than laws, regulations, critiques, or the ideas of researchers.

The current incentives are to “engage” people as much as possible, which means triggering the “lizard brain” and fight-or-flight responses. People have always been a little paranoid, xenophobic, racist, neurotically vain, irritable, selfish, and afraid. And yet putting people under the influence of engagement algorithms has managed to bring out even more of the worst of us.

The current incentives are to ‘engage’ people as much as possible, which means triggering the ‘lizard brain.’

Can we survive being under the ambient influence of behavior modification algorithms that make us stupider?

The business model that makes life worse is based on a particular ideology. This ideology holds that humans as we know ourselves are being replaced by something better that will be brought about by tech companies. Either we’ll become part of a giant collective organism run through algorithms, or artificial intelligence will soon be able to do most jobs, including running society, better than people. The overwhelming imperative is to create something like a universally Facebook-connected society or a giant artificial intelligence.

These “new gods” run on data, so as much data as possible must be gathered, and getting in the middle of human interactions is how you gather that data. If the process makes people crazy, that’s an acceptable price to pay.

The business model, not the algorithms, is also why people have to fear being put out of work by technology. If people were paid fairly for their contributions to algorithms and robots, then more tech would mean more jobs, but the ideology demands that people accept a creeping feeling of human obsolescence. After all, if data coming from people were valued, then it might seem like the big computation gods, like AI, were really just collaborations of people instead of new life forms. That would be a devastating blow to the tech ideology.

Facebook now proposes to change its name and to primarily pursue the “metaverse” instead of “social media,” but the only changes that fundamentally matter are in the business model, ideology, and resulting incentives.

Mr. Lanier is a computer scientist and the author, most recently, of “Ten Arguments for Deleting Your Social Media Accounts Right Now.”

Clive Thompson: Online Communities That Actually Work

Are there any digital communities that aren’t plagued by trolling, posturing and terrible behavior? Sure there are. In fact, there are quite a lot of online hubs where strangers talk all day long in a very civil fashion. But these aren’t the sites that we typically think of as social media, like Twitter, Facebook or YouTube. No, I’m thinking of the countless discussion boards and Discord servers devoted to hobbies or passions like fly fishing, cuisine, art, long-distance cycling or niche videogames.

I visit places like this pretty often in reporting on how people use digital tools, and whenever I check one out, I’m often struck by how un-toxic they are. These days, we wonder a lot about why social networks go bad. But it’s equally illuminating to ask about the ones that work well. These communities share one characteristic: They’re small. Generally they have only a few hundred members, or maybe a couple thousand if they’re really popular.

And smallness makes all the difference. First, these groups have a sense of cohesion. The members have joined specifically to talk to people with whom they share an enthusiasm. That creates a type of social glue, a context and a mutual respect that can’t exist on a highly public site like Twitter, where anyone can crash any public conversation.

Smallness makes all the difference. These groups have a sense of cohesion.

Even more important, small groups typically have people who work to keep interactions civil. Sometimes this will be the forum organizer or an active, long-term participant. They’ll greet newcomers to make them feel welcome, draw out quiet people and defuse conflict when they see it emerge. Sometimes they’ll ban serious trolls. But what’s crucial is that these key members model good behavior, illustrating by example the community’s best standards. The internet thinkers Heather Gold, Kevin Marks and Deb Schultz put a name to this: “tummeling,” after the Yiddish “tummeler,” who keeps a party going.

None of these positive elements can exist in a massive, public social network, where millions of people can barge into each other’s spaces—as they do on Twitter, Facebook, and YouTube. The single biggest problem facing social media is that our dominant networks are obsessed with scale. They want to utterly dominate their fields, so they can kill or absorb rivals and have the ad dollars to themselves. But scale breaks social relations.

Is there any way to mitigate this problem? I’ve never heard of any simple solution. Strong antitrust enforcement for the big networks would be useful, to encourage a greater array of rivals that truly compete with one another. But this likely wouldn’t fully solve the problem of scale, since many users crave scale too. Lusting after massive, global audiences, they will flock to whichever site offers the hugest. Many of the proposed remedies for social media, like increased moderation or modifications to legal liability, might help, but all leave intact the biggest problem of all: Bigness itself.

Mr. Thompson is a journalist who covers science and technology. He is the author, most recently, of “Coders: The Making of a New Tribe and the Remaking of the World.”

Does Facebook Really Make Sense?

An essay on social networks and regulation, published by Project Syndicate.

A Facelift for Facebook

One can agree with the explanation of the problem – centralized control of an increasingly valuable asset: information data. I’m not sure a real solution has been proposed yet. When I explain how platforms exploit the collection of users’ personal data for great material gain, I usually get a shoulder shrug. People still fail to appreciate that their data is as valuable as their labor, if not more so. They would not give away their labor for free, so why give away one’s valuable data for a free user page and some simple tools?

At a macro level, a social network like FB makes almost no sense, except as a data mining tool. FB thrives on little more than gossip networks and if one looks at the function of social gossip across time and cultures one realizes a global gossip network makes no sense from a human pov. All the negative effects and few of the positive. As Hill points out, Online Social Networks make sense for small assemblies of friends, families, and interest groups. This is the goal for OSNs of the future. FB “Groups” might resemble the type of content-focused social network that is valuable to users, but, of course, on FB these are exploited exclusively for FB or the administrator of the group. The users get free participation, but little of the value created. A small club of influencers is not the future of OSNs.

A digital license could impose some necessary public goods features, but for regulating audience size, the potential for abuse and centralized control probably outweighs the benefits. Better for the market to solve this problem with competition, but that will probably require some government policy that reduces or eliminates the existing natural monopolies due to network effects. (“Search” needs to be a public regulated utility, while Amazon needs to spin-off its vertical integration. I’m still of the opinion that large social networks like FB will be competed away.)

I would imagine the future would look like many social networks that are decentralized but coordinated in some way so that one doesn’t get siloed. And personal data must be under the control of users with the value of the social network created shared among them. For that one probably needs some kind of a decentralized blockchain solution. Most large, complex systems only become manageable through coordinated decentralization of control. Think representative democracy and Federalism.

Q: How Can a Musician Make Money?

Q: What do musicians do?
A: Create and share their art!
Q: How does a musician make money?
A: Money?

Hint: It’s all about the data.

Read more…

The Digital Planet

The Information Age is different in many ways. This is why digital formats have roiled physical formats across all the creative industries. We need to think outside the box.

Interesting article from an academic expert (my annotations in red):

a digital platform is either large or dead.

Why economics must go digital

neweurope.eu

Diane Coyle

One of the biggest concerns about today’s tech giants is their market power. At least outside China, Google, Facebook, and Amazon dominate online search, social media, and online retail, respectively. And yet economists have largely failed to address these concerns in a coherent way. To help governments and regulators as they struggle to address this market concentration, we must make economics itself more relevant to the digital age.

Digital markets often become highly concentrated, with one dominant firm, because larger players enjoy significant returns to scale. For example, digital platforms incur large upfront development costs but benefit from low marginal costs once the software is written. They gain from network effects, whereby the more users a platform has, the more all users benefit. And data generation plays a self-reinforcing role: more data improves the service, which brings in more users, which generates more data. To put it bluntly, a digital platform is either large or dead.

As several recent reports (including one to which I contributed) have pointed out, the digital economy poses a problem for competition policy. Competition is vital for boosting productivity and long-term growth because it drives out inefficient producers and stimulates innovation. Yet how can this happen when there are such dominant players?

Today’s digital behemoths provide services that people want: one recent study estimated that consumers value online search alone at a level equivalent to about half of US median income. Economists, therefore, need to update their toolkit. Rather than assessing likely short-term trends in specific digital markets, they need to be able to estimate the potential long-term costs implied by the inability of a new rival with better technology or service to unseat the incumbent platform.

This is no easy task because there is no standard methodology for estimating uncertain, non-linear futures. Economists even disagree on how to measure static consumer valuations of free digital goods such as online search and social media. And although the idea that competition operates dynamically through firms entering and exiting the market dates back at least to Joseph Schumpeter, the standard approach is still to look at competition among similar companies producing similar goods at a point in time.

The characteristics of digital technology pose a fundamental challenge to the entire discipline. As I pointed out more than 20 years ago, the digital economy is “weightless.” Moreover, many digital goods are non-rival “public goods”: you can use software code without stopping others from doing so, whereas only one person can wear the same pair of shoes. And they require a substantial degree of trust to have any value: we need to experience them to know whether they work, and social influence is often crucial to their diffusion.

Yet standard economics generally assumes none of these things. Economists will bridle at this statement, rightly pointing to models that accommodate some features of the digital economy. But economists’ benchmark mental world – particularly their instinctive framework for thinking about public policy questions – is one where competition is static, preferences are fixed and individual, rival goods are the norm, and so on.

Starting from there leads inexorably to presuming the “free market” paradigm. As any applied economist knows, this paradigm is named for a mythical entity. But this knowledge somehow does not give rise to an alternative presumption, say, that governments should supply certain products.

This instinct may be changing. One straw in the wind is the call by Jim O’Neill, a former Goldman Sachs economist who now heads the Royal Institute of International Affairs (Chatham House), for public research and production of new antibiotics. Having led a review of the spread of anti-microbial resistance – which will kill millions of people if new drugs are not discovered – O’Neill is dismayed by the lack of progress made by private pharmaceutical companies.

Drug discovery is an information industry, and information is a non-rival public good which the private sector, not surprisingly, is under-supplying. [Yes – this is what intellectual property rights/copyrights/patents is all about. The problem is attributing the value created by the sharing of information. We may be able to solve that with blockchain ledgers.] That conclusion is not remotely outlandish in terms of economic analysis. And yet the idea of nationalizing part of the pharmaceutical industry is outlandish from the perspective of the prevailing economic-policy paradigm.

Or consider the issue of data, which has lately greatly exercised policymakers. Should data collection by digital firms be further regulated? Should individuals be paid for providing personal data? [Yes, they should. Personal data is as proprietary as personal labor and personal ideas. Making sure users get paid for their data changes the business models of these natural monopolies.] And if a sensor in smart-city environment records that I walk past it, is that my data, too? The standard economic framework of individual choices made independently of one another, with no externalities, and monetary exchange for the transfer of private property, offers no help in answering these questions. [Yes, because we don’t yet assign value to shared information. We rely on the property rights of tangible assets.] 

Economic researchers are not blameless when it comes to inadequate policy decisions. We teach economics to people who go out into the world of policy and business, and our research shapes the broader intellectual climate. The onus now is on academics to establish a benchmark approach to the digital economy and to create a set of applied methods and tools that legislators, competition authorities, and other regulators can use.

Mainstream economics has largely failed to keep up with the rapid pace of digital transformation, and it is struggling to find practical ways to address the growing power of dominant tech companies. If the discipline wants to remain relevant, then it must rethink some of its basic assumptions.

Data Land Grab

FB-vs-Google

‘Good for the world’? Facebook emails reveal what really drives the site

As we can read from this article and Facebook’s internal management debates, Web 2.0 (of which the GAFA companies are the archetypes) is built on a data land grab. It’s rather similar to the actual land grab that the European powers battled over for the New World, then with the colonization of Africa and Asia.

Data is now a valuable resource that has been priced up there with land and capital. Naturally, the tech oligopolies and their startup wannabes all want to grab as much as possible. And who are they grabbing it from? The network users of course.

Web 3.0 is all about democratizing the value and monetization of personal networked data. It’s about decentralized ownership and control, much like the desire to own and control the fruits of one’s labor that ended slavery. Web 3.0 is the future, because Web 2.0 is unsustainable.

 

Data Privacy

facebook lobby

Good, thorough, and l-o-o-o-o-ng article on data privacy issues, legislation, and network value. From the NYT Magazine. Read about what’s being done to you behind closed doors…

The Unlikely Activists Who Took On Silicon Valley — and Won

Some excerpts:

Almost by accident, though, Mactaggart had thrust himself into the greatest resource grab of the 21st century. To Silicon Valley, personal information had become a kind of limitless natural deposit, formed in the digital ether by ordinary people as they browsed, used apps and messaged their friends. Like the oil barons before them, they had collected and refined that resource to build some of the most valuable companies in the world, including Facebook and Google, an emerging duopoly that today controls more than half of the worldwide market in online advertising. But the entire business model — what the philosopher and business theorist Shoshana Zuboff calls “surveillance capitalism” — rests on untrammeled access to your personal data. The tech industry didn’t want to give up its powers of surveillance. It wanted to entrench them. And as Mactaggart would soon learn, Silicon Valley almost always got what it wanted.

Through the Obama years, the tech industry enjoyed extraordinary cachet in Washington, not only among Republicans but also among Democrats. Partnering with Silicon Valley allowed Democrats to position themselves as pro-business and forward-thinking. The tech industry was both an American economic success story and a political ally to Democrats on issues like immigration. Google enjoyed particularly close ties to the Obama administration: Dozens of Google alumni would serve in the White House or elsewhere in the administration, and by one estimate Google representatives visited the White House an average of about once a week.

Mactaggart … faced an American political establishment that saw the key to its future in companies like Google and Facebook — not because of whom they supported but because of what they did. The surveillance capitalists didn’t just sell more deodorant; they had built one of the most powerful tools ever invented for winning elections. Roughly the same suite of technologies helped elect Obama, a pragmatic liberal who promised racial progress and a benevolent globalism, and Trump, a strident nationalist who adeptly employs social media to stoke racial panic and has set out to demolish the American-led world order.

In the end, not a single lawmaker in either chamber voted against the compromise.

Political power is a malleable thing, … an elaborate calculation of artifice and argument, votes and money. People and institutions — in politics, in Silicon Valley — can seem all-powerful right up to the moment they are not. And sometimes, … a thing that can’t possibly happen suddenly becomes a thing that cannot be stopped.

The promise of blockchain is to disrupt this Monopoly game.

The Creators Case for Blockchain

Social Media Connection

Nice article on Medium:

A Poet’s Case for Blockchain

I would add that the major problems for artists in the digital age stem from the explosion of new supply of content. This drives the price down and the search costs of discovery up. The failure then becomes that artists can’t find their audiences and consumers can’t find the content they desire. For poets this means finding an audience not necessarily to sell poetry; rather more important is to find readers and appreciators of their poetry.

Large centralized network servers based on algorithms can’t solve this problem without commoditizing content and delivering the most popular but mundane content churned out by those metrics.

We need to empower the human by connecting the creative.

OSN Heart