The Founders’ List: “Status as a Service (StaaS)” by Eugene Wei (Former Product Leader at Amazon, Hulu, Flipboard, Oculus)

This is Kristen O'Brien, Managing Editor at NFX, and this is the founder list. Audible versions of essays from technology's most important leaders selected by the founder community. This is status as a service written by Eugene Way, former product at Amazon, Hulu, Flipboard, and Oculus. Red by NSX. Status seeking monkeys. It is a truth universally acknowledged that a person in possession of little fortune must be in want of more social capital.

So wrote Jane Austin, or she would've, I think, if she were chronicling our current age, Instead, we have Taylor Lawrence, and thank goodness for that. Let's begin with 2 principles. People are status seeking monkeys and people seek out the most efficient path to maximizing social capital. Status seeking monkeys will also be the name of my indie band if I ever learn to play the guitar and start a band. I begin with these 2 observations of human nature because few would dispute them.

Yet I seldom see social networks, some of the largest and fastest growing companies in the history of the world, analyzed on the dimension of status or social capital, it's in part a measurement issue. Numbers lend an air of legitimacy and credibility. We have long standing ways to capital and its flows. Entire websites, sections of newspapers, and a ton of institutions report with precision on the prices and movements of money.

We have no such methods for measuring the values and movement of social capital, at least not with anywhere near the accuracy or precision. The body of research feels both broad and yet meager. If we had better measures besides our user counts, this piece and many others will be full of charts and graphs that added a sense of intellectual heft to the analysis.

There'd be some annual presentation called the state of social akin to Meeker's internet trends report or perhaps it would be a fifty page subsection of her annual report. Despite this, most of the social media networks we study generate much more social capital than actual financial capital, especially in their early stages. Almost all such companies have internalized one of the popular truisms of Silicon Valley.

That in the early days, companies should postpone revenue generation in favor of rapid network scaling. Social capital has much to say about why social networks lose heat, stall out, and sometimes disappear altogether. And while we may not be able to quantify social capital as highly attuned social creatures, we can feel it.

Social capital is, in many ways, a leading indicator of financial capital, and so its nature bears greater scrutiny Not only is a good investment or business practice, but analyzing social capital dynamics can help to explain all sorts of online behavior that would otherwise seem irrational In the past few years, much progress has been made analyzing software as a service, SAS businesses.

Not as much has been made on social networks, analysis of social networks still strikes me as being like economic growth theory, along before Paul Romer's paper on endogenous technological change. However, we can start to demystify social networks if we also think of them as SaaS businesses, but instead of software, they provide status This post is a deep dive into what I refer to as status as a service, status businesses.

Think of this essay as a series of strongly Beller hypotheses without access to the types of data, which I'm not even sure exists, it's difficult to be definitive. As ever, my wise readers will add or push back as they always do. Traditional network effects model of social networks. One of the fundamental lessons of successful social networks is that they must first appeal to people when they have few users. Typically, this is done through some form of single user utility.

This is the classic cold start problem of social. The answer to the traditional chicken and egg question is actually answerable. What comes first is a single chicken and then another chicken and then another chicken and so on. The harder version of the question is why the first chicken came and stayed when no other chickens were around and why the others followed.

The second fundamental lesson is that social networks must have strong network effects so that as more and more users come aboard, the network enters a positive flywheel of growth. A compounding value from positive network effects that leads to hockey stick growth that puts dollar signs in the eyes of investors and employees alike. Come for the tools, stay for the network, wrote Chris Dixon in perhaps the most memorable Maxim for how this works.

Even before social networks, we had Metcalfe's law on telecommunications networks. The value of a telecommunications network is proportional to the square of the number of connected users of the system. And to the power of 2. This ported over to social networks cleanly. It is intuitive, and it includes that tantalizing math formula that explains why growth curves for social networks Beller up sharply at the ankle of the classic growth s curve. But dig deeper and many, many questions remain.

Why does some large social networks suddenly fade away or lose out to new tiny network Why does some new social networks with great single player tools fail to transform into networks while others with seemingly frivolous purposes make the leap? Why does some networks sometimes lose value when they add more users? What determines why different networks stall out at different user base sizes?

Why do some networks cross international borders easily while others stay locked within specific countries? Why if Metcalf's law holds do many of Facebook's clones of other social network features fail while some succeed like Instagram stories. What ties many of these explanations together is social capital theory, and how we analyze social networks should include a study of a social network's accumulation of social capital assets and the nature and structure of its status games.

In other words, how do such companies capitalize either consciously or not on the fact that people are status seeking monkeys, always trying to seek more of it in the most efficient way possible? To paraphrase Nicki Minaj, if I'm fake, I ain't notice because my followers ain't. Just as a note, sometimes the followers actually are fake. Utility versus social capital framework. Classic network effects theory still holds. I'm not discarding it. Instead, let's append some social capital theory.

Together, those from the 2 axes on which I like to analyze social network Beller. Actually, I tend to use 3 axes to dissect social networks For this post though, I'm only going to look at 2 of them, utility and social capital as the entertainment axis adds a whole lot of complexity, which I'll perhaps explain another time. Utility doesn't require much explanation, though we often use the term very loosely and categorize too many things as utility when they aren't that useful?

We generally confuse circuses for bread and not the reverse. Fox News, for example, it's more entertainment than utility as is common of many news outlets. A social network like Facebook allows me to reach lots of people I would otherwise have a harder time tracking down and that's useful. A man app, like WhatsApp, allows me to communicate with people all over the world without paying texting or incremental data fees, which is useful.

Morgan and Reddit and Discord and most every social network offers some form of utility. The other axis is for lack of a more precise term, the social capital axis or the status axis. I use a social network to accumulate social capital? What forms? How is it measured? And how do I earn that status? There are several different paths to success for social networks, but those which compete on the social capital access are often more mysterious than pure utilities.

Competition on raw utility tends to be Darwinian, ruthless, and highly legible, This is the world, for example, of communication services like messaging and video conferencing. Investing in this space also tends to be a bit more straightforward. How useful is your app or service? Can you get a distribution, etcetera? When investors send me decks on things in this category, I am happy to offer an opinion but I enjoy puzzling over the world of artificial prestige even more.

The creation of a successful status game is so mysterious that it often smacks of alchemy, For that reason, entrepreneurs who succeed in this space are thought of as a sort of shaman, perhaps because most investors are middle aged white men who are already so high status, they haven't the first idea why people would seek virtual status. More on that later.

With the rise of Instagram with its focus on photos and filters and snap Pete with its ephemeral messaging and vine with its 6 second video limit. For a while, there was a thought that new social networks would be built on some new modality of communications.

That's a piece of it, but it's not the complete picture, and not for the reason many people think, which is why we've seen a whole bunch of strange failed experiments in just about every odd combination of features and filters and artificial constraints in how we communicate with each other through our phones.

Remember Facebook Snapchat competitor's slingshot in which you had to unlock any messages you receive by responding with a message, it felt like product designed by Madlives, When modeling how successful social networks create a status game worth playing, a useful metaphor is one of the trendiest technologies, cryptocurrency. Social networks as ICOs. How is a new social network analogous to an ICO? 1, Each new social network issues a new form of social capital, a token.

2. You must show proof of work to earn the token. 3. Over time, it becomes harder and harder to mine new tokens on each social network creating built in scarcity. And 4, Many people, especially older folks, scoff at both social networks and cryptocurrencies. Why does anyone care what you Pete for lunch? Is the canonical retort about any social network, though it's fading with time. Both social networks and ICOs tend to drive skeptics crazy because they seem to manufacture value out of nothing.

The shifting nature of scarcity will always leave a wake of skepticism and disbelief. Years ago, I stayed at the house of a friend whose high school daughter was home upstairs with a classmate. As we adults drank wine in the kitchen downstairs while waiting for dinner to finish in the oven, we heard lots of music and stomping and giggling coming from upstairs. When we finally called them down for dinner, I asked them what all the ruckus had been.

My friend's daughter proudly held up her phone to show me accordingly posted to an app called Musically. It was a lip sync and dance routine replete with their own choreography. They rehearsed the piece more times than they could count It showed their faces were shiny with sweat and they were still breathing hard from the exertion. Proof of work, indeed. I spent the rest of the dinner scrolling through the app.

Fascinated, interviewing the girls about what they liked about the app, why they were on it, and what share of their free time it had captured. I can't tell if parents are offended or glad when I spend much of the time visiting them interviewing sons and daughters instead, but in the absence of good enough metrics with which to analyze this space, I subscribe to the Jane Goodall theory of how to study your subject.

Besides, status games of adults are already well covered by the existing media from literature to film. Children's status games once familiar to us begin to fade from our memory as time passes and its modern forms have been drastically altered by social media.

Other examples abound perhaps you've read a long and thoughtful response by random person on Morgan or Reddit or watch YouTube vloggers publishing night after night or heard about popular vine stars living in houses together helping each other shoot and edit 6 second videos. While you can outsource Bitcoin mining to a computer, people still mine for social capital on social networks largely through their own blood, sweat, and tears.

If you yourself are non aspiring social network star, living with 1 is not recommended. Perhaps if you spend enough time around today's youth, you've watched with a mixture of horror and fascination as a teen snaps dozens of selfies before publishing the most flattering one to Instagram only to pull of Pete had an early signature proof of work hurdle. For Facebook, it was posting some witty text based status update.

For Instagram, it was posting an interesting square photo for Vine an entertaining 6 second video. For Twitter, it was writing an amusing bit of text of a 140 characters or fewer, Pinterest, pinning a compelling photo. You can likely derive the proof of work for other networks like Quora and Reddit and Twitch and so on. Successful social networks don't Pete trick questions at the start. It's usually clear what they want from you.

On a side about exogenous social capital, you might complain that your tweet are more interesting and grammatical than those of, say, Donald Trump. You're probably right, or that your photos are better composed and more interesting at a deep level of photographic craft than those of Kim Kardashian. The difference is they bring a massive supply of Exogenes Pete existing social capital from another status James.

The fame game to every table, and some forms of social capital transfer quite well across platforms, generalized fame is one of them. More specific forms of fame or talent might not retain their value as easily. You might follow Paul Krugman on Twitter, for example, but not have any interest in his Instagram account. Don't know if he has 1, but I probably wouldn't follow it if he did. Sorry, Paul. Nothing personal.

If you've ever joined one of these social networks early enough, you know that on a relative basis, getting ahead of others in terms of social capital, followers, likes, etcetera, is easier in the early days. Some people who are featured on recommended follower lists in early days of Twitter have follow accounts in the 7 figures, just as early masters of musically and vine were accumulating massive and compounding follower counts.

The more people who follow you, the more followers you gain because of leaderboards and recommended follower algorithms and other such common discovery mechanisms. It's true that as more people join a network, more social capital is up for grabs in the aggregate.

However, in general, if you come to a social network later, unless you bring incredible exogenous capital, Taylor Swift can join any social network on the planet and collect a massive following immediately, the competition for attention is going to be more intense than it was in the beginning. Everyone has more of an understanding of how the game works so the competition is stiffer. Why proof of work matters? Why does proof of work matter for a social network?

If people wanna maximize social capital, why not make that as easy as possible? As with cryptocurrency, if it were so easy, it wouldn't be worth anything. Value is tied to scarcity and scarcity on social networks derives from proof of work. Status isn't worth much if there's no skill and effort required to mine it. It's not that a social network that makes it easy for lots of users to perform well can't be a useful one, but competition for relative status still motivates humans.

Recall our first tenet, humans are status seeking monkeys. Status is a relative ladder. By definition, if everyone can achieve a certain type of status, it's no status at all. It's a participation trophy. Musically created a hurdle for gaining followers and status that wasn't easily cleared by many Pete.

However, for some, especially teens and especially girls, it was a status game at which they were particularly suited to win, and so they flocked there because According to my second tenant, people look for the most efficient ways to accumulate the most social capital. Recall Twitter in the early days when it was somewhat of a harmless, but somewhat inert status update service.

I went back to look at my first few tweets on the service from some 12 years ago and my first 2, spaced about a year apart, were both about doing my taxes. Looking back at them, I bore even myself. Early Twitter consisted mostly of harmless, but dull life status updates. A lot of is this thing on tapping on the virtual microphone? I guess I am in the camp of not caring about what you had for lunch after all. Pete off my lawn or phone screen.

What changed Twitter for me was the launch of Fave Star and favored, both now defunct ruthlessly murdered by Twitter. These global leaderboards that suddenly turned the service into a competition to compose the most globally popular tweets. Recall the Twitter graph was not as dense as it was now, nor did distribution accelerants like one click retweeting in moments exist yet.

What FAESTAR in favor did was surface really great Pete and ranked them on a scoreboard, and that to me launched the performative revolution in Twitter. It added needed feedback to the feedback loop, birthing a new type of comedian, the master of the 140 character or less punch Flint, The internet has killed the joke, humorous all punch Flint now that the setup of the joke is assumed to be common knowledge, thanks to Google.

The launch of these global Pete scoreboards reminds me of the moment of the now classic film Battle Royale when Beat Takeshi Catano informs a bunch of troublemaking school kids that they've been deported to an island and are to fight to the death last student standing wins and that those who try to sneak out of designated battle zones will be killed by explosive collars.

I'm not saying that Twitter is a life or death struggle, but you need only time travel back to pre product market fit Twitter to see the vast difference in tone. Now classic because Battle Royaleis have secretly been ripped off, Paid tribute to by the hunger games, Fortnite maze runner, and just about every YA franchise out there because who understands Barbara's status games better than teenagers? It's critical that not everyone can quip with such skill.

This gave Twitter its own proof of work and over time, the overall quality of tweets improved as that feedback loop spun and tightened. The strategies that gained the most likes were fed an increasing volume in people's timelines as everyone learned from and competed with each other.

Read Twitter today and hard any of the tweets or the mundane life updates of its awkward Pete puberty years, we are now in late stage performative Twitter where nearly every tweet is hungry as hell for favorites and retweets, and everyone is a trained pundit or comedian. It's hot tanks and cool proverbs all the way down. The harmless status update Twitter was a less thirsty scene, but also knowledge of a business. Still, sometimes I miss the Halcyon days where not every tweet was a thirst trap.

I hate the new Kanye, the bad mood Kanye the always rude Kanye spas in the news Kanye, I miss the sweet Kanye, chop up the beats Kanye. First for status is potential energy. Is the lifeblood of a status as a service business. To succeed at carving out unique space in the market, social networks offer their own unique form of status token. Earned through some distinctive proof of work.

Conversely, let's look at something like prisma, a photo filter app which tried to pivot to become a social network, Prisma surge in popularity upon launch by making a trivial to turn one of your photos into a fine arc painting with one of its many neural network powered filters. It worked well. Too well. Since almost any photo could with one click be turned into a gorgeous painting, no single photo really stands out.

The star is the filter, not the user, and so it didn't really make sense to follow any one person over any other person. Without that element of skill, no framework for a status game or skill based network existed. It was a utility that failed at becoming a status as a service business.

In contrast, while Instagram filters in its earliest days improved upon the somewhat limited quality of smartphone photos at the time, the quality of those photos still dependent for the most part on the photographer. The composition, the selection of subject matter, these still derived from the photographer's craft, and no filter could elevate a poor photo into a masterpiece. So to answer an earlier question about how a new social network takes hold, let's add this.

A new status as a service business must advise some proof of work that depends on some actual skill to differentiate among users. If it does, then it creates like an ICO, some new form of social capital currency of value to those users. This isn't the only way a social network can achieve success.

As noted before, you can build a network based around utility or entertainment However, the addition of status helps us to explain why some networks which seemingly offer little in the way of meaningful utility is a service that forces you to make only a 6 second video useful, still achieve traction. Facebook's original proof of work. You might wonder how did Facebook differentiate itself from myspace? It started out as mostly a bunch of text status updates, nothing necessarily that innovative.

In fact, Facebook launched with one of the most famous proof of work hurdles in the world, you had to be a student at Harvard. By requiring a Harvard dot edu email address, Facebook drafted off one of the most elite cultural filters in the world. It's hard to think of many more powerful slingshots of elitism. By rolling out first to Ivy League Schools, then to colleges in general, Facebook scaled while maintaining a narrow age dispersion and exclusivity based around educational credentials.

Lay that on top of the broader social status game stalking attractive members of the other sex that animates much of college life, and Facebook was a service that tapped into reserves of some of the most heated social capital competitions in the world. Social Capital ROI. If a person posts something interesting to a platform, how quickly do they gain likes and comments and reactions and followers? The second tenant is that people seek out the most efficient path to maximize their social capital.

To do so, they must have a sense for how different strategies vary ineffectiveness. Most humans seem to excel at this. Young people with their much higher usage rate on social media are the most sensitive and attuned demographic to the payback period in ROI on their social media labor. So for example, young people tend not to like Twitter, but do enjoy Instagram.

It's not that Twitter doesn't dole out the occasional viral supernova Beller so often someone composes a tweet that goes over a 1000 and then 10,000 likes or retweets. Twitter should allow people to buy a James print of tweet with a silver or gold 1 k club or 10 k club designation to supplement its monetization. But it's not common, and most tweets are barely seen by anyone at all.

Pete that with the fact that young people's bias towards and skill advantage in visual mediums over textual ones, and it's not surprising Instagram is their social battleground of preference. Video games might be the most lucrative battleground for the young if you broaden your definition of social networks, and that's entirely reasonable, though that arena skews male.

Instagram, despite not having any official reshare option, allows near unlimited hashtag spamming, and that allows for more deterministic Beller generated distribution. Twitter also isn't as great for spreading visual memes because of its stubborn attachment to cropping photos to maintain a certain level of Pete density per phone screen. The grading of your network's social capital ROI can often govern your market share among different demographics.

Young girls flock to musically in its early days because they were uniquely good at the lip sink dance routine videos that were its bread and butter. In this age of never ending notifications, heavy social media users are hyper aware of differing status ROI among the apps they use. I can still remember posting the same photos to Flint and Instagram for a while and seeing how quickly the latter passed the former in feedback.

If I were an investor or even an employee, might have something like a representative basket of content that I'd post from various test accounts on different social media networks just to track social capital interest rates and liquidity among the various services. Some features can increase the reach of content on any network. A reshare option like the retweet button is a massive accelerant of virality on apps where the social graph determines what may into the feed.

In an effort to increase engagement, Twitter has over the years become more and more aggressive to increase the liquidity of tweets and now display tweets that were liked by people you follow, even if they didn't retweet them, and it's populated its search tab with moments, which like Instagram's discover tab guesses that other content you might like and provides an endless scroll, fill up with it.

TikTok is an interesting new player in social media because its default feed for you relies on a machine learning algorithm to determine what each user sees the Pete of content from creators you follow in contrast is hidden one Pete over.

If you're new to TikTok and have just uploaded a great video, The selection algorithm promises to distribute your post much more quickly than if you were sharing it on a network that relies on the size of your following, which most people have to build up over a long period of time.

Conversely, if you come up with one great video about the rest of your work is mediocre, you can't count on continued distribution on TikTok since your followers live mostly in a feed driven by the tick talk algorithm, not their follow graph. The result is a feedback loop that is much more tightly wound than that of other social networks, both in the positive and negative direction.

Theoretically, if the algorithm is accurate, the content of your feed should correlate most closely to quality of the work and its alignment with your personal interest rather than drawing from the work of accounts you follow. At a time when ByteDance is spending tens, 100 of 1,000,000 of marketing dollars in a bid to acquire users in international markets the rapid ROI on new creators work is a helpful quality in ensuring they stick around. This development is interesting for another reason.

Graph based social capital allocation mechanism can suffer from runaway winner take all effects. In essence, some networks reward those who gain a lot of followers early on with so much added exposure that they continue to gain more followers than other users, regardless of whether they earned it through the quality of their posts.

One hypothesis on why social networks tend to lose heat at scale is that this type of old money can't be cleared out and new money loses the incentive to play the game. One of the striking things about Silicon Valley as a region versus East Coast power corridors like Manhattan is its dearth of old money. There are exceptions, but most of the fortunes in the bay area are not just new money, but freshly minted new money from this current generation of tech.

You have some old VC or semiconductor industry fortunes, but most of those people are still alive. It's a New York city that you run into multi generational old money hanging around on the east or west sides of Manhattan Morgan encounter old wealth being shouted around town by young socialites whose source of wealth is simply a fortuitous last James. Trickle down economics works, but often just down the veins of family trees.

It's not that the existence of old money or old social capital dooms a social network to inevitable stagnation a social network should continue to prioritize distribution for the best content, whatever the definition of quality, regardless of the vintage of user producing it.

Otherwise, a form of social capital inequality sets in and in the virtual world where exit costs are much lower than the real world, new users can easily leave for a new network where their work is more properly rewarded and where status mobility is higher. It may be that Silicon Valley never comes to be dominated by old Morgan, and I considered that a net positive for the region.

I'd rather the most productive new work be rewarded consistently by the marketplace than a bunch of stagnant quasi monopolies hang on to wealth as they reach bloated James that aren't conducive to innovation. The same applies to social networks and multiplayer video games as a newbie, how quickly if you put in the work are you in the James? Proof of work should define its own meritocracy.

The same way many social networks track Keystone metrics like time to x followers, they should track the ROI on posts for new users. It's likely a leading metric that governs retention or churn. It's useful as an investor or even as a curious onlooker to test social networks by posting varied content from test accounts to gauge the efficiency and fairness of the distribution algorithm.

Whatever the mechanisms, social networks must devote a lot of resources to market making between content and the right audience for content so that users feel sufficient return on their work. Distribution is king, even when Morgan especially when it allocates social capital. Why copying proof of work is lousy strategy for status driven networks?

We often see a new social network copy as successful incumbent, but with a minor twist thrown in, In the wake of Facebook's recent issues, we may see some privacy for social networks, but we have an endless supply of actual knockoffs to study. App dotnet and then Mastodon were 2 prominent Twitter clones that promised some differentiation, but which built themselves on the same general open messaging framework. Most of these near clones have and will fail.

The reason that matching the basic proof of work hurdle of a status as a service incumbent fails is that it generally duplicates the status game that already exists. By definition, if the proof of work is the same, you're not really creating a new status ladder James. And so there isn't a real compelling reason to switch when the new network really has no one in it. This isn't to say you can't copy an existing proof of work and succeed.

After all, Facebook replaced social networks like Myspace and Friendster that came before it. And in the real world, new money sometimes becomes the new old money. You can build a better status game or create a more valuable form of status. Usually, when such displacement occurs though, it does so along the other dimension of pure utility. For example, we have multiple messaging apps that become viable companies just by capturing a particular geographic market through localized network effects.

We don't have one messaging app to rule them all in the world instead of a bunch that have won in particular geographies. After all, the best messaging app in most countries or continents is the one most other people are already using there. But in the same market, copying a proof of work there is a tough road.

The first mover advantage is also such that the leader with the dominant graph and the social capital of most value can look at any new features that fast followers launch and pull a reverse copy, grafting them into their more extensive and dominant and comic graph. In China, Tencent is desperate to cool off ByteDance's momentum in the short video space. Duyin is enemy number 1.

Tencent launched a Flint, but added a feature which allowed viewers to record a side by side video reaction in response to any video. It took about half a second for ByteDance to incorporate that into DUian and now it's a popular feature in TikTok the world over. If you can't change the proof of work competition as a challenger, copy and throttle is an effective strategy for the incumbent. Not to mention that a wholesale rip off of another app tends to be frowned upon as poor form.

Even in China with its reputation as the land of loose IP protection, users will tend to post dismissive reviews of blatant copycat apps and app stores. Chinese users may not be as aware of American apps that are knocked off in China, but within China, users don't just James shipped to out and out copycat apps. There has to be an incentive to overcome the switching costs and that applies in China as it does elsewhere.

A few specifics of note here, I once wrote about social networks that the network's the thing that is the composition of the graph once a social network reaches scale is its most unique quality. I would update that today to say that it's the unique combination of a feature and a specific graph that is any network's most critical competitive advantage.

COMbing some network's feature often isn't sufficient if you can't also copy its graph, but if you can apply the feature to some unique graph that you earn some other way, it can be a defensible advantage.

Nothing illustrates this better than Facebook's attempts to win back the Young from Snapchat by copying some of the networks of femoral messaging features Morgan Facebook's attempt to copy TikTok with Lasso or, well, Facebook's attempt to duplicate just about every social app with any traction anywhere. The problem with copying Snapchat is that, well, reason young people left Facebook for Snapchat was in large part because their parents had invaded Facebook.

You don't leave a party with your classmates to go back to when your parents are throwing just your dad brings in a keg and offers to play beer pong. The pairing of Facebook's gigantic graph with just about almost any proof of work from another app changes the very nature of that status James. Sometimes in undesirable way, Do you really want your coworkers and business colleagues and family and friends watching you lip synch to it's getting hot in here by Beller on Lasso?

Facebook was rumored to be contemplating a special memes tab try to woo back the young, which again completely misunderstands how the young play the Pete status game. At last check, that plan had been shelved. Of course, the canonical Facebook feature grabbed that pundits often cite as having worked is Instagram's copy of Snapchat's story format. As I've written before, I think the stories format is a genuine innovation on the social modesty problem of social networks.

That is all but the most just show offs feel squeamish about publishing too much to their followers. Stories by putting the onus on the viewer to pull that content allows everyone to publish away guilt free without regard for the craft that regular posts demand in the ever escalating game that is life publishing. In a world where algorithmic feeds break up your sequence of posts stories also allow gifted creators to create sequential narratives.

Thus, stories is inherently about lowering the publishing hurdle for users and about a new method of storytelling. And any multisided network seeing declining growth will try grafting it on their own network at some point just to see if it solves supply side social modesty. Ironically, as services add more and more filters and capabilities into their story functionality, we see the proof of work game and stories escalating.

Many of the Instagram stories today are more elaborate and time consuming to publish than regular posts. The variety of filters and stickers and gifts and other tools in the stories composer towards limited filters available for regular Instagram posts. What began as a lighter weight posting format is now a more sophisticated and complex one. You can take the monkey out of the status seeking game but you can't take the status seeking out of the monkey.

The greatest social capital creation event in tech history. In the annals of tech and perhaps the world, the event that created the greatest social capital boom in history was the launch of Facebook's news feed. Before news feed, if you were on, say, MySpace or even on a Facebook before news feed launched, you had to browse around to find all the activity in your network.

Only a demographic of a particular age will recall having to click from one profile to another on my space while stalking one's friends. It almost seems comical in hindsight that we'd impose such a heavy UI burden on social media users. Can you imagine if to see all the new photos posted in your Instagram network had to click through each profile 1 by 1 to see if they'd posted any new photos.

I feel that my parents talking about how they had to walk miles to grade school through winter snow wearing moccasins of tree bark when I complained about the undue burden of social media browsing before the news feed, but it truly was a monumental pain in the ass.

By merging all updates from all the accounts you followed into a single continuous surface and having that serve as the default screen, Facebook's newsfeed simultaneously increased the efficiency of distribution of new posts and pitted all such posts against each other in what was effectively a single giant attention arena. Complete with live updating scoreboards on each post.

It was as if the Panopticon inverted itself overnight as if a giant spotlight turn on and suddenly all of us performing on Facebook for approval realized we were all in the same auditorium on one large connected infinite stage, singing karaoke to the same audience at the same time.

It's difficult to overstate what a momentous sea change it was for 100 of millions and eventually billions of humans who had grown up competing for status in small tribes to suddenly be dropped into a talent show competing against every person they had ever met. Predictably everything exploded, the number of posts increased. The engagement was said posts increased.

This is the scene in a movie in which having launch something, a bunch of people stand in a large open war room waiting and suddenly a geek staring at a computer goes wide eyed, explaining Oh my god.

And then the senior ranking officer in the room probably played by a scouring ed harris or Kyle Chandler walks over to look at the screen where some counter is incrementing so rapidly that the absolute number of digits starts it's incrementing in real time as you look at it because films have to make a plot development like this brain dead obvious to the audience.

And then the room erupts and cheers while different people hug and clap each other on the back and one random actress sprints across the screen in the background, shaking a bottle of champagne that explodes and ejaculates a stream of frothy bubbly through the air like some capitalist money shot that inspires later, a 2000 word essay from Gigi.

Of course, users complained about news Pete at first, but their behavior belied their words, something that would come to haunt Facebook later when it took it as proof that users would always just cry wolf and that similar changes in the future will be the right move regardless of public objections. Back in those more healthy in James, though news Pete unleashed a gold rush for social capital accumulation. Wow. That post over there has ten times the likes of my latest does.

Okay. What can I learn from it to use in my next post? Which of my content is driving the most likes. We talk about the miracles of machine learning in the modern age, but as social creatures, humans are no less remarkable in their ability to decipher and internalize what plays well to the peanut gallery. Stories of teens AB testing Instagram posts, yanking those which don't earn enough likes in the first hour are almost beyond satire.

A show like Black Mirror often just resorts to episodes that show things that have already happened in reality. The key component of the 10000 hour rule of expertise is the idea of deliberate practice the type that provides immediate feedback. Social media may not be literally real time in its feedback, but it's close enough, and the scope of reaches magnitudes of order beyond that of any so performance arena in history.

We have a generation now that has been trained through 100 of 1000, perhaps millions of social media reps on what engages people on which platforms. In our own way, we are all buzzfeed. We are all Kardashians. The tighter the feedback loop, the quicker the adaptation, compare early Twitter to modern Twitter.

It's like going from listening to your coworkers at a karaoke bar to watching Beyonce play Coachella, I wrote once that any Twitter account that gained enough followers would end up sounding like a fortune cookie, but I underestimated how quickly everyone would arrive at that end state. As people start following more and more accounts on a social network, they reach a point where the number of candidates stories exceeds their capacity to see them all.

Even before that point, the shear signal to noise ratio may decline to the point that it affects engagement. Almost any network that hits this inflection point turns to the same solution an algorithmic feed. Remember, status derives value from some type of scarcity. What is the one fundamental scarcity in the age of abundance?

User attention, the launch of an algorithmic feed raises the stakes of the social media game, even if someone follows you, they might no longer see every one of your posts, As Dicaprio said in Jango unchained, you have my curiosity, but now under the algorithmic feed, you have earned my attention. As humans, we intuitively understand that some galling percentage of our happiness with our own status is relative.

What matters is less our absolute status than how we are doing compared to those around us. By taking the scope of our status competition's virtual, we scaled them up in a way that we weren't entirely prepared for. Is it any surprise that seeing other people signaling so hard about how wonderful their lives are decreases our happiness?

As evidence of how anomalous a change this has been for humanity, witness how many celebrities continue to be caught with a history of offensive social media posts that should obviously have been taken down long ago given shifting sensibilities.

Kevin Hart, baseball players like Josh Hader, Tria Turner, and Sean Newcomb, and a litany of other public figures in their management teams didn't think to go back and scrub some of their earlier social media posts despite nothing but downside optionality. Could social networks have chosen to keep likes and other such metrics about posts private visible only to the recipient? Could we have kept this social capital arms race from escalating?

Some tech CEOs now look back and like Alan Greenspan, bemoaned the irrational exuberance that led us to where we are now, but let's be honest, the incentives to lower interest rates on social capital in all these networks given their goals and those of their investors were just too great. If one company hadn't flooded the market with status, others would have filled the void many times over.

A social network like Pete attempts to limit your social graph size to the Dunbar number capping your social capital accumulation potential and capping the distribution of your posts. The exchange they hoped was some greater transparency, more genuine self expression, the anti Facebook. Unfortunately, as social capital theory might predict, Path did indeed succeed in becoming the anti Facebook, a network without enough users.

Some businesses work best at scale and few believe that people want to accumulate social capital as efficiently as possible, putting a bound on how much they can earn is a challenging business model as dark as that may be. Why social capital accumulation skews young? I'd love to see a graph social capital assets under management by user demographic.

I'd wager that we'd see that young people, especially those from their teens when kids seem to be given their first cell phones, through early twenties are those who dominate the game.

Mind if you can post a photo of his elbow on Instagram and accumulate a couple hundred likes, I could share a photo of myself in a Morgan line with Barack Obama and Beyonce while Jennifer Lawrence sits on my shoulders pouring Chris Stahl over my head and still only muster a fraction of the likes my nephew does posting a photo of his elbow.

It's a young person's game and the live journal blogger flicker, friendster, myspace era in which I came of age feels like the Pete Cambrian era of social in comparison. While we're all status seeking monkeys, young people tend to be the tip of the spear when it comes to catapulting new status as a service businesses and may always will be. A brief aside here on why this tends to hold. One is that older people tend to have built up more stores of social capital.

A job title, a spouse, maybe children, often a house or some piece of real estate, maybe a car, furniture that doesn't require you to assemble it on your own, a curriculum vitae, 1 or more college degrees, and so on. This differs by culture, of course, in the US where I grew up, one job is the single most important status carrier, which is why so many conversations there begin with. What do you do? Young people are generally social capital poor unless they've lucked into a fat inheritance.

They have no job title. They may not have finished college They own few assets like homes and cars. And often if they finish college, their saddle was substantial school debt. For them, the fastest and most efficient Pete to gaining social capital while they wait to level up enough to win at more grown up games like office politics is to apply their trade on social media or video games, but that's a topic for another day.

Secondly, because of the previously accumulated social capital, adults tend to have more efficient means of accumulating even more status than playing around online. Maintenance of existing social capital stores is often a more efficient use of time than fighting to earn more on a social network given the ease of just earning interest on your sizable status reserves. That's just math, especially once you factor in loss aversion.

Young people look at so many of the status games of older folks, what brand of car is parked in your garage, What neighborhood can you afford to live in? How many levels of CEO are you in your organization? And then look at apps like Vine and Musically, and they choose the only real viable and this optimal path before them. Remember the 2nd tenant, people maximize their social capital the most efficient way possible, both the young and old pursue optimal strategies.

That so much social capital for the young comes in the form of followers, likes, and comments from peers, and strangers shouldn't lessen its value. Think back to your teen years in to recall any real social capital that you could accumulate on such a scale. In your youth, the approval of peers and others in your demographic tend to matter more than just about anything. And social media has extended the reach of the youth status game in just about every direction possible.

Furthermore, old people tend to be hesitant about mastering new skills in general including new status games, especially if they involve bewildering new technology. There are many reasons including having to worry about raising children and others such adult responsibilities and just plaintal decay and neural malleability. Perhaps old dogs don't learn new tricks because they're closer to death, and the period to earn a positive return on that investment is shorter.

At some point, it's not worth learning any new tricks at all, and we all turn into the brushed, old lady in every TV show. Example, Maggie Smith in downtown Abby, dropping withering quips about the follies of humanity all around us. I look forward to this period in my life when through the unavoidable specter of mortality I will naturally settle into my DGAF phase of courageous truth telling.

Lastly, young people have a surplus of something which most adults always complain they have too little of. Time. The hurdle rate on the time of the young is low and so they can afford to spend some time of that surplus exploring new social networks minding them to see if the social capital returns are attractive, whereas most adults can afford to wait until a network has runaway product market fit to jump in. The young respond to all the status games in the world with a consistent refrain.

If you're looking for ransom, I can tell you I don't have money, but what I do have are a very particular set of skills. Among those are the dexterity and coordination to lip sync to songs while dancing block boy JVs shooting my bedroom and the time to do it over and over again until I nail it.

I wrote this long before recent events in which Pete Meeson lit much of his social capital on fire, vacating the wrong devengeful father with incredible combat and firearm skills role to the next agent male star. These modern forms of social capital are like new money. Not surprisingly then, older folks who are worse at accumulating these new badges than the young often scoff at those kids wasting time on those apps.

Just as old money from the Upper West And Upper East sides of New York looked down their noses at those hoodie wearing new money billionaire Philistines of Silicon Valley. The exception might be those who grew up in the 1st golden age of social media. For some of this generation's younger NBA players who are on Instagram from the time they got their first phone, posting maybe second nature, a force of habit they bring with them into the league.

When is how many young NBA stars track their own appearances on House of Highlights, the way stars of old looked for themselves on sports center. If this generational divide on social media between the old and the young was simply a one time anomaly given the recent birth of social networks and if future generations will be virtual status seeking experts from womb to tomb, then capturing users in their formative social media years becomes even more critical for social networks.

I contain multitudes. Said the youngblood. Incidentally, teens and 20 somethings more so than the middle aged and elderly tend to juggle more identities. In middle and high school, kids have to maintain an identity among classmates at school, then another identity at home with family. 20 somethings craft 1 identity among coworkers during the day than another among their friends outside of work. Often those spheres have differing status games and there is some penalty to merging those identities.

Anyone who's ever sent a text meant for their schoolmates to their parents or email the boss or coworker something meant for their happy hour crew knows the treacherous nature of context collapse. Add to that, this younger generation's preference for and facility with visual communication, and it's clearly why the preferred social network of a young is Instagram. And the preferred Messenger Snapchat both preferable to Facebook.

Instagram, because of the ease of creating multiple accounts to match one's portfolio of identities, and Snapchat for its best in class ease of visual messaging privately to particular recipients. The expiration of content, whether explicitly executed on Instagram, you can easily kill off a meme account after you outgrown it, for example, or automatically handled on a service like Snapchat is a must have feature for those of whom multiple identity management is a fact of life.

Facebook with his explicit attachment to the real world graph and its enforcement of a single public identity is just a poor structural fit for the more complex social capital requirements of the young. Common social network arcs. It's useful to look at some of the common paths that social networks traverse over time using our 2 axis model. Not all of them took the same Pete to prominence. Doing so also helps eliminate the most productive strategies for each to pursue future growth.

First utility then social capital. This is the well known come for the tool, stay for the network path. Instagram is a good example here given its growth from filter driven utility to social photo sharing behemoth, Today, I can't remember the last time I used an Instagram filter. In the end, I think most social networks, if they've made this journey, need to make a return to utility, to be truly durable. Commerce is just one area where Instagram can add more utility for its users.

First social capital, then utility. Come for the James, stay for the tool, Foresquare was this for me. In the beginning, I checked in to try to win mayor's ships at random places. These days, Foresquare is trying to come more of a utility with information on places around you rather than just a quirky distributed social capital game.

Heavy users may have thoughts on how successful that has been, but in just compiling a database of locations that other apps can build off of, they've built up a store of utility. IMDB, Wikipedia, reddit, and Cora are more prominent examples here. Users come for the status and help to build a tool for the comments. Utility, but no social capital. Some companies managed to create utility for a network, but never succeed at building any real social capital of Pete, or don't even bother to try.

Most messaging apps fall into this category. They help me to reach people I already know, but they don't introduce me to too many new people and they aren't really status games with likes and follows. Skype, Zoom, FaceTime, Google Hangouts, Viber, and Marco Polo are examples of video chat apps that fit this category as well.

While some messaging apps are trying to add features like stories that start to veer into the more performative realm of traditional social media, I'm skeptical they'll ever see traction doing so when compared to apps that are more pure status as a service apps like Instagram.

This bottom right quadrant is home to some businesses with over a Beller users, but in minimizing social capital and competing purely on utility derived network effects, this tends to be a brutally competitive battleground where even the slimmest moat is fought for with blood and sweat, especially in the digital world where useful features are trivial to Pete. Social capital, but little utility.

1 could argue Foursquare actually lands here, but the most interesting company to debate in this quadrant is clearly Facebook. I'm not arguing that Facebook doesn't have utility because clearly it does in some obvious ways. In some markets, it is the internet. Messenger is clearly a useful messaging utility for over a billion people.

However, the US is a critical market for Facebook, especially when it comes to monetization, so it's worth wondering how things might differ for Facebook today if it had succeeded in pushing further out on the utility axis. Many people I know have just dropped Facebook from their lives this past year with little impact on their day to day lives. Among the obvious and largest utility categories like commerce or payments, Facebook isn't a top tier player in any except advertising.

This comparison is especially stark if we compare it to the social network to which it's most often contrasted. Both social capital and utility simultaneously. The holy grail for social networks is to generate so much social capital and utility that it ends up in that desirable upper right quadrant of the 2 by 2 matrix. Most social networks will offer some mix of both, but none more so than WeChat.

While I hear of people abandoning Facebook and never looking back, I can't think of anyone in China who has just gone cold turkey on WeChat. It's testament to how much of an embedded utility we chat has become that to delete it would be a massive inconvenience for most citizens. Just look at the list of services in the WeChat or WePay or Ally Pay menu for the typical Chinese user and consider that Facebook isn't a payment option for any of them. Of course, the competitive context matters.

Facebook faced much stiffer competition in these categories than WeChat did. For Facebook to build a better mouse trap in any of these, the requirements were much higher than for WeChat. Take payments, for example, the Chinese largely skipped credit cards for a whole host of reasons.

In part, it was due to a cultural aversion to debt in part because Visa Mastercard, and American Express weren't allowed into China where they would certainly have marketed their cards as aggressively as they always do. That meant Alipay and WePay launched competing primarily cash and all its familiar inconveniences.

Compare that to say, Apple Pay trying to displace the habit of pulling out a credit card in the US especially given how so many people are addicted to credit card points and miles, airline frequent flyer programs being another testament to the power of status to influence people's decision making. Making a real dent in new categories like commerce and payments will require a long term mindset and a ton of resources on the part of Facebook and its subsidiaries like WhatsApp and Instagram.

Past efforts to, for example, improve Facebook search position Facebook as a payment option and introduce virtual assistance on Messenger seemed to have been abandoned. Beller new efforts like Facebook's cryptocurrency effort or Instagram's push into commerce be given a sufficiently long leash? Social network asymptote 1 proof of work. How do you tell when a status as a service business will stop growing?

What causes networks to suddenly hit that dreaded upper shoulder in the s curve if According to Metcalfe's law, the value of a network grows in proportion to the square of its users. What are the missing variables that explain why networks don't keep growing until they've captured everyone? The reasons are numerous. Let's focus on social capital theory.

To return to our cryptocurrency analogy, the choice of your proof of work is by definition on asymptote because the skills it selects from are not evenly distributed. To make a specific example, since it's the app du jour, let's look at the app formerly known as Musically TikTok. You've probably watched a TikTok video, but have you tried to make one? My guess is that many of you may not and never will, but if you have, please send me a link. This is no judgment I haven't either.

You may possess in your estimation too much self dignity to wallow and cringe. Your arthritic joints may not be capable of executing orange just Whatever the reason TikTok's creator community is ultimately capped by the nature of its proof of work, no matter how ingenious its creative tools. The same is true of Twitter. The number of people who enjoy crafting witty 140 and now 280 character info nuggets is finite.

Beller network has some ceiling on its ultimate number of contributors, and it is often a direct function of its proof of work. Of course, the value in total user size of a network is not just a direct function of its contributor count. Whether you believe in the 1 990 rule of social networks or not, it's directly true that any network has value to people besides its creator In fact, for almost every network, the number of lurkers far exceeds the number of active participants.

Life may not be a spectator sport, but a lot of social media is. This isn't to say that proof of work is bad. In fact, coming up with a constraint that unlocks the creativity of so many people is exactly how status as a service businesses achieve product market fit Constraints force the type of compression that often begets artistic elegance and forcing creatives to grapple with a constraint can foster the type focus exertion that totally unconstrained exploration fails to inspire.

Still, a ceiling's a ceiling. If you wanna know the terminal value of a network, the type of proof of work is a key variable to consider. Ceiling of users in China if it hasn't already, or what the cap of active users is for any social network, first ask yourself how many people have the skill and interest to compete in that arena. Social Network asymptote 2, social capital inflation, and devaluation. More terrifying to investors and employees than an asymptote is collapse.

Recall the cautionary myth of the fall of my space James after the little known Greek god of vanity, my spakos, I made that up. It's actually narcissus. Why does some social networks given Metcalfe's law and its related network effects theories not only stop growing, but even worse contract and wither away. To understand the inherent fragility and status as a service businesses, we need to understand the volatility of status. Social capital interest rate hikes.

1 of the common traps is the winner's curse for social media. If a social network achieves enough success, it grows to a size that requires the imposition of an algorithmic feed in order to maintain high signal to noise for most of its users. It's akin to the Fed trying to manage inflation by raising interest rates. The problem, of course, is that this now diminishes the distribution of any single post from any single user.

One of the most controversial of such decisions was Facebook's change to dampen how much content from pages will be distributed into the news Pete. Many institutions, especially news outlets, had turned to Facebook to access some sweet sweet eyeball inventory and news feeds. They devised all sorts giveaways and promotions to entice people to follow their Facebook pages.

After gaining followers, a media company had a free license to publish and publish often into their news feeds an attractive proposition considering users were opening Facebook multiple times per day for media companies who are already struggling to grapple with all the chaos the internet is unleashed on their business models This Beller like upgrading from waving stories at passersby on the street to stapling stories to the inside of eyelids, the

world over several times a day, deterministic guaranteed eyeballs. Then one day, Facebook snapped its finger like Thanos and much of that dependable reach evaporated into ash. No longer would every one of your page followers see Beller one of your posts. Facebook did what central banks do to combat inflation and raised interest rates on borrowing attention from the news feed. Was such a move inevitable? Not necessarily, but it was always likely.

That's because there's one scarce resource, which is a natural limit on every social network and media company today, and that is user attention. That a social network shares some of that attention with its partners will always be secondary to accumulating and retaining that attention in the first place. Facebook, for example, must always guard against the tragedy of the commons when it comes to news feed. Saving media institutions is a secondary consideration if that.

Social capital deflation, scarcity, precarity, or the groucho Marx conundrum, Another existential risk that is somewhat unique to social networks is this. Network effects are powerful, but ones which are social in nature have the unfortunate quality of being just as ferocious in reverse. In high growth handbook by Beller Gil, Mark Andreessen notes, I think network effects are great, but in a sense, they're a little overrated.

The problem with network effects is they unwind just as fast, and so they're great while they last but when they reverse, they reverse viciously. Go ask the Myspace guys how their network effect is going. Network effects can create a very strong position for obvious reasons, but in another sense, it's a very weak position to be in because if it cracks, you just unravel. I always worry when a company thinks the answer is just network effects how durable are they?

Why does social network effects reverse? Utility, the other axis by which I judge social networks, tends to be uncapped in value, It's rare to describe a product or service as having become too useful. That is it's hard to over serve on utility. The more people that accept a form of payment, the more useful it is like Visa or Master card or Alipay, people don't stop using a service because it's too useful. Social network effects are different.

If you've lived in New York City, you've likely seen over and over, Knight clubs which are so hot for months suddenly go out of business just a short while later. Many types of social capital have qualities which render them fragile. Status relies on coordinated consensus to define the scarcity that determines its value. Consensus can shift in an instant.

Recall the friend and swinger's who at every crowded LA party quips, this place is dead anyway, or recall the wise words of noted sociologist groucho Marx, I don't care to belong to any club that will have me as a member. The groucho marx effect doesn't take effect immediately. In the beginning, a status hierarchy requires lower status people to join so that the higher status people have a sense of just how far above the masses they reside.

It's silly to order bottle service at Hakasan in Las Vegas if no one is sitting on the opposite side of the velvet ropes. A leaderboard with just a single high score is meaningless. However, there is some tipping point of popularity beyond which a restaurant, club, or social network can lose its cool. When Malcolm Gladwell inserted the term tipping point into popular vernacular, He didn't specify which way things were tipping.

We tend to glamorize the tipping into rapid diffusion, the tow of the s curve, but in status games like fashion, the arc of popularity traces not an s Currier, but a bell curve. At the top of that bell curve, you reach the less glamorous tipping point, the one before the plummet. When the definition of status is distributed, often one minority has disproportionate sway. If that group, the cool kids pulls the rip cord, everyone tends to follow them to the exits.

In fact, it's usually the most high status or desirable people who leave first the evaporative cooling effect of social networks. At that point, that product or service better have moved as far out as possible on the utility axis or the velocity of churn can cause a nosebleed. Momenic desire is a cruel mistress. Gerard would have had a field day with a fire festival. Congratulations, Beller McFarlane.

You are the ritual sacrifice with which we cleanse ourselves of the sin of coveting thy influencers bounty. Fashion is one of the most interesting industries for having understood this recurring boom and bust pattern in network effects and taken ownership of its own status devaluation cycles. Some strange cabal of magazine editors and fashion designers decide each season to declare arbitrarily new styles the fashion of the moment. Retiring previous recommendations before they grow stale.

There is usually no real utility change at all. Functionally, the shirt you buy this season doesn't do anything the shirt you bought last season still can't do equally well. The industry as a whole is simply pulling the frontier of scarcity forward like a wave we're all trying to surf. This season, the color of the moment might be saffron. Why? Because so uncooler than he said so. Tech tends to prioritize growth at all costs given the non rival 0 marginal qualities of digital information.

In a world of abundance, that makes sense. However, technology still has much to learn from industries like fashion about how to proactively manage scarcity, is important when goods are rivalrous. Since many types of status are relative, it is by definition rivalrous. There is some equivalent of crop rotation theory which applies to social network but it's not part of the standard tech playbook yet.

A variant of this type of status evaluation cascade can be triggered when a particular group joins up. This is because the stability of a status lattice depends just as much on the composition of the network as its total size. A canonical example in tech was the youth migration out of Facebook when their parents signed on in force.

Because of the incredible efficiency of news feed distribution, Facebook became a de facto surveillance apparatus for the young, Mommy and daddy are watching, as well as future universities and employers and dates who will time travel back and scour your profile someday. As Facebook became less attractive as a platform for the Young, many of them flock to Snapchat as their new messaging solution.

It's a femoral nature offering built in security and its UX opacity acting as a gate against clueless seniors. I've written before about Snapchat's famously opaque Easter egg UI as a sort of tamper proof lid for parents But if we combine social network utility theory with my post on selfies as a second language, it's also clear that Snapchat is a suboptimal messaging platform for older people whose preferred medium of communication remains text. Snapchat opens to a camera.

If you wanna text someone, it's extra work to swipe the left pane to reach the text messaging screen. I'd be shocked if Facebook did not at one point contemplate a version of its app that opened to the camera first instead of the news Pete considering how many odd clones of other apps it's considered in the past.

If so, it's good they never shipped it because for young people, Publishing to a graph that still contained their parents would have still been prohibitive, while for old folks who aren't as biased toward visual mediums, such a UI would have been suboptimal. It would have been a disastrous lose lose for Facebook. Patrick Collison linked to an interesting paper on network effects traps in the physical world.

They exist in the virtual world as well and status as a service businesses are particularly fraught with them. Another instance is Pete dependent user composition, a fervent early adopter group can define who a new social network seems to be for, merely by flooding the service with content they love. Before it inserted efforts to personalize the front page more quickly, Pinterest seemed like a service targeted mostly towards women, even though its basic tools set is useful to many men as well.

Because a new user's front page usually drew upon pins from their friends already on the service, the earliest cohorts, which lean female, dominated most new users feeds. My early's Pinterest homepage was an endless collage of makeup, women's clothing, and home decor because those happened to be some of the things my friends were pinning for a variety of projects. Growcho Marx was ahead of his time as a social capital philosopher, but we can build upon his work.

To his famous aphorism, we should add some variants, When it comes to evaporative cooling, 2 come to mind. I don't want to belong to a club that will have those people as a member, and I don't want to belong to any club that those people don't want to be a member of mitigating social capital devaluation risk and the Snapchat strategy.

In a leaked memo late last year, Evan Spiegel wrote about how one of the core values of Snapchat is to make it the fastest way to communicate, quote, The most durable way for us to grow is by relentlessly focusing on being the fastest way to communicate. Recently, I have the opportunity to use Snapchat V5.0 on an iPhone 4 It had much of Bobby's original code in many of my original graphics.

It was way faster than the current version of Snapchat running on my iPhone X. In our excitement to innovate and bring many new products into the world, we've lost the core of what made Snapchat the fastest way to communicate. In 2019, we will refocus our company on making Snapchat the fastest way to communicate so that we can unlock the core value of our service for the billions of people who have not yet learned how to use Snapchat.

If we aren't able to unlock the core value of Snapchat, we won't ever be able to unlock the full power of our camera. This will require us to change the way that we work and put our core product of being the fastest way to communicate at the forefront of everything we do at Snap. It might require us to change our products for different markets where some of our value add features to tracked from our core product value.

Unquote. This clarifies Snapchat's strategy on the 3 axis of my social media framework Snapchat intends to push out further on the utility access at the expense of the social capital access, which, as we've noted before, is volatile ground to build a long term business on Many will say especially Snapchat itself that it has been the anti Facebook all along because it has no likes.

It liberates people from destructive status games To believe that is to underestimate the ingenuity of humanity in its ability to weaponize any network for status games. Anyone who studied kids using Snapchat knows it's just as integral a part of high status and FOMO wars as Facebook and arguably more so now that those kids largely don't use Facebook. The only other social media app that has a sharp of a stick is Instagram, which has its true, more overt social capital accumulation mechanisms.

Still, the idea that kids use Snapchat like some pure messaging utility is and makes me wonder if people have forgotten what teenage school life was like. Whether you see people attend a party that you're not invited to on Instagram or on someone's snap, you still feel terrible. Remember Snapchat's original best friends Flint?

I'm gonna guess many of my readers don't because as noted earlier, old people probably don't play that status game if they even figured out how to use Snapchat by that point. This was just about as pure status game feature as could be engineered for teens, Not only did it show the top 3 people you snap with most frequently, you could look at who the top 3 best friends were for any of your contacts.

Essentially it made the hierarchy of everyone's friendships public making the popularity scoreboard explicit. As with aggregate follower counts and life, the best friend's list was a mechanism for people to accumulate a very specific form of social capital. From a platform perspective, however, there's a big problem with this feature Each user could only have one best friend. It put an artificial ceiling on the amount of social capital one could compete for and accumulate.

In a clever move to unbound social capital accumulation and to turn a 0 sum game into a positive sum game, broadening the number of users working hard or engaging Snapchat deprecated the very popular best friends list and replace it with streaks. If you and a friend snap back and forth for consecutive days, you build up a streak which is tracked in your friends list. Young people quickly threw their heart and souls into building and maintaining streets with their friends.

This was literally proof of work as proof of friendship, quantified, and tracked. Streets, of course, have the wonderful quality of being unbounded. You can maintain as many streets as you like. If you don't think social capital has value, you've never seen as I have a young person sobbing over having to go on vacation without their phone or somewhere without cell or Wi Fi access only to see all their streaks broken.

Some kids have resorted when forced to go abroad on a vacation to leaving their phone with a friend who helps to keep all the streets alive like some sort of social capital babysitter or surrogate. What's hilarious is how efficiently young people maintain streets. It's a daily ritual that often consists of just quickly running down your friend Flint and snapping something random, anything just to increment the street count. My nephew often didn't even bother framing the camera up.

Most of his street maintenance snaps were blurry pics of the side of his elbow, half his shoulder, things like that. Of course, as evidence of the fragility of social capital structures, streaks have started to lose heat. Many younger users of Snapchat no longer bother with them maintaining social capital James is always going to be a volatile James, prone to sudden and massive deflationary events. But while they work, they're a hell of a drug.

They also can be useful For someone snapping frequently like all teens do, having a best friend's list sorted to the top your distribution list is a huge time saver. Social capital and utility often can't be separated cleanly. Still given the precarious nature of status and given the existence of Instagram, which has always been a more unabashed social capital accumulation service, it's not a bad strategy for Snapchat to push out towards increased utility in messaging instead.

The challenge James anyone competing in the messaging space knows is that creating any durable utility advantage is brutally hard, In the game theory of tech competition, it's best to assume that any feature that can be copied will, and messaging may never be from a profit perspective, the most lucrative of businesses. As a footnote, Snapchat is also playing on the entertainment axis with its discover pain.

Almost all social networks of some scale will play with some mix of social capital utility, and entertainment, but each chooses how much to emphasize each dimension. Lengthening the half life of status games. The danger of having a proof of work burden that doesn't change is that eventually everyone who wants to mind for that social currency will have done so, and most of it will be depleted. At that point, the amount of status driven potential energy left in the social network flattens.

If at that inflection, the service hasn't made any headway in adding a lot of utility, the network can go stale. One way to combat this, which the largest social networks tend to do better than others, is add new forms of proof of work, which effectively create a new reserve of potential social capital for users to chase. Instagram began with square photos and filters.

It's since removed the aspect ratio constraint added video, lengthened video limits, and added formats like Boomerang and Stories. Its parent company, Facebook, arguably has broadened the most of any social network in the world. Going from a text based status update tool for a bunch of Harvard students to a social network with so many formats and options that I can't keep track of them all. These new hurdles are like downloadable content and video games, new levels to spice up a familiar game.

Doing so is a delicate balance because it's quite possible that Facebook is so many things to so many people that it isn't really anything to anyone anymore. It's hard to be club that admits everyone, but still wants to offer a coherent status ladder. You can argue Facebook doesn't want to be in the status game, but if so, it'd better add a lot more utility. Video games illuminate the proof of work cycle better than almost any category.

It is the draws of Beller of this type of analysis given its rapid life cycle and overt skill versus reward trade offs. Why is it, for example, that big hit games tend to have a life cycle of about 18 months? A new game offers a whole new set of levels and challenges, and players jump into the status competition with gusto. But eventually, skill differentiation tends to sort the player base cleanly. Players rise to the level of their mastery and plateau.

Simultaneously, players become overly familiar with the game's challenges, the dopamine hit of accomplishment dissipates. A franchise like, say, Call of Duty, learns to manage this cycle by investing 100 of 1,000,000 of dollars to issue a new version of the game regularly. Each game offers familiarity, but a new set of levels and challenges and environments. It's the circle of life. Some games can lengthen the cycle.

For example, casino games in Vegas pay real money to set an attractive floor on the ROI of playing. Some MMORPGs offer other benefits to players like a sense of community, which last longer than the pure skill challenge of playing the game. Looking at some of the longer lasting video game franchise like World of Warcraft, League of Legends, and Fortnite reveal a lot about how a parallel industry has succeeded in lengthening the productive middle age of its top properties.

I suspect the frontier of social network strategy will draw more and more upon deep study of these adjacent and much older social capital James. Fashion, video games, religion, and society itself are some of the original status as a service businesses. Why some companies will always struggle with social? Some people find status games distasteful. Despite this, everyone I know is engaged in multiple status games.

Some people smear it people, hashtags spamming on Instagram, but then retweet a phrase on Twitter. Others roll their eyes at photo albums of expensive meals on Facebook, but then submit research papers to prestigious journals in the hopes of being published. Parents show off photos of their children's performances at recitals. People preen in the mirror while assessing their outfits. Employees flex on their peers and meetings.

Entrepreneurs complain about 30 under 30 lists while wishing to be on them, reporters check the tech mean leaderboards. Life is nothing if not a nested series of status contests. Have I met a few people in my life who are seemingly above all status games? Yes, but there's so few as to be something akin to miracles and damn them for making the rest of us feel lousy over our vanity. Number of people who claim to be above status games exceeds those who actually are.

I believe their prosthesis taste to be genuine, but even if it isn't, the danger of their indignation is that they actually become blind to how their product functions in some ways as status as a service business. Many of our tech giants in fact are probably always going to be weak at social apps and executive turnover or smart acquisitions. Take Apple, which has actually tried before building up social features, They built 1 in music, but it died off quickly.

They've tried to add some social features to the photo album on iOS. Though every time I've tried them out, I end up more bewildered than anything else. I messages Apple fans might proclaim. 100 of millions of users a ton of usage among teens. Isn't that proof that Apple can do social? Well, in a sense, but mostly one of utility. Apple's social efforts tend to be social capital Baron.

Since Apple positions itself as the leading advocate for user privacy, it will always be constrained on building out social features since many of them trade off against privacy. Not all of them do and it's possible a social network based entirely on privacy can be successful, but one, it would be challenging and 2, it's not clear many people mind trading off some privacy for showing off their best lives online.

This is of course exactly why many people love and choose Apple and they have more cash than they can spend. No one need to feel sorry for Apple and as is often the case, a company's strengths and weaknesses stem from the same quality in their nature. I'd rather Apple continue to focus on building the best computers in the world still, it's a false trade off to regard Apple's emphasis on privacy and excuse for awkward interactions like photo sharing on iOS.

The same inherent social myopia applies to Google, which famously took a crack at building a social network of its own with Google plus. Like Apple, the team in Mountain View has always seen more suited to building out networks of utility rather than social capital. Google's often spoken of as a company software engineers have the most power. Engineers in my experience are driven by logic and status centered products are distasteful or mysterious to them Morgan both.

Google will probably always be weak at social, but as with Apple, they compensate with unique strengths, oddly enough Pete controlling one of the 2 dominant mobile platforms they have yet to be able to launch a successful messaging app. That's about as utility driven a social application as there is, akin to email where Google does have a sizable market share with Gmail.

It's a shame as Google could probably use social as an added layer of utility in many of their products, especially on Google Maps. Amazon and Netflix both launched social efforts, though they've largely been forgotten. It's likely the attempts were premature, push out into the world before either company scale to enable positive flywheel effect.

It's hard enough launching a new social network, but it's even harder to launch social features built around behaviors like shopping or renting DVDs through the mail occur infrequently. Neither company's social efforts were the most elegantly designed either. Facebook is underrated for its ability to launch a social product that's scaled to 1,000,000,000 of users, Its design team has a mastery of maintaining ease of use for users of all cultures and ages.

Given the industrialization of fake reviews and given how many people have prime accounts, Amazon could build a social service simply to facilitate product recommendations and reviews from people you know and trust.

I increasingly turn a skeptical eye to both extremely positive and negative reviews on Amazon, even if they are listed as coming from verified purchasers, the key value of a feature like this would be utility, but the status boost from being a product expert would be the energy turning the flywheel.

The thing is Amazon actually has a track record of harnessing social dynamics in service of its retail business with features like reviewer rankings and global sales rank, both are discussed a bit further down. As for Netflix, I actually think social isn't as useful as many would think in generating video recommendations That's a discussion for another day, but suffice it to say there is some narcissism of small differences when it comes to film taste.

However, as an amplifier of Netflix as the modern water cooler, as a way to encourage her behavior, social activity can serve as an added layer of buzz that for now is largely opaque to users inside Netflix apps. It's a strategy that is only viable if you can achieve the size of subscriber base that Netflix has and thus is a form of secondary scale advantage that they could leverage more.

However, there's another reason that senior execs at most companies, even social networks are ill suited to designing and leveraging social features. It's a variant of winners curse. Let them eat cake. You'll hear it again and again. The easiest way to empathize with your users is to be the canonical user yourself. I tend to subscribe to this idea, which is unfortunate because it means I have hundreds of apps installed on my phone at any point in time.

Just trying to keep up with the product zeitgeist. With social networks, one of the problems with seeing your own service through your user's eyes is that every person has a different experience given who they follow and what the services algorithm feeds them. When you have 100 of millions or even billions of users across different cultures, how do you accurately monitor what's going on?

Your metrics may tell you that engagement is high and growing But what is the composition of that activity and who's exposed to what parts? Until we have metrics that distinguish between healthy and unhealthy activity, Social Network execs largely have to steer by anecdote by licking a finger and sticking it in the air to ascertain the direction of the wind. Some may find it hard to believe when execs plead ignorance when alerted to the scope of problems on their services, but I don't.

When it comes to running a community, the thickest veil of ignorance is the tidy metrics dashboard that munges 100 1000, or maybe even millions of cohorts into just a handful. To really get the sense of the health of a social network, one must understand the topology of the network and the volume and nature of connections and interactions among 100 of 1,000,000 or even 1,000,000,000 of users.

It's impossible to process them all, but just as difficult today to summarize than without losing all sort of critical detail, but perhaps even more confounding is that executives at successful social networks are some of the highest status people in the world. Forget 1st world problems, they have Flint 1 percent or even Flint 001 percent problems. On a day to day basis, they hardly face a single issue that their core users grapple with constantly.

Engagement goals may drive them towards building services that are optimized as social capital gains but they themselves are hardly in need of more status, except of a type they won't find on their own social networks. The one exception may be Jack Dorsey As any tweets he posts now attracts an endless stream of angry replies.

It's hard to argue he doesn't understand firsthand the downside risk of a public messaging protocol, maybe for victims of harassment on Twitter, we need a jack that is less thick skinned and stoic, not more. The social capital financial capital exchange. If you fully believe in the existence and value of social capital, you can skip this section, though it may be of interest in understanding some ways to estimate its value.

That some of the largest most valuable companies in history have been built so quickly in part on creating status games should be enough to convince you of the existence and value of social capital. Since we live in the age of social media, we live in perhaps the peak of social capital assets in the history of civilization. However, as noted earlier, One of the challenges of studying it is that we don't have agreed upon definitions of how to measure it and thus to track its flows.

I haven't found a clean definition of social capital, but think of it as capital that derives from networks of people. The fact is I have deep faith in all my readers when it comes to social capital that like Supreme Court as potter Stuart once said about pornography, you know it when you see it. But more than that, the dark matter that is social capital can be detected through those exchanges in which it converts into more familiar stores of value.

If you've ever borrowed a cup of milk from your neighbor or relied on them to watch your children for an afternoon, you know the value of social capital. If you lived in an early stage of human history, when people wandered in small nomadic tribes and regularly clog people of other tribes to death with sticks and stones, You also know the value of social capitals for the protective cocoon of its presence and the sudden violence in its absence.

Perhaps the easiest way to spot social capital is to look at places where people traded for financial capital. With the maturing of social networks, we've seen the infrastructure to facilitate these exchanges come a long way, These trades allow us to assign a tangible value of social capital the way one might understand the value of an intangible asset like leveled up world of Warcraft characters when they're sold on the open market.

Perhaps the most oft cited example of a social to financial capital exchange is the type pulled off by influencers on Instagram and YouTube. I've Pete models who in another life might be mucking outside an Abercrombie and Fitch or working the front door at some high end restaurant in Los Angeles but instead now pulled down over 7 figures a year for posting photos of themselves luxurinating in specific resorts, wearing and using products from specific sponsors.

When Jake or Logan Paul post a video of themselves preening in front of their new Lamborghini in the driveway of the mansion they bought using money stemming from their YouTube streaming, we know some exchange of social capital financial capital has occurred upstream, reshaped distribution, and you reshape the world. Similarly, we see flows the other direction, Pete buying 100 of 1000 of followers on Twitter is one of the cleanest examples of trading financial capital for social capital.

Later, that social capital can be converted into financial capital, any number of ways including charging sponsors for posts. Depending on the relative value in both directions, there can be arbitrage. Clout, a much mocked company online, attempted to more precisely track social capital valuations of people online, but just as truly wealthy mock the new Vaux Rich as Ghoche many found the explicit measurement attempts unseemly.

Most of these same people, however, compete hard for social capital online, so the designation of which status games are acceptable is itself a status game. Asia where monetization models differ for a variety of culture and contextual reasons provides an even clearer evaluation of social capital. There, many social networks allow you to directly turn your social capital into financial capital without leaving the network.

For example, on live streaming sites like y y, you can earn digital gifts from your viewers which cost actual money, the value of which you split with the platform. In the early days, a lot of y y consisted of cute girls seeing pop songs. These days, as seen in the fascinating documentary People's Republic of Desire, it has evolved into much more. Agencies have sprung up in China to develop and manage influencers, almost like farm systems in baseball with player development and coaches.

The speed at which social capital can be converted into your own brand product lines is accelerating by leaps and bounds and nowhere more so than China. Meanwhile, on Twitter, if one of your tweets somehow goes massively viral, you still have to attach a follow-up tweet with a link to your GoFundMe page of vulgar monetization hacking comparison. It's China, not the US, that is the bleeding edge of influencer industrialization.

I'm skeptical that all of Asia's monetization schemes will export to the culture in America, But for this post, the important thing is that social capital has real financial value and networks differ along the spectrum of how easily that exchange can be made. Social capital, accumulation, and storage. As with cryptocurrency, it's no use accumulating social capital if you can't take ownership of it and store it safely.

Almost all successful social networks are adept at providing both accumulation and storage mechanisms. It may sound obvious now, but consider the main apps and services that failed to provide something like this and saw all their value leaked to other social networks. Hipsmatic came before Instagram and was the first photo filter app of note that I used on mobile. But unlike Instagram, it charged for its filters and had no profile pages, social network, or feed.

I used hipstomatic filters to modify my iPhone photos and then posted them to other social networks like Facebook. Hipstomatic provided utility, but captured none of the social capital that came from the use of its filters. Contrast this with a company like Musically, which I mentioned above. They came up with a unique proof of work burden, but unlike Pete somatic, they wanted to capture the value of the social capital that its users would mind by creating their musical skits.

They didn't want these skits to just be uploaded to Instagram or Facebook or other networks. Therefore, they created a feed within the app to give its best user's distribution for their work. By doing so, musically owned that social capital it helped generate, If your service is free, the best alternative to capturing the value you create is to own the marketplace where that value is realized and exchanged.

Musicly founder Alex Zhu licensed starting a new social network to founding a new country and trying to attract citizens from established countries. It's a fun analogy, though I prefer the cryptocurrency metaphor because most users are citizens of multiple social networks in the tech world. Managing their social capital assets across all of those networks as a sort of diversified portfolio of status.

For the individual user, we've standardized on a few basic social capital accumulation mechanisms. There's the profile to which your metrics attach most notably your follower count and list. Follower or friends are the atomic unit of many social networks and the advantage of followers as a measure is it generally tends to only grow over time. It also makes for an easy global ranking metric.

Local scoring of social capital at the atomic level usually exists in the form of likes of some sort, one of the universal primitives of just about every social network. These are more ephemeral in nature given the nature of feeds which tend to prioritize distribution of more recent activity but most social networks have some version of this since followers tend to accumulate more slowly.

Likes correlate more strongly with your activity volume and serve as a source of continual short term social capital injection, even if each like is in the long run less valuable than a follower or a friend. Some networks allow for accelerated distribution of posts through resharing, like retweeting, with many unintended consequences, but that's a discussion for another day.

Some also allow comments and there are other network specific variants, but most of these are some form of social capital that can attach to posts. Again, this isn't earth shattering to most users of social networks. However, where it's instructive is in examining those social networks which James such social capital accumulation difficult. A good example is the anonymous social network like Whisper or secret.

The premise of such social networks was that anonymity would enable users to share information and opinions they would otherwise be hesitant to be associated with. But as is often the case, that strength turned out to be a weakness because users couldn't really claim any of the social capital they created there. Many of the things written on these networks were so toxic that to claim ownership of them would be social capital negative in the aggregate.

A network like Reddit saw this through the implementation of Karma, but it's fair to say that it's also been a long struggle for Reddit to suppress the dark asymmetric incentives unlocked by detaching social capital from real life identity and reputation.

Beller Srinivasan once mentioned that someday the cryptocurrencies might allow someone to extract the value from an anonymous social network without revealing their identity publicly, but for now, at least a lot of the status on social networks isn't monetary in nature. A lot of it's just for the lulz. For any single user, the stickiness of a social network often correlates strongly with the volume of social capital they've amassed on that network.

People sometimes will wholesale abandoned social networks, but it's rare unless the status earned there has undergone severe deflation. Social capital does tend to be non fungible, which also tends to make it easier to abandon ship. If your Twitter followers aren't worth anything on another network, it's less painful to just walk away from the account if it isn't worth the trouble anymore.

It's strange to think that social networks like Twitter and Facebook once allowed users to just wholesale export their graphs to other networks it allowed competing networks to jumpstart their social capital assets in a massive way, but that only goes to show how even some of the largest social networks at the time underestimated the massive value of their social capital assets.

Facebook also at one point seemed to overestimate the value of inbound social capital that they'd capture by allowing 3rd party services and apps to build on top of their graph. The restrictions on porting graphs is a positive from the perspective of the incumbent social networks, but from a user point of view, it's frustrating.

Given the difficulty of grappling with social networks given the consumer welfare standard for antitrust, an option for curbing the power of massive network of fax businesses is to require that users be allowed to take their graph with them to other networks as many have suggested. This would blunt the power of social networks along the social cap access and force them to compete more on utility and entertainment James. Social capital arbitrage. Because social networks often different audiences.

And because the configuration of graphs, even when there are overlapping users often differ, opportunities exist to arbitrage social capital across apps. A prominent user of this tactic was at the Fat Jewish, the popular Instagram account. His real name was Josh Ostrovsky. He accumulated millions of followers on Instagram in large part by taking other people's jokes from Twitter and other social networks and then posting them as his own on Instagram.

Not only did he rack up followers and likes by the millions, he even got signed with CAA. When he got called on it, he claimed it wasn't what he was about. He said, again, Instagram is just part of the larger thing I do. I have an army of interns working out of the back of a nail salon in Queens. I have so much stuff going on. I'm writing a book. I've got Rose. I need them to bathe me I've got so many other things that I need them to do.

It just didn't seem like something that was extremely dire, which is really a long bizarre way of saying, you caught me. Pete he who does not have an army of interns bathing them throw the first stone. Since then, similar joke aggregator accounts on Instagram have continued to proliferate but some of them now follow the post fat Jewish scandal social norm of including the proper attribution for each joke in the photo.

For example, including the Twitter username and profile pic with the photo of the borrowed tweet. But many do not, and even for those who do, the most prominent can trigger a backlash. The hashtag fuck fuck Jerry is an emergent protest against the popular Instagram account at fuck Jerry, which, like at fat Jewish, curates the best jokes from others and daytraded that into a small media company, one that featured in the fire festival debacle.

As long as we have multiple social networks that don't quite work the same way, there will continue to be these social media arbitragers copying work from one network and to a different network to accumulate social capital on closing the distribution gap. Before the internet, members ordered to quoting movies or Mitch Hedberg jokes in conversation to steal a bit of personality and wit from a more gifted comedian, This is the modern form of that supercharged with internet scale reach.

At some level, a huge swath of social media posts are just attempts to build status off of someone else's work. The 2 tenets at the start of this article predict that this type of arbitrage will always be with us. Consider someone linking to an article from Twitter or face book or posting a screenshot of a paragraph from someone else's book, the valence of the reaction from the original creators seems to vary according to how the spoils of resharing are divvied up.

The backlash to Instagram accounts like the fat Jewish and fuck Jerry may stem from the fact they don't really share value from those whose jokes they redistribute. Whereas posting an excerpt from a book on Twitter, for example, generates welcome publicity for the author. Social capital gains as temporary energy sources. Structured properly, social capital incentive structures can serve as an invaluable incentive.

For example, curation of good content across the internet remains a never ending problem in the age of infinite content. So offering rewards for surfacing interesting things remains one of the oldest and most reliable marketplaces of the internet.

A canonical example is Reddit, where users bring interesting links among other content in exchange for a currency literally named Karma accumulate enough karma and you'll unlock other benefits like the ability to create your own subreddit or to join certain private subreddits. Twitter is another social network where people tend to bring interesting content in the hopes of amassing more followers and likes.

If you follow enough of the right accounts, Twitter becomes an interesting this pellet dispenser, Some companies which aren't typically thought of as social networks will turn to social capital James to solve a particular problem. On one Christmas vacation, I stumbled downstairs for a midnight snack and found my friend father 3 still up typing on his laptop.

What I asked was he still doing up when he had to get up in a few hours to take care of his kids He was, he admitted sheepishly, banging out a litany of reviews to try to maintain his Yelp elite status. To this day, some of my friends still speak briskly about some of the Yelp elite parties they attended back in the day, think of how many reviews Beller accumulated in the early days just by throwing a few parties.

It was no doubt well worth it and at the point when it isn't What's the marginal value of writing the at last count, 9655th review of Pete in New York City? It's something easily dialed back or deprecated. Amazon isn't typically thought of as a company that understands social, but in its early days before even Yelp, it employed a similar tactic to boost its volume of user reviews. Amazon top reviewers was a globally ranked list of every reviewer on all of Amazon.

You could boost your standing by accumulating more useful review votes from shoppers for your reviews. I'll always remember Harriet Klausner who dominated that list for years reviewing seemingly every book and print Amazon still maintains a top customer reviewer list, but it has been devalued over time as volume of reviews is no longer a real problem for Amazon. Another example of a status game that Amazon employed a great effect and which doesn't exist anymore was global sales rank.

For a period, every product on Amazon got ranked against every other product in a sales rank leaderboard, and the figure would be displayed prominently near the top of each product detail page. Book authors pointed customers to Amazon to buy their books in the hope of goosing their sales rank same way authors today often commit to buy some volume of their own book when it releases in the hopes of landing on the New York Times Beller list the week it releases.

IMDB and Wikipedia are 2 companies which built up entire valuable databases almost entirely by building mechanisms to harness the equal mix of status seeking and altruism of domain experts. As with reddit, accumulating a certain amount of reputation on these services unlocked additional abilities, and both companies built massive databases of information with very low production and tutorial costs.

You can think of social capital accumulation incentives like these as ways to transform the potential energy of status into whatever form of kinetic energy your venture needs. Why most celebrity apps fail? For a while, a trend among celebrities was to launch their own app. The Kardashian app is perhaps the most prominent example, but there are others. From a social capital perspective, these create little value because they simply draw down upon the celebrity's own status.

Almost every person who joins just wants content from the eponymous celebrity. The volume of interaction between the users of the app themselves, the fans, is minimal to nonexistent. Essentially, these apps are self owned distribution channels for the stars. And as such, they tend to be vanity projects rather than durable assets.

You can imagine such apps trying to foster more interaction among the users, but that is a really complex effort, and most such efforts have neither the skills to take this on nor the will or capital necessary to see it through. Another way to think of all these celebrity ventures is to measure the social capital and utility of the product or service if you remove the social capital from the celebrity in question. A lot minus a lot equals 0. Conclusion. Everybody wants to rule the world.

In the immortal words of Obi Wan Kenobi, status is what gives a Jedi is power. It's an energy field created by all living things, It surrounds us and penetrates us. It binds the galaxy together. That many of the largest tech companies are in part, status as a service businesses is not often discussed. Most people don't like to admit to being motivated by status and few CEOs are going to admit that the job to be done for their company is stroking people's egos.

From a user perspective, people are starting to talk more and more about the soul withering effects of playing an always on status game through the social apps on their always connected phones. You could easily replace status as a service with FOMO as a service. It's one reason you can still meet so many outrageously wealthy people in Manhattan or Silicon Valley who are still miserable.

This piece is not my contribution to the Beller trod genre of medium think pieces counseling stoicism and Buddhism or transcendental meditation or deleting apps off your phone to find inner peace. There's wisdom in all of those, but if I have anything to offer on that front, it's this. If you want control of your happiness don't tie it to someone else's scoreboard. Recall the wisdom of Neil McCauley in the great film heat.

At the end of heat, he fails to follow his own advice and look what happened to him. Pete, I come not to bury Caesar, but also not to praise him. Rather, as Emily Wilson says at the start of her brilliant new translation of the Odyssey, Beller me about a complicated man. So much of the entire internet was built on a foundation of social capital of intangible incentives like reputation.

Before the tech giants of today, I combed through news groups, blogs, massive FAQs, and countless other resources built by people who felt in part a jolt of dopamine from the recognition that comes from contributing to the world at large. At Amazon, someone coined a term for this type of motivational currency, ego boo, shortfall, you guessed an ego boost. Something like Wikipedia built in large part on ego boo is a damned miracle. I don't want to lose that.

And I don't think we have to lose that. Of course, like the force, status is equally potent as fuel for the darkest, cruelest parts of human nature. If you look at the respective mission statements of Twitter and Facebook, to give everyone the power to create and share ideas and information instantly without barriers, and to give people the power to share and make the world more open and connected, what is striking is the assumption that these are fundamentally positive outcomes.

There's no questioning of what the downsides of connecting everyone and enabling instant sharing of information among anyone might be. Of course, both companies and many other have now had to grapple with the often unbounded downside risk of just wiring together billions of people with few guardrails. Reading the senate intelligence reports on Russian infiltration of social networks in the 2016 election, what emerges is unsettling.

In so many ways, the Russians had a more accurate understanding of the users of these services than the product teams running them. In either case, much of the cost has been born not by the companies themselves, but society. Companies benefit from the limitless upside of their models, so it's not unreasonable to expect them to bear the costs just as we expect corporations to bear the cost of polluting rivers with their factories.

If we did as Hunter Walk has noted, profit margins would be lower, but society and discourse might be healthier.

Contrary to some popular Twitter council, the problem is not that the leaders of these companies don't have humanity's degrees, but the solution also doesn't lie in ignoring that humans are wired to pursue social capital In fact, overlooking this fundamental aspect of human nature arguably lands us here at the end of this first age of social network alliance, wondering where it all went haywire, If we think of these networks as marketplaces trading

only in information and not in status, then we're only seeing part of the machine. The medicine phone call has been coming from inside the house all along. Ben Thompson refers to this naivete from tech executives as the polyanis assumption. Having worked on multiple products in my career, I'm sympathetic to fact that no product survives engagement with humans intact, but this first era of status as a service businesses is closing and pleading ignorance won't work moving forward.

To do so is to come off like captain Louis Reynelle in Casablanca. For more audio essays from the people who've built companies like Instacart, Facebook, Trello, HubSpot, and Dropbox, visit the founder list atnfx.com Omri subscribe to the NFX podcast at podcast.nfx.com Omri wherever you get your podcasts.