After boring accounting stuff yesterday, let's do another exercise in "trivial self-observation" which is hopefully more entertaining. Let's talk about semi-privacy: the littoral between public and private spheres. #TuesdayThoughts
Sunday was #DataPrivacyDay and private vs public matters *a lot* in law, economics, sociology, cryptosecurity of course, but how much time have you spent recently choosing semi-privacy over real privacy?
There's an econ joke that defines economics as "finding separating hyperplanes in the n-dimensional vector space", but often investigating is more interesting than finding them. Turns out the public-private boundary is as fuzzy as most boundaries we like to simplify as in-out.
When was the last time you poured your heart out to your best friend about a messy breakup -- in a cafe? On your Facebook timeline?
Most security efforts (cyber or real) focus on properly protecting your privacy and chide you for not doing enough: scrappy passwords, door unlocked, ramshackle fences. But the creation of semi-private spaces might be the most ingenious social engineering of the 21st century.
Semi-private spaces are the spaces where we feel comfortable doing private things in public because we feel that our voices will not carry far and those who hear it won't be all that interested or won't use it against us.
So introspection time: when do you spend in semi-private spaces, and how did it affect your behavior? I'm off to a cafe now for a "private" evening...
Twitter is a semi-private space. Starbucks puts a lot of effort into making semi-privacy comforting. If you use Gmail, you're ok with someone reading your mail, and if it's only a machine. Facebook lets you post a status update to "friends of friends".
The new economy runs on semi-privacy. Why? Or financial budget is limited. Our supply of private information is unlimited, and, more relevantly, it's non-rivalrous. Any private information we pass on we can still keep ourselves.
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To assess the relevance of blockchain to economics, it might be useful to sidestep the politically charged topics for the moment, to postpone judgment on the feasibility of any currently proposed solutions, and to focus entirely on the problem it tries to tackle.
We can, if we want, divide the "machine age" into five phases that align with the automation of particular enterprise functions: production, administration, supply, demand. The function that is still largely resisting automation is governance.
This might be somewhat counterintuitive since accounting, a major component of enterprise governance, was one of the earliest adopters of mainframe computing. But the role of automation in accounting is largely restricted to administration, the inward-looking part.
From my own experience: There is no job market for economists* in German tech companies. One of the reason why the German big players missed the move from business processes to business models.
*Economics = VWL
H/t @abhishekn papers.ssrn.com/sol3/papers.cf…
"Business process" is about optimizing the enterprise as a production function. "Business model" is about optimizing the enterprise as a market participant. Germany as a tech economy is really good at the former, and has created a specialized labor market around it.
Business process is the realm of industrial engineering. Business modeling is the realm of industrial organization, a field that is still almost completely unknown in Germany, more than twenty years into the internet era.
In a B2B context (i.e. "enterprise blockchains" aka "DLT") speed is indeed the main driver for any kind of research into blockchain. The two main areas of research, settlement automation and supply chain traceability, are driven by expected speed advantages over current tech.
Which shouldn't come as a surprise to anyone knowledgeable in enterprise systems. These processes are notoriously difficult to implement in an enterprise-centric systems landscape. Settlement takes days, establishing provenance can take weeks.
For industries with a high premium on real-time information (FMCG) or information integrity (pharma, food) "blockchains" are a heaven-sent for a problem that is only becoming more pressing over time.
Hey, we sure like Uncle Bert, but we could do without his political rants on FB. This problem that connectivity clashes with preferences gave rise to websites like Flickr or LastFm where we can match preference and connectivity.
One of the key shortcomings of network theory is that it's still largely a theoretical construct, with weak empirical support. Most of our understanding is anecdotal, which is subject to ex post rationalization (like almost everything else in innovation econ).
Indeed since interaction effects undermine revealed preference, it's very tricky to empirically separate preference from influence in observed group behavior.
Let's talk a bit about what @VitalikButerin called "anti-network effects". TLDR: There is no empirical basis for the notion that network effects inevitably lead to a winner-takes-all outcome. In most cases, such a conclusion is simply a matter of framing.
One of the iffy folk tales in network economics emerged when Brian Arthur didn't get his papers on increasing returns published in 1985/6 and opined that this must be that this must be bc his ideas were too radical and thus rejected by mainstream economists.
That maverick story was repeated in Mitchell Waldrop's 1992 on Complexity and the early days of the Santa Fe Institute, and like many of those truthy-sounding stories it just refuses to die. It's also mostly nonsense.
I've seen quite a bit of "fishing for truth" about the interlocking topics of network effects, technology standards, platforms/two-sided markets, and blockchains recently, so it might be worthwhile untangling the lot.
TLDR: There's still a massive amount of confusion reverberating through the field, with sloppy definitions and the penchant to peddle old and largely false folk tales taking the brunt of the blame. Kinda ironic bc "path dependency" is a core concept.
The common impetus for the work in this field is to challenge the underlying assumption of consumer choice theory in standard microeconomics that individuals make choices disconnected from each other and reap utilities disconnected from each other.