When dominant companies launch big open products they’d don’t fully control because they'll win anyway
Any time you can make something important legible to computers, you can change the world. If you look at all the revolutions that happened after smartphones got significant penetration, it was because suddenly people’s locations were legible and the world around them was legible with cameras. Suddenly you have Uber, Instagram, all these things.
How does legibility come about in the world? Censuses are an obvious example; it’s difficult to plan a tax regime or carry out a vision when the population is illegible. From James C. Scott’s “Seeing Like a State: How Certain Schemes to Improve the Human Condition Have Failed” (I didn’t read this book; I’m just distastefully blockquoting Venkatesh’s post on legibility):
The more I examined these efforts at sedentarization, the more I came to see them as a state’s attempt to make a society legible, to arrange the population in ways that simplified the classic state functions of taxation, conscription, and prevention of rebellion. Having begun to think in these terms, I began to see legibility as a central problem in statecraft. The pre-modern state was, in many crucial respects, particularly blind; it knew precious little about its subjects, their wealth, their landholdings and yields, their location, their very identity. It lacked anything like a detailed “map” of its terrain and its people.
Other times, legibility emerges, and new companies spring up to capitalize on the world’s newfound datasets. From Byrne Hobart’s post about iBuyers, which, in the unabridged version of the quote below, also cites this James C. Scott fella:
Zillow is buying homes in markets like Phoenix, Las Vegas, and Miami. Opendoor is in similar markets. Both companies skew towards the “sand states” that were ground zero for the real estate bubble. This is not a coincidence: the bubble increased housing supply in these markets, and in order to most efficiently increase supply, homebuilders tended to standardize homes. This reduces the number of variables necessary to model the market price of a home — a model with fewer features is a model that’s less likely to overfit...
They’re essentially following a path forged by the last bubble — when the market had high demand for generic residential real estate, the result was some extremely generic residential real estate. Bubbles systematically impose legibility on the real world, because every bubble starts with an abstract vision of how the world ought to work, and then deploys capital to make it so. You can see countless examples of this in history:
• The rise of global trade incentivized the development of longitude, literally adding an axis to the graph of where everything is in the world.
• The railway bubble added the dimension of time, by giving travel within countries a fixed timetable.
• Electrification in the 1920s standardized factory layouts and appliances; power was a sort of “API” built out in the first half of the twentieth century, which later technologies like microwaves, TVs, and computers could directly tap into.
• The Internet bubble pulled a lot of information online, jammed it all into HTML, and then made that HTML the endpoint of search engines. If you didn’t format your content in a way search engines liked, it basically didn’t exist (sorry, flash-based websites!), so everyone stuck to the common standard.
So we have two ways in which legibility is forged: Via governments seeking to exert more control, and via financial bubbles collectively seeking to expand economic opportunity. The former is accomplished systematically with power, the latter more organically with financial incentive. It follows that, in the rare scenario when these two forces converge—namely, a company with a lot of power and a lot of financial incentive—legibility is to be forged in the image of that company’s incentives.
Google wins when information is more legible. They made existing information in the world legible through search, and now has the power and incentive to make information that was once illegible legible. Hence Android, which assures that the world’s information isn’t locked into iOS, and all the tooling to structure websites and apps in a way that exposes them to Google. Even though Android is open source, and all that information on the web is also exposed to competitors, Google has the people, processes and purpose to know that it’ll win when information in the world is legible. This is also why TensorFlow and Chromium are open source, and Google Analytics is free. While legibility is a different concept than commoditizing your complement, they’re related; even if the world is equally legible to Google’s competitors, Google can do more with the commodity through scale.
Microsoft wins when real world products and services become legible software. This is not what you would have concluded during Microsoft’s decline, as they tied their fortunes to controlling distribution to end users on a full Windows stack via failed attempts in mobile. Their bigger mistake was waiting too long to embrace open source, as it turns out there are all kinds of business models Microsoft could have executed we earlier. Microsoft has always had the people, processes and purpose to sell great products to developers whose work is all legible on Github and the attention to sell to enterprise decision makers is addressable via the internet (think LinkedIn), even if it’s not it’s all Microsoft all the way down.
Facebook wins when interactions between people are more legible. They make it so by normalizing social interaction via posts on Facebook and Instagram—what else is a Facebook or Instagram post but a protocol for individuals to advertise their social worth? Now they have the people, processes and purpose to know they’ll win whenever interactions between people are more legible, exclusivity be damned. Hence Libra.
This is my retort to the take that Libra is a bait-and-switch. For one, things are never so black-and-white. For another, there are heavy hitters in the Libra Association that even Facebook may not want to cross. And most importantly, I suspect Facebook is simply confident enough that it can win without total control, because Facebook has the people and people and processes to win when financial interactions between people, and between people and businesses, are more legible.
Here’s a rundown of some of great posts on legibility