TiB 164: Zuckerberg as monarch; the limits of IP; crypto and values; and more...

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Zuckerberg, Facebook and lessons from history

A surprisingly relevant lesson from early modern history is that, counterintuitively, an absolute monarch can increase their power by giving some of it away. The reason is that unconstrained absolute monarchs can’t make credible commitments about their future behaviour: everyone knows they can always renege. But this makes it harder to, for example, raise money through loans or enter into alliances. Creating or strengthening power-sharing institutions, like parliaments, can help fix this (For classic papers on this, see here and here).

Mark Zuckerberg has learned this lesson, sort of. If regulation is one of the few existential threats to your business and giving you a kicking is a bipartisan pastime, the ability to credibly say that certain political decisions are out of your hands is a major asset. This was the idea behind Facebook's independent Oversight Board, which was announced a couple of years ago (see TiB 88 for more). The Board has the power to make uphold or reverse Facebook's content moderation decisions, which are sometimes high stakes politically. The king's hands are tied, which makes him stronger.

That was the idea... but it doesn't seem to have worked out in practice. This week the Oversight Board announced its decision on whether to uphold Facebook's banning of Donald Trump, which it made after the storming of the Capitol in January. Its answer, quite pointedly, was that Facebook couldn't punt responsibility in this way and needed to decide itself. As Judd Legum argues, the problem is that Facebook hasn't really given up any power, so its attempts to hide behind the Board ring hollow. Perhaps it's time for Facebook's Glorious Revolution.

Learning-by-doing > Intellectual Property

The Biden Administration this week announced support for intellectual property waivers on COVID vaccines to accelerate the end of the pandemic. The problem is, as Alex Tabarrok explains in this wonderful, righteously angry post, IP is not the bottleneck. Manufacturing is. Some of this is because key raw materials are in short supply (as Tabarrok says, "plastic bags are a bigger bottleneck than patents"), but some is simply because the processes are complex and new:

[E]ven Moderna and Pfizer don’t yet fully understand their production technology, they are learning by doing every single day [My emphasis]

This challenge isn't confined to vaccine manufacturing. It has echoes in many strategically important industries, including (surprise!) semiconductors. I highly recommend this excellent piece on the history of semiconductors and industrial policy in America. The core argument is the early days of the industry, US policy focused on using government procurement and grants to create a robust ecosystem of small firms pushing the "technological frontier” and larger firms investing heavily in process improvements to enable innovation to scale up.

But in the 1970s, the authors say, this gave way to "capital-light science policy" which led to a handful of behemoths (like Intel) and lots of asset-light (i.e. IP-only) innovators. The problem is that the latter group doesn't create or capture process improvements, which left the whole domestic supply extremely fragile, especially once Intel lost its technology edge (see TiB 158):

Learning-by-doing cannot be easily simulated in a low-capex asset-light production environment

In short, capital-light is great for investors seeking return on equity, but not so good for national security and resilience. This poses a conundrum for policymakers - and is another one to chalk up to the stubborn persistence of the physical world (see TiB 109 and 161).

Crypto and the problem of "scaling values"

One critique of the crypto/blockchain/Web3 world is that it's not actually delivered much of real-world importance, beyond making some people a lot of money. But there have been some good recent bull cases: see Chris Dixon's recent Invest Like the Best episode or Packy McCormick's long and excellent post on how Web3 might offer the best chance of unseating today's tech giants (Interestingly, given the Facebook discussion above, Dixon calls out the ability to "write code that makes strong commitments about how it will behave in the future” as one of crypto's advantages)

As an example, Tal Shachar has a good post from a couple of weeks ago on how and why we might expect Decentralised Autonomous Organisations (DAOs - good intro here) to unlock new possibilities for funding and enabling creative work. The argument is that DAOs combine the best parts of investment (like WeFunder or Crowdcube), membership (like Patreon) and crowdfunding (like Kickstarter) platforms to "intertwine two kinds of motivations that are usually seen as far apart: social and financial".

But is this how things will play out in practice? Danny Zuckerman makes the case against in this thread (Thanks Zefi for the link). Zuckerman argues that financial incentives "crowd out other values": once people can get rich through participation, communities become markets, and mercenary behaviours dominate. It's hard to fix this "on-chain" (which reminds me of the Vitalik Buterin point about off-chain legitimacy that we discussed in TiB 158). Nevertheless, it's an exciting space. As Schachar says:

[W]hen thinking about Creator DAOs forget about the structures that currently exist today... It’s not about creating old stuff with a DAO. It’s about ‘the new stuff a DAO allows us to create.’

Quick links

What superspreading means. "Each person in the UK who got COVID in late Jan 2020 went on to cause 3,000 follow-on cases and 25 deaths"
Is there life on Mars? Robin Hanson says maybe. Erik Hoel says nah.
There's plenty of room at the bottom. Low end wages are exploding (see also this very good piece by Joe Weisenthal) .
Doctor, who? Interesting results on the effect of team structure and changes on creativity.
History is extraordinarily contingent. Manhattan Project edition (amazing story).

The bit at the end...

Thanks for reading all the way to the end (though TiB has been described as "mercifully short").

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Until next week,

Matt Clifford

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