All Things Technology, Film, and Media, with Eugene Wei

Eugene is a former product executive who is one of the best technology bloggers online today. Since 2001, Eugene has been publishing a blog and newsletter called Remains of the Day where he writes about technology and media. The blog distills complicated consumer tech trends not just from a product design standpoint, but also from a user psychology perspective. His essays on Status as a Service (StaaS) and Seeing Like an Algorithm serve as guiding mental models for the tech community.  

Eugene’s past experience gives him a unique historical perspective on the development of consumer technology platforms. Most recently, Eugene was Head of Video at Oculus and before that, he led product teams at Flipboard, Erly, Hulu and Amazon. 

In this interview, we talked to Eugene about:

• How he first got interested in TikTok
• What other domains could become TikTok-ified
• How his experience in film school impacts his work as a product leader
• How our chances in media have impacted how we relate to famous people (such as with The Queen in popular TV series The Crown), and how that extends to our relationships on social media
• The impact of technology on modern film & television, such as with real-time VFX
• Why he started writing and what he learned from the responses
• If he thinks the SF exodus is overrated or underrated
• And more!

You can listen to the podcast here or watch the YouTube video. You can find the full transcript of our conversation with Eugene below. Enjoy!

• Welcome back to Means of Creation, our weekly show where we are deep diving into the passion economy and the future of work. I'm your host Li Jin along with Nathan Baschez. And I hope everyone had a really great Thanksgiving last week and rested up because today we are going to have an absolute banger of a conversation with our very special guest, my friend Eugene Wei. Eugene is a former product executive who is undisputedly one of the best technology writers online today. For about 20 years, Eugene has been publishing his blog called Remains of the Day, where he talks about the intersection of technology and media. And his writing dissects complicated consumer tech trends, not just from a product design perspective, but also from a user psychology perspective. His essays, including Status-as-a-Service and Seeing Like An Algorithm really serve as guiding mental models for the broader tech community as a whole. And today, Eugene is an angel investor and advisor to various startups. And previously, he was the head of video, Oculus, and also led product teams at Flipboard, Hulu and Amazon. And in between all of those things. He also had a brief stint in film school at UCLA, which I want to talk about as well. But without further adieu, Eugene, thanks so much for being on the show today.

Eugene:

• Thanks for having me.

Li: 

• Yeah, it's great to have you here. So I want to kick off the conversation by starting with this piece that you wrote, I think about, maybe more than a year ago, early 2019, you came out with this amazing piece that I think was the first time that I realised like who you were, and was like, wow, I need to talk to Eugene. And that was your piece about status as a service. And obviously, a lot has happened since then, the creator ecosystem has entered prominence. And everyone is really interested in creators that I was wondering if you could just summarise for those of us in the audience who haven't perhaps read it summarise the core ideas of Status-as-a-Service?

Eugene:

• Sure. I started with two basic principles, which I think have long been understood about humans. One is that we are status seeking by nature, we are social creatures. And it's really important to us for you know, whatever reasons, evolutionary psychology or other reasons to gain status within our tribe. And the second point was just that, that humans tend to try to seek out the most efficient way to gain status for them. And then I applied that to broader social networks that were in technology to try to explain some of the phenomenon we see with social networks, and try to expand on our understanding of a particular type of network effect. Because I think up until that point, network effects are the most popular sort of phenomenon that we talk about in technology. And obviously, social networks are the easiest place to apply the idea of network effects. But I felt we had a more limited understanding of network effects and how they worked. And we had a very crude model, which was really based on Metcalfe's law, this idea that the value of a network sort of increases roughly in proportion to the square of the number of users in that network. And that's, broadly true, but when you apply it to specific use cases, it actually really matters, what the type of network effect is, and how it operates. so that you understand when it stops working, and why that's like the basic framework of Status-as-a-Service, and then as a metaphor to explain it, I tried to analogize it to ICOs in crypto. Because I thought that it was really interesting that every new social network that starts reminded me of an ICO where there's these status tokens that they're offering to you. And there's some sort of proof of work that you have to go through to try to earn those tokens. And one reason I use that metaphor was that over time, more of the status tokens tend to be mined away, and it gets harder and harder to gain that. So I thought it was a useful way to explain why we were starting to see diseconomies of scale or negative network effects creeping in on some networks. Because if you believe in Metcalfe's law, you would say that the first social network to get big should just run away and become dominant forever. And we've certainly seen that's not the case. Yeah, that was I think the basic idea of the piece was, I've long, it's not like I've worked on a lot of social networks, but I find them a very fascinating sort of business model incredibly leveraged some of the fastest growing companies in the history of the world, but yet also mysterious in some ways. The networks get big and then suddenly, they're not cool anymore, and people leave and go to another network, why does all that happen? So that was an early attempt of mind to try to make sense of it all.

Li : 

• Yeah, I think that over time it becomes harder to mine new tokens and there's this built in scarcity of status that is really interesting. I remember early on, when I first entered VC was 2016. And at that time, the prevailing notion among investors was maybe consumer social had just been played out, it was over, there would be no more consumer social networks, because all of the ones that we had seen, had reached worldwide scale, and basically gotten everyone with a computer or a smartphone signed up. And per the prevailing notion of network effects, those kinds of that scale network effect meant that it would be really hard for a newcomer to ever be able to offer as much utility to users signing up for a new service. And obviously, that hasn't happened. That hasn't been true, social networking, obviously, there's been new networks that have been started since Facebook and since Instagram that have really come up and grown really rapidly. And I think Status-as-a-Service is a really good explanation as to why. I'm curious, if you think about that notion of scarcity of status for any network, does it imply that there will forever be new startups that can disrupt the ones before and there's basically a longevity, a built in timeline to the duration of any social network?

Eugene: 

• That is one possible outcome. I especially think it's interesting when you think about generational turnover, because one thing we know traditionally is (any parent can explain this in even more detail) every generation of kids are, you know, creating a new sort of status dynamic for their generation that is different than the one that their parents had. And that was certainly a beneficial dynamic for Snapchat. We know that it was problematic for Facebook, when a lot of parents started joining, and were suddenly your parents were looking at what you're posting in your newsfeed had such a strong observational effect on what happened there. And so those types of dynamic dynamics are in play when it comes to building a social network, and how you structure it: what's the topology of your network? and what groups are interacting? I think a lot of it happened by accident, I think this first generation of social networks were just trying to grow, and they were growth hacking, and they're using machine learning. And then we're just dealing with things as they went along. And maybe not thinking about it from a sociological perspective. So some of that all happening was just an accident. But I'm really interested in that intersection of social networks affecting real world status dynamics and real world networks. If you think about it, and this is really true for me now, most of my interactions with most of the people in my life actually take place through social media now. If you just did a share count, and I encourage you to do that, do a rough estimate in your life. That's such a difference from when I was a kid, when most of my interactions with people were in person, and not mediated through these networks, which are not designed necessarily with that in mind. And that's really affecting a lot of things in society. And in everything, right. It's increasingly the case that social networks are how citizens of a country understand each other and talk to each other, and how we debate different ideas. And in some ways, I don't think we were ready for that to happen. The counter to the idea that we'll always have new social networks might be this idea that if you look at something like WeChat, I think that's a network that kind of moved much harder towards becoming just general, kind of utility for society, and is a little bit harder to to displace. But even in the case of WeChat, you still see that there are alternative networks in China that can serve different functions. So I always think there will be some level of diversity of networks because it's just very hard for one network to do all those different things. Well, how to serve all those different cases.

Nathan: 

• It's almost like WeChat has managed to stake out ground at a higher level of abstraction. Because there's networks that form within networks. There's a group within Facebook within the web and mobile ecosystems within the Internet and Phone, actual physical connections where TCP/IP is but one of maybe the protocols that data is being transferred on those pipes from. It's interesting: probably the more abstract you are, the closer you get to the metal, the harder it is to get off the ground, the more sticky it is when it's there, especially as you get more people building smaller versions of networks. And even this conversation is its own network of sorts, or this show where it's you really think of it as a network. But there's chat, people are talking to each other.

Eugene: 

• Yeah, there's, there's also the effect of when disruption theory became really popular in tech, you started to see companies actively trying to stave off disruption. So there's some extent, as we start to understand social networks better, they themselves will try to evolve to stave off extinction, or disruption from other networks. I still tend to think that humans are more complicated than networks can evolve to accommodate. So even for WeChat, if you look at WeChat, now, they're now shipping a bunch of updates that feel very much like putting story-like sticky stuff at the top of the feed and things like that as a reaction to other networks that are gaining on them in different domains. There is a weird thing in tech where, because all tech companies have the same sort of rough set of skills in terms of just employees, you just all have a bunch of software developers, and you're all building software, there's always that possibility that one of your competitors will just get into your space, or that you'll want to go invade. And that's just a very different dynamic from the more atoms based world where if you were Ford, you weren't worried that DuPont would start making cars necessarily. But if you see in tech, there's this history of Wow, Google's in search. But then one day, Amazon built a search engine, or one company is in digital music, and then all of a sudden, all of them are in digital music. So that's competitive dynamic, and the threat will always just hang over the entire industry, which makes it fun.

Li: 

• The other topic that I definitely want to get your thoughts on is around the intersection of the ideas of the passion economy with Status-as-a-Service. A few months after you wrote Status-as-a-Service last year, I published a piece called The Passion Economy and the Future of Work, which talks about how new platforms are giving people the ability to monetize individuality, and create a wide range of various creative products and services. And I think that the two ideas are actually quite complimentary, in the sense that I think for much of human history, you could use economic capital to purchase status, and vice versa, if you were a high status person, you could probably convert that into capital. And I think the new battleground for social networks and creator platforms is no longer just offering the most fruitful grounds for one to accrue status and followers, but also to be able to monetize that to convert that status into a source of income. That seems like an additional source of defensibility now that hadn't really been in play before. But I'm really interested to get your thoughts on that and where you see the intersections of those two ideas?

Eugene:

• Yeah, I think one of the challenges with social capital theory in general traditionally has been that it's a little harder to measure in discrete terms than financial capital. So we have just, really, you know, elaborate theories on, I don't know, options pricing, and all these things in the financial world, because we have a way to put numbers to them. And social capital traditionally has been a little harder to quantify. I'm a firm believer that just because you can't measure something discreetly doesn't mean it doesn't exist. And the way that you can measure the value of social capital is often when it gets converted into financial capital, right, like an influencer, who has x number of followers on Instagram will get an offer from a brand to do a post at some price. That establishes some market price for that number of followers for that person. And so you can start to see the edges of social capital, right, you can start to put math to it. And we're just getting better and better at doing that. Because you have more and more influencers or different people who are achieving fame in the social media age, who are trying to make themselves into durable brands or businesses in one way or another. And you have people doing it in all different ways, right? People are putting out branded merchandise, people are selling subscriptions, you go down the line, and that all i think is helpful in making social capital feel more real. And one of the interesting things that we're seeing right now is that for a long time, everyone's been trying to use the big social networks that exist now, to build their followings. Whether it's YouTube or Instagram or whatever, you can name all of them. But they're somewhat limited by the monetization, options that are available through those and those haven't really matured, or the platforms themselves have some dynamics whereby maybe they want to limit the degree to which creators can monetize, because there's rev share agreements or some other dynamic in play. So you're starting to see that dynamic where you build a following on one platform, and then you go off platform to try to maximise the value of that social capital. I think there's some loss, there's some dead loss right now, that definitely occurs where you're super famous on TikTok or Instagram or something you're unable to capitalise fully on how much that's worth. And so you end up going to build your own infrastructure or something to try to narrow that gap. So that's an interesting dynamic that we'll continue to see. And you'll continue to have that dynamic where any platform that makes someone famous, you know, those people at the top are always the ones most at risk of leaving the network, because they have the strongest following. That's always going to be the case. Then the network has to decide: “Do I strike a special deal to keep them around?” Or is it just “I let them leave, and then I build up someone else to become famous again.” So you have people on Twitch, like Ninja who got paid a lot of money to go to Mixer, and you can argue, “Hey, that was a good deal for him to capture some of that value, right then and there in hard cash.” But Twitch survived fine. It turns out that if you go to the homepage of Twitch, you find other people to follow and their ability to crown new people is a strength of their network. So this is always just a trade off of distribution power. And so same thing with people fighting with Apple now over Apple Store distribution, right? How much are they? How much incremental distribution are they giving you? And is it worth 30%?

Nathan:  

• Right? This is why they hired Josh Elman.

Eugene:

• Yeah, yeah, I know. Good for Josh, and good for Apple. At one point, for sure the App Stores was worth 30%, maybe worth more to many people. But now I can definitely see the case where some companies are like: “No, it's not worth it, because they're not actually driving that much more incremental distribution.” And it'd be the same for Charlie D’Amelio, or Ninja or all these people. They're all roughly in the back of their head doing that math: “Does this platform drive enough incremental distribution to justify the costs?” And if not, at some point, you'll jump, and you'll probably end up with more sort of lightweight infrastructure platforms out there, which are like: “Look, we actually don't even drive any distribution for you. We're just a layer for you to collect payments or whatnot, but we charge a lot less. And if you're famous at some point, you'll make the jump.

Li :

• Yeah. So when do you think that strategy of paying very influential creators works versus doesn't work? Because obviously, Ninja I wouldn't point to that as a success, because obviously Mixer shut down. Triller now is attempting to do it with top TikTok stars and paying them lots of guaranteed income plus providing them with cars, sushi dinners, things like that. Facebook with Reels, Substack doing that for journalists with advances. I'm curious about your thoughts around that strategy of trying to jumpstart a network by just paying top creators and the viability of that?

Eugene:

• Yeah, I don't think there's a universal rule on this front. I don't think it's a terrible idea sometimes to think about paying creators, but it really depends on your product, right? And like the dynamics of your product yourself, because it really you could just treat it as a paid, you know, advertising, right, you're paying influencers, you're really just trying to bring a bunch of eyeballs to a service at one time. And you could do that any number of ways. You could pay to have influencers bring their existing followings, you could go do ads on TV, whatnot, is your product ready to retain those types of users? And that kind of differs by platform I think. In the case of Substack for example, I I think that is different from something like a Triller and is different from something like a Mixer or something like that. Because each of those platforms has a different dynamic in terms of how they cross merchandise, their fans, do they have a feed or not? Substack is still a series of mostly individual newsletters. There's less of a there's not like a Substack feed right now or something like a news feed or something like that. Where Triller is different, right? They're trying to do a TikTok model where they have a feed and things like that. So I don't think there's a hard and fast rule. If you pay a bunch of influencers to bring their people to the crowd and your product’s not ready for it, and it's not going to retain those people, then you're just lighting money on fire.

Li:

• Yeah. That makes sense. Blake Robbins had a really interesting tweet yesterday where he talked about the opportunity to build a YC for creators, meaning I'm interpreting that as training the next generation of creators to become successful. And today, on most of the social platforms, they got there on their own. They learnt how to do all the TikTok dances on their own, they learnt how to create YouTube videos on their own. There's no real systematised education for creators. Do you think something like that could work? I'm curious about the concept of training people to play these status games?

Eugene: 

• Yes, and no. I guess I'll be a boring guest in that I always like to split a lot of these things. So I think there's just nuance to all these things. So yes, from the perspective of generally, I think, in many domains, it's true that the friction to getting into that space and becoming good at it is still relatively too high. Just to be an entrepreneur, just to do a startup, if I were to take 10 people and say, okay, we want to make these people entrepreneurs, I do think you could do a ton to make that easier for them. Just having a thing like Stripe Atlas is already just such an improvement in the friction of starting a company. If you look at the general American Idol like model, which is, hey, where there are people like Kelly Clarkson just out in the population that would have never gotten famous unless we pluck them out of a crowd? And, and you could argue, yeah, I actually do think that happens in a lot of fields. So I think you could take a bunch of people and make them influential. On the other hand, there still are differences between people. Some people do have certain talents that are better suited to certain things, I don't think Charlie D’Amelio would have hit 100 million followers on TikTok just only if TikTok had pushed her a lot. I do think there was something, there are some things about her that makes her uniquely able to capture that. So there is an interaction effect, right? If you look at a Ninja, or if you look at Disguised Toast streaming Among Us, I do think he's a better streamer among us than other people. It's not just a random happenstance thing that made him big. On the other hand, in the modern age, I do think it's also true that there are runaway winner effects, because of the way that algorithmic amplification works. So that the winners now tend to just be they win by a bigger margin than previous people. And that may not be fully reflective of their talent or skill difference versus the next person. But there is a first mover effect that's very real in a global economy. And one one thing, which I didn't know if we were going to talk about this or not, but one of the opinions I have, which I think goes counter to what I had believed or been taught earlier in my career was when I was at Amazon, they always said, you should just focus on the customer, don't focus on the competition. And I hear that a lot from everybody. They're always like, focus on the customer, don't worry about what your competition is doing. But I actually think that I don't believe that anymore. And part of the reason I don't believe that is that, in this sort of global networked internet age economy, there is a very strong winner take all effect in a lot of markets, where if you get early momentum, you just get so much of an advantage in terms of capital, customers, media, everything that you'll run away. And so if you look at you versus your competition, you could just model it at a very basic level as you're in and adapt a complex adaptive system. And it's evolutionary, and you are trying out different business models and products in the marketplace. Those are your sort of evolutionary adaptations, one is trying to grow wings, the other is growing big legs, so they can run fast, whatever metaphor you want to use from evolutionary theory. And you can model that at the market level as just random. Now, if you believe that you are actually just smarter; your path of choosing the right model is better then yes, you should just focus on the customer and be the first to come up with the best business model. But if you believe inherently, that process is somewhat random, that this idea of the idea maze, you're just two different people, an idea maze running around in different places. If you start to see your competitor actually stumble on something that works better than you, then they're actually just going to run away from you and just crush you. And that's why I advise a lot of startups that advise now that, yes, pay attention to the customer focus mostly on that. But yeah, you should keep one eye open on your competition, because if they hit on something, you better go chase them down and follow them quickly. And in a way I think that's what Facebook did really well with. They get beat up a lot with Instagram for copying stories from Snapchat. But I don't know, if you can swallow the embarrassment of people almost saying that you copied, it's actually a rational strategy for them. And it might be actually, if you merge disruption theory and this theory around winner take all markets, it might be that they're better off just continually doing that once you get large, just keep looking at anything that gets traction and just copying it, because you'll probably the market is probably going to be more innovative than you will be. But you have the advantage of scale.

Nathan:   

• And you might fail in some cases: Amazon's iPhone competitor obviously did not work. But was it worth it for them to try? 100%? The cost is pretty low. No one even talks about the Fire Phone anymore. And the tablet is still a thing.

Eugene:  

• Yeah, in the three body trilogy analogy where I was talking earlier about how all tech companies are capable of invading each other's markets. That's not totally true. I do think there's more than just having software developers. But it's also true that there is this mutually assured destruction threat that always looms out there where you're like: “I should just try to build a phone just in case Apple decides to be like really ruthless with the iPhone and kick us off, that would be just brutal for us to miss out on the mobile platform.” And that threat will always make it so that companies will do weird projects, I try to build their own phone, they just want to have a credible alternative in case that happens. Now, you would hope that antitrust law and different things ensure that doesn't happen. But I don't think people can really fully appreciate how much when people internalise disruption theory, how paranoid people at different big tech giants are about what their competitors will do. When I was at Facebook, we weren't allowed to use Google Suite products, because they were lik: “maybe there'll be reading our email.” and things. It's a very high stakes competition. And that's actually rational in the age of the internet, right? Because the stakes are so high. They're really like global markets.

Li:

• Yeah, I know that in your discussion about winner-take-all effects and how success begets more success, you're probably talking about startups and businesses. But I feel like that also holds true for fame and talent and creators, where there are like right now, to some extent, Charlie's growth to 100 million is probably propelled by the fact that she has a lot of followers already who are telling their friends about her and she's famous and that propels more fame, and that draws, better opportunities for her or better content editors, or she just sees things first and can produce the best content. And I feel like that effect exists on a number of different content creation platforms where there's almost like a moat that you get from being the first to fame or the most famous person like Kim Kardashian, that notion of being famous for being famous.

Eugene:  

• I don't know if you know about the Santa Fe Institute, but they did a lot of early work on complexity theory, and complexity science. And I think there was like this winter for that type of theory, where it was just like, oh, how do we apply this to the economy and the business world, it's not clear, but I think in the internet age, we are starting to see that stuff, come back into vogue and have more explanatory power, and that we are starting to move beyond just old supply and demand curves and scarcity based economic theory. And so if you look at Charlie on TikTok, and I don't know if you remember when she first started to gain a lot of followers, like, she was like, even I don't understand what's happening. Like, why am I getting so popular? 

Nathan:  

• Her bio was: “I don't get it either.” That was like literally her bio on TikTok. 

Eugene:

• There were all these like conspiracy theories, people were like “they're manually boosting her, it's all fake.” But if you just actually look at how the TikTok algorithm works, I think there is a rational way to explain it that does not have to rely on conspiracy theory or anything. First of all, the algorithm is heavily exploit based and heavily, you know, weighted towards amplifying someone who's getting a little bit of amplification. Second, because of the way the FYP feed works, and because of the existence of the duet feature, what you had was like she started to get famous. There was a backlash against her. A lot of people were posting videos being like, she's not worth the hype or whatever. Then you had the backlash to the backlash, which were like, women came in and were like women standing up for women there was that dynamic, and then you had the backlash to the backlash, and then you also have the grifters who are like: “Man, it's hard for me to get in the FYP feed. But what if I just duet one of Charlie's videos, I might be able to ride her coattails for more distributions.” Which kind of works sometimes as a strategy. And so when you have all that happen, all it takes is like a spark, right? Someone breaking out for that to just become a runaway process and amplify itself. Now, that's happened to other people since Charlie and they haven't become as famous as she has or gained as many followers. So I do think that's the part where her ability to appeal to a broad audience still matters. But yeah, you have that happening. And that's an interaction with the algorithm itself in a previous age that just would have happened much more slowly through the old media model, where you get to that level of fame. If you look at the Kardashian-Jenner clan, as the previous version of Charlie. They were like pre-TikTok. They also are an example of capitalising on the modern social media ecosystem to achieve a larger scale of fame more quickly.

Li :

• Yeah. I was wondering if you could expand on the idea of creativity network effects that you had been talking about, I think on a different podcast that I listened to. Explain that to us, because it's quite novel. 

Eugene: 

• Yeah, so going to the beginning of our talk, I was talking about how it's important to understand the nature of network effects, because they're very, there're so many different types of network effects, and they all operate differently. Network effects of creativity is an idea that I've been thinking about with respect to TikTok, right. So TikTok does a number of things to accelerate that. You can actually have network effects of creativity in the physical world. I used to be in a writing group in college. And there's just sort of this idea that if you get together with other people, all the writers in the group benefit. And that was true. What TikTok does is they're like: “Okay, is there a way we can use software to actually increase network effects of creativity to actually encode those into our product?” and they do it any number of ways. So one is they went off and licenced a bunch of music. But also, anyone who creates a TikTok, you can use the soundtrack to their TikTok as the soundtrack to yours, and you can lip sync it or whatnot, just by pressing a button. You don't actually have to go like in the old days, I'd have to download it, split the audio in Premiere, like then overlay my video over it and do it, it is very complicated. Duetting is one of the most underrated features out there. You can duet someone’s TikTok, and essentially, it just puts you side by side on the same video plane. Which sounds pretty trivial. But actually, if you do try to do that in Premiere or something, it's actually a pain, right? Like, I'd have to download the video, put it in, I'd have to block out the space. And they just make it a one touch process. And you can go down the list of their features, which actually just allow you to quickly borrow any component of someone else's video to do it. At a broad structural level, though, maybe the most important network effect of creativity that TikTok has is just giving you an idea of what to do. If I were to just say: “Hey, Lee or Nathan, go make a TikTok with no prompt.” You'd have to sit around and think of an idea. It's actually really hard to come up with an original, funny, entertaining idea. Most of the TikToks that are made are actually not original. They're just riffs off of someone else's idea. And that's great. You can go on TikTok, look at the Discover page, see what hashtags are trending. Or you can just go through the FYP, and if you find one that's funny, you can instantly with two presses, start making your version of that one. And any creative person, any writer, Nathan you have a Substack so you can appreciate this: the blinking cursor is the curse for any writer. You're like: “Oh my god, I have to produce something every week from scratch.” It's not easy. And so I think that's the most interesting thing about TikTok is that it makes eligible a whole range of memes that are happening at any time. And that means that you can just start not from scratch. You don't start with a blank page.

Nathan:  

• I think that's so critical. The format of pretty much any meme is a blank space where you can do your twist on it. So when we talk about things going viral, I mean, the reason why Coronavirus has the shape that's got little things sticking out of it that make it look like a crown. The point is those things attach very easily to other molecules. And that's why it's so viral is because there's a blank space where things can go. And I think there's something deep about that structure of Mad Libs almost where it's like: “Yep, I'm going to reuse the sound but I'm going to put my own twist on it.” or “Oh, like I saw Bill Bishop created Sinocism. I bet I could analyse South Africa because I knew a ton about South Africa.” or whatever. And so there's always “Oh, I saw someone Doing it, I can do that thing too. But I'm going to do it a little bit differently.” And just the friction removal from TikTok is taken to the extreme. If I was still working on product at Substack, it'd be interesting to think about what is Substack’s version of taking something and riffing on it. Because writing is very hard! 

Eugene:  

• You have to some extent, you have that happen in the writing world where, people in tech are always writing about, right mimetic violence from Rene Girard or whatever. There's certain themes that everybody sort of just goes off of, or people talk about disruption theory, or even TikTok itself, right. Now everybody's writing about TikTok because it was like the app of the day and people are trying to become like TikTok experts. And so you always have some level by which network effects of creativity or that kind of mimetic mass copying happens, or that riffing happens. It's just interesting. I think TikTok is just interesting, because they actually encoded at the software level. Yeah. And you can see, right, like, one of the reasons that Santa Fe complexity theory that science I think is starting to have more relevance in the modern world is that the internet essentially, actually makes the world a densely connected network. And TikTok is just one community, which is hyper connected. And complexity theory is all about these mesh networks, and these complex adaptive systems and the world has essentially become one in the information sphere. That's why I think more and more, you'll start to see that stuff has more explanatory power, about what is happening on the internet. And so I think I'm excited about that piece of it influencing business strategy. I think I was reading this book. It's called Lords of Strategy. It was about the people who came up with business strategy in the 60s, it's Michael Porter at HBS. And then it was the three founders of McKinsey, Bain and BCG consulting firms. When I graduated undergrad, and even today, a lot of business strategy is built around the theories that they came up with the BCG 2x2 to Porter's five forces or six forces now. 

Nathan: 

• There’s a sixth? 

Eugene:

• Yeah, there's a sixth force now. I forget what it is. 

Nathan: 

• Did Porter officially add it? 

Li: 

• Porter is the Corgi. Yeah.

Nathan: 

• Yeah I named my Corgi after Michael Porter 

Eugene: 

• Hahaha oh, my gosh. That's unfortunate! 
• But yeah, Porter added a sixth force, which I only learned recently, when I was talking to the team at Stir, because they just hired someone from HBS, who had just taken Porter's class. And he's like, yeah, there's a sixth force now. But what's funny is that I do think a lot of business strategy was devised in an age where there's just more scarcity. And so yeah, if you're the brand manager of Tide detergent, at P&G, your BCG frameworks might help you if you're trying to gain three points of market share on Clorox or something. But if you're an entrepreneur trying to do a startup, or if you're competing in the internet space, I just not sure some of those theories actually work. Given the dynamics of the internet and abundance and the infinite replicability of information at zero marginal cost, at the edges of the supply and demand curves, a lot of our theories actually go wonky.. They're super bizarre effects at the edges. And I think it's interesting to think about what is the new Bible of business strategy for this era. And some of it, I think, will come from things like complexity science and complexity theory. And some of it will come from other things. We'll just have a better understanding.

Nathan:

• Have you read the Origin of Wealth?

Eugene:

• I have. Yeah. Really good read in terms of a first glance at this. And there are a bunch of other really good really thinkers, I think, on this topic, but none of them have become the new Michael Porter just yet. But yeah, a lot of people are working on it. 

Nathan: 

• I’m gunning for that! But I’m a long way off. :) 

Eugene: 

• Someone will name their dog Baschez someday! 

Li: 

• Amazing. So with our remaining time, I want to turn it over to audience questions. There's a lot of people here who are your fans, Eugene, and have a lot of things to ask you. So if you have a question, type it into the Q&A, and we will pick and choose from that, but maybe we can start with some of the ones that people have already left in here.
• There was a question that I got last night. I crowd sourced it from a community. But people were interested to hear you speak about the cultural differences or similarities between the East and West. And whether you think there's models in China that are empowering creators that you think can be translated to the US or serve as a new model for a platform in the US.

Nathan: 

• Maybe if culture could perhaps be abstracted somehow into software? 

Eugene:  

• Yes, and no, I do think that so the last couple years pre-pandemic, I was going back to China, maybe once a year to speak at companies or at conferences, and I'd usually spend a week or two travelling around Beijing or Shanghai just to meet up with different investors and different companies. And it's really, first of all, it's actually very enlightening to study because of the nature of the Chinese market being somewhat separated by the Great Firewall, and because it's such a different culture, essentially, we are able to look at the effect of path dependence and cultural context on the tech space. They're evolving on their own timeline, in their own directions. And as a self-described, cultural determinist, I would say some of what they do, I think, does point the way to what can happen in the US. You can see it actually withTikTok, right, like a lot of the things we're seeing on TikTok now, already happened in China with Douyin there just a little bit further ahead. And there are two things that are important there. One is the Leapfrog effect, the incumbent solutions in China in a lot of spaces are just very different than in the US. So they were able to leapfrog ahead of us on many numbers of dimensions, including digital payments. The other is just that the culture itself is quite different. And that means that some things just have different fundamentals than they do. In the US. For example, People always talk about the big red envelope promotion that drove a lot of people adopting digital wallets in China. And people talk a lot about digital tipping in China for creators, right on networks. And to some extent, we're starting to see a little bit, like we see a little bit of digital tipping on Twitch, and things like that. But I think there's a very real reason why China was ahead of us on digital tipping for the creator economy. And that has to do with the nature of how we even think about it. In China, it's not thought of as.. tipping has a very specific connotation. When I say tipping in America, most people think of tipping someone who provided a service. And it actually has some racist roots in history around what tipping started off as, but that's how people think about it. And so when you think about “Should I tip this creator?” For a lot of the older generation, they think: “They are not providing a service directly for me, it doesn't feel right.” But in China, they don't think of it as tipping. They don't really have a big tipping culture. At restaurants in China, you don't actually leave a tip. Giving money in China as a way to actually increase your own status. Right? If you go to your manager's house if they have you over for dinner, you would actually bring a gift that was either money or a bottle of expensive liquor. At Chinese weddings, a lot of people say the best gift you can give is cash. In America, people would be like “why would you give cash at a wedding? that shows a lack of thought.” And so I think there are so many cultural differences that, I think, affect the adoption of certain trends, that I think it's hard to project out. To use just one more example: If you think about food delivery as a market. And then you go to China and look at the food delivery infrastructure. Actually a better example would be live streaming commerce since a lot of people are thinking about that and talking about that. Live Streaming commerce is much bigger in China than it is in the US. And I do think live streaming commerce can be a thing in America. But one thing to remember about China is just First of all, there are like two digital wallets almost everybody has in China. They're embedded in your phone. So no matter what app, I'm watching live streaming commerce in China, if I see something I want, I tap the button. I choose the size or colour if that's an option. I hit buy, almost always I’m not paying for shipping, and I'll get that in one to three days. Essentially, China has Amazon Prime, one click shopping for the entire market. Yeah. Now compare that to if I see something I want to buy on Instagram, and I decide to buy it, what steps do I have to go through to make that happen. Do I have to pay for shipping, etc. All those things are different. And those things have huge effects like actual adoption rates, and total market size. 
• It's important when you analyse East versus West dynamics to be aware of those cultural dynamics, and not just assume that everything that's big in China now will be big in the US. I actually like Apple Pay better than using the QR code WeChat pay system in China, in a lot of ways. But in America, we're just so addicted to our credit card miles and points and just, it's just like a habit for us to whip out our credit card and pay with that. We don't see the same level of adoption. And that's, again, that's the leapfrog problem.

Li:  

• I was just gonna say I think those cultural differences and nuances are so important to explore, because I agree that not everything translates. I think part of what is driving live streaming, donations or tipping in China is, I don't know if I'm even allowed to say this, but just mistress culture—the culture of buying things for whoever you're romantically involved with. Or even if it's not a mistress, even if it's just dating, there's a huge culture around the guy having to constantly buy things for the girl gifts, like taking her shopping, giving her an allowance, paying for everything. That's a big thing there. And I think maybe it's rooted in the gender disparity. And the mismatch in the number of men and women who are single, but that just doesn't exist. And if you look at the live streaming apps in China, that's a huge element of the dynamic of what drives monetization is women live streaming and men watching and buying her digital goods. And that doesn't happen in the US.

Eugene:  

• Yeah, I didn't bring up gender dynamics, but that certainly is another cultural context that really affects adoption rates and total addressable market size for some phenomenon in China versus the US. To generalise it at a higher level, I would just say that, I often talk about culture, or user psychology as one of these additional factors that we have to build in. But these are all phenomena, right? The economic context, the incumbent competition, all of these things add up to a level of complexity that's not easily compressed into some bite size analysis “That worked in China. So it's gonna work in the US!” or vice versa. Some of it does, like some of it does apply. But I'm always of the belief that—so there's this book The Beginning of Infinity by David Deutsch, which was, like, really influential on me when I first read it, but he talks about, we're all we always need to seek out better explanations for things. And if you have a good explanatory theory, that's the beginning of infinity from the title of his book, because it allows you to, I think, he uses an example: we can understand what's happening on the surface of a star across the universe, even though we'll never travel to see it, because we actually have a theory that explains what's happening, and for a lot of tech analysis, I think the difference between interesting tech analysis and not interesting analysis often comes down to that, can you actually come up with a theory that explains at a sort of physical level, why something is happening. And I'm not saying that my theories are necessarily those, but that's what sort of drives me to write more and think more about phenomenon. Take a problem that you don't understand, and try to break it down and come up with a theory that explains it better than previous theories. And then someone will take your theory, say it's wrong and build off of it, and improve on it. And that's how we move our move ourselves forward in our understanding of what's happening.

Li: 

• Yeah. Nathan, I interrupted you, what were you gonna say?

Nathan: 

• Oh, no, that was a beautiful sentiment. I feel like it's a good thing to end on. And I had a very prosaic question back when we're talking about shopping, which was like, What do you think of Instagram Shop, because Instagram is huge and payments are going to be a thing in there and Facebook more generally, their ecosystem, it seems like probably the most promising avenue for that type of behaviour to happen in the US. I'm curious if you have any sort of predictions or things you would look forward to get an early sign?

Eugene:  

• Yeah, yeah, I haven't played a lot with it yet. But certainly, it's a very logical thing for them to do. I've often described Instagram as, it's always been the social network of all advertisements, even personal posts are advertisements on Instagram. So it's perfectly suited towards this use case. And certainly anyone who tried to buy anything on Instagram in the past and having to go through the in app browser, it's just a really rough janky experience. So I think actually, one of the big losses for Google, Facebook, the tech giants, in general, this past decade was just not accumulating more credit cards. Americans are so into their credit cards. And the improvement in user experience of just getting someone's credit card and their shipping address, in terms of what it can do for you throughout the rest of your platform is massive. So I think Instagram Shop is actually probably one of the best chances for Facebook to get tens of millions of credit cards on file and to increase the utility of their overall experience on Facebook. It's the same thing with live streaming commerce in China, where the fact that you don't have to create an account with a password, then type in your address, then input a credit card number, etc. It makes one click shopping easy in China. Anyone who's done any sort of shopping cart process knows that the moment you ask a person to create an account, and do all that stuff, a huge percentage of users will just drop out. And now look, Apple Pay is made that easier in some respects now, so it's getting to be competitive. Apple and Amazon always had that advantage that they already had so many credit cards and addresses.

Nathan:  

• Totally. I think we're out of time, unfortunately. I think we could do this for about two more hours!

Li:

• We need to have another Eugene day where we just block out the whole afternoon and have Eugene back on the show! 

Nathan:

• Next time I have to read Complexity by Waldrop! We can go deep on it.

Li:

• And we have a Discord channel. We have a Discord channel. We just put the link in the chat. Join us there. Maybe Eugene can join us too. If there's additional questions, head over there. But yeah, thank you so much for taking the time, Eugene, for being on the show today. This was honestly so excellent. And like any great conversation—left us with a lot more open questions and thoughts than we had to begin with. So I really enjoyed it. And I appreciate your being here today..

Eugene:

• Thank you for having me. And thanks, everyone who listened in I always appreciate getting any audience at all!