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gilles
@gilles
How to win competition when users have zero switching costs and code is forkable. On building moats in web3 🧵
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gilles
@gilles
1 Competition is the art of acquiring, managing and leveraging scarce resources to create advantage. Competition follows scarcity. And when new technology shifts what is scarce, the competition game changes.
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gilles
@gilles
2 Industrial firms compete on scarce resources • oilfields, mines • intellectual property (Coke's formula) You win by getting resources, then building structural and legal moats around them.
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gilles
@gilles
3 These defensibility principles carry over in web2: • Google search algorithm is a trade secret • Craigslist blasting cease-desists when Airbnb piggybacked their user base. But the new oil (scarce resource) is data.
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gilles
@gilles
4 web2's default business model is advertising: attract+engage users with free stuff, then sell the eyeballs for $$. better+more data → more addictive algorithmic content loops → more ads to sell (alternatively, you pay longer/more for ad-free subscriptions)
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gilles
@gilles
5 the winners extract maximally reap sowed attention as data (tweet, comment, follow, preferences) so to fuel the flywheel better feeds, but also higher switching costs - you build a social graph you can't take anywhere else
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gilles
@gilles
6 so you stay and keep committing data, locking yourself deeper in, training the algorithm thereby attracting new users and getting others to stay: network effects
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@gilles
7 web2 firms acquire user data through behavioral design (so you get hooked and keep committing) and acquisitions (Google→Waze, FB→IG) they manage through big data processing and leverage through AI and machine learning for value creation
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@gilles
8 web3 flips web2 scarcity on its head 1. portable social graphs — no more lock-in: users own their tweets and followers in wallets and can take it to whatever dapp they want
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Logan
@dirkx
This is true so long as the dapps everyone use agree to respect reading / writing from the same data store. For instance, if you could port your Twitter followers to “politics Twitter” which doesnt show any content not tagged as politics, are you still reaching / connecting with your followers in the same way?
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