The Economics of Its & Bits Digital Identity Freedom Privacy Control Security
Economics value creation and capture extraction, exchange, and exploitation _control security value
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Revenue 60 Years of Its & Bits Market Value 1960 1980 2000 2020 2020 e o g o o g e Sy e e e e 1 |@anaral Motors. M2 1 Eomae w0 1 Geesloos 08 1 Wemet smE 1 Mems 1w 2 looenwest | Ten 7 Gt w3 e @ 2 |eaman w2 s 3 [roaveie s 0w w3 e w2 o e 5w s [t 4 o oo TR o e 4 e s o fussos ot e Wm0 Gemer 05 osin E I s o oo . IR HS5 b ST s s 2 v [anor a1 e a7 G L T T T o b e PN s | b T @9 e e b e P 3 [ehmer 208 s e a0 Ao am o wE s e v o [esman s 0 e | 0 som T reserstege T 1 e e 1 a1 e R e N R T T 15 Joes s R N ) o man o [ e o w92 e W6 (s s 6 e T |t 1121 s W i G| 7 (et W 7 o s - [scn WO 0 Tstimie 08 e a6 et wE e ar 1 eoang e W s W0 |wmsonms wE 8 Gadh w ™ s @ s iR e e [ i e
Networks Effects Network scaling law: How network value scales with number of participants. o‘#fi%‘o ‘?"i;"fi‘ Metcalfe’s Law '{==1A A‘=§. v=aN ‘y%%"/ V=aNN=aN A —W Value = Reach
i lidati Metcalfe’s Law Validation Zhang X.-Z., J.-J. Liu and Z.-W. Xu, “Tencent an dFacebook Data Validate Metcalfe's Law," Journal of Computer Science and Technology, vol. 30,
How do we recapture the value in our data? 1- Leverage cooperative network effects 2- Retake control of our data
Cooperating Networks What happens to value when two smaller networks combine? v,=v,=a(N+N) NI Nz V,=a N (N+N)=a N2+a NN, M VE:a'NQ‘(MJrN?):a‘MZH'MM V=V, +V,=aN22-a N, -Nq+a N2=a (N+N)? NN N2 Nz a-N:N,
Cooperating Network Lifetime Value
Xie, J. and Sirbu, M., “Price competition and compatibility in the presence of positive demand
externalities,” Management science, vol. 41, no. 5, pp. 909-926, 1995 When the two networks are value symmetric then it is always more profitable for both to combine. When the two networks are value asymmetric then it is always more profitable for the smaller network to combine. When the two networks are value asymmetric and when the larger network’s size is below a threshold then it is also always more profitable for the larger network to combine.
Feedback and Adoption Growth Rate Sigmoidal Adoption Curve 2 negative feedback E] ‘s k3 £ 2 positive feedback time
Competing Small Networks S size =N B 4 size =N N S size =N N K value = a- N2 NS value = a- N2 N S value =a- N2 N
Super-Network of Cooperating Small Networks o B /’/ size = = M10 \ |/ valua =3 210 =2 (10-NP2A10 = 10-12 s B k - H size=10-N=M B value = a- M2 =a-100- N'2 .
Cooperative Network of Networks Effect VIN:-MYVIN) = (NIM)-a-VB)/(a-Ne) = M/N VIN:M) = (M/N)-V(N) The network effect resulting from sub-network joining a cooperating super-network is that the sub-network’s value is increased by the ratio of super-network to sub-network size. Cooperation Advantage
Small Network Strategy Cooperative Network Cascade
How to remove primary barrier to cooperation?
Different value contexts = not directly competitive. Find value that is transferrable between contexts. Trans-contextual value creation and capture.
Use trans-contextual value creation and capture to fuel cooperative network effects.
Participant controlled
trans-contextual value creation and capture
= virtual participant centric network
Enables participant to amplify own value
across multiple contexts
= maximum adoption pull
= fastest spin-up of cooperative network effects.
Cooperative long-tail network effects " ) Treat long-tail as effective set of different contexts
Q: Where to find trans-contextual value?
A: Transaction Costs? Triangulation: Connection, Find, Filter, Match Transfer: Facilitation,Transport, Delivery, Payment Trust: Security, Competency, Reliability, Privacy, Liability
Platforms/Networks sell reductions in transaction costs.
To a consumer, all costs look like transaction costs.
Principal super aggregator pull is reduced trust transaction costs.
Trust may be highly transferable between contexts! Reduction of trust transaction costs isa primary network effect value from cooperation.
Transitive Value Virtual Network Scaling Law s=[ aN aN, .. aN, ] Set of trans-contextual cooperating networks n. LT PR Ly by e b, _ L I A average transitivity factor, t, [T osts1. _ vy, oy, vi=Ts" n=[ N, N, N, ] V=n-v'=nT-s" https:/imedium.com/selfrule/meta-platforms-and-cooperative-network-of-networks-effects-6e61eb15¢586
Retake control of our data
A o B A o o R y | . . s . Toolkits e > e b F W 5 i e O i - - B e . e : A e | 5 § i E o = L ;4 (& | | | . i | = . L0y . . | | T it 4 = TN \‘i %‘fl/ “ o [ Uv“mufllmxfi
Only have one set of tools for truly secure data control!
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