REPUTATION AND TWO-SIDED NETWORKS e
Inversion The action of inverting something or the state of being inverted: areversal of order An inversion of economic order provides an opportunity to release latent value
Disintermediation Theory
Selectorate: Those in power to make decisions for others as intermediaries, e.g. their agents. Selectorate may be merely nominal, or influential, or essential.
How distributed/centralized is the agency of the selectorate? (democratic——despotic)
Distribution of agency increases the ratio of selectorate to total population
Typically better outcomes arise overall when agency is more distributed
Increased agency results in increased autonomy (happiness) and meritocracy (performance) The mechanism for distributing agency (increasing the selectorate) is disintermediation. To change outcomes, don’t ask those in power to be nicer, fairer, or more responsive, just disintermediate them. Seek disintermediation, not justice.
Disintermediation Opportunities Whenever producers/consumers of value interact through intermediaries (gatekeepers). Example:
Social media on Facebook is intermediated by Facebook.
Facebook is the sole intermediary.
Facebook owns all content and controls all interactions in order to extract value.
What if users could interact without the value tax and interaction control of Facebook?
PLATFORM BUSINESS MODELS A platform is a business based on enabling value-creating interactions between external producers and consumers. A platform provides an open, participative infrastructure and sets governance conditions for these interactions. A platform consummates matches among users that facilitate the exchange of goods, services, or social currency, thereby enabling value creation or co-creation for all participants. A platform is the antithess of a pipeline. (See Platform Revolution 2016, Platform Scale 2015)
PLATFORMS VS PIPELINES A pipeline i a business that directly creates and moves value from ... producers at one end to consumers at the other end.
Platforms eat pipelines because platforms unlock new sources of value creation and supply not-even-mine replaces just-in-time Primary activity shifts from ...
internal mechanisms of control of the value chain
0.
external orchestration/coordination of interactions between third parties
Platform Manifesto External eco-system is the new warehouse and supply chain Network effect is the new driver for scale Data is the new dollar Community management is the new human resource management Liquidity management is the new inventory control Curation and reputation are the new quality control User journeys are the new sales funnels Distribution is the new destination Behavior design is the new loyalty program Data science is the new business process optimization Social feedback is the new sales commission Algorithms are the new decision-makers Real-time customization is the new market research Plug-n-play (APIs) is the new business development Invisible hand is the new iron fist
Radical Disruptive Disintermediation Make the governance of the interaction more distributed. Allow users (producers and consumers) to interact without despotic control. Allow user ownership of their content and control of their interactions. Enable users to extract more value from their content and interactions. Closed pipelines/platforms are opportune for disruptive disintermediation via blockchain technology.
ENABLEMENT Platforms disintermediate pipelines Distributed network computation enables platforms Distributed consensus enables trustworthy platforms Governance matters Distributed Al provides scalable super-efficient user controlled re-intermediation
SINGLE-SIDED NETWORK EFFECT + Network + More consumers increases value which attracts more consumers Demand side driven
i A Supply Platform K T \ / more consumers drive demand which attracts more producers more producers drive supply which attracts more consumers
EXAMPLE pd 4 N { i |
NEGATIVE CROSS-SIDE NETWORK EFFECTS +7 T [ ~ \ | e T \ ‘\;”W —— // ., - 4 More supply choice increases friction e.g. customer confusion in producer selection thereby decreasing demand More demand choice increases friction e.g. producer failure in customer satisfaction thereby decreasing supply
Supply economies of scale (production efficiency)
replaced with Demand economies of scale (network effect multipliers of value) Two-sided network effects Platform Participant Participant =] Core Interaction = Participant/Value unit + Filter Platform = Pull + Match + Facilitate
Match + Filter = Curation Reduces negative cross-side network effects Enhances positive cross:side network effects Essential enabling capability for any platform Curation is applied reputation 4 -+ b T
Platform that facilitates two-sided network effects across and amongst other platforms Portable Reputation is a potential meta-platform -t h -~ ~ Transitive / \ - 0D \\ P J/ / ‘\\ - - Meta-platform may be a system of network intelligence Network effects on network effects
NETWORK EFFECTS
1-Sided Direct:
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Physical: Phone Company
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Protocol: Ethernet, HTTP
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Personal: Influencers
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Market: (N-Sided) 2-Sided Indirect: (Demand and Supply Sides)
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Marketplace: Craigslist, AirBnB
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Platform: (unique supply) iOS App Store
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Asymptotic Marketplace: 2-Sided: Uber, Lyft Data: (Product value increases with more data driving more users) Technology Performance: (More users increases product value) Social: (Interaction between users produces value)
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Belief
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Language
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Bandwagon
DATA NETWORK EFFECTS BN = \ @ S Smarter algorithms
REPUTATION DRIVEN INTERACTION Graduated Participation Interfaces . =N i\l T —_ .,
noun:
The estimation in which a person or thing is held, especially by the community or the
public generally.
root:
Latin word reputdre, which is equivalent to re + putdre, that is, to re-think or re-consider. usage:
A considered evaluation (measure) of past behavior used to predict future behavior. qualification:
Confidence improves with contextual similarity.
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WHAT IS REPUTATION? WHAT IS REPUTATION AI? Contextual predictor of future behavior to enable a transaction Closed-loop automated reasoning, not just open-loop pattern recognition Means to filter and modulate transactions Curator, recommender, decision aid, 1A Contextual predictors are more powerful Behavior based predictors are more credible Transitive predictors are more portable
Computational generation of a reputation is to aggregate relevant instances of behavior. Instances of behavior = reputational events or reputes for short Reputation measures are inferred indirectly from reputes associated with an entity Contrasting Example: * Entities provide direct ratings of promptness of another entity * Collect instances of behavior of entity in context from which promptness can be inferred. Reputation from reputed behavior allows for re-scoping, re-weighting, re-combination, and re-evaluation of collected reputes Enables arbitrary levels of nesting, precision, and granularity in the data aggregation process
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PORTABLE IDENTITY Security, Privacy, Agency (Trustworthy, Private Preserving, Self-Sovereign) Portable Identifiers & Attributes Decentralized (not in a silo)
PORTABLE REPUTATION Security, Privacy, Agency Portable Data & Algorithms Reputation system that spans verticals and applications Benefits from data network effects
OPEN & PORTABLE & PROPRIETARY Open Data Formats Open Frameworks Open Algorithms Open Governance Proprietary Contextualization, Parametrization, Tuning & Data