Hey people! Welcome back to Forests Over Trees, your weekly tech strategy newsletter. It’s time to zoom-out, connect dots, and (try to) predict the future. Let’s go!
Today, I’m talking about an unlikely duo working together. It’s like a tech version of a buddy-cop movie. We’ll meet the characters, understand what makes them tick, and slowly realize why they’re such a great team. Enjoy!
The enemy of my enemy is my friend.
— Ancient Proverb
Last week, I had a crazy realization. Two groups are both pushing tech towards a specific outcome. Typically, these two don’t get along – and they actually make life hell for each other.
Who am I talking about? And what are they pushing for?
I’ll tell you, but it might not make sense yet:
The crypto kids and regulators are teaming up to push for the fediverse.
Let me explain…
The crypto kids want decentralization
In case you haven’t heard, the latest crypto winter is ending. But it’s not a slow thaw… it’s like a hungry bear coming out of hibernation and immediately going hunting. Bitcoin has ETFs and all-time-highs. Ethereum might have ETFs soon. Token prices are through the roof.
But people who have been hanging around crypto for a while will tell you, the investing in tokens (aka speculating aka YOLO) aspect of crypto has overshadowed one of the core motivations for it existing at all. Decentralization.
The philosophical roots of crypto come from libertarians, who want maximum autonomy and freedom for individuals. They want to reduce the role of government and central authorities for everything, including currencies and commerce.
But to have decentralized commerce, you need ways to “encode” trust. And that’s where the cryptographers come in.
Cryptographers are essentially mathematicians who came up with ways to use math proofs as validation/trust. Each crypto transaction is stamped with a metaphorical seal of authenticity, and that seal is a math proof. You might have heard of proof of work (the validation system bitcoin uses) or proof of stake (the validation system Ethereum uses).
So… instead of needing to trust a bank, you can just trust math.
Ok, what in the world does this have to do with the fediverse? And, um… what in the world is the fediverse anyway?
Well, the Fediverse is basically an interconnected social platform ecosystem, which allows you to move your posts, followers, etc. between networks. Instead of being stuck on a single social media platform (or having to “start over” if a new one comes out), you can bring everything with you.
And for the crypto kids, this is like preaching to the choir! You will let us communicate and organize without trusted central parties gate-keeping us? Awesome!
Now if you pictured the perfect ally for this group, who would it be? Some other group that prefers small government, and maximum autonomy, maybe?
Wrong. Against all common sense, it’s actually the regulators – who have sued and stalled crypto at every turn (see more here) – that are also pushing towards the fediverse.
But they’re doing it for a different reason.
Regulators want healthy competition
For the folks at the FTC and the DOJ (who share responsibility for bringing anti-trust action), the name of the game is a simple as this:
Let the best one(s) win.
The regulators want to promote competition, so the companies that do well are the ones doing the most good for consumers. They don’t want to simply let the first-movers or the biggest companies win, squash all future competition, and over time make things worse for consumers.
But if you think about it, that mentality is almost the reverse of how companies build moats. Companies typically want to exert their power to raise barriers to entry, reduce the likelihood of competition, etc… They want to build moats and defend their businesses.
Ok, land the plane sir! What’s this got to do with the Fediverse?
Well, it’s the same dynamic! Regulators are pushing hard for social media companies to reduce switching costs for users, and to embrace open standards.
GDPR (the EU privacy bill that went into effect in 2020) is a great example. It requires that social media companies give users tools to download and take their personal data with them, either for re-posting to other platforms or for archiving.
Tech firms who run social media sites are understandably concerned about that… because they get value from the users and the content they have on-site. The users, data, and content are moats.
They don’t want you to leave!
So because social media sites want you to stay, they resist regulator pressure and slow-roll any response. But we’ve seen the EU regulators getting old dogs to learn new tricks – they’ve even forced Apple to open its App Store (a moat) via the EU Digital Markets Act… something that previously seemed impossible.
Wrapping Up
Already, we’re seeing social media companies start to pre-emptively move in that direction. Mastodon, one of the larger Twitter clones (see more here), has 8M+ active users and is part of the fediverse. And Meta announced plans to eventually connect Threads (their Twitter clone) to the fediverse too.
And if/when the fediverse catches on, I think tech and public sentiment will likely shift – in the next 5-10 years – towards decentralization for other pieces of our digital lives.
What if you could bring your favorite genres and viewing data from Netflix to Disney? Or your at-work reputation (reviews) from Green Grass Company A à Greener Grass Company B?
There are plenty of more-visionary, more capable entrepreneurs that can run with it, but you get the idea.
Bonus Bullets
Quote of the Week
We don't have a monopoly. We have market share. There's a difference.
— Steve Ballmer, former CEO of Microsoft
Quick News Reactions
That was fast – Before the rumor could fade away, the US House of Reps made it real and passed a bill to force a ban or sale of TikTok. Unclear if/when it could clear the Senate, but I’m fascinated. See more in my prior write-up here.
OpenAI board done with musical chairs – The latest board members added include: the Instacart CEO, the former CEO of the Bill and Melinda Gates foundation, and the CEO of OpenAI (Sam himself…).
X is launching a TV app – What? The wild experimentation phase continues for Elon at X… They will apparently partner with Amazon and Samsung to distribute the X streaming app on devices from those companies. Very curious to see how this goes.
Overall Economy
This is the Weekly Economic Index published by the Dallas Fed. It’s made up of 10 different data sources from consumer to labor to production, and it’s designed to closely track US GDP.
Tech Equities & Bitcoin
The Nasdaq (blue) closely tracks tech equities, and I added the S&P 500 (green) and Bitcoin (orange) for comparison. Note: this is not investment advice, but it is interesting.
Tech Jobs Update
Layoffs from 2022-2024: (Source: Layoffs.FYI).
