Status can be a volatile, powerful driver of engagement. Status and one of its underlying mechanisms, scarcity must be considered by product designers in every category, as early on as possible. But it can also be a double-edged sword, as managing a network and the status dynamics within it is constantly recirculating, always shifting. For this reason, status that is more entertainment-based than utility-based can over time become precarious, as well as too restrictive for continued user growth. NFX partner James Currier sits down with Eugene Wei (Product Lead at Amazon, Hulu, Erly, Flipboard, Oculus) to draw from his original Status-as-a-Service article and expand to discuss status in entertainment, frameworks for emotional product design, video games as world leaders in defining scarcity, the future of virtual goods, and the underlying status games that drive us all -- in technology and in life.
James Currier (00:00):
All right. So today I'm so excited to have Eugene Wei with us. Eugene, you've been blogging since 2001, very early. You've been a product person at Amazon, Hulu, Flipboard, and then now Oculus. And about a year and a half ago, you published an article called Status as a Service which was one of those big hit tech blog posts and got everybody buzzing and very insightful. I loved reading it myself. Anyhow, it subsequently made it into the NFX Founder's List audio readout, which goes out to everyone. And just excited today to talk with you because we see things very similarly, you and I. And I want to talk through and unpack some of the psychology of status as a service and as they relate to startups.
James Currier (00:36):
The audience we have here at NFX is with early stage startups. And I'd love to make sure we keep going back to what early stage founders can learn from some of these key insights. Your Status as a Service essay has made the rounds. You basically break social networks down in that article into three axes; utility, status, and then entertainment. And let's talk about the first two and what lessons that we think startup founders can learn from this. Is there an order of operations when you're building a product, when you're building a network? Are we looking primarily for utility? Are we looking for status? Both? I'd love to dive in there.
Eugene Wei (01:07):
I think that in the long run, the ideal is to offer a utility to your user base. It's the most stable sort of long-term competitive advantage that you can have. However, it's also true that a lot of network-based utility only is realized at some level of scale. And so the question is, how do you get to that scale because there are a million networks that died out before they ever achieved that scale. And so I think that's where status sort of comes into me. A lot of networks that struck me as having achieved that super scale had some sort of status incentives or status games built in very early on that helped them to achieve that sort of kinetic energy that you need to achieve some level of scale that then increases your utility. And I think that's why I wanted to write about that because I think a lot of founders when they come up with their business plan, you're always thinking about the utility, what problem you solve for your end users and everything. But network-based utility is just... Getting to that is a very particular sort of path.
James Currier (02:11):
And I think in the article, you mentioned that it's a little bit like people were trying to do with these ICOs a few years back where they would actually pay you in currency to develop the network. And what you're saying is early on before we had ICOs, we were actually paying you to develop the network with ego, with status, with a sort of an emotional payback rather than a monetary one.
Eugene Wei (02:32):
And I think one of the things that over the years as a product person I've become more cognizant of is just really how important it is to have awareness of how your product makes people feel. I think we're used to a very sort of clinical economics driven analysis that's very sort of cost benefit driven. Every user as a rational economic actor trying to maximize some amount of benefits. And overlooked in is that a lot of times people use products that just make them feel good. And that is sort of an understudied aspect of product design and product development. I actually think that people in the gaming world have more of an intuitive understanding of how important it is, moment to moment, to track your user's emotional valence. And that's partially because game designers sort of... Games are a continuous interactive experiences.
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This transcript was exported on Nov 10, 2020 - view latest version here. Eugene Wei (03:24):
And if the user isn't feeling the right balance of challenged, plus motivated, plus rewarded in a game, they'll churn out. But I think that same principle can be applied to a lot of other products. How products take off a lot of it is in how they make you feel. If you watch any Apple keynote, going back to the Steve Jobs days, I think he is underrated for having this very intuitive understanding. That part of why people should buy Apple products or part of why they buy Apple products is that it makes them feel cool or it makes them feel hip, or it makes them feel creative. That applies to social networks just as much.
James Currier (04:02):
You're saying that a lot of founders miss on the emotional and psychological needs of the users as well. I think that there's some Princeton professor got a Nobel prize for pointing that out in economics as well. That it's not just a rational actor who's maximizing something, it's actually has to do with their psychology as well. And why do you think that is? Why do you think so many founders miss out on this and maybe some of the great ones like Steve jobs are so heavy into it?
Eugene Wei (04:25):
That's a tough question to answer. Part of it may just be mental frameworks that are more common in business and analysis tend to be more focused on things that are measurable or easily measured, which often is some sort of utility based function. And it is harder sometimes to measure that emotional quality. What emotional payoff does your product have? You may have to actually sit in a focus group and watch the body language of someone to really understand that. But often it's just in their minds, in their heads. And so the downstream metrics that capture that are sort of a little too late in the game, or we don't connect them back upstream to a user's state of mind. I think Jobs had kind of an intuitive sense of that. And it helps if you're a founder to sort of be that user yourself to be able to feel, moment to moment, how your own product is making you react.
James Currier (05:19):
One thing I've seen with early stage founders is just, you've got a team of people who are trying to produce a product and maybe one person has an intuitive sense of it, but the others don't have that same intuitive sense. And so they need to be convinced. And it's very hard to convince people of emotional and psychological things where it's easier to convince them of utility thing.
Eugene Wei (05:35):
That's certainly true, right? If you think about the average cross-functional team working on a product, you have some product person, you maybe have a designer and maybe have an engineer. And there is one model of product development that moves things through that chain in sort of an assembly line type of process. But if you allow any one function to have total veto power over the overall product design, it only takes one person who is only thinking in a utilitarian mindset to maybe torpedo the products more emotionally appealing aspects. So I do think that's a great point.
James Currier (06:09):
And it's Logical and rational. And so they can make those arguments easily. And maybe that's why we saw such great emotional products out of Apple because we had a dictator who sort of imposed his intuitive sense of it onto the rest of his team.
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This transcript was exported on Nov 10, 2020 - view latest version here. Eugene Wei (06:21):
Right. Right.
James Currier (06:21): Maybe that's why it worked.
Eugene Wei (06:22):
I mean, Apple certainly is famous for its sort of functional organizational structure. It has its advantages and disadvantages. But one of the advantages, if you have someone like a Steve Jobs or a Jony Ive, someone who has that kind of overarching veto power is that if they are very attuned to those emotional aspects of their product, they can sort of shepherd those through the product design process.
James Currier (06:47):
Right. So on the spectrum between, let's say, science and art, we consider movies to be more art. You've got dictators of screenwriters or directors or whatever. And with tech companies, we tend not to have that. And so this really... What you're saying is there might be some people who are just really good artists and they're applying their artistry to these tech products, but because of the group rationality, often they get muted and then you end up with these purely utilitarian products which don't actually shine.
Eugene Wei (07:13):
It's easy to forget that product development in the tech world, in the software world is actually still a relatively young profession in the scheme of things, right? If you compared it to filmmaking, which has been around since the turn of the 20th century, early 1900s, and then you look at software design and tech hardware design, that's still a pretty big difference in how many years it's been around. And I still actually think if you look at just how many product development framework out there from waterfall to agile, to whatever is the latest trendy version of the day, we have not yet hit upon practices that everyone agrees upon, our best. I think we'll converge on them over time, but it may take many more years.
James Currier (07:54):
And also just converging on what type of mindset and what type of talent base or type of people are good at certain things. I'm reminded of a conversation I had last week with Sean Ellis around growth. And he said that the main reason that there's so few great growth people. Is there's just so few humans who think both in emotional, psychological and language terms as well as data.
Eugene Wei (08:13): Right. Right.
James Currier (08:14):
And when you find those rare individuals, that's when you find these great growth experts.
Eugene Wei (08:19):
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I mean, certainly funding and everything into the tech world has flowed in like crazy. And that's also meant that a lot of people have been flying by the seat of their pants for a long time. And we haven't had that time for it all to settle down. We haven't had time for all that knowledge even to move from some people's heads into other people's heads. And the curriculum, if you look at the average business school curriculum or business strategy curriculum, it probably is going to lag what's happening in Silicon Valley by quite a bit. By the time something's written up as a case study for Harvard or something like that, the entire industry has moved. So I think to that type of knowledge capture and sharing probably will always be a little bit behind the state of the art.
James Currier (09:01):
So in the Status as a Service article, you wrote that the entertainment access, if there are three axes which are status, utility and entertainment, the entertainment axis adds a whole lot of complexity, which I'll explain another time. Can we dig into that? Where are you going with that?
Eugene Wei (09:16):
Well, I'm very fond of kind of the Neil Postman, amusing ourselves to death kind of definition of entertainment versus... He was using it in contrast to what's our definition of news. And so he said, " If you listen to a news report on something that happened in politics or something like that, is that hard news or is it entertainment?" And the mistake we make is often that we think something is news when it's actually just entertainment. He defines news as something that will change your behavior. So if I told you it was going to rain today and you had to go out, James, and you decided to bring an umbrella, that's actually news because it changed your behavior. By hearing some story about some political brouhaha or something that happened in the tech world, some company getting acquired, a lot of that actually won't change your behavior at all and it's just entertainment.
Eugene Wei (10:06):
And I think there's a broader lesson to learn from that about the products that we offer to the world in tech. Many people think that their products are very utilitarian. And I'd argue that a lot of products that people build are actually entertainment based products. And the reason this is important, this distinction, is that I think in the modern world, because of the smartphone being always connected to the internet, holding a whole bunch of different apps of all different types, what we're seeing is a collapse of the barriers that used to separate different forms of entertainment into their own sort of vertical. So I also like to talk about when I was a child, I had sort of geographic separation of different forms of entertainment. So I'd only watch TV in our family room because that's where the TV was.
Eugene Wei (10:49):
I'd only play video games in my bedroom because that's where I had the little Apple computer that I would load games on. I would only listen to music really in the car because that's where we had a cassette tape player and radio. And I'd only really watch movies at a movie theater with friends because that's where movies were played. And over the years, those entertainment options have started to blend into each other. We got a VCR, so we could start watching movies at home. We started to have computers that were more portable. So you could take that with you. Music over time became available in more places. So you could listen to music in more spaces. But the smartphone ultimately collapses all those things into one device. So every time I unlock my phone now I'm given a choice of anything.
Eugene Wei (11:32):
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I can choose what my diet of entertainment is. That actually makes all these forms of entertainment actually absolutely competitive with each other. In economics, we have this concept of substitutes. A product can substitute for another product. But I think in entertainment, what you have is actually a lot of forms of entertainment, while they might not be perfect for each other, they're close enough. They're good enough, right? And so you see this now, for example, with let's look at sports as an example. The major sports leagues have an aging viewership. A lot because kids today often choose to play video games instead of watching sports on TV. And you might say, well, those are two different things. Watching sports is a totally different thing than playing a game with your friends. But in that child's mind, it doesn't really matter.
Eugene Wei (12:18):
They're just choosing how to maximize their entertainment value at that moment in time and they're making that choice that it's to play the video game. And so I think a lot of companies that formerly looked at their competitive set as being companies that were directly in their vertical are missing out on the fact that they now compete with companies in a variety of verticals. And what that means is or what I often tell companies now is let's say your product doesn't really have much of a social layer. And you might say, hey, nobody in our industry has a social layer. That's not what movies are about. Movies are a passive form of entertainment. The problem is if all forms of entertainment are now effectively substitutes for each other, you actually don't compete with other movie studios. You actually compete with a game company that has built a really fun party game, social layer. And in the end-
PART 1 OF 4 ENDS [00:13:04]
Eugene Wei (13:03):
[inaudible 00:13:00] that is built like a really fun party game, social layer. And in the end user's mind, there's no distinction. So I think you compete with the best on every aspect, regardless of what industry they come from.
Eugene Wei (13:11):
So I think it's very critical if you're doing a startup to understand if you are going to be offering a product that is an entertainment-based product, because that really changes your competitive set. I'd argue a lot of things like, if you're going to go argue politics with people on Twitter, people think of that as something heavy and serious, but I think that's just another form of entertainment. And so social media, ultimately, a lot of it is just about entertainment, not utility. And that's just more precarious ground to be on than say, if you were truly a utility-based network. Like if you have a network like Uber or Lyft, I mean, you're ultimately about getting someone from point A to point B. That's not really an entertainment-based product. So your competitive set may be more limited.
Eugene Wei (13:53):
So that's why I was like, keep the entertainment access as a separate one, because I actually think the
competitive or strategic questions on that axis are wholly different.
James Currier (14:02):
Got it. Yeah. I remember a few years back Netflix said in their annual report that Fortnite was their
biggest competitor.
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This transcript was exported on Nov 10, 2020 - view latest version here. Eugene Wei (14:08):
Absolutely. But Fortnite effectively is everyone's biggest competitor in entertainment, just as Netflix is a big competitor for Fortnite and vice versa.
James Currier (14:17):
Right. And ultimately, I think we've heard this before, but it's competing for our attention. It's competing for our time. And ultimately there's only a certain number of hours in the day. And so as we look at a world of the internet or of Chinese manufacturing with sort of an infinitude of anything you might want, as we move to the infinity, then really we're looking for scarcity. And scarcity is created by the number of hours in the day, for instance.
Eugene Wei (14:41):
Right. I think about this often, the idea that I was reading this book Lords of Strategy, which was about the four people who invented business strategy in the '60s, was like the founders of Kinsey, Bain and BCG, and then also Michael Porter out of Harvard Business School. And I was certainly, when I went to Amazon early in my career, was given Michael Porter's book on strategy. And I had a lot of friends in consulting, so I was certainly familiar with the BCG 2x2 and all these frameworks that they teach you in business school.
Eugene Wei (15:11):
A lot of them were built around a world of more defined scarcity. And what you realize is a lot of those frameworks, they're not that helpful in a world of just infinity, a world of abundance. Because a lot of those supply demand charts, and a lot of things they tell you, are like, if you were a brand manager for Tide at Procter & Gamble, and you're trying to gain three points of market share, some of that may be useful.
Eugene Wei (15:37):
But if you're in a tech world where you have winner-take-all dynamics, network effects, you have things that are absolutely free and infinitely available effectively. At the edges of a lot of that, the prescriptions kind of break down or they don't work. Your intuition isn't going to work if you're just extrapolating from a world of more constrained supply, a world which doesn't have as many free substitutes available. I really think we have yet to have the [inaudible 00:16:03] of the world of abundance, but we're starting to see more people understand that strategy is pretty different in the tech world now.
James Currier (16:09):
We needed the Lords of Strategy 2.0 to help us in the digital world.
Eugene Wei (16:13):
Yeah. The world of abundance is just very different and not as intuitive often.
James Currier (16:18):
What are some of the things that you've noticed that allow us to create scarcity, because in scarcity, you either creates scarcity or find scarcity. Because we just mentioned that there is a scarce resource of the number of hours a day in which you're awake.
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This transcript was exported on Nov 10, 2020 - view latest version here. Eugene Wei (16:31):
Right.
James Currier (16:31):
I noticed a leaderboard creates scarcity. There's only one number two slot in a leaderboard once you
create it.
Eugene Wei (16:40): Yeah. Yeah,
James Currier (16:40):
As we look at the gamification of everything, we realized that the world had been gamified before with U.S. News & World Report publishing the list of colleges in 1981, which has set off this mad, crazy game about getting into college and achieving status and that sort of thing. They created this scarcity. Who's number one? Who's in the top 10? Who's in the top 50? What other ways are you seeing people create scarcity that then produces energy for people or produces businesses?
Eugene Wei (17:05):
Yeah. That's a great question. I love your U.S. News & World Report example. A lot of, I feel like, the tension from the last generation of media to this new world of more distributed network media is just that the gatekeepers that used to define scarcity have lost a lot of power in the modern world. And ultimately, if you're allowed to define scarcity on any axis, that is a form of power. So if we were to look at networked apps and things like that, you brought up lists and ranks lists. That's certainly going to continue to be a really important way in which people define scarcity. And that's like working its way through every sort of vertical in the world. I also think there is just like, if we were to look at video games, that's just a metaphor for a lot of us and you study the video game world, and you see that they've become really the leaders in the world at figuring out how to define forms of scarcity.
Eugene Wei (17:58):
One option in the gaming world is you have something like a battle royale game mechanic, which is just like, look, there's going to be one winner out of this group of a hundred people every so often. You can look in the retail world at similar things where you have flash sales and things like that, where it's just constrained inventory of something. I mean the retail world now we also have the idea of drops, which have become just like standard operating procedure for so many retail brands. Like Nike is dropping some limited edition sneaker. You're almost certainly not going to be able to get it. And so [inaudible 00:18:29] this huge desire to try to get that. And now you have huge companies like GOAT or StockX that are just really built on being an aftermarket for that type of thing.
Eugene Wei (18:37):
I mean, I was surprised to see even baseball cards have made a comeback, like sports cards have made a comeback now. I feel burned from my childhood because my sports cards were ultimately mostly worthless, but [inaudible 00:18:46] sports cards now selling for millions of dollars. It's absolutely stunning.
James Currier (18:50):
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I [inaudible 00:18:51] through my comic book collection recently as well. And I was like, "Oh, I thought I
had all these valuable comics." Turns out, no, they're worth seven bucks.
James Currier (18:56):
Actually, it's interesting what you say, because one of the biggest asset classes in the last seven or 10 years has been rare cars. The growth in that area has been unprecedented because there are just a limited number of these cars. And as the ultra wealthy search for scarcity as a way to determine their status, they've found that they can have one of these cars.
Eugene Wei (19:13):
Yeah. I mean, if we study traditional status mechanisms in society, just generally, it's always the case that someone is always going to create something even more scarce to differentiate, because it's just as ruthless as status competition at the top as it is in the middle or as it is in the bottom of society.
Eugene Wei (19:31):
And so a funny example is just in LA, you have the [inaudible 00:19:36], or just around the world, but I think of LA because I spend a lot of time there. You have these social clubs, like the Soho Club, which are elite. And then in LA now we have actually newer clubs that are even more elite. The San Vicente Bungalows which are just like... It's even harder to be a member than it is for the Soho Club. And so at the top, you see this continually recirculating game of tightening up that scarcity.
Eugene Wei (19:59):
That is ultimately just, I think when you think about status, one of the important things to manage in the long run, is that I think managing a network and the status dynamics within it, evolves over time. It's the precarious nature of status. We all know that there will be some hot nightclub in New York one year, and then just one day, it will die off and will have to be shuttered and rebranded as something new. A status does have that particularly volatile quality where at scale, at some point, it can just collapse.
Eugene Wei (20:28):
That's why I always say, in the long run as a network, you want to evolve to some utility-based offering to your customers because if some service offers a utility to you, you're not going to actually switch, unless you stop wanting them to do that function for you. You're not going to stop using Uber or Lyft, unless you find another way to get from point A to point B or you don't need to get from point A to point B anymore.
James Currier (20:50):
I love that distinction that you've made between a network that might be personal and then something that might have utility. I remember three years ago, when we published the network effects map, we made that distinction. It was that a personal utility is something like Messenger or WhatsApp, where, if your wife messages you to pick up the kids and you don't, you're screwed. It's bad. So you can't leave WhatsApp or Messenger if you were using that to communicate with the wife. Whereas if you stopped looking at Facebook, your life is fine. We made that distinction back then, and you've made that same distinction. Are you seeing any companies that are navigating from just being entertainment or personal networks to more utilitarian approach? I mean, Messenger adding payments.
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This transcript was exported on Nov 10, 2020 - view latest version here. Eugene Wei (21:27):
Right. Yeah. Well, certainly a wallet is one of the easiest ways to do it. I think it's a little harder in the West because we have such competitive offerings on the payment side. Displacing credit cards has proven pretty challenging in the West because people are just addicted to their points and their miles. And they don't actually feel like it's a huge inconvenience to pull out their credit card or enter it on a website. Whereas in the East, you saw digital payments, China just kind of leapfrogged ahead because people there were used to using cash. A digital payment versus cash. It's just such an upgrade in utility.
Eugene Wei (22:01):
I actually think that Apple Pay on my Apple watch should be one of the killer products of the world. It's actually in many ways to me better than the QR code payment mechanism that they have in China. However, just getting enough vendors to support it and getting people to change that behavior is just so hard. The activation energy to migrate everyone to just tapping their watch on a sensor or something, it's going to take longer.
Eugene Wei (22:25):
In many ways, I actually think China's a good test case of the new world of scarcity, which you asked me about earlier, because I do think they leapfrogged ahead on many aspects and live more a digital native life than even many people in the West. And so you see that they've gotten really good at all aspects of trying to define some new forms of virtual scarcity.
Eugene Wei (22:47):
Have you seen that documentary, the People's Republic of Desire?
James Currier (22:50):
No, I haven't seen that yet.
Eugene Wei (22:52):
Oh, okay. Yeah, it's really good. I recommend it from a ex-Chinese tech product manager. And it was really about this platform called YY in China, the video streaming one. Crazy competition they have at the year end to define their best award-winning video streaming hosts. It hosts this award show, and it's this brutal competition among the most popular streamers to win and get that award. And the way they measure it is just dollar volume of contributions from your fan over a specific time period.
Eugene Wei (23:19):
And the top streamers are all supported usually by some sort of syndicate, with some sort of boss that will make a donation of $2 million or something to try to boost you in those standings. And when you watch this, you're like, first of all, why would someone buy a virtual sports car for someone that's streaming? Why would you do that? That's just not as common in the West, but I think it's coming.
Eugene Wei (23:44):
I think a younger generation in the US is actually very attuned to the emotional value and the status that comes from ownership of virtual goods, whether it's in video games or elsewhere. And I think that's a very big societal shift because if a centralized provider can guarantee the scarcity of that virtual good,
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then it actually does have emotional value. Like people who play League of Legends all know how hard it
is to acquire certain types of equipment in that game. And there's a flourishing aftermarket for it.
Eugene Wei (24:17):
I think China leapfrogged ahead of the West a little bit on that, but that type of virtually defined scarcity is going to come to the West. And I think every product person or entrepreneur moving forward needs to just have familiarity with that tactic and that strategy of like, "Hey, structurally, how you build your product, part of what it's doing is defining what scarcity means on your platform." So, yeah.
James Currier (24:42):
So that you can give out some scarcity to people in order to give them the status or the dopamine hit that they want. I remember my partner, Pete Flint, who founded Trulia [inaudible 00:24:50] said, "What we learned was that there's two ways to pay people. One is with ROI and the other is with EGO or ego." Same idea. I've always remembered that phrase.
Eugene Wei (24:59):
Yeah. I think some people view this type of thing as purely dystopian, and I don't necessarily. I think it comes down to how you decide to use scarcity in your products. For example, at Amazon, early Amazon, we knew that customer reviews were a huge plus to the shopping experience, and we wanted more reviews from our customers. And so we created this ranked list of every reviewer on the entire site. You would have a customer review ranking of like 12,942. And it was just based on the number of, "Hey, this review was useful," votes that you accumulate over some time period for your reviews.
Eugene Wei (25:37):
And gosh, once we set that up, people went crazy writing reviews and it was especially beneficial for you to write the first review on a product that had no customer reviews. Because anyone looking at that product would have to look at your review.
Eugene Wei (25:50):
Do you remember when Amazon had global sales rank?
James Currier (25:52): Yes.
Eugene Wei (25:52):
So every product on the site had a sales rank. Do you remember all the authors competing. They were like, "Please, buy my book. I have to move my sales rank up." So it was a mechanism that served a purpose at a time in-
PART 2 OF 4 ENDS [00:26:04]
Eugene Wei (26:03):
So, it was a mechanism that served a purpose, at a time in the company's evolution, and then ultimately
kind of got deprecated out after it wasn't valuable anymore.
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This transcript was exported on Nov 10, 2020 - view latest version here. James Currier (26:08):
Yeah. I'm reminded of... We ran a gaming company years ago. We invest a lot in gaming companies, but I remember one thing I realized was that what we were doing was creating a context, setting a goal for people saying, "You want to go from here to there, in order to get there, you have to wait. If you don't want to wait, then you have to pay." And I realized that was Graft. And the same thing happens when I go to [Zaire 00:26:28] and I want to build something and the guy says, " Hey, my cousin can get you that permit, which will take 10 months, or we can get it to you in a week. I'm sure if you bought him a car, he would be helpful to you." And that's all it is. It's speed ups. You create scarcity by saying something's going to take you a certain amount of time, but you can pay to speed up.
Eugene Wei (26:43):
Yeah. It's completely virtual, right? It's just a made up scarcity. There's no actual physical constraint
time. You are just creating the mechanism.
James Currier (26:50):
Right. Are you seeing some startups that you think are doing a good job in the last couple of years about this? I mean, because we haven't seen any new social networks really right? We had Musical.ly, which became TikTok and we had Discord, but since Snap in 2011, we really haven't seen much of anything happen.
Eugene Wei (27:05):
Right. I do think on the social side, we probably, at least in the software based social network world, we haven't seen as many new, interesting developments there. I do think that if we look at TikTok, which I've written about recently, there are sort of interesting new column status games or scarcity-based games, that are defined by their particular platform, which is really sort of a creative bar, right? So their algorithm, their for you page algorithm, really ends up as the arbiter of who gets distribution on their platform for their videos. And it's actually pretty hard to get chosen by their algorithm, yet super distribution. And it's partially because they've defined a very particular type of video and a type of culture that isn't easy for certain people to replicate, even if they have status on their networks. It's true that some people who are famous can go on TikTok and get a lot of followers, but that doesn't mean that they're actually very good at creating the types of TikToks that go viral.
Eugene Wei (28:03):
And so, we've all heard, probably now, about a whole bunch of new influencers created essentially by, just TikTok's algorithm. And so I think that's, part of what I talk about in Status as a Service, is you can think of all of these things as a game. And the reason I compare them to an ICO is that there is some sort of proof of work, right? There is some hurdle that you have to do to capture that amount of status. And if you can define some unique form of proof of work, then you may have something that jumpstarts a new game.
James Currier (28:33):
A new game, right. And it's interesting because Vine came out and they said six seconds, but that was a good restriction to give people a parameter or sort of a blank template in which to pour something. But it wasn't restrictive enough. And Musical.ly came along and said, "No, we actually want you to use music in the background. And we want you to do a little thing, like a little dance or..." And as soon as they put
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even further restrictions on it, that's when it really started to work. And we saw the same thing with Fiverr, who said, "We're going to do a marketplace, but everything has to be $5." And everyone's like, "What? That's a stupid idea. That's ridiculous. Things don't just only cost $5." Well, it turns out that it works.
James Currier (29:07):
Has a way of starting off to restrict the template enough so that an initial group of users can get excited about it and then start to build that network effect. And I found that fascinating, to watch that happen with both of those companies. And there's probably so many more examples of that, like Top Hat, who said, "You can only come to our marketplace from 8:00 to 9:00 East Coast time, U.S." And so everyone was showing up, of the thousand users, everyone showed up during that one hour. And so there was a lot of hubbub during that time. So these restrictions, in order to create the scarcity, drives initial white hot center type activity, which then can bleed into bigger products.
Eugene Wei (29:40):
It's sort of an art form to design this, right? Because the risk is always that you put in some restriction and people are like, "Oh, it's not even worth going through that. I actually don't care." And you just end up killing off usage of your product. So you have to define some form of restriction where enough people feel... It's kind of like game design, which I know you're familiar with, James, right? A lot of game design is about giving people a sense of progression. So you need a challenge, but you also need to give people hope that they can overcome that challenge with enough time or enough grinding or enough improvement in their skill level. Otherwise, they just churn out. That's why they talk about games with a heavy skill cap, being sort of really limited in their TAM or the ultimate user base.
Eugene Wei (30:20):
Game like chess, has a really high skill cap. And so it's the same with status, right? What is your sense of progression in these social networks, if there is scarcity involved? For Instagram, for example, right? In the early days, I think, there was a sense of progression in that they had filters and things that allowed you to feel like you were improving as a photographer. But the part of Instagram that's challenging now is a lot of that network is about, just if you have a lot of wealth or something, you can post photos from amazing vacation spots or dinners or things like that. Where the average person is going to be like, "That's not my life. I can't compete with that." And so there is a sense in which you start to feel you could churn out of that network because you're not going to feel any progression.
Eugene Wei (31:03):
And that's why I often think the difficulty in all of these things is that the status dynamics are constantly shifting as more people join. Just like managing a game like World of Warcraft, over many generations, you're struggling with that, right? There were certain games in the early days, where they got stuck because a new player just had no chance to compete with an experienced player that had progressed much further in the game, because they just had so much more equipment or power. And it was just overwhelming. So then player matching and skill matching became a huge and important art in the game world. I think it's the same with social networks like Facebook and Instagram, everything. At the level of scale that they're at now, the status game and the sense of progression is going to be way different than it was when they were just starting out.
James Currier (31:48):
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Yeah. I remember back in 2010, when we were building games and people started saying, "It's gaming as a service." Meaning, instead of you just put out the game and people play it, you're tweaking it on a daily basis to make sure the spears don't overwhelm the shields or to make sure that you don't get too many rubies and too little gold. You kind of have to balance it out for people on a regular basis so that it stays in that zone of competence, right? That zone that people get into. And that's why it's so brilliant when you came out with that article saying, "Oh, what these social networks are doing, is it's Status as a Service." It's like we are providing an ongoing relationship so that people can get their status hit. There's this great book called Impro, I-M-P-R-O, by this guy named Keith Johnstone.
Eugene Wei (32:28):
Oh, right. Yes, I've read it.
James Currier (32:29): Right. You've read it, right?
Eugene Wei (32:30): Yeah.
James Currier (32:30):
And the first third of it is all about how he became one of the greatest improv teachers in the world, based on this one insight. If you make status the key driver of how people act on stage, suddenly everything becomes clear. Everything becomes real and your actors are that much more engaging to the audience because they intuitively understand how every sentence, every movement displays some sort of status relationship between people. And that insight that he had at some point made him the go-to guy for teaching improv. And I thought that was fascinating, that subsequent ideas or things like people who are your friends are people who you've agreed to have status games with. Like, you can say, "F you, man." And the person's going to laughs, because you're now putting them down, but they appreciate that because you're a friend and you've agreed to play status games with each other. And that's the definition of a friend. I was like, "Wow, powerful insight."
Eugene Wei (33:20):
Look, I'm not an evolutionary biologist by trade or anything, but I certainly think there's something to the idea that humans are wired to be very, very conscious of status. And that it may have come from another time in mankind's history when your status within your small tribe or group was actually critical to your survival. And so, that sort of carried over to the modern world and the fact that we have these social networks that knit together the world, that allow us to see the activity or status of other people all over the world has sort of, I think, risen the stakes. Has pushed the emotional stakes of status games to, maybe, an unhealthy place. But, I think... There's this book by Fussell, which is about sort of status in American society. And he talks about how backsliding and status is one of the greatest fears for any person in society. You never want to be seen as middle-class and then backsliding out of the middle- class, or you don't want to be in the upper-class and then backsliding back into the middle-class.
Eugene Wei (34:28):
People have this deep anxiety about that. And I think there's a degree to this in our general sort of
economic inequality question in America right now. Where people talk about, "Hey, we're starting to see
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class mobility sort of stagnate." It's like a game where progression has stopped for a huge segment of society. I just think that's just a really important problem to grapple with. And so I think, when people design status into their apps and things, there's also that aspect of like, "Hey, can we do these things in a way that's productive and not detrimental to people's mental health?"
James Currier (35:01):
Yeah, it doesn't feel as if many of the CEOs and heads of product and heads of algorithm have made that mental shift from, "I want my company to survive and I want it to be successful and I want to be successful in my career," to the place of being a steward of the users or a steward of society. Where you have a broader perspective on the trade offs there. And so it's interesting about the lack of mobility, because it goes back to the point you were making earlier, which is that there's this utility, but then there's also the psychological and emotional.
James Currier (35:27):
And so it might be, that from a utilitarian perspective, the stagnation in mobility has been there for 40 years, but the emotional feeling of stagnation or the emotional feeling that everyone has of backsliding has now gotten to such a critical point, now that we have social media and we have infinite cable channels. We can see ourselves backsliding. We can see ourselves being dissed. We can see ourselves experiencing disdain from others, as a lower member of the status hierarchy within the United States. And that, I think is, maybe, more the issue, is that. We could have a debate. Is it more the issue that people are just feeling as if they're backsliding or is the issue that they really are backsliding? I don't know.
Eugene Wei (36:04):
Yeah. I don't know. But I certainly think in my experience that as you noted from the book Impro and other things, anytime a person feels like someone else might diminish their status or lower their status, and we know status is a relative measure, every sort of emotional defense will fire. And that's one of the most threatening situations people can be in. And I think, for example, a lot of political debate on social networks can model as just kind of team versus team games. Where everybody thinks of it as zero-sum. If that person gained status, then I have lost status in some way. And we know that anytime a game is viewed as zero-sum, it becomes much more vicious. In a more positive-sum environment, if the GDP growth were higher and everything, I think that sort of just eases the tension throughout the system.
Eugene Wei (36:54):
But anytime you create a more directly competitive situation, we know this from game design perspectives, and then it becomes an adversarial game. And yeah, I think that's the thing where I think in some ways, you almost... If you descend into a zero-sum design of status, you almost can't avoid ending up in this really vicious negative cycle.
James Currier (37:15):
Sure. No, I agree. I mean, it does feel tenuous right now in the States around this. And I think it's tenuous, I think in many other parts of the world as well. And it was real, experiencing the same sort of problem that we are. And so what topic haven't you written about yet, but you can't stop thinking about, right now?
Eugene Wei (37:29):
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It's a good question. Well, maybe one of the things that interests me more broadly, and maybe other entrepreneurs in your network are thinking about this as well, is we really have long held out this idea that there will someday be this kind of Metaverse-like world that more of us live in. And I've long thought that we actually have already, sort of partially, transitioned into it with our smartphones. I mean, yes, we're not wearing necessarily VR headsets and spending all our days like those people in Wall-E, in these virtual worlds. Most people I know today, if you look at their screen time stats, they spend a good fraction of the day with their face in their phone, interacting in software constructed environments. So the fact that it's not 3D, I think doesn't mean that's not a form of sort of low fidelity Metaverse.
Eugene Wei (38:19):
And I do think that is something that I'm very curious to see how that evolves, because I think we'll get another turn of the Metaverse, this sort of lower fidelity Metaverse, before we get the actual real sort of Ready Player One style Metaverse. And I think the pandemic has kind of just exacerbated that, right? We've spent the last half year, a lot of us, really stress testing, every social path that we have. Because we just can't see other people the way that we used to, we can't go places. And what I think you see is that a lot of our modern infrastructure for living a more virtual life just isn't there yet. It's just not built out. It's not mature. There's still a lot to learn. People are using Zoom a lot, but I certainly think anyone who's used Zoom a lot over the...
PART 3 OF 4 ENDS [00:39:04]
Eugene Wei (39:03):
Using Zoom a lot, but I certainly think anyone who's used Zoom a lot over the past half year would say, "Hey, there's a bunch that needs to be upgraded for this to feel like what it used to feel like in an office." And I don't think it's any surprise that some of the biggest winners during the pandemic are party games, which give us a form of connectivity with other people in a low threatening and fun environment. And so now it's a race, right? It's a race to get to building out this entire set of infrastructure for the metaverse light.
James Currier (39:29):
It's an interesting idea. And basically the smartphone is pong, if you will. It's like the very initial interactive game. It's a lofi version of second life and we're probably going to get another second life at some point that people will actually spend more time in.
Eugene Wei (39:43):
Yeah. And the powerful thing about this, and you see this in China, too, where they leapfrog the head. And so I think if you look at people's screen time stats in China, they're even further ahead of where they are in the US. People don't have any qualms about spending almost all their non-working hours immersed in their phone in a variety of experiences. And I still wonder what those key pieces of intermediate infrastructure will be.
James Currier (40:09): Do you have any ideas?
Eugene Wei (40:10):
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James Currier (40:13):
Eugene, you're angel investing, right? You could be helpful to people building these things. You state
them and people hear this podcast and say, "I'm going to go talk to Eugene. He understands my idea."
Eugene Wei (40:21):
Yeah. Well, certainly I think we still have a ways to go building out what I think of as the real time ambient presence indicator. In a way I feel like we back slid from the days when we had AOL instant messenger ICQ or whatever. You would just leave the client open and you could just alter your status time to time. And then essentially Discord does a version of that for gamers. If I turn on Discord, I can see what games a friend of mine might be playing at that moment. What's the version of that for everything and everyone? And I think part of it comes with, this is the cultural diffusion quotient, which I think of in every society. Part of adoption of a new product or service comes if a culture is welcoming and accepting of it.
Eugene Wei (41:06):
And that's often the hardest challenge, right? Say what you will about Google Glasses or something, but our culture wasn't ready for people wearing those type of glasses full time when it first came out, regardless of how well that product was designed. I think that cultural problem was there. And in the West, there's a lot of forms of technology that are regarded as either by the users or by the media or both as being sort of dystopian in nature. I think part of why China has leapfrogged American tech in some areas is just that they're a different culture with different things that are taboo. And so some things that are taboo in the West are not seen as that in the East and vice versa. And so you see certain products advance more quickly in different areas. So when I think about status, there's intro product status, how to status work within your product, but there's also just external status, right?
Eugene Wei (41:53):
How is your product viewed by society writ large? And I think the other thing I would say is that I think first decade or two of the internet and the web and the smartphone and everything was really focused on achieving efficiencies from going asynchronous. It's like, "Hey, why do I have to watch Friends at 7:00 PM on a Thursday?" Netflix is like, "You can just watch things whenever is convenient for you." And so we moved to video on demand and people are like, "Hey, that's generally better." And with messaging, we used to have to call people and hard interrupt them to communicate with them. And then we got email and messaging and it's like, "You know what? Most things aren't that urgent. Let's go asynchronous in our communications." And people are like, "Wow, this is a great advance for the world."
Eugene Wei (42:33):
And every field you can see, there are a huge gains to going asynchronous. But I think what was lost in that is that social feeling of community that comes from synchronous and synchronicity. And I think there's some amount of that that will come back over time where we're like, "It actually does matter occasionally that a society is all watching something at the same time or you and a group of people are doing something together." And it's not to say that all the gains from going to remote work and asynchronous processes will go away, it's more that I think we underrate how much we feel connected to other people when we synchronously do something with them. And a lot of our social fabric, our
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feeling of our sense as, "Hey, we're all Americans in this together," or something, comes from a bunch of synchronous processes and rituals, like going to church or whatever it is, that are starting to fray over time.
Eugene Wei (43:27):
That's then when you start to feel like societies start to fracture is when you don't have that feeling of
communal harmony. Have you ever read this book called Crowds and Power by Canetti?
James Currier (43:38): No.
Eugene Wei (43:38):
I was recommended the book by Alex Stanko. and it's a really fascinating book that gets into crowd or mob psychology. And one of the observations Canetti, who, I think he's kind of like a philosopher or sociologists with his hair on fire, but he talks about the paradox, which is that if you're in the mosh pit at a concert or if you're part of a group of rioters or whatever it is, there actually comes a moment when you're part of that group where it's a sense of relief because you lose your sense of individuality. You actually just become one of that crowd. And there's a way in which, on social media, we generally are in this very performative mode all the time, constructing the self as a brand, and how just exhausting that is to maintain this very distinctive identity and personal brand.
Eugene Wei (44:29):
But people are very attuned to status, so they're constantly grooming their social media to construct this image of their selves. And why we start to see things like cancel culture and mobs and things like that, often is that we need some emotional relief from having to just be this very individual and distinct brand all the time. It's really comforting to let yourself go when you're in the mosh pit. And I think that's just a really important dynamic to understand as we start to think about, "How do we fix some of the more toxic side effects of social media from the first generation?" And I think, again, it comes down to how products make people feel. I don't think you can solve that problem unless you acknowledge that sometimes joining in with the mob to cancel someone actually feels good for people
James Currier (45:12):
Do you think that we can "fix" the social networks which currently bind our society together? I fear that they are like Velveeta cheese melted and poured over potatoes, where they have simply taken on the form of the human psyche. The potatoes are us, and it's not as if Zuckerberg and his team has designed it, they just AB tested their way to form fit onto our own psychology. And if they put up something and we didn't use it, then they would take it down. And if they put something up and we used it, they would leave it there. And so what has been left there is just a cast molding over the face of humanity. And anything less than that is going to be less effective. And so to fix it will be to hobble it, and to hobble it will open opportunity for someone who wants to become more dark to come and build something that will get those clicks, that will get that energy.
Eugene Wei (46:02):
Well, I'm hopeful on a few fronts. Look, I don't know if our current social networks will be the ones to
solve these problems because, as you pointed out, there are probably a lot of incentives for them to
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keep their engagement metrics and everything the way they are, and I'm not sure if the negative side effects will rise quickly enough to cause them to be the ones to adjust their behavior. But I certainly think some new social networks might come along, study the ones that are at super scale now, and learn from their mistakes. I don't know if a lot of people feel this, but I do sometimes feel a level of exhaustion with our current first gen social networks, a lot of which have reached a stage where their growth is starting to flat line. So they're really just pulling every lever to try to sustain engagement and I think that is problematic.
Eugene Wei (46:45):
I think a lot of it comes down to how you think about friction in your product, because if you look at growth hacking and everything, so much of product design in gen Y and Silicon Valley was remove friction, increase virality, increase engagement, increase network effects, regardless of what form that engagement takes. And so all product people have it beaten into their heads that, "Hey, you've got to remove friction from every process in your app. From the signup flow to this flow, everything has to be fast and easy." But we know, my original metaphor status and comparing it to an ICO is that, "Actually you do need a proof of work. You do need some friction in the product and it can be used for something good. It can be used to motivate certain things."
Eugene Wei (47:29):
And so I think in the future, when we think about product design, we have to think about those positive forms of friction. I would argue that a lot of news that travels on Twitter today, the most provocative, controversial, crazy disinformation, a lot of that problem could be solved if we applied more friction to the distribution of that stuff. But all these networks are hardwired to act like a rail gun. It's just about accelerating things that show any form of engagement. And I think we have to start to distinguish between positive and negative forms of engagement. And look, I certainly don't think in the West, our regulatory apparatus is pretty far out behind the tech world in understanding how to deal with these types of things. But the one thing I do know is that in the long run, these social networks will either regulate themselves or eventually some form of government regulation will come. And I think tech would be smarter to try to be part of a solution to be ahead of that rather than waiting for it to happen to them from a bunch of politicians who are maybe really old and don't really understand that world.
James Currier (48:29):
Yeah, I think that's going to require, like we said, a steward mentality, a mature perspective. And I don't
think they've achieved that yet.
Eugene Wei (48:34):
It certainly seems like seed as much of that responsibility as possible to try to maintain this idea of themselves as these neutral airwaves. Oh, we know that their algorithms are constantly, every moment, making millions of decisions about what gets distribution and what doesn't. So there's no really any way for them to retreat from that responsibility.
James Currier (48:54):
Agreed. All right, Eugene, it's great to talk to you, buddy. Hopefully we can do this again soon.
Eugene Wei (48:58):
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