I keep trying to write this article for a few reasons. First, the FAANG (Facebook, Amazon, Apple, Netflix, Google) make up the majority of the S&P 500 which acts as a barometer for the economy at large. But also, because these companies shape our lives through the decisions they make (whether we want them to or not). The social trickle down effect of the FAANGs collective direction have massive implications for not only every business, but arguably every person on earth.
The problem with these guys is that things keep changing, so the article I wanted to write 12 months ago is not the same as the one I am writing today. That’s perfectly fine. As I personally shift this newsletter to be more web3 focused, I think Big Tech is telegraphing their intentions to shift that way as well. One thing to note, I am not exclusively discussing FAANG companies, moreso I am using it as a metanym for Big Tech, so I am using these terms loosely.
Let’s start with the obvious telegraphs. Facebook changed its name to Meta, and Square changed its name to Block. If you don’t know, Block is founded by Twitter founder, Jack Dorsey, who recently just stepped down as Twitter CEO to focus exclusively on blockchain stuff. Square is that cute little credit card machine that plugs into your phone and enables small businesses to accept payments anywhere. It’s a huge unlock for the economy, and Block’s mission has always been to expand into areas where it has historically been really hard to get credit card machines to work, or get businesses approved to accept credit cards. These places include Africa and South America, as well as inner city and rural America. Block also owns the Cash App, as well as Bitcoin development firm Spiral, as well as the (well known because Jay-Z was notoriously not on Spotify because of his exclusivity agreement with) music streaming platform Tidal. The final piece under the Block umbrella is a DEX (decentralized exchange protocol) named TBD. As I wrote in The Creator Economy, I think that decentralized, shared creative content is going to be a big value unlock for web3. Block has all the pieces needed to jumpstart web3 on its own: a content distribution service, an IRL payment processor, a payment app, an exchange system to get those payments on-chain, and a dev agency to click all the pieces into place. The one big bet that Jack is making? He is building all of this on the Bitcoin blockchain, to manifest his vision of having a single coin be the defacto and indisputable one true “internet money”. As audacious as all of that is to do at face value, the added difficulty of doing is solely on the (notoriously old and slow) Bitcoin network, is an added level of difficulty that has major ramifications in the decades to come, as Bitcoin and other top coins will battle it out for supremacy.
Facebook » Meta. So this happened at the quite conspicuous time of being on the heels of the whole whistleblower fiasco in which Frances Hougen decided we all needed to know what Facebook had known for years, which is that the social media platform was having a negative affect on teenager’s mental health. Facebook obviously had this PR pivot in their back pocket for some such public embarrassment, and in true Zuckerberg fashion had no shame in parading the new Meta strategy about as if it had nothing to do with the whistleblowing. Mental health issues aside, they had clearly been plotting this pivot for a while, dating back to their purchase of VR goggle company Oculus in 2014. What do you get when you put all your Facebook friends in a VR room together? The Metaverse of course! The same place that has been written about and foretold in science fiction novels for decades. An alternate, digital reality where you can be your anonymous self, exploring a new world, creating a new life (hypothetically much cooler than your IRL one). Let’s put aside the skepticism about how we have already had metaverses with The Sims, or that you don’t buy into the VR hype. If you are familiar at all with video games you know that the graphics get better every year. We are very close to passing the Uncanny Valley with regular animation, imagine being immersed in such a world in 3D. I don’t think it is up for debate about IF, more a matter of WHEN it will happen.
So Meta wants to have a fun little playground where all your weird uncles with controversial political views and estranged friends from high school can get together and hang out in a virtual 3D space. As amazing as that sounds, how does that connect to web3? Let’s first take a quick detour with Apple, and their relationship to Meta and Google.
The iPhone has a 51% market share in the US (that number is lower globally, but closer to 99.9% in California. As an aside - don’t try to date in Los Angeles with a green bubble - you will literally look like an alien). The consumer shift over the past decade has been out of brick and mortar, and into e-commerce. And within that e-commerce trend the shift has been out of desktop, and into mobile. Thus, the place where the majority of people are buying things in America, is on their iPhones. And how do people know which things they need to buy? Digital advertising of course! The original sin of the internet brought to you by Meta and Google. As one US Senator famously asked Mark Zuckerberg when called before Congress “how do you make money when your product is free?”. Well, Senator, they sell you ads. And they are really, really good at it, like a trillion dollars good. So what do you do if you are Apple and you are sitting at the top of the FAANG table looking around at your fellow top market cap amigos thinking to yourself, how do I make myself look even better? I can’t force my way into people’s homes with software the way Meta and Google can, but I do control the (now majority of) hardware the software runs on, so I can jack up the cost of doing business for them. App Tracking Transparency is born.
As I write this, there is a huge iPhone advertisement ironically staring into my apartment from across the street. Apple has made it their marketing strategy to lead the way in privacy. Every user that opts out of allowing a Meta or Google app from tracking them is a user that can’t be targeted by those company’s advertisements, making those company’s advertisements less effective, which drives down their advertising revenue as advertisers start to… advertise less on this big platforms. Apple is also front-running the government regulations that are sure to weave their way further into the courts over the next decade, with things like the GDPR in the EU and the CCPA in CA already well into existence.
Google is also front-running the regulations by announcing that their ever present third-party cookies will be deprecated in 2023. Cookies are the thing that identifies you as you, so they they can follow you around the internet with incessant display ads. The trend line here is that the people want to be anonymous, they don’t want to be tracked, and this is reflected by the increase in government regulations, and further solidified by Big Tech’s capitulation. What’s a thing that does anonymous transactions really well? Oh, blockchains, that’s right.
Apple does have another horse in this race. Remember, they are the hardware experts, and you cannot expect Meta (a software company) to beat them out in the physical world of atoms. Apple’s AR (augmented reality) is already very good, and offers a nice dip of the toe into the water for people who aren’t ready for a full VR experience. I think this AR/VR debate will be prevalent in the coming years, as they both get dual-pathed to the mainstream. Google also famously launched Google Glass many years ago, way ahead of its time, but it is not hard to imagine a very near future where lightweight glasses can be worn with a digital heads up display populating AR in front of your eyes, with walking directions, points of interest, temperature readings, or photo opportunities. This race started long ago, and it is going to take the collective deep pockets of Big Tech, but Meta has telegraphed the vision by placing the proverbial stake in the ground via the company name change. If AR is the gateway drug to VR, which many people think is the case, it is only a matter of time before it is VR all day every day. When that day comes (via the sheer manifestation of sci-fi prophesizing), people are DAMN SURE going to want to be anonymous AF.
Google has another horse as well (so many horses!) in their Chrome browser. Most people when accessing the internet are using a Chrome browser and searching on Google. Every website in the world still has to conform their code to Google’s specific preferences to index better in their search engine. So while Amazon’s AWS owns all the servers that the internet runs on, and Apple owns the majority of the devices, and Meta gets the consumers to convert purchases, Google wraps all of this in a nice little package called Google Analytics. You can’t run a website without GA, lest you not care about where your traffic is coming from or how its performing. More than anyone, Google is the company that knows who you literally are. That’s why Google’s regulation front running does not stop at 3P cookies, they are forcing everyone to update to the newest version of GA, GA4. The biggest change in GA4 is that it is a bitch to install and does not play well with others. The biggest little startup that could, Shopify, with its mere $42B market cap sitting as the #343rd biggest company in the world, a far cry from the FAANG table, is being gate kept by the fact that it takes a developer to connect Shopify to GA4, when previously it was the click of a button. It’s easy to foresee a Google takeover of Shopify, or just launch their own in-stack website creator tool. The Trade Desk (market cap of $20B) who has been on the forefront of the cookie-less revolution in creating their UID2.0, is also on the radar for Google’s succubus. UID (universal identifier) is an aggregate of consumer data that TTD has parsed together to create an anonymous (to advertisers) consumer that can still be targeted. There are other companies in this space such as startup Habu, who are creating “data clean rooms” where companies like Disney can come in and buy a bunch of advertisements that target people directly, but they can keep their hands clean by maintaining that cognitive dissonance that “we didn’t actually target you”. Consumers don’t want to be targeted, but hey, advertisers gotta advertise. With GA4, Google is essentially creating their own UID, and because advertisers gotta advertise (and know how its performing), it only makes sense to run more ads with Google (as opposed to with Meta) as they will have the best concept of who the customer is, within their nice little vertical stack that they are creating.
So Big Tech is become more privacy focused, at the same time leaning into AR/VR, at the same time becoming more vertically integrated, centralized, siloed, and abrasive with each other. There are big stakes at play here. Being the largest companies in the world means that you are the economy, and now you have the burden of having to grow 8% each year on top of that to keep everyone happy. It’s clear we are moving towards a(n even more) digital world in which we are somewhat protected from a data leak and being doxxed, but more importantly for consumers is that feeling that their information isn’t being bought and sold a dozen times over. It’s sort of a rigamarole and a tap dance by Tech to get us to a place where we don’t feel like we’re being tracked and advertised to, but we are still totally being tracked and advertised to. But there is a more important notion at play here, that is the undercurrent of this privacy trend, which goes grossly unspoken about in crypto/web3 land seeing as it is (IMO) the most important piece of the pie, and that is ownership and governance.
Regulators have a beef with Big Tech because they are making boat loads of money and they want some of that money to pay for the government program du jour, but consumers have a slightly different perspective. People are starting to realize that they are the product of these companies, not the consumer. If Meta has 4 billion users, and a market cap of $400 billion, and the users are the product, doesn’t that mean that each user is worth $100? If you are selling my information, shouldn’t I get a piece of that margin? I may not have done a thing to contribute to the mechanism to make the money printing machinery run, but inherently as me, the machinery would have no money to print without me. Or, more accurately, there would be no money to be made without us. Any individual could tap out and Meta or Google would not care one bit, but if everyone tapped out there would be no product. The money is made in the aggregation of data, our literal collective lives and experiences and hopes and desires, everything that makes us us is what provides value to these systems. So what if people decided they didn’t want to be a part of these systems, or better yet, what if people decided they liked these systems, they like buying stuff, they like being in social networks, they like advertising and being advertised to, but they just want a piece of the ownership. Like student athletes in the NCAA, they want to be paid off their name and likeness.
On the surface this sounds like some sort of Marxist dreamland or Ayn Rand dystopia where some genius creates a technology and everyone else mooches off it “from each according to his ability, to each according to his need” or “until we are all equally poor” depending on your perspective. However, there are so many pencils in this pencil box that is blockchain technology, so many perspectives, that you can’t pigeonhole it into some left or right political ideology. As Balaji says in his book The Network State, the political axis is going to shift, and it is not going to be about red vs blue, but green vs orange (centralized dollar vs de-centralized crypto).
Blockchains are uniquely structured to perform governance because of their trustless nature. There is no man behind the curtain pulling the strings, it is just computer code, visible to all, that anyone participating in has by default agreed upon. Agreeing upon the computer code is another thing, but for that we can look to the game of poker. When online poker first became a real phenomenon, all of the professional poker players would play it constantly at home when they were not at a casino. They did this because there was no better way to get that volume of poker hands dealt in any casino. Players could play 10 tables at once, in games that had super short time limits, and could thus experience 1000 poker games (for practice, or real money) in the same amount of time it would take to play 1 IRL poker game. The takeaway here is that blockchains as tools for ownership and governance can run the same such gambit. It opens pandoras box of government structures, voting mechanisms, auction parameters, equity agreements, all being experimented on at warp speed, over and over. This creates Adam Smith’s “invisible hand” economic effect on the people’s true equilibrium for the ideal governance, with ramifications on everything from video games economics in the metaverse, to private and public equity structures, to municipal and federal representation.
That may sound a little far-fetched to some, so let me bring it back up the stack and talk about one other big company that was conveniently left out, Amazon. Everyone knows the story of the CPG/retail side where Amazon loss led their way to increasing market share, making no revenue, instead investing profits back into the company to create topline growth. The other thing everyone is starting to realize is that Amazon still makes no money on retail products, and that all of their operating margin comes from AWS (Amazon Web Services). AWS is essentially a bunch of servers where data gets hosted. 6% of the internet is hosted on a server owned by Amazon, as are 33% of all cloud based services. It’s not quite hyperbole to say that Amazon owns the rails that actual internet runs on. This is the other often misunderstood or unspoken about attribute of blockchains. They are by nature distributed computer systems. As Chris Dixon has put it, “they are a new kind of computer”. You don’t need one centralized server in an AWS warehouse holding all of your information. Your information can exist on a block, which is distributed in a decentralized fashion across all nodes in the network, where everyone has access to all data. This is the monumental breakthrough of the technology, that this can be accomplished in such an anonymous and trustless environment. The same way we are all the product of Meta and Google, and want to get paid for it, we all have the distributed capacity to be AWS, and get paid for it. What’s the difference between a bitcoin miner burning electricity to prove he has mined a new block of data and an AWS server burning electricity to prove he is housing the data you want to access? The only difference is in the centralized vs de-centralized ownership.
So what is Big Tech telegraphing? They are telegraphing their intentions to centralize that which should remain (or become) decentralized. The EnFAANGlement we are going to see is a world where Mark Zuckerberg with Meta wants to get everyone into his centralized fantasy land and have it connect to your digital wallet so you can spend your crypto coins on the VR version of Candy Crush. But like Disneyland, it all exists within the Meta metaverse and your megabucks probably aren’t good for anything IRL. Jack Dorsey has a slightly more philanthropic approach where he wants to spread a single digital currency (specifically Bitcoin) far and wide across the globe, into every nook and cranny, and have it be the undisputed currency of the world. A grand notion, possibly for good, but still centralized around one specific blockchain, albeit with rails being built to connect to other chains. Block’s work will act as a tide lifting all boats in the space, and accelerated that which is being telegraphed. Apple and Google are creating their own little product stacks that will connect to Meta and Block, to sell you more products, and give you cooler experiences with increasingly impressive technology. Amazon is about 1 Presidential cycle away from an antitrust suit breaking off the AWS division, creating a free for all in the retail space while Jeff Bezos Blue Origins himself off the planet (potentially as blockchains then destroy the AWS cash cow). All of this competition, all of this posturing and positioning, all of this entanglement, seems to be front-running the obvious thing that hundreds of billions of dollars is being poured into to bring these behemoths to their knees. Libertarian or Socialist, the people and their governments want to stick their faangs into that juicy tech money, and do away with the monopolies that aren’t really monopolies but kinda are, and usher in a new social and economic order where nobody knows anybody and transactions are irreversible. Will there be chaos, and scams, and people losing everything, and idiot trillionaires, and communist micro societies, and laissez-faire macro societies, and everything in between up, down, backwards, and sideways? Yeah. That’s what people want, they just don’t know it yet, but Big Tech does, and they are doing everything they can to stay in control.