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Price is determined by how much a purchaser is prepared to pay. Value is what we receive after the price has been paid. Of course, depending on the price, it can either be great or poor value.

Tesla make terrific cars. It’s true that they started the inevitable shift to our electric car future. However, Tesla Inc. is not worth more than the entire auto industry combined. Yet ‘investors’ are currently paying more than the aggregate value of the next 12 biggest car companies to own a piece of Tesla. As I write this, Tesla has a market capitalisation of US$1.230 trillion. The second biggest car company in the world as defined by market value is Toyota. Toyota is currently valued at only $US254 billion, or 20% of the price of Tesla. For context, Toyota will make 11 million cars this year, while Tesla might manufacture 800,000, if they are lucky. Toyota is valued at $23,000 per car sold, while Tesla is currently valued at $1.5 million per car sold. All other car companies have a much lower market capitalisation per car sold (average is around US$10,000 per car). In order for Tesla to collect the same price per car sold as Toyota, Tesla would need to sell 55 million cars a year. While Tesla is positioned and priced as a technology firm, it will never get around the reality that they have to bend metal like other OEMs. Of course there are another dozen reasons the price of Tesla stock seems irrational, but you get the picture.

So the big question, is why is Tesla worth so much?

Is it because Tesla:

• Has uncovered a more efficient method of car production? Nope.
• Is the only firm that knows how to make electric cars? Nope.
• Is the only car company with autonomous driving technology? Nope.
• Has unique battery and solar capabilities? Nope.
• Is the only premium electric car brand? Nope.
• Has unique software powering the car? Nope.
• Has an unassailable lead in emerging car technology? Nope.

It is because stories are more profitable than reality.

Of course the products are real, and the company has real value – but the price reflects something different. Elon Musk has attained the status of ‘Nerd Jesus’, preaching his visions of the future to his growing flock of loyal acolytes.

In many ways, technology has become a new religion. It would appear that tech giants are the only ones who can lead us in these uncertain times. There is a such a sense of mystery to what they build and how they beguile so many of the world’s population. They hold the secrets to algorithms that steer our lives. They are the inventors of all the technology we use, yet don’t understand. It has been foretold that Elon Musk will lead us to a post-fossil fuel sustainable utopia. While Big Tech CEOs are not actually leaders of religious institutions, they certainly embrace Messianic tics. Their product launches are delivered to rapturous audiences, ready to sing the praises of the anointed one. Their mantras often set lofty goals for humanity, rather than brand propositions:

• Facebook – A more open and connected society (Zuckerberg)
• Twitter – Change the world 140 characters at a time (Dorsey)
• Google – Organise the world’s information (Brin and Page)
• Apple – Think Different (Jobs)

None are better than Musk, who proclaims on Twitter to his adoring 57 million followers that we need to become a multi-planetary species to survive. Investors are buying the story of Musk, our real life Iron Man. It’s my firm belief that much of the Tesla share price can be attributed to his persona and aura than economics. Likewise, a Hermes Birkin bag can sell for as much as US$500,000, because it is not just the leather and craftsmanship on offer.

So potent is the veneration surrounding Musk, any slightly negative posts about him or Tesla on social media will earn you the wrath of his congregation, descending upon you in outrage at an alternate view.

Will Tesla stock crash? It might. Or it could just as easily reach US$2 trillion dollars. Markets can stay irrational far longer than most investors can stay solvent.

To keep your head, here are two things to remember:

1. Never forget that stories have real economic value. Don’t forget to tell yours.
2. Keep your investments anchored in reality, because we never know when sentiment might just change.

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Keep Thinking,

Steve.

Within a decade we’ll see multi-billion dollar corporations with exactly zero employees. They’ll won’t have a CEO, a board, and some might not even have shareholders. Companies will become ‘protocols’ – organisms which organise the factors of production to serve the people who work in and around them. Welcome to the dawn of the DAO.

If you’re not familiar with DAOs – it’s an acronym that will become commonplace. It stands for Distributed Autonomous Organisation. A DAO is essentially an organisation created by developers which can automate decisions, and uses smart contracts to facilitate ‘all that happens’ in the organisation via cryptocurrency and blockchain capabilities, without the need for management.

They allow for a kind of digital collaborative commons without any central authority – the authority is instead given to ‘the code’. The idea is that a well-designed DAO could eliminate human frailty or manipulation of a corporation for managements’ benefit. The authority to make decisions is instead via automated systems, crowdsourced decision-making, both of which are guided by a constitution developed at the digital genesis of the organisation.

This doesn’t mean that every organisation or corporate structure would necessarily follow this move, or investors would seek out public companies under a DAO structure. However, it will create a big shift in the short to medium term of how many crowd-powered or user centric internet services currently operate.

Last week a report was released by the bipartisan Senate Committee on Australia as a centre for finance and technology. The plan is an ambitious one that laid out 12 key recommendations, one of which included establishing a new Decentralised Autonomous Organisation structure (DAO) to be recognised by the Corporations Act.

Gigs and Big Tech

Often coined as Web 3.0, DAO’s could launch a brave new world that reverts to the original promise of the internet: a technology powered by people and not a handful of giant technology companies.

Let’s take the gig economy and Uber as an example. Uber is actually a very simple technology protocol. It links demand and supply with trips to providers, ratings systems and payment gateways. The only complexity associated with their business is scale – much of which was facilitated by pre-emptive monopoly generating venture investment for rapid growth. As a result, much of the largesse generated by the firm goes to the organisation and its shareholders.

Of their $US12 billion in revenue, 27.5 per cent goes back to Uber – a total of $US3.3 billion. If this company were run as a DAO, most of the $US3.3 billion could remain with the drivers. This entire company could be replaced by a DAO run by and for the drivers themselves. Protocols could be set up to replace the need for a technology landlord like Uber. A certain amount of revenue would go towards maintaining the system itself with a pool of developers, and a business and marketing team. It could even allow for an employment structure, with employee benefits like sick leave and superannuation under certain conditions as defined by the DAO. The best part for the drivers is that they could keep 99 per cent of the revenue for each trip they take.

If a DAO were set up for Uber and any gig economy-based business, it is very difficult to see a for-profit competitor being able to win, because those working the system have a very strong incentive to support a DAO. This might be a way to ensure the internet starts to become more distributed and provide a turning point to the eroding middle class – something modern civilisations are built on.

Now take this idea and think about how we could create a DAO-based social network – that is built for and by the users, or peer-to-peer trading ecommerce platform funded by a taking a small percentage of each sale, and maybe even a search engine. It’s little surprise we don’t hear much about the benefits of DeFi or web 3.0 discussed by big tech — it doesn’t suit their business model. 

Just like last time, and the time before that, technology always emerges which works to displace existing power structures.

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Keep Thinking,

Steve.

A few years from now, every country will have a very different, national internet.

Yes, we’ll still have access to many global platforms, but very soon using the web in different parts of the world will be more like visiting a foreign country was in the 1970’s. A nuanced and culturally different experience. In the long arc of history, national and regional policies move like tides, across generations. The tide has turned against a one size fits all Techtopia. But first, let’s remind ourselves how we got to now.

Global Utopia?

In the early 1990’s it seemed as though our geopolitical future was determined. Capitalism and democratic freedoms had won. Assisted by the fall of the Berlin Wall, the end of communism in Eastern Europe and a burgeoning new communications technology called the internet, borders and knowledge opened up. We quickly globalised through mutually beneficial trade and cultural understanding. But this era of unfettered globalisation is coming to an abrupt end.

Economies the world over are starting to re-nationalise, put up technological boundaries, and remember that at a certain level of income, what a country believes in is more important than pure economics.

The financial benefits of the web are very unevenly distributed. A simple example is this: Revenue per employee of the Ford Motor company is $682,000 while Facebook has revenue of $2.3 million per employee – and that’s even before relative profitability is taken into account. In the western world, the many benefits of globalisation have gone to emerging technocrats and the shareholder class, and the middle class and Governments are starting to notice. Regulation will take hold in every country limiting the power of big tech and openness of the web. I’m not saying this is good or bad, but it is happening.

Bonus: this short song is a must listen to what the internet has become (You won’t regret it)

The Splinternet

It was in many parts the web was a new economic paradigm without a policy.

Up until 2010 Google had a 30 per cent market share of search in China before they abruptly left that market amid a cloud of hacking, censorship and PRC policy conflicts. We can see national value systems emerging via internet policy, resulting in a Splinternet.

China: has already removed all US tech firms from its shores (Including Linkedin just today), it sees the internet as a tool of Sovereignty and Surveillance. The policy has been one of allowing innovations in the short term to learn from and copy, be it US tech firms, or blockchain-based technologies until such time that they can launch sovereign versions and remove the intruders. While it seems draconian to us to hear about the internet is being used by the PRC to maintain total control, the people (of mainland China at least) seem happy to sacrifice liberty, for continued prosperity and improved living standards.

Europe: the internet has become a battle around Data and Privacy. In the European Union the internet is increasingly about protecting people and local firms from the evils of the internet, rather than trying to build out dominant firms in the space.

USA: is trying to tame the beast that is Big Tech, A set of corporate institutions more powerful than nation states. A beast which is dividing their society socially, economically and politically. As of today the top seven technology firms in the US have a collective market capitalisation of $US9.9 trillion. This has increased more than 30 per cent in a single year. The internet on its shores is set to be heavily regulated like manufacturing and traditional media and eventually broken into many more pieces as inevitable antitrust actions take hold.

Australia: recent events have triggered the end of the www, or the wild-wild-west, and now we are taking steps to create the social and economic boundaries society is demanding. This is an especially easy move to make given we hardly benefit from big tech’s dominance. The accumulation of Government intervention cannot go unnoticed, regardless of their actual effectiveness. Policies including the News Media Bargaining Code, the G7 global tax agreement, the High Court ruling that firms are responsible for comments on their managed pages and recent commentary from the Morrison Government about making social media giants needing to be accountable for content on their platforms are all part of a huge shift.

Something is wrong with the internet!

“Something is wrong with the internet”… was a statement made widely around the world early last week as the Entire Facebook Eco-System was down for around 7 hours.

It would be easy to think these noobs were wrong describing the Facebook outage as being a problem with the ‘internet’ – but oh, how right they were. In fact, 2.8 billion people were locked out which is more than 60% of the world internet population. The fact that it has become many peoples only tool of communication on the web is an absolute travesty. In a grand irony, Facebook staff got locked out of their own HQ because they used Facebook apps as their building entry tool. They even had to get tradespeople in with angle grinders to break locks and get into office doors. Many small businesses couldn’t connect with their customers.

All this is a reminder that in a civilised society, we need to civilise our technology.

Whether it is splitting up companies that have too much power, stopping the spread of misinformation, adding safety features, making companies responsible for products they put in market and regulating so that economic benefits are shared more widely across society. Just imagine if we didn’t have road rules, or any safety features in cars or need a drivers licence. it’s unthinkable.

Pure capitalism is as dangerous as communism is. What we need is a balance of rules and regulations so that we can participate in the economy in a civilised manner – and be the beneficiaries of technology delivered by thoughtful legislators and profit seeking, yet compliant corporations. Because as far as I can tell, not company in the history of capitalism has ever self regulated out of the goodness of their hearts.

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Keep Thinking,

Steve.

This week in Melbourne, we faced violent protests from a noisy minority ostensibly fighting against mandatory vaccinations for the construction industry. It has been asserted that many of the protesters were anti-vax interlopers and from other extremist groups.

Like a lot of things these days, it’s increasingly hard to figure out what’s true. This is a real problem, and it’s pulling apart the fabric of society. At a time when the world’s knowledge has finally become mostly available for free, we are at risk of regressing. Entering a technological Dark Ages, if you will.

People who oppose vaccines, without legitimate medical reasons, remind me of Seinfeld’s bit on helmets. Some people’s brains are operating so poorly that they refused to wear helmets to protect themselves. While fringe views and conspiracy theorists have always existed, it’s ironic they can now spread their messages on social media virally to the unprotected and at scale.

The Anti-vax movement is the latest in a long list of problems social media is contributing to. Fixing problems now clearly evident with global social media products is much easier than Social Media companies make it out to be. The playbook from Facebook and Twitter, has been simple but effective: confuse the possible with the profitable.

Social media’s product is to sell attention. On the social web, enragement equals engagement. The net result is that mistruths, violent content, gamified financial scams, crime – you name it – all do a better job of reaching an audience than rational, civilised content. I used to love Twitter, but its landscape is now just troll versus troll with opposing views. Mark Zuckerberg and Jack Dorsey know this and still, they choose to ensure their secret algorithms leverage whatever maximises our attention.

If lies about the climate emergency were not spread on social media, how further advanced might our renewables sector be?

What type of risk does the continued anti-vax movement fuelled on social media pose to our post-COVID economy?

More importantly, how do governments around the world respond to ill-informed pockets of our populace on issues that shape economic and social policy? The threat of misinformation to our future stability and prosperity is real, with far-reaching consequences for us all.

How to fix social media

Three simple steps:

1. Know Your Customer:  Social media platforms should mandate users to register with 100 points of ID as a criteria for participation. Immediately, this imposes on users a new level of accountability and traceability. Doing this will go a long way towards removing bots pretending to be people.

Bots are used to gamify social media, distort amplification of issues and manipulate trending topics and mistruths. These are the same bots for which advertisers are currently over-charged to sell their products.

It’s astounding to think that we need to provide our identity to drive a car, buy securities, open a bank account, obtain a credit card, board a plane, operate machinery, purchase a mobile phone, use a SIM card in another country, even to ride on a train – and yet social media doesn’t face the same scrutiny. Quite lopsided, given social media is the most powerful communications tool ever invented.

It’s time we added a ‘Know Your Customer’ element to the digital world. No bots, just real people.

2. Regulate algorithms: It’s time we exposed the ingredients in the algorithms that shape our digital existence. We need this in the same way we have transparency in the ingredients of packaged food.

We need Algorithmic Nutrition Panels that clearly outline what we are seeing and why, plus the ability to turn them off in our feeds. It may well be that certain ingredients in the algorithms need to be outlawed altogether. It’s hard to know which algorithms might be causing the problems when they are still regarded as proprietary secrets.

Nearly a century ago, the packaged foods industry used this playbook too, when secret ingredients included cocaine (in tooth drops), heroin (in cough medicine) and lithium (in 7Up). In real terms, algorithms are editorial decisions. What we let social media feed our minds is surely just as important as what we put in our bodies.

3. Legislate responsibility for platform content: Social media is media. They cannot be compared to telecommunication companies, for instance, who are not responsible for the content of one-to-one conversations on their phone lines.

Social media content has a distribution element that clearly propels it to the broadcast media category. They should be responsible for everything that is published on their platforms. It’s no wonder that traditional media categories can’t compete. If it means that all live video feeds on Facebook should be vetted by humans to avoid the issue of inadvertently live-streaming terrorism, then so be it.

Remember, if identities are not obfuscated on social media platforms, we can implement a rational policy that allows fair use and a system to protect both users and platform providers if abuse does occur. Of course, once we know who everyone is, behaviour on the platforms will be, by default, more considered. Just compare LinkedIn to Twitter and the differences are stark.

So, there you have it – three simple ways to remedy the ills of social media.  They indeed create a cost for social media businesses, but it’s a cost of doing business and all very possible.

At present, social media is incredibly anti-social and we are still in its nascent phase. If we want to avoid the calamities we’ve seen in other countries facilitated via social media – then we should act now.

There is little doubt about how it has been and can be a tool for emancipation, but we should never forget that living in a civilised world is only be possible in a cohesive society.

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Keep Thinking,

Steve.