Markets are Eating the World
In 2011, Marc Andreessen argued “software is eating the world”.
“Over the next 10 years,” Marc said, “I expect many more industries to be disrupted by software, with new world-beating Silicon Valley companies doing the disruption in more cases than not.”
The reasoning behind the phrase was that lower start-up costs, a growing market for online services, and deep pools of innovation-seeking equity capital would breed an environment ripe for creation & disruption.
He was right. Software has already eaten much of the world. And it’s still hungry...
Let’s zoom out for a second: The internet was the general purpose technology of the 2000s. From logistics (optimization software) to agriculture (satellite analysis), and defense (software-powered drones), software has transformed industries all over the world. And it’s done so by providing better information markets.
It’s because of the internet that we can communicate frictionlessly, rate transactions, rate the raters, and provide information liquidity. Software creates markets where they didn’t exist prior.
Dozens of unicorns have emerged from this trend. Uber created a market for riders and drivers to facilitate transportation. Airbnb created a market for homeowners and travelers to facilitate the creation of new lodging. And Ebay and Craigslist created markets for people to sell consumer goods for US dollars.
As we can see, markets and software eat the world in tandem.
While markets have proliferated without software in the past (global shipping trade, the invention of the corporation), almost all new markets now are software-enabled.
Markets Eating The World 1.0 was about online marketplaces transforming travel, transportation, commerce, and much more. That said, this phase is still underway. While every other industry has seen decreasing costs, healthcare, education and construction have somehow become more expensive and opaque. The opportunity is for software and markets to eat those verticals too so that we can invert those cost curves and fix Baumol’s Cost Disease.
Markets Eating The World 2.0 will begin when, instead of revolutionizing existing industries, markets create entirely new ones.
Good examples of this include Prediction Markets (markets for ideas), ISAs (markets for people), Charter Cities (markets for governance), and NFTs (markets for internet culture).
Crypto, in theory, should usher in a new era for markets for the following three reasons:
It removes rent-seeking middle men from taking profits.
It allows markets to operate without being monitored or controlled by those same rent-seeking middle men.
It allows for the creation of totally autonomous systems. A machine can now participate in a market without needing a human to intervene.
Quoting Taylor Pearson: “What we call society is a series of overlapping networks. Some networks are physical—roads + electricity grids. Some are digital--internet. Some are mental—religion, nation-states, money. Blockchains will make it possible to convert networks into markets.”
To give an example of this in the wild, When you get in the self-driving car of the future, you can imagine seeing a sliding scale offering the ability to calculate the cost of the ride. That self-driving car will manage its own defi bank account and manage its own schedule and routing to optimize its cash flows without human intervention. When the car needs to be refueled, it drives to the gas station and buys more fuel - no humans needed. When it needs repairs, it drives to the repair place and uses its own funds to buy repairs. No humans needed.
Crypto networks offer:
Superior governance (by allowing users to fork off into their own governance structure)
Superior liquidity (for otherwise illiquid assets via tokenization)
Superior transparency (eliminating the need for trust & lowering the barriers to entry for market participants)
Superior autonomy (because its payment and communication system works between machines)
Patri Freidman wrote this a few years ago which explains the sentiment well: “So, blockchain is fundamentally an agoric technology...Money is an important marketplace, enabler of marketplaces & blockchain's first killer app. But most future growth will be from markets eating the world.”
Remember, when software eats the world, it eats everything in its path — like an avalanche blowing through the mountains, it doesn’t stop for anyone or anything. Markets are no different.
Thanks to Patri Friedman, Taylor Pearson, Jake Hallac, Dani Grant, and Zach Davidson for conversations and contributions that led to this piece.
Technologies for more seamless transactions are eating the world.
Some call it the sharing economy.
Another way to generalize this is to call them exchanges.
Exchanges are eating the world.
This comment board, Pinterest, Reddit, Twitter, etc., are further examples of exchanges .
I bring this up because a lot of people wouldn’t necessarily call them markets. From the users’ POVs, there’s no money being transacted. Some call it the marketplace of ideas.
With opportunity comes challenges.
There are already many digital versions of:
1) counterfeit money (cryptocurrency spoofing; dubious alt coins)
2) counterfeit ideas (trolls, misinformation)
3) counterfeit products (NFT art)
4) flooding the market (NFT art; dubious altcoins)
5) cheap knock-offs) (NFT art, altcoins)
6) online cults, which are groups of blind followers being manipulated for fun, profit, misguided or fallible leaders. Q-Anon, fantasy sports/influencers, Naval, Bajali all have their cults.
7) blocking the streets to markets with carts and wagons and toll booths (slow hash rates; gas fees; ransomware)
8) blowing up roads and bridges (cyber warfare)
9) thieves & pickpockets
10) contagion/pandemics. Wherever people gather, they can be exposed to bad infections as well as good ones. Q-Anon is the easiest example. Wokeness is a good virus like a vaccination, namely being more considerate of marginalized people, that has gone too far.
Elites (leaders, priests, guilds) and nations (tribes, religions, governments) emerged to help protect folks from the above chaos.
The dream is to have algorithms do the same. But anything nature made, include man made, is fallible.
Nature uses millions upon millions of fungi and tiny bots called viruses per cubic meter of air and earth to tear the exchanges down. No joke. They are mostly gentle garbage and recycling services relentlessly working in the background. Sometimes they go awry especially in crowded conditions, wrong context or when weakened organisms can’t fend them off.