See Eugene Wei's original blogpost.

Three basis vectors of social networks: utility, social capital, entertainment

Utility

Metcalfe's Law on telecommunications networks:

The value of a telecommunications network is proportional to the square of the number of connected users of the system ($n^2$)

Social networks must first appeal to people when they have few users. Typically this is done through some form of single-user utility.

Competition on raw utility tends to be Darwinian, ruthless, and highly legible. This is the world, for example, of communication services like messaging and video conferencing.

Come for the tool, stay for the network: Instagram's growth went from filter-driven utility to social photo sharing.

Social capital

Relative status

What matters is less our absolute status than how are we doing compared to those around us. By taking the scope of our status competitions virtual, we scaled them up in a way that humans who had grown up competing for status in small tribes, were suddenly dropped into a talent show competing against every person they had ever met.

Tight feedback loop

The key component of the 10,000 hour rule of expertise is the idea of deliberate practice, the type that provides immediate feedback. Social media may not be literally real-time in its feedback, but it's close enough (example: teens A/B testing Instagram posts, killing a post if it hasn't reached enough likes). The tighter the feedback loop, the quicker the adaptation.

User attention as scarce resource

As people start following more and more accounts on a social network, they reach a point where the number of candidate stories/posts exceeds their capacity to see them all. Even before that point, the sheer signal-to-noise ratio may decline to the point that it affects engagement. Almost any network that hits this inflection point turns to the same solution: an algorithmic feed.

Status derives value from some type of scarcity. User attention is the fundamental scarce resource and platforms need to raise interest rates on borrowing attention from facebook's news feed for example, to combat inflation

Capping competition pool size: a failed experiment

A social network like Path attempted to limit your social graph size to the Dunbar number (suggested cognitive limit to the number of people with whom one can maintain stable social relationships $\approx 150$), capping your social capital accumulation potential and capping the distribution of your posts. The exchange, they hoped, was some greater transparency, more genuine self-expressio: the anti-Facebook. Unfortunately, as social capital theory might predict, Path didn't reach enough users. Some businesses work best at scale, and if you believe that people want to accumulate social capital as efficiently as possible, putting a bound on how much they can earn is a challenging business model

Entertainment

Discover feature on snapchat, TikTok...

Modeling social networks like a cryptocurrency

When modeling how successful social networks create a status game worth playing, a useful metaphor is cryptocurrency.

1. Each new social network issues a new form of social capital, a token.

2. You must show proof of work to earn the token. People compete/mine for relative status on social networks largely through their own blood, sweat, and tears. The value comes from the proof of work.

3. Over time it becomes harder and harder to mine new tokens on each social network, creating built-in scarcity.

(Many people, especially older folks, scoff at both social networks and cryptocurrencies)

Quote about memes: "humor is all punchline now that the setup of the joke is assumed to be common knowledge"

Why some social networks fail

Context collapse and low exit cost

Graph-based social capital allocation mechanisms can suffer from runaway winner-take-all effects. One hypothesis on why social networks tend to lose heat at scale is that this type of old money can't be cleared out, and new money loses the incentive to play the game.

A form of social capital inequality sets in, and in the virtual world, where exit costs are much lower than in the real world, new users can easily leave for a new network where their work is more properly rewarded and where status mobility is higher.

The same way many social networks track keystone metrics like time to X followers, they should track the ROI on posts for new users. It's likely a leading metric that governs retention or churn.

The composition of the graph once a social network reaches scale is its most unique quality. Copying some network's feature often isn’t sufficient if you can’t also copy its graph

Example: Facebook's attempts to win back the young from Snapchat by copying some of the network's ephemeral messaging features, or Facebook's attempt to copy TikTok with Lasso, or, well Facebook's attempt to duplicate just about every social app with any traction anywhere. The problem with copying Snapchat is that, well, the reason young people left Facebook for Snapchat was in large part because their parents had invaded Facebook (=context collapse)

How to explain the S-curve

I.e. why don't social networks grow until they've captured everyone?

• TikTok's / Twitter's creator community is capped by the nature of its proof of work. The number of people who enjoy creating videos / crafting witty tweets is finite.
• 1% rule: only 1% of an internet community creates content while the other 99% lurks.

Question is: how many people have the skill and interest to compete in that arena?

Snapchat case

Stories format

Stories format is a genuine innovation on the social modesty problem of social networks. That is, all but the most egregious showoffs feel squeamish about publishing too much to their followers. Stories, by putting the onus on the viewer to pull that content, allows everyone to publish away guilt-free, without regard for the craft that regular posts demand in the ever escalating game that is life publishing. In a world where algorithmic feeds break up your sequence of posts, Stories also allow gifted creators to create sequential narratives.

Status games

Anti-facebook?

Many will say, especially Snapchat itself, that it has been the anti-Facebook all along. Because it has no likes, it liberates people from destructive status games. To believe that is to underestimate the ingenuity of humanity in its ability to weaponize any network for status games.

Anyone who has studied kids using Snapchat know that it's just as integral a part of high school status and FOMO wars as Facebook, and arguably more so now that those kids largely don’t use Facebook.

The only other social media app that is as sharp a stick is Instagram which has, it’s true, more overt social capital accumulation mechanisms.

Whether you see people attend a party that you’re not invited to on Instagram or on someone’s Snap, you still feel terrible.

Best friends list vs streaks

Remember Snapchat's original Best Friends list? This was just about as pure a status game feature as could be engineered for teens. Not only did it show the top three people you Snapped with most frequently, you could look at who the top three best friends were for any of your contacts. Essentially, it made the hierarchy of everyone's “friendships” public, making the popularity scoreboard explicit.

There's a big problem with this feature: each user could only have one best friend. It put an artificial ceiling on the amount of social capital one could compete for and accumulate.

In a clever move to unbound social capital accumulation and to turn a zero-sum game into a positive sum game, broadening the number of users working hard or engaging, Snapchat deprecated the very popular Best Friends list and replaced it with streaks.

If you and a friend Snap back and forth for consecutive days, you build up a streak which is tracked in your friends list. Young people quickly threw their heart and souls into building and maintaining streaks with their friends. This was literally proof of work as proof of friendship, quantified and tracked.

Some kids have resorted, when forced to go abroad on a vacation, to leaving their phone with a friend who helps to keep all the streaks alive.

What's hilarious is how efficiently young people maintain streaks. It's a daily ritual that often consists of just quickly running down your friend list and snapping something random, anything, just to increment the streak count. Some don’t even bother framing the camera up, most their streak-maintenance snaps are blurry pics of the side of their elbow.

Utility vs social capital

• Streaks have started to lose heat. Many younger users of Snapchat no longer bother with them.
• Snapchat intends to push out further on the utility axis (by becoming the fastest way to communicate) at the expense of the social capital axis which, as we’ve noted before, is volatile ground to build a long-term business on.
• Given the precarious nature of status, and given the existence of Instagram which has always been a more unabashed social capital accumulation service, it’s not a bad strategy for Snapchat to push out towards increased utility in messaging instead. The challenge, as anyone competing in the messaging space knows, is that creating any durable utility advantage is brutally hard. In the game theory of tech competition, it's best to assume that any feature that can be copied will. And messaging may never be, from a profit perspective, the most lucrative of businesses.

Why are young people better at social networks than old people

• older people already have social capital (car, neighborhood, job title)
• thus, older people also don't learn new skills
• social networks are the only viable options for young people to accumulate social capital
• young people have a surplus of time

These modern forms of social capital are like new money. Parallel with Upper East/West Side scoffing at hoodie wearing silicon valley billionaires.

multiple identity management (family vs friends vs coworkers): snapchat. Facebook enforces a single public identity (suits retirees)

Social capital is volatile: link to the fashion industry

• Status relies on a coordinated consensus to define the scarcity that determines its value.
• Sociologist Groucho Marx: "I don't care to belong to any club that will have me as a member." (meaning, I'm only interested in club that make me ascend in status)

In the beginning, a status hierarchy requires lower status people to join so that the higher status people have a sense of just how far above the masses they reside. It's silly to order bottle service at Hakkasan in Las Vegas if no one is sitting on the opposite side of the velvet ropes; a leaderboard with just a single high score is meaningless.

When the definition of status is distributed, often one minority has disproportionate sway. If that group, the cool kids, pulls the ripcord, everyone tends to follow them to the exits. In fact, it’s usually the most high status or desirable people who leave first (notice link to mimetic desire)

Fashion has understood this recurring boom and bust pattern in network effects and taken ownership of its own status devaluation cycles. Some strange cabal of magazine editors and fashion designers decide each season to declare arbitrarily new styles the fashion of the moment, retiring previous recommendations before they grow stale

Sidenote on network effects traps in the physical world: path dependence in the location of economic activity. Once economic activity concentrates in a given location, it can persist there for centuries even if the location is no longer optimal. Welfare losses can accumulate over time. Network effect traps exist in the virtual world as well. E.g. Pinterest attracted mostly women at first and user feed was optimized for women.

The danger of having a proof of work burden that doesn't change is that eventually, everyone who wants to mine for that social currency will have done so, and most of it will be depleted. At that point, the amount of status-driven potential energy left in the social network flattens.

One way to combat this, which the largest social networks tend to do better than others, is add new forms of proof of work which effectively create a new reserve of potential social capital for users to chase. Example: Instagram began with square photos and filters; it's since removed the aspect ratio constraint, added video, lengthened video limits, and added formats like Boomerang and Stories.

Video games: proof of work cycle lasts 18 months. New game offers new set of challenges, players jump into the status competition. Players' skill plateaus and they become overly familiar with the game. Dopamine hit dissipates. Franchises like Call of Duty or Fifa learn to manage this cycle by issuing new versions of the game regularly.

Some game cycles last longer by introducing other benefits to the players: a sense of community (world of warcraft, fortnite), financial rewards (casions, NFTs )

Unhealthy activity: until we have metrics that distinguish between healthy and unhealthy activity, social network execs largely have to steer by anecdote. To really get the sense of a health of a social network, one must understand the topology of the network, and the volume and nature of connections and interactions among hundreds of millions or even billions of users.

Converting social capital to financial capital

Definition of social capital: capital that derives from networks of people. Can be detected when converted to familiar stores of value. Social to financial capital exchanges: instagram or youtube influencers paid for posts. People buying followers on twitter.

If your service is free, the best alternative to capturing the value you create is to own the marketplace where that value is realized and exchanged.

Most users are citizens of multiple social networks in the tech world, managing their social capital assets across all of those networks as a sort of diversified portfolio of status.

Social capital does tend to be non-fungible which also tends to make it easier to abandon ship. If your Twitter followers aren't worth anything on another network, it's less painful to just walk away from the account if it isn't worth the trouble anymore.

social capital arbitrage: e.g. publishing popular tweets as instagram posts

Social graph as unpriced externality

Given the difficulty of grappling with social networks given the consumer welfare standard for antitrust, an option for curbing the power of massive network effects businesses is to require that users be allowed to take their graph with them to other networks (as many have suggested). This would blunt the power of social networks along the social capital axis and force them to compete more on utility and entertainment axes.

Just like with carbon emissions, much of the cost has been born not by the companies themselves but society. Companies benefit from the limitless upside of their models, so it’s not unreasonable to expect them to bear the costs, just as we expect corporations to bear the cost of polluting rivers with their factories. If we did, profit margins would be lower, but society and discourse might be healthier.