Plus! Lessons from the Danish Krone
This month in the Blip:
Norms: Bugs or Features?
Lessons from the Danish Krone
Content moderation lessons from a co-founder of Reddit
This month building: Using Gumroad for side-projects
You can download the Substack app if you want to listen to this post.
Norms: Bugs or Features?
I’ll start here with four vignettes and then pull them all together.
Antibiotics have become the norm
We expect an antibiotic when we see a doctor for a bad cold or flu. Some phrases commonly heard in a GPs office:
“But it’s gone down into my chest”
“But the mucus is green – so I must need an antibiotic”
“I can’t believe I paid 70 Euro for a doctor’s appointment and they wouldn’t even give me an antibiotic!”
Ten years ago, there weren’t many bank fees. Interest rates were higher. Banks made money by paying out less interest on deposits than what they earn.
Then interest rates went negative. Now Bank of Ireland and Allied Irish Bank and Wise (formerly Transferwise) and Revolut charge fees for different things.
Today, people feel aggrieved that banks are charging for everything under the sun.
Previously, banks were probably charging something similar, or more. But the charge was indirect. It was hidden and we liked it!
Stock trading fees
It was common to pay a commission for buying stocks. It might cost $10 for a trade, or it might cost some fixed percentage.
Then came the idea of Payment for Order Flow (P-FOF). Rather than charge commissions, brokers/banks forward customer orders to hedge funds. Those hedge funds execute the orders. Hedge funds can use to their advantage the information of who is buying what. So, hedge funds make money on customer data. And customers get trades that are commission-free.
A few notes on the pervasiveness of PFOF:
The approach is documented (perhaps exaggeratedly) in Michael Lewis book “Flash Boys”.
There is an exchange called IEX that was specifically set up to conduct trades in a way that blocks traders/hedge funds from taking advantage of customer information.
This same issue (payment for order flow) is present in blockchains under the name of “Miner Extracted Value”. It is probably the #2 biggest debate in Ethereum after the topic of staking centralisation (which I won’t get into here).
The whole original innovation of “Robin Hood” the US financial app was to allow users to trade commission-free. This was and is enabled by PFOF.
PFOF is not necessarily bad. Maybe it’s good. One has to consider about behavioural aspects of technology and not pure financials. Customers seem to prefer low bank fees and commission free trading.
You’ve probably already heard:
If you don’t pay for the product, you are the product!
You don’t pay for social media with money. You pay with your data.
At the same time, since social media (and email and internet) has largely been free, we have adapted to it being free. The willingness to pay for social media and internet products is low. I think top Twitter users will pay a fee – whether they say they are happy about it or not. However, I don’t think most users will pay. We pay indirectly for social media, and we prefer that!
So – antibiotics, bank fees, stock fees and social media – what’s the link?
These are examples of socially engrained norms that are hard to change. These norms place limits on new business models or approaches. Can you charge 70 Euro for a doctor’s appointment if you don’t get an antibiotic?
Perhaps, as we move to test new business models – like subscriptions, we will come to appreciate the virtues of hidden fees?
As Vitalik perhaps implies in his recent piece, perhaps advertising is overrated as evil and underrated as socially beneficial. Advertising allows many people to view content who would not otherwise be able to pay.
When looking at social media, perhaps advertising is the good thing. The bad thing is we give up control of our data.
We shouldn’t shun advertising, especially because there is a technological improvement to how we manage data.
A significant technological improvement is the invention of zero knowledge proofs. These make it possible to verify something (e.g. having more than X in a bank account, having an Irish passport, proof of having paid taxes) without disclosing the exact details. Basically you get trust and selective information disclosure but without complete data disclosure.
This is done via advanced cryptography. I expect these proofs will allow for advertising models to operate (perhaps somewhat less targeted than today), but still effectively enough to be a viable business model.
Lessons from the Danish Krone
There was a shared European currency in the late 19th century – called the Latin Monetary Union (LMU).
It set a standard for the amount of gold or silver in certain coin denominations. The initial countries were France, Belgium, Italy and Switzerland.
Many other countries joined – including Peru, Colombia and Greece. By the time of the first world war in 1914, the currency went out of use. By printing money (LMUs), the government deficits of some countries were effectively being socialised across all countries. Sound familiar?
The Latin Monetary Union was an influence on the forming of the Scandanavian Currency Union between Norway, Sweden and Denmark in 1973, which was based on a gold standard.
When the Scandinavian Currency Union disbanded around 1914, the Krone stayed in place in each of the three countries, but as separate currencies.
The Danish Krone is interesting because it is still the currency in Denmark – where the Euro has not been adopted. Over time, the Danish Krone has been pegged to gold, the German Reichsmark (during WWII), the British Pound, the US dollar, and now the Euro.
I was wondering why Denmark would bother with it’s own currency if it’s just pegged to the Euro. But the Krone has been pegged to many things, so I see the point now of that flexibility.
Content Moderation on Social Media
I recommend this Twitter thread from the co-founder of Reddit – an online discussion forum that gets me answers to questions I can’t find on Google.
Notably, “spam” messages are moderated – not because they incite hatred or violate any rights – but because spam makes for a bad user experience. So, content moderation is not just about policing what is breaking the law or not. Most moderation is not about what is morally right or wrong.
This month building: Gumroad for side-projects
Last month I launched an eBook and checklist for personal digital security. Since then, I’ve moved the product to Gumroad, which is a platform for launching digital products. I’ve also added an eBook covering personal crypto security.
This is the first time I’ve used Gumroad. I highly recommend it for selling digital products. My launch strategy for a digital product now is:
Build a product page on Gumroad
Use Canva to make any artwork I need
Make a product page on ProductHunt and schedule it to launch next day
Post the product on Hacker News
Write a thread about the product on Twitter
That’s it for this month. Cheers, Ronan