Status Games: Engineering Scarcity in a World of Abundance

A lot of networks that have achieved super scale had some sort of status incentives or status games built in, very early on. It helped them to get that kinetic energy that you need in order to achieve scale that then increases your utility. Those networks were paying you to develop the network — paying with ego, with status, with a sort of an emoti... See more

If we study traditional status mechanisms in society, just generally, it’s always the case that someone is always going to create something even more scarce to differentiate.

That’s where status comes in.

I think it’s the same with social networks like Facebook and Instagram, everything. At the level of scale that they’re at now, the status game and the sense of progression is going to be way different than it was when they were just starting out.

A funny example is: in LA you have these social clubs, like the Soho Club, which are elite. Only now there are actually newer clubs that are even more elite. The San Vicente Bungalows — it’s even harder to be a member than it is for the Soho Club.

However, it’s also true that a lot of network-based utility only is realized at some level of scale. (As per NFX: “The simplified definition of network effects is that they occur when a company’s product or service becomes more valuable as usage increases.)

So I think it’s very critical if you’re doing a startup to understand if you are going to be offering a product that is actually an entertainment-based product — because that really widens your competitive set.

There’s a broader lesson to learn from that about the products that we offer to the world in tech: Many people think that their products are very utilitarian. But I’d argue that a lot of products that people build are actually entertainment-based products.

Social media, ultimately, is mostly just about entertainment, not utility. And that’s just more precarious ground to be on than say, if you were truly a utility-based network. Like if you have a network like Uber or Lyft, I mean, you’re ultimately about getting someone from point A to point B. That’s not really an entertainment-based product. So yo... See more

So the question is, how do you get to that scale? There are a million networks that died out before they ever achieved that scale.