Technology is a concentrating force. It always has been.
Everybody sewed their own clothes until we built textile factories.
It used to take one farmer to feed four people. Now each farmer feeds 130 people.
Home Depot killed thousands of local hardware stores. Opendoor is replacing legions of Keller-Williams agents. Salman Khan teaches algebra to more kids than the next 10,000 math teachers combined.
Gold, silver, USD, CNY, and EUR are all converging on the blockchain.
Human history is a story of increasing centralization. From roaming the plains of Africa, to settling down and building homes, to buying food in central markets, to instituting courts of law. Progression is compression. How can I make it so everybody isn’t making their own shirts? Deciding their own justice? Tabulating their own spreadsheets?
The internet, contrary to popular opinion, is accelerating the pace of centralization.
Software is centralizing in the App Store. Compute is centralizing in AWS-US-EAST-1. Culture is centralizing on TikTok. Stock trades are centralizing in Citadel’s dark pool. Politics are centralizing around personality. Work and cities are centralizing online.
Decentralization is a narrative mirage because three trends are frequently misinterpreted: the downfall of institutions, the death of the gatekeeper, and remote work.
These aren’t representative of decentralization, but instead are examples of increasing concentration.
Personality is the force majeure of the internet. In a noisy world, it’s much easier to diligence an individual than it is to understand institutional motives. Who supports NPR? Who’s the NYT’s customer? Advertisers? PR people? Me? What are we being sold?
Institutions aren’t crumbling because of decentralization, but rather the opposite: institutional power is being compressed into personalities.
Trump became the GOP. AOC is becoming the DNC. Dave Portnoy is becoming ESPN. Sam Harris is now NPR. Elon is Tesla.
Organizational power is inherently decentralized. Shareholders vote for board members. Boards approve plans. Plans coordinate across loosely-coupled internal orgs.
But individual power, like autocratic government, is singular.
Directives no longer need to flow through layers of hierarchy. Tesla no longer needs a network of dealers to sell cars on tesla.com, nor do they need an army of salespeople. Why listen to Bob at the local showroom when you can follow Elon on Twitter?
It’s the same in politics. We used to elect state representatives who would elect electors in the legislature who would elect a President. Then communication and transportation improved. We got railroads and national radio, so we put the Presidential candidates directly on the ballot.
Nowadays the President doesn’t even need TV stations: they can instantly drop messages into the pockets of 80M followers.
Betting on the internet means betting against institutions,1 not because institutions are exploding supernovas but because institutions are imploding black holes.
It’s true, gatekeepers are dead. It’s a huge improvement over the pre-Internet era.
I never learned about Richard Dawkins growing up. Then I went down a Carl Sagan Pale Blue Dot rabbit hole. I discovered Christopher Hitchens talking about evolution, consumed all of his religious debates, and then came across this Oxford evolutionary biologist who wore funny ties. The Selfish Gene fundamentally changed the way I view the world.
YouTube extends far beyond space videos. There’s debates about quantum theory, DIY construction how-to’s, makeup tutorials, and an unbelievable amount of unboxing videos.
The best part? There’s no school board deciding what you can and can’t watch and there’s no MTV exec telling David Dobrik what he can and can’t upload.
It’s easy to think the unlimited nature of content is a decentralizing force. Yet the reality is that winning content in an unlimited world is watched over and over and over again.
Taylor Swift can reach billions of listeners, Salman Khan can teach algebra to millions of students, the best Stack Overflow answers get upvoted thousands of times.
Imagine if San Francisco had no zoning rules. There’d be cranes and giant skyscrapers everywhere. The city would be reaching Tokyo-level density, concentrating people in the Bay Area from across the country.
The internet is a supercharged no-zoning Bay Area. YouTube, TikTok, Amazon, Shopify are all limitless. Their success is exponential, like the weight of gravity, pulling in more and more eyeballs.
The gap between first place and second place is far more pronounced online than it ever was offline. 30-45% of all e-commerce goes through Amazon. Walmart managed to handle only 9% of physical retail at their peak.2
Power is shifting to the dancer who can get featured by TikTok’s algorithm, to the business that can place first in Google’s results, to the reseller that pays the most to top Amazon’s catalog, to the singer that can get featured in Spotify’s Discover Weeklies.
The long tail of content is a distraction from the reality: online power is concentrating in an extreme power law. Yes, anybody can build a following. But the winners dwarf the long tail.
After all, audiences are so concentrated that it only took three companies to silence the sitting POTUS.
I miss going into Industrious. I’d wake up, walk to FiDi, pour myself a cup of coffee in a grey mug, sit in a mid-century modern green chair, and get to work.
When I flew to Chicago, I’d take a train to the Fulton Market Industrious, pour myself coffee in a grey mug, sit on a mid-century chair, and get to work.
Fly to Atlanta? Ride to Ponce. Coffee, grey mug, green chair, work.
New York? Union Square. Coffee. Chair. Work.
As people move their work lives online, the experience everywhere is going to be the same. Morning ride on the Peloton, get to WeWork, drink some Blue Bottle, hop on a video call, order groceries from Instacart, rinse and repeat. The only difference will be whether we see palm trees or wildfire smoke out the window.
The “everyone is leaving SF” narrative isn’t about decentralization, it’s about centralizing online. Everybody is on Zoom now. “Remote work” doesn’t mean you can now live some exotic life in a faraway place, it means that people in Birmingham can live the same as those in Cow Hollow. And work for the same companies, too.
Not only are we all working on Zoom, but we’re all shopping on the same “hip” street, the one with Warby Parker and Bonobos and Lululemon and La Colombe all lined up side by side. Sub-in Blue Bottle, and I’ll tell you if you’re east or west of the Mississippi.3
Part of it is that capital is cheap and management can be centralized, so chains are able to grow quickly nationwide without leaning on franchise models.4
But the other part is that our tastes as Americans are compressing. Every town has incredible breweries, third wave coffee, Trader Joe’s, and a Costco out in the suburbs. We’re all watching Netflix and Charli D’Amelio. We’re all peddling to the same bike instructors as Biden. How much longer until we all lose our regional accents, too?
Everything is shifting online. From how we find office space, to get rides, to feed ourselves, to exercise, to work and to live.
The meme that this constitutes “decentralization” is like the ocean on the edge of the Saharan horizon. It is an illusion.
The spectrum of opinions, of tastes, of behaviors is compressing. The platforms and personalities with power will continue to grow in size. The power law of the internet remains irrefutable.
Soon one farmer will feed 1,300 people, robots will sew our Nikes, there will be one nationwide math teacher and a single wealth ledger.
And our lives will be fully uploaded.
If you want to bet with the Internet, bet against institutions.— Naval (@naval) February 1, 2021
I’m going to get flack for “being in a bubble.” I’m just using upper-middle-class-young-professional as the example. But shared tastes are true up and down the socioeconomic spectrum. Whether you’re shopping at Aldi or Whole Foods, or eating at Chili’s or Soho House, your counterparts across the country are doing the exact same thing.↩︎
Franchises are dead— Will Schreiber (@breakfastbybill) January 27, 2021
OEM to dealerships -> Tesla
KW/Coldwell/Compass -> Opendoor
McDonald's -> Starbucks/Chipotle
Franchise model used to unlock capital and management. Now you've got 0% interest rates and computers.