*Migrated from Medium* Original Date - 07/19/20

Human history is painted with the ebbing and flowing of groups. As living organisms, we tend to group, and as times change, we leave groups, and the structures alter. We have grouped into empires, and disbanded those. We grouped into global supranational organizations, and now those are slowly crumbling. We saw the rise of the big corporate… yet those fell to more nimble tech entrants and disruptors. I am not arguing that everything trends towards decentralization, but just that a lot of large archetypes we construct fall to decentralizing forces.

Online content is the next archetype to decentralize. We have seen it in so many facets already. Instead of starring in TV shows, create a YouTube channel or a TikTok following. Instead of writing for the WSJ or the NYT, create a Substack or a Medium account. Instead of teaching for an institution, license your work on Thinkific. Why work at a gym when you can sell your content on Patreon?

Clearly, the internet has become a mechanism through which all these decentralizing sub-trends can be realized. What does this mean for the business landscape? What types of companies will win? Who will lose? How will the value chain be reshaped? These are questions I seek to answer in this new ‘thread’ (for lack of a better term).

There are two large frameworks that I wish to introduce:

• Value chain modularization and integration (Stratechery)

• Use of crypto for the ownership economy (Variant)

Modularization and Integration

The concept of modularization and integration was presented to me by Ben Thompson in one of his fabulous Stratechery articles. It essentially states that innovation and change bring about shifts in the value chain between parts that are modularized and parts that are integrated. By shifting around parts that are modularized and integrated, new ways to build and accrue value form, and Thompson argues that this is how the likes of Netflix and Airbnb arose. To cite the idea from its primary source, I have included the same excerpt Thompson included in his post:

“Formally, the law of conservation of attractive profits states that in the value chain there is a requisite juxtaposition of modular and interdependent architectures, and of reciprocal processes of commoditization and de-commoditization, that exists in order to optimize the performance of what is not good enough. The law states that when modularity and commoditization cause attractive profits to disappear at one stage in the value chain, the opportunity to earn attractive profits with proprietary products will usually emerge at an adjacent stage.” — The Innovator’s Solution, Clayton Christensen

So, how did Netflix do this? Well, in the case of watching movies/ TV shows, there were four main components to the value chain: content, production, distribution/ subscription, and viewers. Before Netflix, content and production was integrated, while subscriptions and viewers were modularized/ commoditized. The content creators raked in the big profits and essentially shaped one’s life around them — one watched the show at 9:30pm on Wednesday night because that is when it came on. Come in Netflix, and content was commoditized while production and subscription was integrated, leading to a Google-like shift: content (supply) and viewers (demand) had to meet on an aggregator platform.

How is this relevant to my quest into online media decentralization? Well there has to be a value chain shift going on, and as a passionate investor, I need to find out what is being modularized and what is being integrated!

The Ownership Economy

This framework is based on the main thesis for blockchain/ crypto VC firm, Variant (led by Jesse Walden). His thesis states that society will move to platforms and business networks where the community members and content creators will be the ones to absorb the value. Out go the record labels, the mainstream media giants, the franchises… and in come the personal brands and community-friendly networks. What underlies this whole system? According to Jesse, it is the use of blockchain and tokenization to provide the mechanisms for these new players to accrue value.

From looking into NFTs to tokenized basketball contracts to Reddit’s testing of crypto for subreddit engagement, I have gotten glimpses of what Jesse’s vision could actually look like in the real world. With the use of crypto (literally a decentralized technology) the decentralization of online media isn’t just feasible, but actually possibly profitable. Let’s not kid ourselves, people are motivated by profit in nearly all scenarios. Therefore, if decentralization can lead to personal profitability, the invisible hand may bump us down that path.

The use of crypto as a potential investment vehicle for this decentralization trend leads me to a batch of key questions. How does one value future flows of media? How decentralized do we really become? Is it a different crypto per person or will Substack itself release a crypto? What will token economics look like for these personal media platforms?

Bringing these two frameworks together, it seems like I have an interesting quest to go on. I am happy to say that I have two frameworks that when put together must yield an investible value pocket to be found.

Disclosure:* This blog series is strictly personal/ educational and is not investment advice nor a solicitation to buy or sell any assets. It does not represent any views from where the author is working — all views, opinions, and arguments are the author’s. Please always do your own research.*