Stakeholders, Innovation and Blockchain Technology

Thoughts on Facebook and The Incentive Economy

The Future is Private. — Mark Zuckerberg, Founder, Facebook

This was an amazing admission from the founder of Facebook, a company that has encouraged public sharing of information since its inception. The social network started as a closed network, only accessible to students in a select few universities. Its strategy was to onboard universities in a piecemeal fashion, providing access to students in a controlled environment. It was carefully able to tweak user experience, incentivize sharing (likes), and create a whole new way for people to communicate — publicly. Privacy was not only unnecessary in the world, it was to be shunned for Facebook to grow. In 2009, Facebook admitted that they had made a lot of mistakes in launching Beacon — a feature that tracked user activities everywhere (outside of Facebook) on the internet. The company has since always played hooky with user data and privacy concerns. Here is a timeline of Facebook’s privacy issues from 2006–2018.

So what changed in the last week?

Blockchain. It has been brewing up for a while now and the times they are a-changing.

So far, startups and companies like Facebook have focused on finding a “Product-Market Fit” to help them grow and thrive. Often this focus has come at the expense of the actual stakeholders in the business. Arguably, in Facebook’s case, the actual stakeholders are the users themselves, for it is their data that is being commercialized by the company. However, these users are entirely left out of the monetization process. Traditionally, the concept of catering to stakeholders has been an afterthought — much like Facebook’s belated realization now that the future is private.

This means that the business model has to change — the ad based model and privacy are mutually exclusive. If a company’s revenue is dependent on selling user information, they can’t simultaneously protect their privacy. If stakeholders are to be empowered, they need to have a direct participation in the financial gains accruing from the business model. With their new $1B crypto initiative to build a fiat pegged stablecoin for financial transactions, the company may well be moving in that direction. To align it with Whatsapp, a privacy centric communications platform hints at the broader direction the company’s business model is shifting towards.

Similar shifts in business models are playing out elsewhere in completely orthogonal industries. There is a renewed emphasis on empowering the stakeholders directly. For example, Jaguar Land Rover inked a deal with IOTA, a blockchain platform for connected devices, to incentivize drivers to earn crypto while driving. Drivers earn rewards in exchange for sharing data about “useful road [conditions]…such as traffic congestion or potholes.” The information is shared with navigation providers and local authorities to improve the the virtual and physical driving experience. It is early days, but directionally, it is clear that stakeholder incentives will drive new business models. There are learnings in this on how Uber and Lyft can incentivize their stakeholders, both drivers and passengers, instead of subsidizing rides.

Verification of personal identity and credentials is another huge industry where the stakeholders have completely been left out of the $10B+ market dominated by third parties. Students, employers, government agencies continue to rely on third parties to be able to verify personal identity and match it with information and credentials earned. With blockchain technology it is now possible to give control over such information back to the earners of the credentials. For example, universities can now issue digital credentials to students that can be transparently verified on a blockchain without any third party involvement (see below for Singapore’s initiative in this). In this model, the stakeholders — both issuers and receivers — are empowered to issue, share and limit access to credentials. These systems are built on the idea of privacy and shifting control of information back to the owners of the information itself.

Incentives for stakeholders will be at the heart of business models built on a blockchain first premise and will be almost as important as the traditional product-market fit.

Originally published at https://proteum.substack.com.