On incentives and information curation

From newspapers to crypto-economic networks

TL;DR

The information that we consume determines the decisions that we make both individually and as a collective. The capitalist, market-based economy enables an efficient allocation of resources but often at a price of misaligned market incentives and societal values. There are clear examples of this in our information diet. Can we design a system that leverages the benefits of the existing one while simultaneously provide information curation whose emergent collective behavior aligns with our societal values?

Let's begin.

“A love of nature keeps no factories busy.”

Aldous Huxley

There is a reason why in the dystopian novel Brave New World, the masses are manipulated by the use of three carefully crafted slogans: “War is peace. Freedom is slavery. Ignorance is strength”. In the same way that a food diet affects how we look physically, our diet of information affects how we think and act. While inflicting pain is one way of controlling people, so is inflicting pleasure or more broadly, targeting our most primitive impulses.

The information curators, which act as arbiters of truth, determine the information that we’re given. If we acted rationally and predictably, the way we’ve often been modeled in the economic theory, this wouldn’t be an issue. All of us would converge on the information that serves us best, whatever that might be. But the human element comes into play with bounded rationality and with that, the emergent, often surprising nature of our collective behavior. The information we consume might divide us, rather than unite us. It might give us more reasons to be anxious about, rather than fill us with gratitude for our current state of living.

In this essay, I will focus on how these powerful actors have changed in the last decades as a result of evolving technology. With this, I will demonstrate the mechanics of the old media (newspaper business) and the new media (technology business) and how the market incentives affect the curation of information by these actors.

“We’ve got Paleolithic emotions, medieval institutions, and godlike technology.” Edward Osborne Wilson

One of the byproducts of technological progress in the last 30 years was the near-zero cost of the replication of information. While this meant access to an enormous amount of information, it also means that the curation of this mass-produced information becomes more and more crucial over time. It’s the shift from the paradigm of scarcity to the paradigm of abundance that we were not evolutionarily adapted for.

Newspapers represented the main source of information curation in the past and distributed the information in physical form. There was a clear business mechanic: curate and distribute the information, charge for a mark-up on top of the production cost of the newspaper and complement it with the revenue generated from the advertisements in the newspapers. Whereas the newspaper businesses experienced growth from the 1950s until the 1990s, the growth rapidly declined. Enter the World Wide Web. With that, Google, Facebook, and other tech companies proliferated and took their cut of the advertisement and information distribution/curation business. These “other companies” make up a rather small percentage of market share as Google and Facebook account for more than 80% of global advertising revenue, forming a de-facto duopoly.

The newspaper business was forced to adapt to the changing landscape, while somehow remaining relevant. They began focusing more on their online presence as it was clear that this is where the consumer’s attention (and money) was. We no longer consume information by reading our newspaper over breakfast. Now, we often just scroll through our social media feeds and read what’s intriguing, but not necessarily informative. This is not a moralistic stance as every type of content serves a purpose, whether it’s memes on 9GAG or articles from The Economist.

In the past, traditional mass media relied on their brand recognition, consumer loyalty, and barriers to entry as the main leverages for high margins (a result of the experienced pricing power enabled by the lack of elasticity of demand). This changed with Web 2.0, especially with the proliferation of social platforms. It has become more about entertainment and optimizing the conversion rates than actually providing information that they deemed was useful for their readership. Everything has become directly measurable (moving away from the spray and pray advertising) and the more the views, the higher the revenue.

With this shift in the incentive structure, the old business of sharing information needed to act in order to remain profitable. Even the most reputable newspapers had to adapt with information designed to target a dopamine response.

The first-order effect of the changed incentive structure and consequently, the business strategy is the possibility of short-term revenue. The second-order effect is gradually diminishing trust in the newspaper business as a byproduct of market pressures. With that, the result would be lower long-term revenues. It’s a clear example of the tragedy of the commons (in the pursuit of an individual agent's self-interest, the ecosystem as a whole suffers). Nassim Taleb’s words put it clearly: “Survival comes first, truth, understanding, and science later.” The newspaper business is not exempt from this maxim and when survival and quality content become mutually exclusive, it’s clear which one will be prioritized.

Who are the information curators that are gaining a competitive edge in the market? The ones that, of course, target our most primitive impulses. An obvious example of this is a click-bait title that generates high traffic, which translates to revenue. This is the natural result of the incentive structure where the business model is dependent on advertisement.

Additionally, these platforms are gaining more and more power through network effects where there is often a winner-take-all dynamic. The information curation method used by the (centralized) businesses is to design algorithms, optimized for the best proxy metric of user engagement that is aligned with the future business revenue generation. User engagement begets user value which begets revenue generation.

Besides that, the old media was often a tool for censorship and control. Whereas it is becoming less common over time, there are still actors that have the power to do so. Not only that, open information gives us different challenges such as more ideological polarization, filter bubbles, fake news and other issues that we will have to learn to manage over time.

Questions about information curation are often more philosophical than technological in nature. To what extent does a platform prioritize freedom of speech as opposed to protecting their users from hate-speech? Can these be mutually exclusive? These are questions with no quick and easy answers. In the end, it actually doesn't matter who controls the new platforms, what matters is that the information curation is being done by people that specialized in building technology businesses that maximize future cash flow, not in acting for the good of the public. This task is probably too large for anyone to bear, whether it's an individual or an organization. It’s easy to fall into the trap of having a knee-jerk reaction and just censor anything that offends enough people. This is a slippery slope to institutional convergence of groupthink, void of any ability to diverge from the accepted way of thought. The move from free speech to safe thought.

With this being said, not everything is as gloomy as it sounds. Technology rarely has a binary, either only positive or only negative effect on society. A clear benefit of the Web 2.0 is that today everyone can broadcast their own message. This is clearly important as the barrier to entry into the information business has diminished.

Medium and YouTube are examples of largely permissionless media platforms. Largely because they are still owned by centralized organizations that curate the information that is aligned with their business model.

Another phenomenon that has emerged over the past years is the influencer model of information curation on platforms such as Instagram and YouTube. They enable different brands to leverage customers' trust by using influencers that speak to a certain customer segment. The trust in influencer marketing is a result of an established reputation and is the core differentiation for the influencers. It’s an effective use of accountability and skin in the game. If an influencer doesn’t do effective filtering for the customers, they lose their reputation as a reliable source of information curation.

Joe Rogan, Sam Harris, Jordan Peterson, and many others have leveraged the Web 2.0 to grow their audience. They've also started reverting to the long-form style of information that wasn’t possible before. Historically, intellectuals had extremely limited time to present their ideas to the general public which was a byproduct of the scarcity of space in the old(er) information mediums. This is not the case anymore. No matter how niche a certain area is, there is usually some segment of the population that will value the content (long tail). Through the near-zero marginal cost of replication, media becomes the leverage to wealth, even more so than in the past. The price of this is the need to embrace accountability.

So what is the second-order effect of the possibility to distribute long-form information? The traditional media loses its power. In the past, it was more likely that information would be misrepresented or taken out of context by traditional media, however, the power is now in the hands of people to represent their own ideas. The audience can then decide for themselves what they believe. This is the power of new media.

There are clearly pros and cons of the way the process of information curation has changed over time. Can we improve this further while tackling the negative consequences? I mentioned in a previous essay on crypto-economic networks that the market incentives are often not aligned with societal values. This is shown in the examples of the effects of the information curation that exists today. With crypto-economic networks, we can align these together. This raises the question: Can we, as a society, curate information without any central authority curating it for us? Could we, instead, incentivize people to curate information themselves? With that, can we move from a top-down to a bottom-up information curation system?

This is becoming more of a reality by the day. Crypto-economic primitives are one of the components used to design these networks and act as building blocks of the network's incentive structure. Curation markets are one of the examples of these implemented in practice and are used to signal how relevant a certain asset might be. That being said, governing a crypto-economic network means managing a system of human and machine interactions which is complex by definition. With that, the more of these are implemented in practice and tested "in the wild", the more feedback we get which can be used to design and govern networks with desirable properties (via token engineering). These have the potential to change the way we interact with each other in a way that is aligned with our societal values.