The Outcome Economy

2019-04-01

Information technology cycles are fundamentally driven by the cost of producing a particular resource, and the consolidation of power over the means of producing that resource.

The basic cycle is as so—

  1. a new technology emerges which brings down the cost of producing a currently-monopolised resource
  2. new organisations are able to enter the market
  3. this drives the margins of monopolistic incumbents down
  4. new users/business models/entrepreneurs are attracted to the space
  5. these new businesses consolidate through vertical/horizontal expansion
  6. new entrants can't compete
  7. repeat

We've seen this countless times in the industry – IBM monopolised hardware, Microsoft software and most recently, the likes of Google, Facebook, Amazon, Twitter, Apple etc have monopolised the production of IT services.

So to me it is the clean, and at this point fairly obvious, narrative which suggests that we are witnessing the replacement of such services with open equivalents produced by cryptonetworks.

Obvious examples include the likes of FOAM replacing Google's location services. Also the likes of IPFS replacing S3.

Bit of a sidebar here – the pattern which I haven't heard elucidated often in this capital consolidation/dissolution model of IT is the one about disruption of adjacent, non-tech resource producers. In the case of the web, it wasn't merely the IT-specific domain of software distribution which was opened up, but also the entirety of content distribution services too – the traditional world of media.

Given this adjacency phenomenon, we are likely to see the disruption of not just IT services like social networking, compute and data storage opened up by crypto, but also typical services in education, finance and healthcare radically altered too. We're seeing the beginnings of this in the finance space with the DeFi movement.

This adjacency phenomenon is indeed an interesting sidebar. It's probably one worthy of its own post. I might write that another time.

Right now though, I'd like to focus on the question of this post.

First, to tie up a loose end. My last post was titled "What is the most expensive part of building a cryptonetwork?". I believed this was the fundamental question which would dictate value capture in this new world. But just a few days later, it's as clear as day that that was just the wrong question.

My real next question should've been "what is going to be built on top of all these open services – what's the next layer in the IT stack?"

The natural ideas bouncing around were a vague mix of governance, community and ecosystem. But something just didn't click about those – probably because they don't form a natural pattern with previous revolutions in the IT stack.

Electronics, Hardware, Software, Services... Governance (?!)

Doesn't make sense...I guess there's a slightly more natural fit for community. My gut is telling me the next layer is something else though.

There's a chance, given the nature of crypto, that community or something like a DAO will be the vehicle through which the new monopoly resource is manufactured. This is important for one's business/investment strategy as it dictates the kind of organisation you're building or investing in.

But for now I just want to establish what the next layer in the stack is. That's the first step, because it helps one recognise who is going in the right direction.

So my theory is pretty simple. The next stage in IT history is about outcomes and solutions.

The most recent paradigm was about monopolisation of network services, as mentioned. The model is simple – pay some money and you get access to this thing and you can come in and get things done.

I think in the next era, you won't simply buy access – you'll buy full outcomes.

What led me to this idea was the question – "what can you build when you have access to all the world's services and data through a single API?"

And I believe the answer is outcomes.

What do I mean by outcomes? Well, rather than saying to customers "subscribe to this thing which you can use to get your various stuff done" you can simply say "buy this thing and your stuff will be done."

In other words, you'll buy solutions rather than tools.

Let's take a look at this idea through the lens of an example.

Muscle Gain as an Outcome

Gaining muscle in 2019 is still a difficult and complex process. It isn't something you can buy. And the reason you can't buy it is because the intricacies of delivering weight loss at scale to millions of people is far, far too complex.

You might, if you're lucky, have a good personal trainer who you can afford to keep you on track and keep you motivated to break through the complexity of making progress. But this is outside the reach of many, unlikely to be that effective and will require a big investment of personal financial capital, time and energy.

Here are some of the things you need to do to gain muscle—

  • find a gym – based on price, location, facilities etc.
  • pay for that gym
  • attend the gym several times a week
  • learn how to use the equipment
  • buy shirts, shorts, underwear, socks and shoes for exercise
  • wash gym clothes once a week
  • set a reasonable goal in your mind, based on current performance, your genetic capacity etc
  • set exercise goals
  • adjust exercise goals regularly according to your performance
  • set goal for weight gain
  • overcome the pain of exercise
  • understand the importance of food consumption in muscle gain
  • plan diet
  • refine diet over time
  • buy groceries for special diet
  • prepare meals
  • keep track of workouts
  • etc etc.

That's not an exhaustive list, but it gives the flavour of why muscle gain isn't easy. Particularly when you're trying to do it alongside a full time job, keeping in touch with family and friends, raising children etc.

The situation has been improved in recent years. There are apps to track your workouts, to plan your meals, to order food.

But there isn't anything which ties these services together in a coordinated way around your goal.

I believe there is capacity in this new age of open services and open data to do precisely that – to tie services together in a hyper personalised way in aid of reaching a particular result.

Suffice to say, a muscle gain product like this would look very different to the existing solution. Rather than paying multiple services – gym, supermarket, exercise apps, exercise magazines etc – and sustaining a significant chance of failure and wasted resources, the model I propose would simply involve buying an outcome upfront, and having an organisation tie resources together behind the scenes.

I'd like to go into further detail about how this might work behind the scenes, and walk through some ideas for which protocols might be put to use, in which ways. I also have UX questions about how such a service is delivered to a consumer with trust being maintained – particularly important because you would likely be bestowing an external agent with control over your funds and ability to make big trade-offs on your behalf. Additionally, how would these organisations be structured – traditional equity businesses? DAOs?

As interesting as I find these questions, I'd prefer to leave them for another post.

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Copyright 2019 Jay Bowles Product Development Ltd.