🌀🗞 The FLUX Review, Ep. 141
Episode 141 — April 11th, 2024 — Available at read.fluxcollective.org/p/141
Contributors to this issue: Spencer Pitman, Ben Mathes, Jon Lebensold, Erika Rice Scherpelz, Justin Quimby, Neel Mehta, MK, Boris Smus
Additional insights from: Ade Oshineye, Dimitri Glazkov, Alex Komoroske, Robinson Eaton, Julka Almquist, Scott Schaffter, Lisie Lillianfeld, Samuel Arbesman, Dart Lindsley, Melanie Kahl, Kamran Hakiman
We’re a ragtag band of systems thinkers who have been dedicating our early mornings to finding new lenses to help you make sense of the complex world we live in. This newsletter is a collection of patterns we’ve noticed in recent weeks.
To work with Things in the indescribable
relationship is not too hard for us;
the pattern grows more intricate and subtle,
and being swept along is not enough.Take your practiced powers and stretch them out
until they span the chasm between two
contradictions… For the god
wants to know himself in you.— Rainer Maria Rilke
🎨🔍 An abundance of value
We’re inundated with entertainment content. From shows and movies to books and music, the wealth of human creative output is unprecedented — and this is just one domain. Be it entertainment, information, or commerce, abundance is now the default state for non-physical (and often physical) goods. This surge in content has led to the rise of aggregators: platforms designed to help us navigate this sea of choices. Simultaneously, abundance poses unique challenges for the creators of that content. Despite the potential to reach wider audiences through aggregation platforms, creators often find themselves with less control and diminished compensation compared to earlier artists with a more direct connection with their audience.
While this is just a single example, it shows us the dynamic and nuanced interplay of value creation and value capture. Value creation occurs when someone produces something valuable to others (a concept straightforward on its own, but more nuanced when considering negative externalities). Value capture occurs when someone, not necessarily the creator, converts some of the finite value created into benefit for themselves, such as profit or claiming credit.
At their best, value creation and value capture are complementary activities. In our entertainment example, creators and aggregators add value in different ways. Artists provide content. Aggregators suggest the right content to the right person at the right time. Artists can capture value more easily because aggregators add a value-capture channel from which both can profit. Yet there’s an underlying tension: aggregators may appear to profit at the expense of artists. This tension is not new; publishers and labels have long been accused of profiting from a similar dynamic. Look up “Hollywood accounting” as an example of the movie industry.
Is this tension merely due to our intuition catching up with the dynamics of abundance? To some degree, yes. However, we are also sensitive to the kingmaker dynamic at play. Abundance creates value but makes it hard for anyone, the creators included, to capture that value. Value is often captured by bringing back a sense of relative scarcity — and that requires making choices about what to include and what to exclude. Aggregators, for better and for worse, profit directly from the fact that they create relative scarcity out of abundance. Despite playing a vital role, should they become dominant gatekeepers, aggregators will be seen as capturing an unfair amount of value.
Value capture is not necessarily bad. Systems that allow for predictable value capture and securing of said value, such as property rights, are necessary to motivate value creation. We can look at value capture as a spectrum. At one end, creators are rewarded directly (although often only within a limited market).
A classic example at the other end of the spectrum is a landlord who sits on a house and charges rent. Imagine if such a landlord doesn’t improve the building, lets it fall into disrepair, and lobbies the local government to prevent any other homes from being built (to remove competition) — but they continue to cash those rent checks. They are doing value capture without value creation. This behavior leads to one of the worst insults you can hear from an economist: rent-seeking. Rent-seeking manipulates public policy or economic conditions as a strategy for increasing profits. Rent-seeking goes beyond value-capture; it aims to capture value at the expense of value creation.
The key lies in balancing the needs of different players in the ecosystem. We can recognize that abundance creates significant value but also necessitates the creation of mechanisms for value capture; we must also realize that value capture has to be held in check. This understanding can pave the way for business opportunities that respect the delicate balance that stops the useful act of guiding consumers from turning into the pernicious act of gatekeeping creators. By seeing aggregation and abundance as a problem of nurturing ecosystems, we can foster an environment where both creators and aggregators can thrive.
🛣️🚩 Signposts
Clues that point to where our changing world might lead us.
🚏❄️ Melting Arctic sea ice could help internet cables avoid the conflict-plagued Red Sea
Over 90% of internet traffic between Europe and Asia travels on cables through the Red Sea, which has become a dangerous single point of failure — Houthi rebels in Yemen have been cutting these vital cables in recent months, for instance. But a new project, Far North Fiber, promises to bypass the Red Sea by connecting northern Europe to Japan via the Northwest Passage, snaking around Greenland, northern Canada, and Alaska. This project would have been impossible a few years ago, but rapidly melting sea ice in the area now lets ships pass through and lay down cables during the summer. (Meanwhile, there’s still enough sea ice in winter to protect cables from saboteurs.)
🚏🕹️ Gamers have been logging fewer hours since the pandemic’s peak
According to a new report, video gamers’ average quarterly playtime fell 26% from 2021 to 2023, a trend that’s expected to continue this year, which seems to be partly a regression to pre-pandemic levels and partly due to a weak release schedule. The gaming industry’s growth rate has also fallen below pre-pandemic levels: compare the projected 2.7% annual growth rate from 2023–’26 to the 7.2% annual growth rate experienced from 2015–’21. Old standbys like Fortnite, Roblox, Minecraft, and League of Legends are still dominating the industry, though.
🚏🪴 TikTok is expanding its “STEM feed” amid criticism of its impact on kids
Last year, TikTok unveiled a “STEM feed” for US users: a scrolling feed of science-related videos, placed prominently atop the app next to the famous “For You” and “Following” feeds. The company is now rolling out the feature to European users as well. It’s been a potent shield to help TikTok counter criticism that it’s bad for young users; indeed, TikTok’s CEO has showcased the STEM feed during two separate congressional hearings in the last year.
🚏🍣 The owners of a decentralized crypto platform voted to give themselves control of the treasury
SushiSwap, a decentralized finance platform that lets users swap one cryptocurrency for another, has been governed as a DAO (decentralized autonomous organization), where token holders can vote on binding governance proposals based on one coin, one vote. The core SushiSwap team recently submitted a proposal to transfer control of $40 million in the project’s treasury to that central team in the name of “efficiency and faster development.” Because the team already controlled so many Sushi tokens (and thus votes), they could ram through the proposal and give themselves the keys to the treasury. Some community members cried foul, claiming that the team had played dirty by not announcing the vote on social media and had manipulated votes by temporarily creating millions of new coins that they alone controlled.
📖⏳ Worth your time
Some especially insightful pieces we’ve read, watched, and listened to recently.
Doom-Bringing Solar Eclipses in the World’s Religions (Religion for Breakfast) — Describes how some of the world’s ancient religions tried to make sense of solar eclipses. Eclipses were widely seen as harbingers of war, plague, and societal collapse, and they often had doomsday prophecies attached to them.
The Electric Car Replacement Acid Test (Ed Niedermeyer) — Argues that electric cars aren’t drop-in replacements for gas cars: mobility and range are commodities for gas cars (higher-priced cars have largely the same range and differentiate on more “luxury” features), while electric cars’ range largely scales with price. Americans who are used to getting high mobility at a low cost won’t find EVs workable unless they change their approach to getting around. In short, “we’ve been pretending that this transition [to EVs] can happen without a fundamental shift in consumer attitudes and behaviors, and the sooner we accept that we’ve been fooling ourselves about this the better.”
STEM’s Empire (Paul Musgrave) — Compares the US’s current love affair with STEM education to the Soviet Union’s obsession with hard science. Argues that it’s not so surprising that the USSR undervalued social science: “The presumption of pure social science is that truth must be checked and discovered, rather than calibrated against known doctrines… such a position obviously contradicts orthodoxy of any stripe, whether materialist or spiritual.”
The Worst US Bridges Are Getting Fixed (Construction Physics) — Finds that bridges in the US are getting more “average” over time: “we have fewer excellent bridges, but we also have many fewer bridges in poor condition.” Since the difference between a bad bridge (i.e. one at risk of collapse) and an okay one is far greater than the difference between an okay bridge and a great one, this is a net positive and a pleasant bit of good news.
📚🛋️ Book for your shelf
A book that will help you dip your toes into systems thinking or explore its broader applications.
This week, we recommend Panarchy by Lance H. Gunderson and C. S. Holling (2001, 536 pages).
Panarchy dives into the nature of change in complex adaptive systems. It introduces the concept of the “adaptive cycle,” a foundational model for understanding the dynamics of change in ecological, economic, and social systems. This adaptive cycle comprises four phases: rapid growth/exploitation, conservation, release/collapse, and reorganization. Panarchy uses this framework to explore a paradoxical dualism of systems—their resilience and susceptibility to transformation. What appears to be characteristically distinct may be different stages of the same cycle.
A central concept is the interplay between connectivity, resilience, and cross-scale interactions. The theory posits that systems are nested within each other across different scales, creating a complex web of interactions that influence and are influenced by changes at various levels (we’ve talked about this before when exploring pace layers). This nested structure facilitates the transfer of energy, information, and resources, enabling complex adaptive systems to adapt and respond to disturbances. Stability in one layer may arise from change in another. Systems can leverage adaptive (but not controlling) management in sustaining system health and promoting recovery to maintain their integrity and function in the face of challenges.
Panarchy delves into other interesting concepts, such as thresholds, regime shifts, and the importance of the reorganization phase for innovation and system reconfiguration. The book highlights how the reorganization phase is particularly useful as a window of opportunity for introducing innovations that enhance system resilience and adaptability.
Although fairly academic, Panarchy is a rich and comprehensive toolkit for surfacing valuable insights into managing complex systems. Its main praxis is sustainability and environmental management, but the strategies it explores to foster resilience are useful in various systems.
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