and I really enjoyed listening to his half-hour podcast about the Internet’s past and the outlook for cryptocurrencies.
Essentially everything he says about the Internet explosion in 1993-1995 resonates with me, especially his discussion of how hard it was for an ordinary civilian to get Internet access in 1994.*
When he talks about what it was like trying to persuade legacy financial firms to use the Internet, it also resonates.**
I also agree that the advertising model is the cause of much bad juju on the Internet.
But I hear Marc as saying (and he talks very fast, so I may have this wrong) that cryptocurrencies will enable micropayments, and micropayments will enable content providers to ditch the advertising model. If that is indeed what he is saying, then I disagree. I think that the main barrier to micropayments is not technological. It is psychological–what Clay Shirky dubbed mental transaction costs. I have talked about this several times, for instance in this essay.
*I quit my job at Freddie Mac launched a commercial web site in April of 1994. I did so by going to an Internet publishing start-up called Electric Press, where at their site one of the partners taught me the rudiments of HTML–rudiments being pretty much all there were at that point. He coded up the first pages I wanted for my site, registered the domain name, set up the server, and loaded the pages onto the server.
Then I wanted to be able to access the Internet myself, so that I could edit pages, add new pages, and so on. Previously, I had only accessed it through online services like AOL which did not have web access. There was a service you could use through a library that offered a text-only browser called Lynx, but I had only seen a graphical web browser twice:
once when some of us at Freddie went to visit a General Electric research site and while the higher-ups were having a pow-wow a tech guy took me to the basement to show me Mosaic (developed by Marc) and the second time was when I got my training session at Electric Press.
Electric Press was not in the business of helping individuals get on the Net, so they referred me to an Internet Service Provider, called us.net. They sent me a floppy disk. I could not install that software properly. So I called us.net, and the President of that small start-up (he may have been the sole employee) drove to my office during a torrential downpour helped me load the software on to my PC.
Rather than take this as a clue that the Internet was not for ordinary civilians, I kept at it, waiting for the day when getting on the Internet would be easy. That day arrived in August of 1995, when Microsoft finally released Windows 95 (which they had been promising since 1994) and America Online added the Web to their Internet offerings. That is when the traffic on my web site went from a trickle to a tsunami.
**I convinced a large mortgage banker to put up some pages on my site. They sent me a draft contract which read, in part, “Arnold Kling, who owns a service known as the Internet. . .” If only.
Pay per view works for big sporting events, recently released movies and science journal article.s In each case the material must be timely.
The real transaction costs are giving up credit card info to sellers of information. But Mark is talking about no overhead, a bearer asset is sent, no personal credit information needed. The technology is not deployed, blocked by the NSA.
I have to note that risk equalization in electronic trade is a form of prescription service. The trader meets the terms and has entry to the pits. The pits themselves are micro, direct in that the pits are pure liquidity, no trusted miner. There is no trusted miner because the pit rules are provable, from design to actuation, in run time, for a fee. Or, better said, the trader already agreed to a prescription service and is free for one to one swaps in the pits.
Use the specific example.
I sign on to a prescription service with blogger .com. I am thus free to trade digital bearer pennies for content. I am risk equalized, by prescription, so blogger .com can price me relative to others. Blogger .com has a huge base, there is every reason to allow spot purchase, mainly make the content and ads incredibly more sensible, because they are priced, search bots can make their search graphs linear, for me, a huge jump. My bot then knows how to prioritize my vast array of hobby purchases for my PC plane obsession, it knows which articles and topics I favor, currently. I am better targeted by ad companies, they become more useful.
“Rather than take this as a clue that the Internet was not for ordinary civilians, I kept at it, waiting for the day when getting on the Internet would be easy.” I think there’s a pattern for success that combines raw intelligence with a certain amount of cluelessness (especially but not limited to reading social cues). Is there a name for this combination?
Perhaps the term that best comes to mind is “visionary.” It means someone who sees something that others don’t see. When what one sees isn’t really there, it’s a pathology. When someone sees something that eventually turns out to be there, in hindsight they were visionary. In hindsight, I was visionary about the commercial potential of the web. I’ve also had plenty of other “visions” that proved mistaken, but fortunately that was the one I made the biggest personal bet on.
If Marc is right about cryptocurrencies and fintech being a huge deal, he will be hailed as a brilliant visionary. If not, . . .
“I also agree that the advertising model is the cause of much bad juju on the Internet. ”
Wasn’t your site one of the first to do internet advertising? Advertising moving services etc to people who were looking how much the cost of living would be in a new city or something? That’s what I recall from your book on this.
Not trying to call you out or saying anyone else would have done everything different, but seems like it might be something that’s easier said than done.
For the first few years, our advertising was not of the banner-ad variety. It consisted of contact forms for service providers. So if you queried about, say, Peoria, you were invited to contact a realtor in Peoria for more information. We eventually included other types of ads, but we were very late adopters of anything other than the contact-form model. And, consistent with one of Marc’s stories, many of the contact forms went to realtors or moving companies via fax, because they did not yet use email.
One trouble with micropayments will be that everything on the Internet gets hacked, sometimes directly, but often in an unpredicted, roundabout way. It will be a bit like giving the electric company (and so on) debit access to a checking account, which is actually done nowadays. You won’t know that someone has drained said account (accidentally or on purpose), until after you get an avalanche of overdraft notices pursuant to various such access permissions. And coping with said avalanche will cost you far more time and maybe even money than would several years of writing checks the old-fashioned way. (There can be mistakes with checks too, but at least there is physical evidence to go on, and those mistakes are less often made in bulk as with hacks.)
It’s far more than just a “mental” cost, although there certainly is that too.
So either the micropayment “meter” will be nattering at you constantly, as distractingly as the avalanche of ads or of European GDPR notices – or else, sooner or later, the (quasi-)account the micropayments are being drawn from will be drained to zero before you can even know it, and you will be left to spend large amounts of time and maybe money to clean up the mess.
Note that automation is good for e-sellers because of all the costs it foists off onto e-buyers. Those include the payment-system risks under discussion, as well as the endless fiddling to establish identity and then laboriously enter details of what one is attempting to purchase and how and where to send it.
One small coping mechanism would be to set a limit per unit of time for each billing entity, with the account custodian refusing to exceed that limit without explicit permission. As far as I know this cannot be done for, say, debit access for the electric bill (again, the automation is for the convenience of the seller not the buyer.) And for the poor schlimazel trying to set up micro-limits for potentially a host of websites, some of which may not even be known in advance, the transaction costs – in time alone – would be beyond astronomical.
The bottom line – oftentimes brainstorms that look oh-so-“cool” to tech nerds work out very badly in the real world. What really needs cooling off is the preciously naive attitude that all tech change is good, no matter how much for the worse it really might be.
It’s not just micropayments. That early users and developers are rewarded with crypto, and if the network gains value the early adopters gain too. There is a democratization of investment going on there too. Early users of Facebook, for example, could share in its growth if it were crypto based.