Source of this article: Wang Chuan of Silicon Valley (id: investguru), original title "Wang Chuan: The Next Decade, Challenges from the Software Defined World"
Author: Wang Chuan
1. The world is a huge network. On a relatively stable network with a few monopolists, competing for scarce resources in accordance with existing rules is a very difficult and unpleasant thing. But people have been trained for a long time to learn the operating rules on the existing network (similar to the application program interface API of software systems), and they have been used to the intuitive response to various things (similar to the computer's cache), from a certain point of view Has become a zombie on this operating system. New opportunities only come from changes in the network topology.
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2. The complete change of the network topology usually has such a rule:
First, two nodes that were previously unable to connect or were not allowed to connect can be connected. For example, the construction of canals, the construction of railways, and the emergence of telegraphs.
3. The time delay of the connection between the nodes gradually decreases and keeps close to zero. For example, the emergence of the steam engine reduced the time for cargo ships from Venice to Istanbul from fifteen to eighty days (heavily affected by the weather) to stable ten days.
4. The cost of connection and transportation between nodes is gradually reduced, and is constantly close to zero.
5. The bandwidth of the connection between nodes continues to increase rapidly. For example, the emergence of containers has greatly increased the world shipping tonnage.
6. These connections can create certain economic benefits locally, so that its progress can be sustained. But when the early infrastructure was not complete and rich, the application scenarios were relatively limited and ignored for a long time. When the infrastructure is weak and the ecology is not rich, those who always want to start a business with their own limited resources, and the overlord hardly bows, easily become a martyr, and therefore sullen and cynical.
7. When the scale and cost cross a critical point, more players and resources quickly migrate from the old network to the network of these nodes in a short period of time, and dock with the new network connection protocol, creating an increasingly rich infrastructure. Gas stations, stations, container terminals, airports, network routers, and mobile phones are all examples of the infrastructure of different networks.
8. A typical example of infrastructure development is the world's largest video website, Oil Pipe. The video content uploaded to the tubing in 2016 was 336 hours per minute (this is sixty times that of the company when it was acquired by Google in 2008), which is equivalent to almost the total of the previous ten years. This means that in 2016, all video content on the entire pipeline doubled in hours. In 2017 and 2018, there were more than 500 hours of uploaded content per minute, which is equivalent to doubling after one and a half years. This leads to a subtle migration of people's daily habits. All topics you care about can be found on the tubing, and more people are more willing to express themselves on the tubing and find their own colleagues.
9. The eighth miracle in the world is compounded growth. But these changes can only be profoundly understood if we continue to observe them over a longer period of time . See my old article
Wang Chuan's Third Rule of Investment: Growth is King
10. With the exponential growth of the number of network nodes, people suddenly find that the connections between nodes can be softwareized and can be called through simple and common APIs (such as calling a taxi to a mobile app and directly calling uber, and a conference call becomes WeChat group discussions, etc.), and the call cost of some pure virtual services can be apportioned to close to zero due to the increase in the scale of use.
11. When all the delays and costs are very low, there will be complex operating systems and various complex applications on this network. Countless new programmers can easily develop a variety of new applications on the new infrastructure, quickly obsolete old ways of doing things, and accomplish things that could not be done on old low-level operating systems. See my old article
Wang Chuan: Why software is eating the world (1)
12. Many people who develop application software are actually not necessarily hard-core in technology. They may not know much about some low-level details, but the biggest benefit is often obtained by a few people who control the application software. Players on the new network will compete fiercely for new scarce resources on the network, and then reach a balance. A few monopolies of key resources will gain major benefits. Typical examples are Facebook, Amazon Cloud Services.
13. The software-defined world is endless, because there are always certain actions that require human intervention, or the cost of communication and transportation is too high. Breaking through these bottlenecks and creating new connections means an increase in new software APIs and the emergence of new applications. Players who are lost or absent in existing games need to emerge suddenly and always find new opportunities in new connections.
14. The keywords of the software-defined world are: zero latency, zero marginal cost, open interface, and the huge scale effect it brings, extremely low unit cost, and extremely complex and rich ecology . Veteran players can do nothing about it, because your unit cost is much higher than others, and when you understand it, you have no time to build your own market ecology.
15. The three major television networks in the United States and the host of the evening talk show have an average annual income of about 15 million US dollars, which has not made much progress compared with the 1990s. But they need to support a huge program production team and a video studio. It is very hard to produce programs every night. Hosts often have to fight with TV executives and other hosts to keep their status as primetime hosts.
16. Joe Rogan, who is far from the west coast, was originally an unknown sports commentator. Now he uses the Internet as a platform to produce about 20 podcasts and videos every month. It is said that he has only three employees, but currently earns an annual income. It is estimated to be more than $ 25 million. And he completely owns his own independent brand and does not need to look at the face of any platform boss. Rogan's development potential, there is still much room to dig.
17. Taking Netflix (Netflix) as an example, the key to its growth over the past ten years is its huge size. It has 160 million paying subscribers worldwide, and it has net increased 28 million in the past year. It took fourteen years from 1997 to 2011 to exceed 23 million. Netflix ’s revenue in the third quarter exceeded $ 5 billion, with an annualized value of $ 20 billion, which has reached half of the $ 40 billion in global cinema revenue. Many movie theaters in the United States such as AMC have a movie ticket price of nearly fourteen dollars, which has exceeded Netflix's thirteen dollars monthly fee. Even more subtle is that because Netflix has a large number of fine-grained user viewing habits, it is more artistically creative. Go bold and innovate (Similarly, the product manager of the well-known video site Bernhaber also analyzes the last video before the user closes the webpage to accurately understand the subtle taste of the audience in order to feed back the content creation). The traditional industrial production of blockbusters, in order to ensure a seat, dare not take risks in artistic creation, there are strict restrictions on the formulation of time, characters and plot transitions, which is no different from industrialized fast food. The difference between the traditional film industry and Netflix continues to widen, but these subtle details are not visible to outsiders.
18. When the software-defined world moves to the financial realm, more exciting evolutions will occur.
19. In my old article in 2018, I mentioned the Lightning Network. This is a Layer 2 protocol on top of the Bitcoin network, the purpose of which is to make payments scalable and real-time, while supporting better privacy protection. Many existing software teams have independently and concurrently developed application software supporting this protocol. See also:
Wang Chuan: Is the Lightning Network coming up?
One and a half years later, the BTC locked on the Lightning Network has increased from the original breakthrough 100 to nearly 900 (equivalent to nearly seven million US dollars), with more than 10,000 payment nodes and more than 35,000 payment channels. The well-known exchange bitfinex also recently announced that it has become the first exchange to support the Lightning Network. As an open source software agreement involving multiple independent teams, unlike centralized institutions such as Libra, Lightning Network cannot find relevant leaders to attend congressional hearings.
20. It is conceivable that the following operational business model is the development of an extremely easy-to-use mobile lightning web wallet. The global payment is received in seconds. The payment unit is "satoshi", which is equivalent to one hundredth of a billion bits. Currency, currently equivalent to about 0.007 cents. This wallet software is completely free, the key feature is easy to use and secure, and then there can be various virtual goods services on it that can be directly clicked to buy or sell. For ordinary people, even if it is a hundred cents, it is equivalent to less than a cent of this small amount of money, everyone will not care, there is little friction when buying, basically do not hesitate, click to complete the payment.
21. The initial entry point for such software is likely to be Africa. Only about 10% of Africa ’s 1.3 billion people have bank accounts, and most people earn less than $ 5 a day (the richest Egyptian per capita GDP is only $ 3,000, and the Egyptian pound has depreciated by 80% relative to the US dollar over the past two decades) . The traditional banking system can be regarded as a software system based on personal identity, but it is expensive to copy this system and the corresponding front-end and back-end infrastructure to Africa. The password-based Lightning Network / Bitcoin system only requires a mobile phone and Internet connection, and the startup cost is extremely low. For most destitute ordinary Africans, this type of mobile wallet can be directly installed and used in a few minutes, without the need for tedious procedures to open a bank account. The gain is that the risk of depreciation is much smaller than the national currency and the universal btc , which is convenient for offline Purchasing clean drinking water and food has greatly improved living standards, and resistance to promotion is expected to be relatively small.
22. The African population was only 630 million in 1990 and has more than doubled in 30 years. There are more than 50 countries on the African continent, with a total area of 30 million square kilometers, which is larger than the combined area of Russia and China (27 million). Nigeria has a population of more than 200 million, and may soon surpass Brazil. It is expected that half of the world's newborns will be born in Africa in the next 30 years, so the market for promoting such products in Africa is very promising. Twitter President Jack Dorsey recently announced that he would spend more time promoting btc in Africa. I believe he must have seen something that many of us have not yet seen.
23. With the increase in the number of users of such wallet software, the increase in virtual product services will slowly enter a virtuous circle, that is, the greater the product sales, the service provider can set the price very low but still make money. The lower the price, the more wallet software users will be invited to purchase, which will further increase the scale and price advantage of this software.
24. At present, all kinds of payments on the Internet can be completed by pressing at least a dozen keys. When you see a cool article, you can automatically reward the author on the Lightning Network with one click. Virtual product services not only include text and image products, but also include tasks such as CAPTCHA identification, mechanical turk for Amazon, and product discount coupons. For example, in November, a company called Honey in Los Angeles was acquired by Paypal for nearly four billion dollars in cash. His main product is to install software plug-ins in the browser, collect the latest product discounts of major companies, and automatically help users get the most Good offers and cashback. Such virtual discount coupons can be freely traded through the Lightning Network, adding more liquidity.
25. A virtual product can also be a standardized service that can be directly invoked by some software, and then produce a variety of extremely complicated permutations and combinations that are now unimaginable. For example, all daily network operations can be "Lightning Network Payment". To prevent spam, you can set the email sender to pay Yoshitomo to be accepted. It can even "lighten the network payment" at the http connection protocol level, and easily solve the problem of distributed denial of service (ddos). You can also use Lightning Network to crowdfund activities like reddit ask me anything at any time, compared to those offline activity summits where people are hurting their financial efficiency and inefficient empty talk. I do n’t know where to go.
26. When this thing first came out, not many people cared, but for a poor person living on less than five dollars a day, it would make sense to provide virtual services on this platform to earn two or three dollars a day. Slowly, once the platform has more than 100 million people, it may form a strong positive feedback. People earn more than ordinary jobs on this platform. They will tell each other. Phase changes will soon occur, and the number of users may exceed one billion. Just like everyone started to worry about troubles and didn't want to go to the tubing to make videos. I heard that Li Ziyi had made millions of dollars in the past year and had to run immediately.
27. Someone will definitely do this thing. The first platform to make this bigger and bigger (not necessarily a centralized company, most likely an open source decentralized software organization) can rely on its super scale, hundreds of millions. With billions of users and higher-level rich software applications that continue to strengthen their monopoly advantages, a small commission (or other indirect profit model) can still make a fortune.
28. On the other hand, such a super platform can allocate many expensive virtual services to hundreds of millions of users, making them extremely cheap, not only the price of cabbage, but also the price of cabbage residue . After people in the traditional financial system realize this change, there is nothing they can do about it.
29. Ford's biggest innovation a hundred years ago was to transport cars to workers through an assembly line. Workers themselves don't have to run around. All at once the efficiency is improved many times. It can be imagined that the Lightning Network has turned the world into a multi-dimensional virtual world pipeline, with billions of people looking for work and going to "stack satoshi". The efficiency and wealth of this system will far exceed today s level.
30. Only a few people are the big winners of this game, and most entrepreneurs may still be busy in the end. Ordinary people can just watch the changes and sit back and enjoy the various super-cheap and high-quality goods and services emerging from it.
31.As a virtual network independent of physical space, Lightning Network has the potential to completely and completely surpass the existing financial system in the world in terms of settlement delay, user coverage, transaction granularity, payment costs, operation API, and richness of application ecology. system. This migration may ultimately be unavoidable. The rough intervention of regulators in any country is likely to lead to a lack of voice in the development of this field. It is better to take the initiative to obtain the maximum benefit after the trend is formed. Otherwise, it is inevitable to repeat IBM to Amazon and Hollywood to Netflix. , The traditional media's mistakes on Facebook and Google. See my old article
Wang Chuan: Will Amazon's Cloud Services Devour the US IT Industry? (Part I)
Wang Chuan: Will Hollywood be consumed by Netflix?
32. What is the purpose of making money? It's all about getting more future resources and services. In a highly developed and ultra-large-scale software-defined world, resource services that can be invoked by highly abstracted software will be inaccessible and imaginable to most people today, or even beyond the means and resources of today's world. The future belongs to new programmers who can freely design and run those new software. See my old article
Wang Chuan: The labor of the abstract, the labor of the abstract (1)
About the author: Wang Chuan, investor, currently lives in Silicon Valley, California. Personal WeChat 9935070, public account investguru, Sina Weibo "Silicon Valley Wangchuan". All articles express the author's personal views for reference only, and do not constitute investment advice on the assets mentioned, investment is risky, you must be cautious when entering the market.