1. Transaction Costs,
Social Scalability &
The Blockchain
Individual

2. WHAT WILL WE COVER?
● What are Transaction Costs And Why Should
We Care?
● What is Social Scalability And Why Should We
Care?
● Transaction Cost And The Internet Economy
● Transaction Costs And The Emergence of The
Blockchain Individual

3. WHO AM I?
Independent Consultant and Writer.

4. Firms...huh...yeah
What are they good for?
Absolutely nothing?
PART 1: Transaction Costs

5. Lower Transaction Costs = Smaller Firms
Transaction Costs Affect the Average Size of
Firms:
Higher Transaction Costs = Larger Firms

6. Transaction Costs Low = Smaller Firms
Transaction Costs High = Larger Firms

7. 1829
The Age of Steam and Railways
1771
The Industrial Revolution
1875
The Age of Steel, Electricity and Heavy
Engineering

8. TRANSACTION COSTS
EXAMPLE:
MECHANICAL CLOCKS

10. - Only so many events per day.
- Accuracy issues.

13. LOWER TRANSACTION COSTS
=
HIGHER SOCIAL SCALABILITY
PART 2: Social Scalability

14. Img credit: Nick Szabo

15. Trust Minimization:
The Internet

16. 1. The amount and type of transaction costs determine how the
economy is organized.
2. Technological paradigms determine transaction costs.
3. Lower transaction costs = improved social scalability
1. The internet reduced transaction costs through matchmaking

17. How did the internet affect
Transaction Costs?
How will Blockchain affect
Transaction Costs?
PART 3: A Deeper Look at
Transaction Costs on The Internet

18. THREE PRIMARY FACTORS
Comprising Transaction Costs:
MEASUREMENT MARKET SIZE ENFORCEMENT

19. THE INTERNET’S IMPACT ON
TRANSACTION COST FACTORS:
Lowered
SEARCH and
MEASUREMENT
costs
Increased
MARKET SIZE
Fragmented
ENFORCEMENT

20. GLOBAL MARKETS
with fragmented enforcementFragmented
ENFORCEMENT

21. 1. LARGE
AGGREGATORS
2. SMALL
BUSINESSES
Image Credit: Stratechery.com
Lowered
SEARCH and
MEASUREMENT
costs

22. 1. LARGE
AGGREGATORS
2. SMALL
BUSINESSES
Lowered
SEARCH and
MEASUREMENT
costs

23. Lowered
SEARCH and
MEASUREMENT
costs

24. Lowered
SEARCH and
MEASUREMENT
costs

25. Lowered
SEARCH and
MEASUREMENT
costs
Amazon drops the minimum viable scale
of running a “publishing” business

26. What about free agent nation?
Lowered
SEARCH and
MEASUREMENT
costs
Lowered
SEARCH and
MEASUREMENT
costs

27. 1. The amount and type of transaction costs determine
how the economy is organized.
2. Technological paradigms determine transaction costs.
3. Lower transaction costs = improved social scalability
1. The internet reduced transaction costs through
matchmaking
1. This brought down minimum viable for digitally affected
sectors like indie authors enabling more people to do
that and for firms to “unbundle”
1. In the book industry, this looked like a large aggregator
(Amazon) facilitating a long tail of self-published authors
lowering the minimum viable scale.

28. Aggregation Theory
Impact on Transaction Costs
PART 4: The Death of the Firm and
The Rise of The Blockchain Man

30. Todays aggregators lowered transaction
costs for small businesses, but didn’t
eliminate them

31. Aggregators imposed a new cost in
the form stifled innovation.

32. - Those aggregators are going to
be protocols rather than
companies so the new
transaction costs introduced by
centralized institutions like
FB/Google/Amazon will be
driven closer to zero
- It’s going to spread longtail
economics to other industries
by reducing transaction costs in
industries other than just media
and retail where the internet
had its primary effect
This will increase social scalability

33. Aggregation Without The Aggregators:
Solving the Bootstrapping Problem

34. Aggregation Without The Aggregators:
Solving the Network Effect Problem

35. Aggregation, Aggregation Everywhere
(and not a profit to take?)

36. Internet Blockchain

38. THREE
ERAS OF
TRANSACTION
COSTS

39. URL: https://TaylorPearson.me/
Twitter: @TaylorPearsonMe
Email: Taylor@TaylorPearson.me
Questions,
Thoughts,
Feedback?