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Transaction Costs, Social Scalability & The Blockchain Individual - Taylor Pearson, Refactor Camp 2018

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Talk given at Refactor Camp, May 2018

Published in: Economy & Finance
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Transaction Costs, Social Scalability & The Blockchain Individual - Taylor Pearson, Refactor Camp 2018

  1. 1. Transaction Costs, Social Scalability & The Blockchain Individual
  2. 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. 3. WHO AM I? Independent Consultant and Writer.
  4. 4. Firms...huh...yeah What are they good for? Absolutely nothing? PART 1: Transaction Costs
  5. 5. Lower Transaction Costs = Smaller Firms Transaction Costs Affect the Average Size of Firms: Higher Transaction Costs = Larger Firms
  6. 6. Transaction Costs Low = Smaller Firms Transaction Costs High = Larger Firms
  7. 7. 1829 The Age of Steam and Railways 1771 The Industrial Revolution 1875 The Age of Steel, Electricity and Heavy Engineering
  8. 8. TRANSACTION COSTS EXAMPLE: MECHANICAL CLOCKS
  9. 9. - Only so many events per day. - Accuracy issues.
  10. 10. LOWER TRANSACTION COSTS = HIGHER SOCIAL SCALABILITY PART 2: Social Scalability
  11. 11. Img credit: Nick Szabo
  12. 12. Trust Minimization: The Internet
  13. 13. 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
  14. 14. How did the internet affect Transaction Costs? How will Blockchain affect Transaction Costs? PART 3: A Deeper Look at Transaction Costs on The Internet
  15. 15. THREE PRIMARY FACTORS Comprising Transaction Costs: MEASUREMENT MARKET SIZE ENFORCEMENT
  16. 16. THE INTERNET’S IMPACT ON TRANSACTION COST FACTORS: Lowered SEARCH and MEASUREMENT costs Increased MARKET SIZE Fragmented ENFORCEMENT
  17. 17. GLOBAL MARKETS with fragmented enforcementFragmented ENFORCEMENT
  18. 18. 1. LARGE AGGREGATORS 2. SMALL BUSINESSES Image Credit: Stratechery.com Lowered SEARCH and MEASUREMENT costs
  19. 19. 1. LARGE AGGREGATORS 2. SMALL BUSINESSES Lowered SEARCH and MEASUREMENT costs
  20. 20. Lowered SEARCH and MEASUREMENT costs
  21. 21. Lowered SEARCH and MEASUREMENT costs
  22. 22. Lowered SEARCH and MEASUREMENT costs Amazon drops the minimum viable scale of running a “publishing” business
  23. 23. What about free agent nation? Lowered SEARCH and MEASUREMENT costs Lowered SEARCH and MEASUREMENT costs
  24. 24. 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.
  25. 25. Aggregation Theory Impact on Transaction Costs PART 4: The Death of the Firm and The Rise of The Blockchain Man
  26. 26. Todays aggregators lowered transaction costs for small businesses, but didn’t eliminate them
  27. 27. Aggregators imposed a new cost in the form stifled innovation.
  28. 28. - 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
  29. 29. Aggregation Without The Aggregators: Solving the Bootstrapping Problem
  30. 30. Aggregation Without The Aggregators: Solving the Network Effect Problem
  31. 31. Aggregation, Aggregation Everywhere (and not a profit to take?)
  32. 32. Internet Blockchain
  33. 33. THREE ERAS OF TRANSACTION COSTS
  34. 34. URL: https://TaylorPearson.me/ Twitter: @TaylorPearsonMe Email: Taylor@TaylorPearson.me Questions, Thoughts, Feedback?

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