Metcalfe & Indie Possibilities | #157
October 16th, 2021: Greetings from Taichung. We are back with Angie’s family for the next two weeks before we return back to the states.
📚 I have 4-5 beta readers reading the book and it goes to the copywriter next week. Right now feeling pretty good about the book and excited to share it with you.
📸 Two friends are launching different but awesome courses on video and launching a successful YouTube channel that I recommend:
👉 Ali Abdaal is launching his Part-Time Youtuber Academy. You can sign up via my link if you are interested. This course is great for people that need help getting started creating a YouTube channel, want feedback on videos, and need help thinking about content. I also wrote a review of what I learned here.
👉 If you are more interested in setting up a high-end video studio for yourself in your hour, then Dream Studio Course with Kevin Shen is what you are looking for. Kevin’s video lectures are exactly what you want in a video course - short, interesting, and actionable. I don’t think I’ve seen anyone better at taking extremely hard-to-understand technical knowledge and turning it into something so accessible. You’ll also get access to his one-on-one support and he’s one of the nicest and most helpful people I’ve met. You can sign up here.
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#1 Metcalfe & Indie Possibilities
Metcalfe’s law is an idea rather than a law. It was proposed by Robert Metcalfe who helped play a role in the early internet. The basic idea is that as each additional node is added to a network, the value of the network increases at a faster than linear rate.
While there are debates about the specifics of the effects, few people debate the power of networks. I find it to be a useful mental model for thinking about the broader indie ecosystem and thinking about how increasing the number of people in this world will lead to increased benefits. Not only economic but social as well.
The Indie Ecosystem
The indie ecosystem is a collection of self-employed entrepreneurs and small business owners, freelancers, the creator economy, gig workers, artists, and even some full-time workers and retirees who dabble with side projects or enjoy the vibe of the network.1
Since I left my job in 2017 my path has coincided with a dramatic increase in the value of this overall network. The number of ways to work, support yourself, find friends, learn, make money and even earn social status and prestige is far beyond the 2017 world I entered.
There is only a “crisis” in the creator economy if you see it through only the lens of economic opportunity and fall into the end of history illusion, assuming that this indie ecosystem is done growing and evolving.
The indie ecosystem is allowing people to find ways of structuring their lives that make them happier and also finding ways of doing work that they are intrinsically motivated to do. This can’t be modeled on a spreadsheet and if we take it seriously it increases the risks with any actions to punish platforms or turn indie workers into full-time employees.
For me, I want to see a million experiments bloom. The potential to give more people paths to live meaningful lives and do work that matters is too big an opportunity to pass up. The best way to do this is to continue to add nodes to the broader indie ecosystem. This is something governments can definitely incentivize but this way of seeing the world doesn’t really align with current political narratives.
I have a few friends that have been in this indie space since the early 2000s. They are the “free agent nation” generation a la Dan Pink’s book. They had to navigate a much more difficult world. Finding work, making friends, navigating payments, working remotely with reliable internet, and getting social approval was much harder.
However, their initial contributions and the existence of other nodes like Ribbonfarm, Nomadlist, Tropical MBA, and Seth Godin helped to change the culture and make it more acceptable for people beyond the early adopters to enter this world.
I think people are still underestimating how the value and quality of this network will continue to increase and specifically in two dimensions:
How adding more people will make people’s lives better
How adding more people to the network will increase the economic opportunities of everyone
#1 Making People’s Lives Better
This is the one that has made it more attractive for many to enter this ecosystem. They can “find the others” before they take a leap and once they enter, there are more niches and communities to help accelerate the path to sustainability
Before I quit my job, I had one real-life friend who was self-employed and Seth Godin’s books. When Michael Ashcroft quit his job, he had many more. I interviewed him on my podcast in a series of interviews starting six months before he quit his job. By the time he quit, he had already made money online, had dozens of friends, and had many ideas of how he might make things work.
As more people enter this broader ecosystem there will be people in almost any city in the world that can help you build your own onboarding to this new world. That is in addition to many more online communities and nodes. Places like this newsletter but also networks like Yak Collective, Interintellect, The Stoa, Ness Labs, Sloww Community, and others.
A big reason people don’t consider entering the indie world is that the uncertainty, discomfort, financial stress, and potential social disapproval are rightly assumed to be painful. However, as more people can dabble in these worlds and prototype a shift before making a leap, there will be many more people willing to make a change.
Most people like doing what most other people are doing. As the number of people in the indie ecosystem increases, I expect that taking a path like mine will no longer seem all that crazy ten years from now.
As more people continue to enter this network, the possibilities for people’s lives will continue to get improve as well. Because of the dynamic nature of the work and also how people are living in this world, it also opens up the space for many more experiments in terms of how people are structuring their lives. I think people underestimate this when they are looking at some of the problems of the creator economy.
Here are some of the things I expect to improve as the indie ecosystem expands:
New places to live and engage with local communities (digital nomad communities are an early version of this)
New tools and online communities where it is easy to meet people around shared interests or types of work
More writing, idea sharing, books, and stories that enable people to understand opt-in to this new ecosystem
Less friction to making friends and finding other people working on similar projects
Higher social approval of these paths and more ways to earn status outside of the traditional metrics
In addition, I think people are underestimating the economic opportunities…
#2 Increasing Overall Economic Opportunity
One of the criticisms of Metcalfe’s law is that not all nodes add equivalent value. For example, if someone joins Facebook, adds five friends, and doesn’t log in more than once a month they are not as valuable to the network as someone who is addicted.
In the indie ecosystem, someone who becomes financially sustainable and likes what they are doing is profoundly more valuable than the person that struggles. With this in mind, one of the highest value things I have been thinking about is how to lower the friction to economic opportunity.
I think there are two approaches to enabling this: increasing the number of experiments & increasing the amount of trust in the ecosystem
Most of the ideas I’ve had of how to make money online have come from watching other people and then copying them. For example, I did not have the idea to run a cohort-based course until I saw Seth Godin do it with altMBA.
Another approach has been to try using new tools and to experiment. I put consulting templates for free on Gumroad in 2017, and then people started gifting me money. I had not realized that was something people would pay for, but since making them available for $49, I have sold more than 100 copies.
As the number of tools and protocols increase so do the number of ways to make money online. In addition, as the number of people in the overall ecosystem increase so do the opportunities to make money by directly selling to the ecosystem.
Platforms like Teachable, Podia, Circle, Stripe, Gumroad, Ghost, and others have had a profound effect on the possibilities to make money online and also then restructure your life around those opportunities.
I don’t see any major problems but a key indicator of health is likely the number of new approaches we are seeing of ways to make money as well as the number of companies that are being started.
One of the biggest opportunities of engaging in this ecosystem is partnering with others to take part in what Packy McCormick has called “liquid teams.”
In the career world this was pretty simple and the best versions of this I saw at places like McKinsey and in business school. There were norms that if anyone asked anyone for help, they would offer whatever they could. It is assumed that if you ask someone for a coffee conversation they will say yes. This is possible because of two reasons.
Low reputation risk: The people inside the network are already screened for being conscientious and that makes it easy to help someone or recommend someone who you have not spent time working with closely
Don’t see others as competition: The aim of connecting is often to find jobs and most people feel that the availability of good jobs is abundant or diverse enough that helping someone succeed does not mean you have any less opportunity.
The indie ecosystem struggles on both dimensions and faces three challenges:
No way of assessing reliability & conscientiousness: Without a common culture or screening criteria people don’t know how to assess the skills and reliability of others without directly working with them
Reputation risk: People perceive to have more at stake because of how much the person’s name is attached to their work
Lack of norms: Even with people that become friends, it can be confusing and awkward to broach the topic of coordinating on projects, especially if one or both people don’t know how much financial opportunity is at stake.
Thinking about new ways to tackle these problems presents an enormous opportunity and is an opportunity for startups and platforms to address.
An example of things that would be helpful:
Standard protocols: How do you establish a Schelling point for cross-promoting, partnerships, and affiliate offers. For example, everyone in finance knows that “20&2” is a standard rate for a hedge fund. What is that number for doing a course launch promotion?
More writing & sharing: It may seem crazy but the amount of high-quality content on how to get started, how to navigate these paths, and offering examples of how to make money are still not abundant.
Stories About the Technical Norms Behind Partnerships: One thing I’ll commit to is surfacing the nitty-gritty behind how people are making partnerships.
Shifting Beyond Competition: The reason I am writing this article is that I think the larger benefits of growing this network are far beyond any attempts to protect methods, approaches, or secrets right now. I want to convince more people to share and build in public.
Making soft skills legible: How do you form collectives, tools, and other ways of making things like reliability, follow-through, quality, and talent legible in ways that new people can tap into?
There is likely an opportunity for building an open-source onboarding handbook for this broader indie ecosystem. I may end up working towards something like that but if you are excited by it, I encourage you to get started and run with that idea.
New Mental Model For Possibilities
The indie ecosystem makes people uncomfortable because of how different it is from what we have come to see as work - labor in exchange for a steady salary. Because income from doing this kind of work is often unpredictable and lumpy, attempts to think about it in the frame of traditional work are unhelpful. For example, I have been writing online for four or five years. I’ve made no more than $5,000 from writing. However, I realized a couple of years ago that since I like writing, if I could commit to it for several more years, I would likely discover huge potential from making money from my writing but likely in ways I couldn’t predict.
This is what makes thinking about investing in the broader ecosystem from a political, large business, or government standpoint impossible. They rely on stable systems that can be predictable and grow in a linear fashion. The investor world, especially the VC world, is likely best suited to think about this. However the downside there is that sometimes they forget to model the non-economic possibilities that people value in their lives.
One way of thinking about this is through an idea called “real options” which I learned during a class at MIT. This was an engineering class focused on large-scale engineering projects. Real options was an approach of figuring out how to build extremely expensive industrial projects but in worlds where demand might be uncertain.
The main approach we learned is to look at it probabilistically and run different analyses on the expected demand and associated returns. You can then work backward from those probabilistic scenarios and design a modular approach to the construction. If there is a higher than estimated demand one year into the project, you can add capacity to the plant because the original design enabled such flexibility. The goal of this is not only to minimize downside risk but to capture as much of the upside as possible.
Here’s a quick graph I threw together for how you might think about this. On the upper right-hand side are opportunities in the future that are not possible yet and are hard to imagine. The indie mindset prices in the unknown upside and then builds a path around being able to opt into those opportunities when they appear.
This approach is not intuitive AND has risks. Your goal shifts from steady progress to one that is more focused on mental resilience and flexibility. You spend more time scanning and understanding the environment and then executing the shifts. This might mean working less or committing to something you want to learn rather than making money. My approach is to design for liking work.
Beware: In the bottom right-hand side of that graph is the risky part of this journey. You might not discover anything to opt-into on your path. Which means being on a path that will pay off might be indistinguishable from one headed for failure. The good news is that the indie world always has a good exit path: regular employment.
Right now I’m moving back to the US and my rational brain is telling me to get a job. But I’ve already experienced enough unexpected upside both personally and financially that I know there is value in continuing to do experiments and contribute to this ecosystem. By doing so I’ll help to grow the possibility space of the overall ecosystem while also continuing to put myself in a position for an interesting life
I don’t know what the “real options” will be for me in 2025 but I am confident that helping more people onboard into this world will be a net benefit for not only me but everyone.
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#2 Chart Of The Week: People Don’t Like Paying 99 cents?
I’ve been selling the pre-sale of my book on Gumroad and they offer a pricing option that is unique. You can set a price and people can then override that and pay more. Conventional wisdom nudges many people to price things at $x.99 (at least in the US) so it surprised me how few people actually end up wanting to pay this price
From the following chart, for every one person that paid $9.99, there was another person that entered a flat $10.
In addition, 63% of people wanted to pay more than $9.99 and the 27% of people who paid more than $10 averaged $21.96 and ranged anywhere from $12.34 to $100.
The other cool thing about this is that most of this money comes directly to me. If you were to publish a book with a publisher and wanted to earn the same amount of money from these pre-sales, how many books do you think I would need to sell?
The answer, assuming the price was still $9.99 would be 917 books.
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I think one of the most interesting groups of people is the baby boomers. Once they finally retire most of them are not going to want to follow the “rest and relax” script that previous generations embraced. They are going to be actively engaged with the world and since they will be living longer and healthier than ever before (not to mention having more wealth), creating on-ramps for this community will be incredibly valuable.