"The Evolution of the Economy: From Information to Ownership"

"The Evolution of the Economy: From Information to Ownership"

The economy has continuously evolved over the years, with new categories emerging every couple of years. It all started with the "Information Economy" in the 90s, which laid the foundation for the digital age. Since then, we have witnessed the rise of various economies such as the Attention Economy, Sharing Economy, On-Demand Economy, Crypto Economy, Creator Economy, and Ownership Economy.

A common thread among these economies is their focus on economic empowerment. Jeff Jordan, a seasoned entrepreneur, emphasizes the importance of building platforms that help people make money. This principle has proven to be successful for many big platforms that have achieved escape velocity. If a platform cannot envision itself as the central node in its own economy, facilitating financial growth for its users, it may struggle to sustain its success.

Interestingly, many consumer platforms did not initially start with the intention of enabling users to make money. Platforms like Instagram, Youtube, and Twitch were initially designed for fun, status, connection, and fame. However, as these platforms grew, users discovered the potential to monetize their presence, which completely changed the trajectory of these companies. Ultimately, economic empowerment becomes a crucial factor for the success of any platform.

The emergence of the "creator economy" further solidifies the importance of economic empowerment. Becoming a creator is now seen as a viable career path, offering not only fame and connection but also creative freedom. Vitalik, the co-founder of Ethereum, once said that even a billion dollars cannot compete with a project that has a soul. This sentiment reflects the deep-rooted desire for economic empowerment and personal fulfillment that the creator economy provides.

To understand the engagement and success of a platform, founders must identify the appropriate metrics for their specific business. One valuable tool is the Power User Curve, also known as the activity histogram or L30, coined by the Facebook growth team. This curve represents users' engagement by the number of days they were active in a month, ranging from 1 day to all 30 days.

Power users, who are highly engaged and contribute significant value to the network, are essential for the success of any platform. While the commonly used metric of daily active users divided by monthly active users (DAU/MAU) provides insights, it has limitations. The Power User Curve reveals the variability among users, distinguishing between slightly engaged users and power users. This distinction is crucial for platforms that rely on frequent user engagement for monetization through advertisements.

Ideally, successive Power User Curves should show a shift towards the right side of the curve, indicating a growing number of power users. However, not every platform needs to have a smile-shaped Power User Curve, as different product categories cater to diverse user behaviors. For example, LinkedIn, a professional networking platform, may not have users checking it daily, but its business model is not reliant on daily usage.

Analyzing the Power User Curve for different weekly or monthly active user cohorts can provide valuable insights. In a network effects product, newer cohorts should gradually improve as network density and liquidity increase. Additionally, the Power User Curve should not be solely based on app opens or logins but should capture core activities that reflect the platform's value.

As the CEO or product owner of a platform, it is crucial to design the platform in a way that allows everyone to succeed. The Power User Curve's beauty lies in its ability to showcase the heterogeneity among user segments, providing a nuanced understanding of user engagement.

In conclusion, the economy has evolved from the Information Economy to various specialized economies, all centered around economic empowerment. Platforms that enable users to make money have a higher chance of success. Understanding engagement through metrics like the Power User Curve can provide valuable insights and guide the growth of a platform. To thrive in the evolving economy, founders and investors must focus on building something that inspires, sustains a real economy, and empowers users to achieve financial success.

Actionable Advice:

1. Prioritize economic empowerment: When building a platform, ensure that it has the potential to help users make money. This focus on economic empowerment can be a key driver of success.
2. Monitor the Power User Curve: Use the Power User Curve to understand the engagement levels of your users. Identify power users and strive to increase their numbers over time.
3. Adapt metrics to your business: Find the metrics that are most relevant to your specific platform and business model. Understand the nuances of user engagement and tailor your strategies accordingly.