Steem must improve and the key metric for that improvement is "utility"
First let's discuss what utility is and the context behind why I think it is the most important metric (more important than market cap).
Utility defined:
In economics, utility is a measure of preferences over some set of goods and services; it represents satisfaction experienced by the consumer from a good. The concept is an important underpinning of rational choice theory in economics and game theory: since one cannot directly measure benefit, satisfaction or happiness from a good or service, economists instead have devised ways of representing and measuring utility in terms of measurable economic choices.
Utility is the metric which tracks the happiness and or wellbeing of sentient beings in a community. Steem is primarily a community of sentient beings. If we assume these sentient beings are rational and interested in pursuing happiness then we know that more happiness and less unhappiness is generally going to be the ideal. Utilitarianism is specific in that it seeks to maximize utility, by in more simple worlds determining the rightness or wrongness of a decision based on how much happiness it generates for the community.
Here is a quote below which sums it up:
Utilitarianism is an ethical theory that determines right from wrong by focusing on outcomes. It is a form of consequentialism.
Utilitarianism holds that the most ethical choice is the one that will produce the greatest good for the greatest number. It is the only moral framework that can be used to justify military force or war. It is also the most common approach to moral reasoning used in business because of the way in which it accounts for costs and benefits.
Greatest good for the greatest number? How can we determine this? Economics provides an answer. When we have a token we can track things. If we think of money as memory, then these tokens allow us to track what people value at any given time (in theory). The best action to take under utilitarianism is the action which maximizes utility.
The problem Steem faces today is a utility maximization problem
This kind of problem is called an optimal decision problem. The conflicts we see over the reward pool is in essence a conflict rooted specifically utility maximization. The utility maximization problem is stated as: "how can I spend my money so that I get the most bang for my buck?" or in other words "how can I spend my money in a way which gives me the maximum utility?". If we think of the collective of Steem Power holders as a single individual who decides how to spend the reward pool in such a way so as to generate the maximum amount of happiness for themselves then in essence that is the exact problem Steem has right now.
When a blogger posts a blog and a group of bloggers believe the blogger is being over paid then this again is a disagreement based in utility maximization. They believe the money could be better spent in some other way than to go to that blogger and because the resources are finite it is all about how best to divide these resources. This makes it an optimal decision problem which means the math can provide the optimal solution to this problem.
Despite what we may think the bloggers actually are not the core of the Steem platform. The core of the Steem platform are the Steem Power holders. In particular, if you bought or earned Steem Power then you've funded Steem and if you've funded Steem then your satisfaction as a customer in my opinion must be paramount. This in my opinion is where utility comes in because the Steem Power holders must get enough bang for their buck (happiness per unit of value spent) in order to have a reason to buy Steem Power and fund whatever Steem produces for them.
This means bloggers are not entitled to rewards, it means the content generated by the bloggers is the reward to the Steem Power holders. If this content provides utility then the Steem Power holders are made happy, are satisfied. Satisfied customers become loyal customers over time.
Steem needs to focus on maximizing utility
This is the key take away, that the problem right now with Steem is that it isn't effectively maximizing utility. In other words the value in terms of how much happiness we get per unit of value we put into it is unfavorable for all participants at this time. In particular, those who buy Steem Power support the ecosystem and the utility they get from the system isn't high enough.
Many people will state that Steem is about making the world better. My response to these people is that the method of making the world better is through utility maximization. If every unit of value spent produces greater utility then everybody wins. The satisfied customers who buy Steem Power will have a reason to keep buying Steem Power. The producers of content who are genuinely talented at producing content will be encouraged by the rewards to keep producing content. Those who find out they aren't so good at doing that anymore will have ways to add value that we cannot yet imagine through SMTs. The point and fundamental concept behind it all is utility maximization, as that is the key to actually leveraging Steem to make the world better (as measured by utilitarianism).
More bloggers doesn't mean more happiness per dollar
Why is this? Quantity of a good or service doesn't necessarily raise the marginal utility. It's a matter of how much of a good thing is enough. The current problem with Steem is everyone wants to be a blogger which just isn't going to work because not everyone is going to be good at it. This means having a million bloggers doesn't mean Steem will be a million times better. I do not think this can be fixed merely by spreading the rewards so all bloggers get a flat fee because again, more bloggers and more content doesn't mean more happiness. In fact there is a hard limit on how much content the community can consume, and so bots are used to distribute rewards when perhaps the content isn't providing any marginal utility or not as much as we currently think.
Conclusion
In the context of cardinal utility, economists sometimes speak of a law of diminishing marginal utility, meaning that the first unit of consumption of a good or service yields more utility than the second and subsequent units, with a continuing reduction for greater amounts. Therefore, the fall in marginal utility as consumption increases is known as diminishing marginal utility.
- How much happiness is Steem generating for you? Does more generated content increase your happiness if Steem is currently set up as a content generator?
- What is the marginal utility of every new blog post?
- Remember, resources are finite, so every new blog post on Steem has to produce value for you in terms of utility. If you are someone who is buying Steem Power then how much utility is being produced for you by the bloggers and how much marginal utility per additional blogger do you get?
My hypothesis is not enough marginal utility is generated by adding an unlimited amount of bloggers. It is true that some people will be very good at blogging and in that case marginal utility increases but for every new talented blogger there are likely many who lack talent. I even will include myself and say that perhaps my own blog only provides marginal utility to Steem because the very talented bloggers are taking their time to find out about Steem. This means in order for even myself to continue adding value to Steem there has to be a diversification in terms of the mechanisms by which value can be added.
Blogging is not enough is the conclusion I arrived at and to maximize utility we require SMTs. A happier community is a community where people are able to add value in ways which take advantage of their talents and in areas where there is demand. Is there really demand for more bloggers or is the supply outpacing the demand to such an extent that not much additional marginal utility is added on average?
Some predictions:
- As the utility of Steem as a platform increases the price of Steem Power shall rise in correlation. This is to say that as Steem Power holders are more satisfied with their purchase then there will be greater demand for Steem Power which is a limited resource.
- As the price of Steem Power rises the reward pool increases in correlation allowing for even greater utility in theory provided that Steem is set up to maximize utility. This is a potential for a virtuous circle.
You make some very good points. I wish all members of the Steemit community would realize that when they act for the greater good, they are benefiting themselves as well as everyone else. If they recognize that and act accordingly, the value of Steem will continue to grow and that will help everyone. I am highly optimistic about the long-term value of Steem and expect SP to eventually hit triple digits. If members of Steem play their cards right, the price of SP could go well into triple digits in the long run.
Good thoughts. All social media platforms should have utility in mind ideally, but I think it's especially important for Steemit, since it's so directly monetized and in such a burgeoning space as crypto. Since users are tasked with the prospect of both authoring and curating content, utility can present itself in a wide spectrum, as gaining useful information, being entertained, or simply earning more rewards. With this high experiential diversity and exponentially growing volume, perhaps a solution lies in more focused bottlenecks of users, creating more well-defined channels for real quality content, then perhaps some more talented bloggers can prioritize content creation, while others can curate or adapt to other Steemit-based platforms like dMania or dLive. I'm not sure what all this means or where it's going, but thanks for your thought-provoking analysis.
I really like your idea of applying marginal utility to Steemit. The way I think of it is the marginal utility of an interaction with Steemit. That interaction will be different if you are an SP hodler, a creator, a curator, an app developer, a witness ... And yet, if we think about what's essential in the long run -- it's the greatest good for the for the people demanding and creating demand for SP and SBD. In the end, the underlying currency is inextricable from an measurement of utility around here.
I see the criticisms of the reward pool, the concentration of Steem from the premine, and whales that game the system for their own benefit at the expense of others. These chip away at marginal utility of interaction for creators and curators, but there is an even bigger issue (for me) that seems relatively easy to solve:
Posts are worthless and invisible after 7 days
I just did a write up about this yesterday, 7 Days to $0. The more I think about it, the more it bothers me -- and the more I don't understand why people don't discuss this as a problem. This is solvable, whereas the wealth concentration will take more time (if it can even be solved).
When I think about people spending a lot of time and research to produce a post that is valuable a year later -- 7 days is ridiculous.
When I think about a curator sifting through the piles of posts -- 7 days is ridiculous. When was the last time a curator outside of Steemit limited themselves to 7 days? You don't find gems when you constrain yourself to an arbitrarily short time frame. Curating with a 7-day limit isn't curating, it's slave labor.
You're right, we can only consume so much -- especially so in 7 days. However, expand that time frame and we can do a lot more. For example, I was active here for several months before I found you. I've enjoyed reading your posts. I've gone back and read older posts, posts older than 7 days, older than a month -- CRAZY, right?! And I gained tremendous value from reading them. My only options are to send cash directly to you or encourage people to follow you. My upvote is worthless (beyond emotional support), I can't resteem your post. Now imagine that with your next 5,000 new followers. It adds up, especially across the entire network of minnows who sometimes posted their best stuff first.
Combine this 7 Days to $0 with extremely poor discoverability on the Steemit website, and I argue that you can't make older posts any more worthless.
For both creators and curators, especially minnows, the marginal utility of an interaction is extremely low. In the end with this marginal utility for all these people being low, they have very little invested in staying here. When the next big thing comes along, they'll leave. Steemit has 1st mover advantage, but it is still relatively easy to replicate. And if the financial rewards are more fair elsewhere and people can also earn income on older content (as a creator and curator), people will cash out and leave.
And when people leave, the demand for Steem currency drops, price drops, whales care, Steemit Inc cares. So in the end, probably the healthiest thing for all of us is a competitor to Steem.
I agree which is why I think the marginal utility of adding more bloggers is diminishing over time. I don't think it will remain worth it for me to continue as a blogger beyond a certain point. SMTs are the best hope I think to expand my ability to add value and SMTs can be used to solve this problem of how to reward timeless content.
It's a good point -- that more bloggers isn't always better.
My understanding of SMTs is very shaky. You piqued my interest in them as a possible solution to the timeless content problem under 7 days. Now I just need to dive in an figure out the best sources of information on the subject.
With Steemit, I just moved out of my fanboy phase, into my doubter phase, and am on my way to being an educated participant. Folks like you and @aggroed have been essential.
Thank you!
I think you are definitely on to something here. We are a community of app and content creators, but most of the content that is being produced is sitting on the sidelines unread.
But I'm not sure how this can be mitigated really...
That could mean more content producers isn't helping very much in terms of producing greater happiness. If you are buying Steem Power to support your favorite content producers there is only so much content you can consume. There are only so many blogs, vlogs, podcasts, that you can consume. Marginal utility is an issue.
I think part of the problem is lack of diversity. If we want more bang for our buck, we need to be able to find different things to spend it on. Right now most blog content here that is successful is focused towards steem and crypto, if steemit is to succeed it will need way more diversification of content. So while SMT's should help with new creations, things that are already in place need diversification within them as well. we are starting to see that a bit more with some of the new vloggers heading this way, but we still have a ways to go. I think that will come with new users if we can retain them long enough. Ease of use for steemit needs an upgrade
I think we need a slower growth rate of bloggers and more roles where people can add value in other ways. More diverse and better content from the most talented bloggers of course, but then millions of people will not be talented bloggers and how can they add value?
Not everyone is supposed to be a blogger and we don't need 5 million bloggers when only 50,000 people hold the majority of Steem Power and don't have the interest in that. This isn't likely to scale unless we have SMTs and unless we go beyond mere blogging.
That's true, there are way too many bloggers and a ton of repeat content, I think that has to do with there being not much else to do here. Obviously things are in the works, like you said, SMT's and the other third party apps on top, so I think it will expand.
I guess what I'm getting at is I'd like to see higher quality bloggers in more niches, right now we have too many bloggers and too few subjects.
As far as SMT's go, I still am trying to wrap my head around the sheer potential of them. Basically it seems like any site could add them to certain aspects like comments, could they also be used as payment? What couldn't they be used for?
I absolutely see the problem the post is talking about, but I'm not sure I see a clear solution. What's the incentive for people to be the audience. Everybody wants to be a "star" and everybody wants a piece of the pie.
The Steem Power holder gets to consume exactly the kind of content on exactly the subjects they want at minimum. The non-Steem Power holding audience isn't so important because ad revenue (eyeballs) isn't the monetization strategy.
This means ultimately providing greater satisfaction to Steem Power holders is the solution but how to do it is the question. We can allow more people to be stars if there are more variety of things people do to earn Steem Power.
I don't think the item of value be it content, applications or whatever else one might think of is what hampers this dynamic currently. If it doesn't work for one type of items (content) why would it work for a others. I don't think the categories matter that much.
I think the problem if we agree that we have one comes from the fact that most people would like to provide said item of interest whatever it is and earn from other people's SP. But the market is not infinite and neither the mean nor the average user spend a good portion of their time consuming and rewarding and their priority is always create and be rewarded. It means there are too many people vying for a limited attention and reward pool.
Not there is another problem that worsens this. A great deal of the active Steem Power is being used on autopilot and the content being rewarded is not actually being consumed. Many Steem Power holders are using it to ensure curation rewards, renting out and selling it to automated services. I'm not sure broadening the scope of the types of things being rewarded can in anyway change those incentives.
But it might thug it in the right direction indeed. But it's not a real solution to the problem you have pointed out.
This point sums all my thought and assertions about Steem
Glad I stumbled across this timely.
"More bloggers doesn't mean more happiness per dollar" a clear fact
Thank you.
This kind of well considered and thought provoking post will always get my upvote.
Even if I don't totally agree with your premise.
Specifically, I don't see the Steem Power holders as "customers" so much as stockholders or "shopkeepers".
Without something for people to "put eyes on", what is there to attract investors?
A big shiny store with nothing on its shelves has virtually no utility.
And while I can't read the minds of anyone at Steemit Inc, I'd have to say that it appears that they consider the core of Steemit to be the Steemit blockchain.
The SP holders merely did the heavy lifting needed to fund it (and, ultimately, EOS and SMTs).
Of course they deserve a return on their investment/risk.
I would just like to see some indication that there's some kind of long term (longer than the 13 weeks it takes to power down) vision, rather than a "So long, and thanks for all the fish" attitude.
So what is the purpose behind the data on the Steemit blockchain if not to make some people happy or improve the wellbeing of some people? And if it does exist for that then it's a question of utility. If it's a question of utility then those who put dollars in will want the most bang for each buck as measured in the happiness or utility they get from every unit of value they input into the product, blockchain, machine or whatever it is.
If we think of Steem as a machine which takes in input (units of value) and outputs utility, then the Steem Power holders are the consumers or customers who must in my opinion not just get paid ROI in $. ROI in $ improves the US Dollar economy but doesn't do anything else. ROI in actual utility means people will use Steem because they actually are made happy or helped in some way by the content Steem is generating.
If it's all about the blockchain and I can even agree, then the utility comes from the data sets. Human beings cannot analyze big data using our brains. This big data once analyzed can unlock the true utility and allow for maximization of utility. What I mean to say is the ultimate benefit Steem as platform can give to the world is measurable in the amount of satisfaction the Steem Power holders are receiving. This means the blockchain would exist to improve the lives of the Steem Power holders primarily and as a side effect of being open anyone else who comes along.
So why would I want to buy Steem Power? If I know I can get content which can make my life happier, more enjoyable, or which satisfies some want or need, then as a customer I'm likely to be loyal as long as I'm getting a lot of Steem for every dollar I put in. If I'm merely being used as an "investor" then why would I care about Steem in the long term after I get whatever USD value I put in? Why would I become loyal to Steem once I got my USD money back? Why wouldn't I take my USD money and put it into something which gives me more satisfaction or more bang for it's buck than Steem?
If I can find more happiness, more satisfaction, somewhere else, then my money rationally speaking would be better spent somewhere else. If what you say is true and it's a "So long, and thanks for all the fish", then there will not be any true value to Steem as a platform beyond speculative. If on the other hand Steem focuses on building actual utility then there will be real value behind the Steem token beyond speculative. Steem Power will be valuable because Steem as an ecosystem is fun.
That, in my opinion, is the sticking point, whether or not there are enough people who truly care about the continued utility, as you do, to overcome the people merely here to speculate and who will use whatever means they can (bot armies, etc) to milk it for everything they can before moving on to the next "opportunity", leaving behind them a virtual strip mine.
These are the Wild West days of cryptocurrency, only time will tell which platforms will stand the test of time.
I've said it before - the platform needs to attract content consumers, perhaps more than content producers (bloggers as you say). There are probably 100 times as many content consumers on youtube as there are producers. If consumers on steem can earn a little just for upvoting and commenting it will bring a lot of people into steem. There also needs to be more longevity to each blog post (not necessarily comments) so that posts aren't time based. This would help both content consumer (because they can use the platform to find interesting content) and producers (because good content will pay out in the longer term).
Just my opinions.
Being new to Steemit (only a couple weeks) I spent all the way up until this morning only reading about the positives of Steemit without really knowing about the dynamics of how it all really works. I have to admit I think ive had my head in the clouds about all of it, and while I am still very optimistic about future of Steemit, reading this and others has helped ground me a little bit.
I have never written content before, and I do see that most of the successful people write about Steemit. I obviously dont know enough about it to write about it.
Im not sure what the future holds for Steemit, I think that with the additions of Zappl, Dmania, and Appics Steemit might move to a more all inclusive causal social network, rather than a full on blogging platform.
The layout of course would have to change, as I don't want to use Zappl because I feel it clogs up my "blog" basically, I have no idea what im talking about and im rambling! lol
Dear @dana-edwards, your basic assumption is that people behave rational. In such a case they would do utility maximization. But are people rational? Even in investment decisions where you wouldn´t expect it we constantly see irrational behavior. Buying high, selling low - the classic. Bloggers which are incentivized by micro-payments and still deliver (fortunately) good content even if the time would be spent more profitable otherwise. Some are believing in the future of Steem and put irrationally more money into it than advisable from a risk minimization perspective. My point is that the economic theory that decisions are carefully judged based on ROI or utility maximization, this theory has severe limitations.
No I do not assume people are rational. I assume the Steem community as a whole is rational. No individual person is rational and that includes me. At the same time when people come together and have the benefit of computers then the big necessary decisions can be rational. So for example deciding on questions of how to distribute the reward pool is an optimal decision problem which can only be solved rationally.
The fact that it's not being treated rationally enough could be the source of some of the bad feelings we see. I see SMTs as a brilliant attempt to provide the tools necessary to solve it rationally. Whether or not the community does the right thing for itself is not up to me but my post is about pointing out what the right thing looks like in terms of utility maximization. I also want to note, I'm not an economist, and I'm only presenting my opinion and on how I would decide the best way to allocate the resources.
I do not see anything wrong with the theory. I just think people decide to waste their resources and I'm included in this. I haven't always been the perfect curator and later on have had second thoughts about my own upvotes but I'm a person. And of course I can be irrational as well, if I put a lot of time into my posts and think it deserves this or that, but at the end of the day my happiness isn't the only happiness to be considered in a community.
For Steem to work then the global happiness must rise, not just my own. This is a must have or Steem will fail in my opinion.
Thanks @dana-edwards, for your always thoughtful replies (that distinguishes you from many others, by the way). Agree with you, in addition one reason why people can´t be rational is, that they usually don´t have 100% information to judge rationally,most miss the full picture / all stakeholders views, etc.
I am not that optimistic if whole communities act together more rationally. Sure, outliers and morons are averaged away. But if people do not know the big picture, communities don´t know it necessarily as well. Besides there often form parties in communities, which stalemate themselves by striving in opposite directions in worst case. Often opinions are biased due to emotions or manipulations (there are whole books about mass manipulation). At the end a lame compromise is pursued due to conflicting interests or mere beliefs.
Manually you are correct because human brains cannot scale. I do not advocate we do things manually. Once we apply machine intelligence to the Steem data already generated we can make magic happen. This could indeed be an SMT and represent the data analytics or even predictive analytics functionality of Steem.
Right, I saw your post about this. I truely hope this will work out, but so far machine learning is rather a big, "sexy" promise and remains to be seen, if it can hold what people expect. It is only so good as the assumptions and goals are that are behind the algorithms and the interpretations (similar to Statistics, just neutral numbers, but people do interprete them to their needs). Probably the profit maximization can happen only, if real AIs step in? But who will then profit most? Still the humans?
The more data you have to feed it the better the learner gets because it works on statistics. More examples, better more efficient learning. So I think Steem data can be useful for improving Steem.
Last I checked most of economic theory, except the very latest stuff, is based on the notion that people actually rationally, in what they believe is their best interests. Now it may be that's an extrapolation of a statistical mean of behaviour down to the individual - the mean behaviour is rational in any large enough sample so we assume individuals are rational and irrational actors aren't significant enough to have any great effect worth worrying about.
Big data. I think with the data acquisition capabilities we have we can capture more of the big picture than in any time in human history. I think the problem is human beings cannot manually process big data. I do think the data exists on the blockchain, on IPFS, and that means when machine intelligence is applied to it then yes we can process it.
It would end up like youtube did; not paying the minnows! Some niche stuff has marginal utility for some people and I believe steemits strength is the diversity of the ecosystem.
If you go by "greatest utility" a post in Chinese is more valuable than the same post in Dutch!
It is a difficult problem indeed.
It is more important to make maximize utility (the most happiness for the most Steem holders) than it is to promote paying minnows. Bloggers have the role of producing content. Bloggers produce content because it makes the consumers of content happy. The Steem Power holders are the funders and their happiness is critical.
And you are right, if most Steem Power holders are Chinese then absolutely there is the possibility that posts in Chinese produce more marginal utility, and this is fine in my opinion even though I can't write in Chinese. It's better for Steem.