Offering a utility to your user base is the most stable sort of long-term competitive advantage that you can have.A lot of network-based utility only is realized at some level of scale.That’s where status comes in.A lot of networks that have achieved super scale had some sort of status incentives or status games built-in, very early on. It helped them to get that kinetic energy that you need in order to achieve the scale that then increases your utility. Those networks were paying you to contribute — paying with ego, with status, with a sort of an emotional payback rather than money.

Status Drives Scale

If a centralized provider can guarantee the scarcity of that virtual good, then it actually does have emotional value. People who play League of Legends all know how hard it is to acquire certain types of equipment in that game and there’s a flourishing aftermarket for it.

Virtual Scarcity = Real Value, Real Status

In the early days of Instagram, there was a sense of progression in that they had filters and things that allowed you to feel like you were improving as a photographer. But the part of Instagram that’s challenging now, is a lot of that network is about if you have a lot of wealth or something, and the average person is going to be like, “That’s not my life. I can’t compete with that.” And so there is a point in which you start to feel you could churn out of that network because you’re not going to feel any progression.

Instagram May Be Imploding

<ul><li>There’s something to the idea that humans are wired to be very, very conscious of status. It may have come from another time in mankind’s history when your status within your small tribe or group was actually critical to your survival.</li><li>That carried over to the modern world — and the fact that we have these social networks that knit together the world, that allow us to see the activity or status of other people all over the world has sort of risen the stakes.</li><li>These social networks have pushed the emotional stakes of status games to, maybe, an unhealthy place.</li></ul>

Humans Are Wired To Be Conscious Of Status

In the first decade or two of the web and the smartphone, everything was really focused on efficiencies achieved from going asynchronous.In every field, you can see there are huge gains to going asynchronous.But we’ve lost that social feeling of community that comes from synchronicity.Over time we will once again say: “It actually does matter occasionally that a society is all watching something at the same time, or that you and a group of people benefit by doing something together.”You start to feel like societies start to fracture when you don’t have that feeling of communal harmony.

When Our Asynchronous Society Starts To Fray

We have long held this idea that there will someday be this kind of Metaverse-like world that more of us live in. We actually have already partially transitioned into it with our smartphones. We’re not necessarily wearing VR headsets and spending all our days like those people in Wall-E. But most people today spend a good fraction of the day with their faces in their phones, interacting in software-constructed environments. The fact that it’s not 3D doesn’t matter — it’s still a form of sort of low-fidelity Metaverse.

Status in the Metaverse

Because games are continuous, interactive experiences. The user in a game will churn out if he’s not feeling the right balance of:<ul><li>Challenged</li><li>Motivated</li><li>And rewarded</li></ul>That same principle can be applied to a lot of other products. How products take off = a lot of it is in how they make you feel.

The Right Balance

Mental frameworks that are more common in business and analysis tend to be more focused on things that are measurable or easily measured, which often is some sort of utility-based function. It is much harder sometimes to measure that emotional quality.

Emotion And Utility

If you’re in a tech world where you have winner-take-all dynamics and network effects, where you have things that are absolutely free and infinitely available, well, at the edges of that, the old prescriptions kind of break down.If you’re allowed to define scarcity on any axis, that is a form of power.Video games have become leaders at figuring out how to define forms of scarcity. You can also look in the retail world for similar things where you have flash sales and things like that, where it’s just constrained inventory or limited time for something.

Scarcity Is A Form Of Power

<ul><li>It’s easy to forget that product development in the tech world, in the software world, is actually still a relatively young profession in the scheme of things.</li><li>If we study traditional status mechanisms in society, just generally, it’s always the case that someone is always going to create something even more scarce to differentiate.</li><li>One of the important things to understand in the long run is that managing a network and the status dynamics within it evolves over time.</li></ul>

The Precarious Nature Of Status

An understudied and overlooked aspect of product design is that a lot of times, people use products that just make them feel good.People in the gaming world have an intuitive understanding of how important this is — how important it is, moment to moment, to track your user’s emotional valence.

How Products Make You Feel

All product people have had it beaten into their heads that, “Hey, you’ve got to remove friction from every process in your app. From the signup flow to this flow, everything has to be fast and easy.” That is not necessarily good.We have to start distinguishing, at the product design level, between positive and negative forms of engagement.You actually need proof of work. You do need some friction in the product, and it can be used for something good. It can be used to motivate.When we think about product design, we have to think about those positive forms of friction.

Designing Products With Positive Friction

Every product person or entrepreneur moving forward needs to have familiarity with the tactics and strategic understanding of this important point: Structurally, when determining how you build your product, part of what you’re doing is defining what scarcity means on your platform.

The Underlying Mechanics of Scarcity

Why do some networks succeed and others fail? One consistent pattern of successful networks is that they have scarcity early on so that people can signal status, and then over time the network moves toward providing more utility. Humans are hard-wired for status games, so product builders would be wise to understand how status & scarcity function.

Status Games: The Premise

Social media, ultimately, is mostly just about entertainment, not utility. But, if you have a network like Uber or Lyft, you’re ultimately about getting someone from point A to point B. That’s not really an entertainment-based product. So your competitive set may be more limited.
It’s very critical if you’re doing a startup to understand if you are going to be offering a product that is actually an entertainment-based product — because that really widens your competitive set.

Products Are Often Entertainment-Based

You can think of all of the things like sales ranking and customer review ratings as a game. There is always some sort of proof of work. There is some hurdle that you have to do to capture that amount of status. And if you can define some unique form of proof of work, then you may have something that jumpstarts a new game.These restrictions, in order to create scarcity, drive initial white-hot centre type activity, which then can bleed into bigger products.

Scarcity-Based Games

James Currier & Eugene Wei (product lead at Amazon, Hulu, Oculus), discuss the underlying status games that drive us all—in technology and life.

Scarcity-Based Games

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