memes over matter, lessons from the Titanic, more

😹🧠 Feature: How bad policy favors memes over matter

by Chris Dixon

With crypto prices reaching all-time highs again recently, there’s a risk of too much speculation — especially given the buzz around memecoins. Why does the market keep repeating these cycles, instead of supporting the more productive blockchain-based innovations that will truly make a difference? 

My goal isn’t to defend or to diminish memecoins. It’s to point out the backward incentives of a regulatory regime in the U.S. that lets only memecoins thrive — while companies and tokens with more productive uses face hurdles. Any mememaker can easily create, launch, and even automatically list tokens. But entrepreneurs trying to build something lasting? They get stuck in regulatory purgatory. 

Think about it this way: We’d consider it a policy failure if we had a securities market that incentivized only GameStop meme stocks, but rejected the likes of Apple, Microsoft, and Nvidia. Yet current regulations encourage platforms to list memecoins and not other, more useful tokens that make it possible for individuals and communities to own internet platforms and services. The lack of regulatory clarity in the crypto industry means platforms and entrepreneurs fear that the more productive blockchain token they are listing or developing could suddenly be deemed a security. 

read more: in the Financial Times | on a16zcrypto.com

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related:

• Blockchains’ two cultures: The computer vs. the casino (also in Fortune) by Chris Dixon 

• Forget what you know about crypto: The next era of internet innovation is here

🔮❓Q&A: The future in 5 questions

in Politico

Last week’s installment of Politico’s “Future in Five Questions” asked Chris Dixon: What’s one underrated big idea? What’s a technology that you think is overhyped? What could government be doing regarding technology that it isn’t? What surprised you most this year? And: 

Q. What book most shaped your conception of the future?

A: Clay Christensen’s The Innovators’ Dilemma is still the most important, influential tech book to me, after almost 30 years. He tries to answer the question of why in technology does it so often happen that, for example, Xerox misses the commercial application of the very thing they invented, or how Google surprised Microsoft — and how again and again you see this pattern of new things coming along to surprise people.

The interesting answer he had was not that the managers are incompetent — but actually that they’re very competent, and they’re trying to please their best customers. But the nature of technology is new things come along; there are low-end new products that look kind of silly or toy-like; but they get better and better over time, and surprise people.

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related: 

• The next big thing will start out looking like a toy (post) 

• Why the next big thing in tech will look like a toy (video)

🚢 ⚓ This week in history: Learning from the Titanic disaster

by Brian Quintenz

This past week (April 15) marked the 112th anniversary of the sinking of the RMS Titanic, which led to the loss of more than 1,500 lives. After it sank, policymakers scrambled to update maritime safety laws to protect passengers. But the effort to prevent another Titanic ended up causing another one. 

It’s a case study that still applies today: a lesson on how overly prescriptive — as opposed to principles-based — regulation often leads to unintended consequences. 

Here’s how: Famously, the Titanic only had enough lifeboats for about a third of her passengers, which became an obvious focus in the aftermath. This led to the Convention for the Safety of Life at Sea (SOLAS) and 1915 Seamen’s Act, which stipulated that ships now had to carry lifeboats and rafts based on the number of persons and not, as before, on tonnage. The implementation of the Seaman’s Act meant passenger ship operators could increase a ship’s capacity by increasing the number of new or retrofitted lifeboats on it.

But instead of limiting capacity, companies like the operators of the SS Eastland realized they could cram more passengers onboard their ships, increasing fares and profits — as long as they added enough lifeboats, rafts, and davits to accommodate the influx. Quite the opposite of the regulators’ intention, but in line with the incentives they had created. In 1915, the SS Eastland capsized in the Chicago River, overburdened by the additional weight allowed by the new “safety” measures. At least 884 people died. 

Ironically, the very regulations designed to present such disasters contributed to another one. But regulators could have pursued other paths. A principles-based approach would have allowed them to achieve their goals by focusing on the desired ends rather than dictating how to get there. This approach is especially important for emerging technologies. Such technologies evolve so rapidly, and are often so complex, that regulators cannot hope to prescribe their way to success — as was the case with passenger ships in the early 20th century, and with crypto/ web3 today… 

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related: “Rules Versus Standards: An Economic Analysis” by Louis Kaplow (1992) 

“According to this Harvard Law professor, outcome-based standards are optimal in settings with substantial differences in the circumstances around each individual case — as is true in crypto and in other industries with ongoing innovation. At the same time, when possible, providing guidance upfront is better than providing guidance after the fact — as happens with regulation-by-enforcement. So if you can state principles that should apply no matter what, it’s best to provide guidance upfront. Conversely, when there's a lot of unpredictability, it's better to have outcome-based assessments that let you decide a given case ex post.”
— Scott Kominers 

🗣️📝 Around the web: On the new stablecoin bill 

in Unchained

From “Regulated Dollar Stablecoins Created by a Proposed New Senate Bill Would be Crypto’s Ultimate Trojan Horse” by David Morris: A new stablecoin bill proposed in the U.S. Senate embodies the duality of regulation…
read here

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-- Sonal Chokshi, Robert Hackett, Tim Sullivan, Stephanie Zinn and a16z crypto teams

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