3BI: Imagined realities and the internet
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Imagined reality
In his popular book Sapiens: A Brief History of Humankind, author Yuval Noah Harari observed that the distinguishing characteristic of humans from other species is our ability believe in shared myths and stories, and because of this, much of the world runs on an “imagined order” that facilitates mass cooperation:
How did Homo sapiens manage to cross this critical threshold, eventually founding cities comprising tens of thousands of inhabitants and empires ruling hundreds of millions? The secret was probably the appearance of fiction. Large numbers of strangers can cooperate successfully by believing in common myths.
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Much of history revolves around this question: how does one convince millions of people to believe particular stories about gods, or nations, or limited liability companies? Yet when it succeeds, it gives Sapiens immense power, because it enables millions of strangers to cooperate and work towards common goals. Just try to imagine how difficult it would have been to create states, or churches, or legal systems if we could speak only about things that really exist, such as rivers, trees, or lions.
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Unlike lying, an imagined reality is something that everyone believes in, and as long as this communal belief persists, the imagined reality exerts force in the world.
The pillars of our society - laws, institutions, governments, currencies, and the like - are not concrete entities that can be defined by physics. They are simply stories that we have all agreed to acknowledge and respect. One US dollar has no inherent value, but it has perceived value according to our imagined reality of financial systems.
The new imagined realities
As the internet continues to flatten the world, we’re slowly seeing some older stories crumble while new ones arise.
Consider finance. In the last decade, the internet created new digital currencies that have soared to record highs. And just in the last week, message board posters found a way to skyrocket the stock price of a dying retail company and bankrupt hedge funds in the meantime. From Matt Levine:
Bitcoin is a financial asset with no cash flows. It has value purely because people think it’s valuable. Bitcoin is worth $34,000 because other people will pay you $34,000 for it, and they’ll pay you $34,000 because other people will pay them $34,000, etc. There is no underlying claim; there is just a widespread acknowledgment that people think it’s valuable.
I do not say this to be negative about Bitcoin. This is fascinating! It is an amazing collective accomplishment to create a new thing, from scratch, that is valuable just because we collectively agree that it’s valuable. It is amazing to find a way to create that collective agreement from nowhere. Once you have it, you can actually do useful things with Bitcoin—as a store of value, a currency, whatever—that you couldn’t do before. Bitcoin created real financial value out of, essentially, the human imagination.
That’s cool but it’s also a terrifying proof of concept. If pure collective will can create a valuable financial asset, without any reference to cash flows or fundamentals, then all you need is a collective and some will. Just hop on Reddit and create value out of nothing. If it works for Bitcoin, why not … anything? Why not Dogecoin? Why not Signal Advance? Tesla Inc.? GameStop?
Imagined realities at scale
Collective will, as noted above, is nothing new, but the speed and scale of creating it is:
Behavioral science has documented the power of barriers. Even the smallest frictions in the way of an action will prevent it from happening.
The barriers to creating an imagined reality used to be enormous. For most of human history, we were unable to even communicate with another human without being face to face, so stories traveled by word of mouth. Now, it’s technically feasibly for anyone to reach millions of people in seconds.
The barriers to communicating and organizing with millions of people are gone. All it takes is a persuasive message board poster to create something out of nothing, whether a cult or financial asset.
It seems like we’re starting to see the ramifications of this accelerate - sometimes for better, and sometimes for worse.
Other stuff
Two good summaries of GameStop saga:
A Journalist of the Plague Year. This is a fascinating interview with Zeynep Tüfekçi, a sociologist who’s gained notoriety for her sharp analysis of the pandemic (and become one of my favorite writers), covering everything from how social media is re-shaping our world to the institutional failures in the COVID-19 pandemic.
A mental model for combating climate change. A useful explainer simplifying the complexity of climate change tactics.