Self-organizing, nonlinear feedback systems are inherently unpredictable. They are not controllable. They are understandable only in the most general way.

Contents

Setting the scene — from resilience to a search for control

The false and exaggerated importance of control

Managing unknowns and the search for certainty

The industrial paradigm of efficiency (through scalability)

The exponential age

The portrait that needs to be repainted

The new architecture

Leverage points in a system

A new structure of open interfaces

The purpose of management — if not control?

From control to control points — value allocation in networks

Facilitating generativity

End notes

Setting the scene

2020 quite…


By Sasu Ristimäki and Kim Weckström

When the operating environment changes rapidly, as it has presently, our ability to make informed decisions is challenged. We have both less information than previously, and the information that we possess has less value as unpredictability increases dramatically. Therefore, the margin of error increases dramatically and businesses risk both inaction or false action.

Managing the information flow requires the ability to structure the information in a new framework. …


By Sasu Ristimäki and Janne Jutila

Setting the stage

The debate on digital currencies, which are often seen as competing with central bank issued money, intensified significantly during 2019. Facebook’s Libra initiative forced the issue centre stage and previously reluctant parties have been forced to scramble for a position. Given the level of current discussion, and action, it seems probable that we will see one or more digital money proposals launch in 2020.

Currently there are three categories of initiatives addressing the same opportunity: public, private and consortium. The main public variant is bitcoin (based on a public blockchain) while the best resourced known consortium initiative is Libra; other…


By Sasu Ristimäki and Kim Weckström

Kim Weckström is a founding partner of Avaus and Sasu Ristimäki is the founder of SRI Capital and an advisor to Avaus.

As long as digital marketing primarily deals with the narrow process of interfacing with customers, it will struggle to have a significant impact on overall business value. For the new marketing practice to make a decisive contribution to corporate value creation, the hierarchy of key business processes must change; marketing must achieve an ability to drive key elements of the overall business. The path towards strategic empowerment of the marketing function will not be straightforward or simple. …


There is a paradigmatic assumption that lower interest rates lead to an increase the value of equities, as well as of certain other asset classes. This is not false, but it is not necessarily quite true either. As the saying goes, it is complicated. Therefore, it is relevant to revisit the details of the assumption which tend to get overlooked, given the paradigmatic nature of the statement.

In modern finance, equity valuation is fundamentally based on discounted cash flow modelling (DCF). This involves modelling the money going into the company over time, the money coming out, and an estimate of…


Libra is not based on proprietary technology or innovation

Perhaps the key understanding of the Libra initiative, though one that tends to get lost in the noise, is that Facebook et al. have not developed any new technology or solutions that would be unique or proprietary. The great leap is that Libra is proposing a fundamentally well designed, comprehensive system, which resolves most of the issues currently affecting decentralized applications, and Libra is of course is proposing deployment at an unprecedented scale.[i]

The Libra White Paper proposes a generally well thought out governance structure, use case, value proposition, business logic and financial engineering. Moreover, though it is not explicit…


Emerging from the protocol rabbit hole

The consensus crypto investment thesis that dominated the discourse in 2017 and 2018 was the fat protocol thesis[1]. Essentially the fat protocol thesis states that, contrary to prior generations of the Internet, most value in decentralized systems will be captured at the protocol and not the application level. Unfortunately, many also interpreted this to mean that investing in crypto, or Web 3.0 was somehow fundamentally different from all prior investing. It was not just a new thesis, it was a new paradigm.

With investment focusing on the protocol level a corollary thesis was that the development of applications, and investment…


From an economic, as well as social perspective, the impact of the internet has largely been a story of disintermediation, which has paralleled by a substantial reallocation of economic wealth. However, the changes in economic value creation and economic organization that underpin the disintermediation and reallocation are still not well discussed or understood.

Web 1.0 to Web 3.0

The commercial age started with Web 1.0, the invention of the web-browser by Netscape enabling the ubiquitous adoption of the Internet. The magic of the ‘Web’ was that any node could directly communicate with any other node, without resorting to any intermediary in between. …


The incumbent narrative

There is a popular media industry narrative that the key issue with broadcast television is the transition from linear to on-demand delivery. It is of course a question that focuses on the delivery channel (form and structure) with a nod to being driven by user centric consumption. It is a useful narrative for the incumbents as well as the would-be-incumbents. Yet, it somewhat misses the point of what is happening.

Expanding the perspective, the deep underlying transition is of television as something which is coherent, manageable and complicated (but not complex) to something chaotic, incoherent and inherently resistant to control.


1. The need for programmable money and establishing legitimacy

1.1. Smart contracts and smart money

The case for digital currencies has not been helped by the fragmented and polarized discussion regarding their uses. Central Bank Digital Currency (CBDC) has been discussed primarily as a replacement for cash in contexts where the use of physical cash is declining (e.g. Sweden)[1], in other words as settlement for simple and mostly petty transactions.

At the other extreme the consensus principal use-case for Bitcoin is censorship resistance. Censorship resistance has positive connotations that are associated with totalitarian contexts but also involves money laundering, terrorism finance, sanctions avoidance, as well as avoidance of capital controls and tax evasion.

Both of…

Sasu Ristimaki

Technology and business analyst. Looking at de-centralization, complexity and how technology is not just a technology question.

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