GigDAO II, Vertical-Specific Stacks, Tim Cook, Negative Rates and Twist Bioscience
The Tech Tok Weekly #30
Happy Monday! Autumn has officially arrived.
Meanwhile, Squid Game has been fun! For a similar show, watch Alice in Borderland. The games are even more brutal.
Monday Musings
The ‘institutionalisation’ of crypto has picked up pace over the last week, with Revolut purportedly launching a crypto token and Société Générale wanting to borrow $20 million worth of DAI on MakerDAO, using its tokenised bonds as collateral. The SocGen development is particularly notable, but it is the former I want to touch upon – namely, what a token for a neobank could look like and what this means for the crypto economy. Revolut is apparently working on something similar to an exchange token like BNB, which is used to pay transaction and trading fees on Binance’s exchange, make credit card payments, process payments, and make investments, among others. Revolut has an expanding set of products and features, from insurance, savings vaults, trading, and crypto, to airport lounges, precious metals, and payday services. It is clearly trying to build a financial super app, and a token that reduces friction within this ecosystem and allows for a stickier consumer experience seems to be the right choice of token. A token could also open up the world of DeFi for Revolut, potentially bolstering and diversifying its bottom line. The smart contracts that power tokens and enable their versatility allow neobanks (and many other types of institutions) to create tokens that are tailored to their businesses and increase stickiness and loyalty from their consumers. For the larger crypto economy, this week’s developments highlight some ways in which institutions could utilise the vast opportunities offered by tokens and DeFi, and signal the growing influence of crypto within the financial system.
Meanwhile, this week…
Li Jin delves into solutions for the problems faced by workers in the platform economy, a16z makes a case for vertical-specific software stacks for solo workers, and Benedict Evans analyses Tim Cook’s decade in charge of Apple. Also, digital currencies could add truly negative interest rates to central bank toolkits, and Twist Bioscience is aiming to provide the infrastructure needed to empower founder-led innovation in the Biotech industry.
#1 A Labor Movement for the Platform Economy
As I was writing GigDAO, Li Jin’s latest newsletter popped into my inbox. In her article alongside Scott Duke Kominers and Lila Shroff, Jin makes several points that perfectly tie in with the concept GigDAO tackles: the problems with the gig economy and the potential of ‘decentralised collective action’ (DCA) to solve them. Gig workers have utilised several new strategies to form a coherent voice, such as:
Informal Unionisation: workers engaging in union-like behaviour by coordinating and submitting demands to the platform;
Mutual Aid: workers engaging in reciprocal support among themselves;
Third-Party Product Enhancement: workers creating digital tools to improve their experience;
Information Levelling: workers pooling learning to navigate confusing work environments;
Algoactivism: tactics to resist managerial control exerted by algorithms;
Public Media Campaigns: publishing worker mistreatment on social media.
These methods, while potentially successful in the short-term, have proven ineffective for lasting long-term change. The future Jin points out includes DAOs. Her version of GigDAO includes native tokens via which ownership is distributed to all shareholders and rewards are distributed for actions that contribute to the network’s success. DAO’s tackle two endemic problems faced by DCA: access to capital and complexity of governance. The speculative nature of the token would allow GigDAO to benefit and raise capital, and a (correctly incentivised) token enables better governance. This would be similar to Yield Guild Games, whose large contingent of gamers negotiates together for better platform policies and design. Other potential solutions could be updated labour laws and platform cooperatives like the Driver’s Cooperative in New York.
Decentralized collective action helps us move in the right direction — both by influencing current platforms, and by forging the next generation of disruptive networks that are more aligned with their participants.
#2 As More Workers Go Solo, the Software Stack Is the New Firm
Keeping with the theme of the individual economy, a16z’s new blog highlights the vast opportunity to build an integrated, vertical software stack for the large and growing segment of solo workers. The opportunity would be in providing bespoke stacks for different verticals, since the tools needed by lawyers and consultants would be completely different to those needed by artists and chefs. These tools would be those needed to manage the business, and engage in marketing, lead-generation, and networking. A vertical stack would resolve the main issue faced by solo entrepreneurs today – that the tools they use do not communicate with one another. It would also create a ‘system of record’ upon which everything else relies, with it being possible to add additional services like marketing analytics or tax estimation. The integrated nature of the stack also increases stickiness, given the increase in friction that would result from replacing a tool from the stack. The vertical-specific nature of the stack would enable each one to be crafted according to the specific dynamics of the vertical it serves, enabling the stack to potentially capture close to the entire total addressable market. Monetisation would be from SaaS fees, payment or lead generation take rates, or subscription fees. The opportunity would be significant across industries, and it will be interesting to see whether the ‘vertical-stack’ industry as a whole operates in a fragmented manner, or consolidates over time into one entity that provides multiple bespoke stacks.
The mix, and the starting point for a software stack, is dependent on the core value the business provides. If the platform is generating leads and therefore revenue, charging a take rate on transactions is logical. If the platform is providing SaaS back-office tools, then a SaaS model makes sense.
#3 A Decade of the Tim Cook Machine
For all intents and purposes, Tim Cook’s reign at the top of Apple has been immensely successful. Following in the footsteps of one of the most admired entrepreneurs of our times, Cook’s more metronomic leadership has led to a $2 trillion machine that delivers hundreds of millions of units at a 40% gross margin, in a seamless operation that essentially prints cash. But the elephant in the room is true innovation – or rather, the relative lack of it. Historically, Apple has been a font of innovation and design, with its computers, the iPod, and of course, the iPhone that kickstarted the smartphone revolution. Over the last 10 years, though, it feels as if the company hasn’t truly innovated in the way it did previously, and has mostly focused (with good reason) on products and services that drive revenue and retention. Its two biggest bets are glasses and cars, with the former not having been tackled successfully yet and the latter seeming curiously outside of Apple’s core strengths. It also poses an intriguing question about how exactly Apple can innovate in the next few years – they are sitting on a war chest of $207 billion, and compounding impact of technology is leading to more opportunities to innovate. Is a more blue-sky thinker in the mould of Steve Jobs needed to take Apple back to its innovation-first roots, or is Tim Cook’s focus on scale enough to maintain Apple’s position at the top of the pack through the next decade?
The iPhones keep coming, with an unassailable lock on their part of the market, and Apple has spent a decade building cross-leveraged accessories and services that drive revenue and retention. And sure, AirPods are cool. But where’s the next Jesusphone?
#4 Digital Currencies Pave Way for Deeply Negative Interest Rates
86% of central banks globally are exploring Central Bank Digital Currencies (CBDCs), from a retail, wholesale, or hybrid perspective.
One of the long-term benefits of introducing CBDCs would be the capability to actually implement negative interest rates and remove the effective lower bound. While including the ability to control interest rates within the toolkit of CBDCs may be some time away (to make their adoption easier and minimise disruption), their eventual introduction would enable central banks to keep cutting rates when a crisis hits. The dependence on bond-buying programs or quantitative easing would be reduced as well. Negative interest rates do not mean that the interest rate earned in a bank account would be below zero – according to the Bank of England, people can typically still keep money in their bank account and not get charged. Rather, borrowing money would be cheaper, consumption and consequently inflation would increase, and lower exchange rates would mean cheaper exports. Sweden’s Riksbank has warned of harmful side effects from long periods below zero – lower bank margins, pension funds and insurers being forced to hold negative-yielding government bonds reducing their returns, and potential financial and real estate bubbles due to cheap money. A counterargument would be that deeply negative interest rates would allow for quicker stimulation and recovery of the economy, giving central banks the flexibility to raise rates again more quickly. Therefore, negative interest rates may not mean a lower average, just higher average inflation with a reduced risk of persistent deflation.
Either way, interest rates matter for bond yields, and electronic money can give central banks more freedom with interest rates. How long it takes is up for debate, but some countries have already moved beyond the experimental stage, and policy makers are feeling the pressure from crypto developers, especially so-called stablecoins tied to the value of ordinary currency. It is time for long-term investors to start paying attention.
#5 Twist Bioscience: The DNA API
A DNA factory that moonlights as a software company: Twist Bioscience is at the forefront of genetic innovation. Twist takes the inputs for DNA (the A, C, T and G chemical letters) and outputs DNA sequences whose code is compiled by cells into molecular products. Today, we’re not very good at writing new DNA sequences from scratch. Making DNA has two main problems: cost and error rate. Adding a letter to a sequence involves a 4-step reaction, leading to high process and input costs. Currently, the cost is $1/letter, and each sequence has a few thousand letters. Most biology work deals with libraries of hundreds or thousands of sequences – with high error rates. This makes the process exorbitantly expensive. A solution is to print arrays of DNA strands, reducing the cost to cents per base pair. Twist has scaled this concept, printing thousands of DNA sequences on silicon chips with low error rates, packaging them up, and sending them to recipients in the mail. Bioengineers do ‘parallel work’ – they load up thousands of build cycles in parallel, most of which are automated as much as possible. Twist is attempting to sell users the input libraries of variants that go into the parallel build cycles – essentially, a playbook on automating the DNA creation process. This enables Twist to act as a ‘Stripe for Biotech’, making it easier for founders to start biotech firms and create new DNA sequences, with Twist potentially acting as the piece of infrastructure that hypercharges the industry’s development.
So what's the real point of all of Twist, in the grand scheme of things? It's not just DNA-as-a-service, or their library of libraries business. The opportunity is to catalyze a generational transformation in how life sciences companies are started and grown.
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