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Hi friends 👋 ,

I keep finding myself pulled back to the same question:

This is the third part in an unintentional and ongoing series about how the internet and web3 are shaking everything up. It’s a playbook, developing in real time. 

If Power to the Person was about technology empowering individuals, and The Great Online Game was about how the internet blurs the line between work and play, this essay is about how we play the game as teams of individuals or small groups. 

Power to the Person was a thought exercise. But just because individuals can accomplish more alone doesn’t mean that we should all sit in a basement, working alone. The Great Online Game isn’t about the endless quest for likes and followers, but about opening yourself up to opportunities online. 

Together, those pieces are about the fact that individuals are becoming self-sustaining atomic units, and that work and play are blurring as people spend more time pursuing the things they genuinely love. But we’re not playing alone. The people who play this game best are the ones who play together.

Let’s get to it.

The Cooperation Economy 🤝

Cooperation is the winning strategy in the Great Online Game. 

Individuals are becoming more important than institutions. Work is becoming more liquid. People can accomplish more on their own than ever before. 

At the same time, though, it’s easier and smarter than ever for talented people to work together. Transaction costs are decreasing. As the atomic unit of commerce gets smaller, there is more surface area for cooperation, more room for more people to pursue the same opportunity as a group. Individuals can cooperate with each other with much less friction than companies can. 

This is a tale as old as time: everything is bundling and unbundling. 

But bundling and unbundling has always felt a bit Sisyphean to me. It misses the directional element. In this case, traditional employment is becoming unbundled and people are choosing to bundle back up with each other. We’re doing it from a place of increased individual empowerment, with more flexibility and optionality baked in.  

The Passion or Creator Economy (used interchangeably here despite subtle differences) is about empowering individuals to do more on their own. The individual is the atomic unit of the internet economy. You no longer need to be a part of a large company to successfully compete with a large company. That’s what Power to the Person was all about; in the not-so-distant future, there will be a trillion-dollar company with just one full-time employee, the founder. 

The Cooperation Economy is about what’s possible when many of those individual atomic units recombine in new ways, of their own volition. The Cooperation Economy is emergent; if companies are planned top-down, collaborations form and dissipate as needed. Individuals will come together -- formally or informally -- to create Liquid Super Teams, formed of people with the right set of combined attributes for the task at hand. They might last a day, they might last three years. Then each member will go their own way, until they find the next quest to join.

If we’re playing the Great Online Game, these Liquid Super Teams are our squads. Individual venture capitalists are teaming up to invest in great companies and use their combined skills to help them grow. DAOs are forming to buy NFTs, build products, and even bid on NBA teams. I’m even part of a startup made up of all part-time people. 

The ideas in this essay are based on my recent observations and experiences. I write it at the risk of coming off like the pretty girl in a movie who’s new to town and is shocked by how nice and helpful all the town’s men are. 

That caveat out of the way, I think the Cooperation Economy, the lightweight convergence of people with differentiated and complementary skill sets around a goal, is here to stay, and isn’t just for influencers. 

Participation in the Cooperation Economy requires only something with which individuals come pre-loaded: differentiation. Understand what you’re uniquely good at, how you want to play the Game, and then join forces with people with shared goals and complementary skills.

The Cooperation Economy is an optimistic vision for the future. It’s community at Great Online Game scale, with real financial upside. More liquid co-ops for the internet. Just because we can do more on our own doesn’t mean that we should. 

Let’s take a journey to explore the Cooperation Economy:

• The Big Smile

• LeBron and Super Teams

• Liquid Work

• Liquid Super Teams

• The Cooperation Economy in Action

• Cooperation as a Strategy

Thanks to the internet, people have more power than ever before. We’re nowhere near as dependent on traditional institutions as we were a century, decade, or even two years ago. Understanding the Cooperation Economy starts by understanding why individuals have advantages over institutions in the first place.

The Big Smile

On the internet, individuals have two key advantages over middlemen: we’re naturally differentiated and more of our revenue drops to the bottom line. We can operate in the niches, feasting on wins that would be too small for companies but can be life-changing for people. 

In 2014, early into his run at Stratechery, Ben Thompson wrote two pieces about The Smiling Curve in quick succession. Thompson extended the Smiling Curve, originally “an illustration of value-adding potentials of different components of the value chain in an IT-related manufacturing industry,” to describe the value chain in the publishing business. This chart has stuck with me since: 

It shows that, online, value accrues to the Creators and Aggregators, and that the Publishers in the middle get crushed. That same curve can be used to describe almost any industry touched by the internet: the tails are better off, the middle is fucked.

Why does that happen? 

On the Aggregator side, the reasons should be clear. If you control the enormous amount of demand on the internet, you have a tremendous amount of power. Aggregators control the flow of information, serve demand with near-zero marginal costs, and take a cut of nearly all internet activity. If you can build and own an Aggregator, by all means, do it. 

Most of us, though, are not going to build the next Google or Facebook. That’s OK. Individuals do well online, too. According to Thompson (emphasis mine): 

That writer or publication has one unique superpower: they are the only one of their kind. To use the strategic term, they are differentiated, and differentiated people – or products – can charge far more than their marginal cost.

People follow people. Writers are now able to reach the specific group of people interested in their differentiated product -- the content, sure, but also the individual person’s story and personality -- and the ability to form that direct relationship outweighs whatever benefits the publisher is able to provide. 

Inside of the publisher, a writer’s differentiation is obfuscated by the publisher’s brand. Fans can only get a little piece of them; their employment agreement or contract cuts off other opportunities for monetization, growth, and expression. If that writer is a rich, colorful, 3D sphere, fans only get the 2D, Flatland version, and the writer only gets the opportunities that come with that sliver of themselves. 

Historically, writers made that trade because the publisher provided all sorts of things that they needed and couldn’t afford or attain on their own: distribution, editors, a brand, legal, illustrators, benefits, and a steady income. New tools, from Twitter to Foster to Substack to Opolis, deliver those services at a fraction of the cost. The writer can go independent and keep nearly all of the revenue they produce; the publisher is stuck with an unsustainable cost structure. 

Increasingly, people with the talent to make it on their own are striking out on their own. This can be seen in the rush of once-employed journalists to Substack, and even in the trickle of veteran Substack writers, like Azeem Azhar, away from Substack to platforms over which they can exercise even more control. 

And it can even be seen in the top publishers’ counter-response: brands like the New York Times and Barstool are paying the very top talent salaries and upside on par or above what they would make on their own, and giving them the mic. The media brands that are succeeding are the ones that put the individuals first. 

It’s not just publishing. As we’ve talked about here before, new waves seem to crash on publishing and media first, because their models and products are simpler. A text editor and email service provider are easier to spin up than a global supply chain. 

Then, those waves spread to the rest of the economy. In Power to the Person, I highlighted a number of “Business-in-a-Box” tools that let solopreneurs spin up everything from online stores to schools to trucking businesses. Influencers are attaching themselves to brands and getting equity upside in the process, a la Charli D’Amelio’s deal with teen neobank Step. There’s been a marked rise in the number of Solo GPs or Solo Capitalists, too, as individuals become venture capitalists and compete with firms. People increasingly want to, and can, do their own thing. 

The takeaway is this: individuals have more power than ever before, and they depend on companies for their survival less than ever before. Power to the Person. 

In the first inning of this power shift, many people have decided to go it alone. That’s what I’m doing right now, and there are countless others in the Passion Economy who are doing the same. When you taste freedom for the first time, the instinct is to maximize it. But I don’t think the real freedom here is working alone; it’s the freedom to choose how, and with whom, to work. 

This presents a big, hairy question: how do talented people, with more options than ever before, each of whom bring different things to the table, choose to organize over time? It’s a wicked problem, one whose “social complexity means that it has no determinable stopping point." Luckily, we have an example of a tame problem to draw on for guidance: the NBA. 

LeBron and Super Teams

Player empowerment is a catchall for the fact that the league has done a terrible job of empowering teams. The players have all of the leverage in every situation. I think it’s the worst thing that ever happened to professional sports on all levels.

-- Unnamed NBA General Manager, The New Yorker

That quote is unbelievable. It’s the purest distillation of established institutions’ inner feelings, rarely spoken aloud, towards power shifting to individuals.  

This is happening everywhere in the economy -- individual empowerment at the expense of employers. But the economy is a big, hairy subject to tackle, so let’s look at the NBA. The NBA is a good place to start studying this phenomenon because it’s a controlled microcosm. It’s a tame problem. There’s a clear goal -- win the Championship -- and set rules, including how many players each team can sign, how much money they can make, and how often they can switch teams. 

Despite the set rules, the trend in the NBA has mirrored the more wicked society at large. Over the past half-century, the balance of power in the NBA has clearly shifted from the teams to the players, from institutions to individuals. 

Back in the day, NBA players had almost no rights. A team drafted a player, and the “option” or “reserve” clause in the standard NBA contract bound that player to the team for life at the team’s will. The team could trade that player to another team, or could release them, but the player couldn’t just say, “You know what? I would much prefer to live and work in New York than Milwaukee. I’m going to start looking for a basketball job there.” Whatever city the NBA Commissioner said before calling a player’s name on Draft night is where that player might spend the next decades of their life, find a partner, and raise a family. Pretty fucked up. 

In 1970, NBA legend Oscar Robertson, in his role as President of the National Basketball Players Association (NBPA), filed an antitrust suit against the league’s fourteen teams. In 1976, the league settled with the NBPA and established what became known as the “Oscar Robertson Rule.” They eliminated the lifetime team option and modified the draft, giving players the right to sit out a year and re-enter the draft if they weren’t happy with their destination. The Oscar Robertson Rule was the first step towards unrestricted free agency in the NBA. 

With free agency, players were able to put their services on the open market and choose among interested teams based on where they wanted to live, who they wanted to play with and for, how much money a team offered, and a number of other factors. Free agency made the NBA’s employment market behave more like a regular employment market (albeit one with a salary cap). In 1975, the average NBA player made $90,000. In 2021, the average NBA salary is around $10 million. Free agency gave players some autonomy and control, if not quite power. 

What players have decided to do with that power is the interesting and relevant part. 

For the first few decades of free agency, individual players made decisions every few years on where they wanted to play, optimizing for factors like team quality, location, quality of life for their family, and of course, money. They made the best decision for themselves and their families, plugging themselves into existing situations that best fit their needs.  

Since LeBron’s “Decision” in 2010, though, the best players started forming Super Teams. 

While there have always been dynasties in the NBA -- the Celtics, Lakers, and Bulls all dominated for a decade or more -- the past decade’s Super Teams are different in that they formed because groups of superstar players decided they wanted to play with each other, and then made it happen. Instead of choosing among a set of existing environments, the best players create their own environments, using their influence -- a combination of their on-court value and social media-powered direct connection with fans -- to force teams to make their dreams come true.

LeBron has more control than whichever GM or Coach his team happens to employ. Power shifted to the best players, and the best players decided that they wanted to work together to maximize their chances of success, and their enjoyment. 

NBA teams still have it relatively good, though. There are only 30 of them. If players want to play in the best league in the world, they need to play for one of those 30 teams. And there are still multi-year contracts and a salary cap that limits how much a player can make. LeBron makes $39 million per year playing for the Lakers, not bad, but he’s a non-owner employee of a Lakers organization that’s worth $4.6 billion. He can’t just wake up tomorrow, decide that’s unfair, and call eleven friends to start a competing team with him. 

In the NBA, while the players may hold more power than ever before, the atomic unit is still the team -- if you’re not on one of the 12 players on those 30 teams, you can’t compete in the NBA -- and the players’ upside is capped (albeit at very high numbers). 

In the internet economy, though, the atomic unit is the person, and work is becoming more liquid as people realize that they’re able to flow more freely. 

To learn about Liquid Work, Liquid Super Teams, The Cooperation Economy in Action, and why Cooperation is a winning strategy…

Continue Reading Online

Thanks to Dan for editing!

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Thanks for reading and see you on Thursday,

Packy