- Signaling is the hidden component in our actions and choices that communicates tribal affiliation and social status.
- According to Robin Hanson (author of The Elephant in the Brain), over 90% of human behaviour can be explained by signaling.
- Components of a typically signal mechansim:
- Signal message: The hidden subtext you’re trying to convey
- Signal distribution: The channel for communicating your message
- Signal amplification: Methods to boost your message against status rivals
- This is visible everywhere if you look deeply enough.
- Consumption patterns constantly change with people trying to buy things that signal premium-ness or exclusivity. eg. iPhones over other phones?
- Education choices of people lean towards highly-paid international schools rather than an affordable private or public school.
Digital vs Physical Products
- Digital products struggle with signaling due to their intangible nature. Physical products like a LV bag has much simpler way of signaling.
- Digital products are harder to monetise at premium prices compared to physical luxury goods.
- Over time though, digital products have also developed their signaling mechanisms:
- Adding physical elements (e.g., neobanks offering premium metal cards)
- Built-in distribution (e.g., Superhuman’s email signature)
Social Networks and Signaling
- Primary function of social networks is building social capital through signaling.
- They do this by following methods:
- Provide free distribution to maximise user base
- Monetise signal amplification features
- Status wouldn’t mean a lot if everyone had them, so all of the social networks have introduced unique mechanisms to differentiate.
- Facebook’s status updates
- Instagram’s square photos
- TikTok’s complex video creation
- New networks must innovate on proof mechanisms to stand out.
- These networks make money by either of these ways:
- Focus on high distribution (e.g., free social networks). Allow people to signal to huge sections of population all at once.
- Limit access to create a strong signal message (e.g., invite-only platforms).
- Offer paid features to stand out (e.g., Tinder Boost, Fortnite cosmetics).
Future Possibilities
- Practically, any proof mechanism can be used as-is or with some modifications to create new social networks.
- We’re bound to see social networks built on all kinds of proof-of-works. Some examples are:
- Cooking: Proving culinary skills visually
- Learning: Quantifying knowledge acquisition
- Reading: Tracking and gamifying reading habits
- Predictions: Social network for accuracy in forecasting
Inspirations