The news last week that bitcoin's founder had been sort-of/maybe/not-so-much “found” got ConvergExs's Nick Colas thinking about the importance of creation myths in business and economics. A key part of bitcoin's current appeal is anonymity, so the fact that the digital currency’s inventor is unknown highlights that central value proposition. The tech industry is full of creation myths that resonate with both general social messages and specific business models. Hewlett and Packard, Jobs and Woz, Page and Brin – all began their businesses in garages, showing that anything is possible with a great idea. However, as Colas details below, the truth behind all these stories is, of course, far more complex than the idealized creation myths we tell about them.
The bitcoin story is the same, but with a twist. It may be the first business/economic creation myth where technology, rather than a human, is the star of the show. As Colas concludes, in a decentralized and tech-driven world, we are all Spartacus.
Via ConvergEx's Nick Colas,
“In the beginning, God created the heavens and the earth.” That, of course, is the first line of Genesis. It follows the rule all good journalists know by heart: don’t bury the lead (except they call is a lede – don’t ask). God made everything, and the next 26 verses outline the famous six days of creation. In Chapter 2, you get Adam and Eve; Chapter 3 gives us the banishment from Eden. In just a few hundred words, you essentially get the story of everything on planet Earth in one tidy story of creation. Done and dusted, as the saying goes.
Creation myths, of which Genesis is perhaps the most famous example, explain a society’s central values. In religion, they outline the supernatural forces at work in creating our world. In business, creation stories reinforce the role of the individual as a societal agent of change and speak to a core audience of customers. They are the bedrock for what marketers call “Brand” and the source waters for Wall Street’s “shareholder value”.
Consider the following examples of business creation myths:
Bill Hewlett and Dave Packard built their first product in 1939 – an innovative audio oscillator – in Packard’s garage. The two had met at Stanford University – both were on the football team. The company they formed, using their two names, survives to this day.
Fast forward to 2006, and two other Stanford alums named Larry Paige and Sergey Brin set up shop in a Menlo Park, CA garage just 2 miles from the site of the Hewlett and Packard’s original location. The only difference: they already had $1 million in seed funding for Google, versus the $500 HP had when they started to ship their first product. That would be $8,400 in today’s money.
Eleven miles from the HP garage sits 11161 Crist Drive is Los Altos CA. This is where Steve Jobs and Steve Wozniak started Apple Computer in 1976. Don’t go looking for it under that address, however – the house number is now 2066. And yes, the garage is still there too.
In Facebook’s creation story as told in the movie The Social Network, Mark Zuckerberg gets dumped, gets drunk, and decides to build a ranking site for Harvard students. The truth is, apparently, not as clean. No girlfriend involved, but a good story nonetheless.
Some 20-somethings have a dinner party in San Francisco in 2005. The host, Steve Chen, and others take amusing videos during the evening. Unable to find a place to host them online, the host builds Youtube. In a 2006 Time interview with Chen reveals some fuzziness about this narrative, but – again – a great creation myth totally in concert with how many users still engage with the site.
All these commercial creation myths share two common factors: humble beginnings and individuals with a vision to make something new. When they succeed, we celebrate their foresight and dedication. The success of a Steve Jobs or a Hewlett/Packard is an integral part of how we view a capitalist and free society – the doors of opportunity are open for anyone with a good idea and a lot of persistence. Yes, the tech-focused world of the 21st century may distribute its wealth with increasing asymmetry. As long as you have a garage, however, you may still have a shot at success.
At the same time, we are in the middle of a societal reset on the garage-and-a-dream creation myth, for consider the events of the last week in bitcoin. We’ve been writing about this online crypto-currency for the last year, largely because we think that its rise to prominence says a lot about how society’s relationship with technology has evolved in the last few years. The latest storyline that proves out this thesis goes like this:
On March 6th, Newsweek published an article which claimed that bitcoin’s inventor was a 64 year old Californian named Dorian Nakamoto. His original name was Satoshi, and that is the name used by the author of the posting outlining the structure and coding behind bitcoin five years ago. Everyone from journalists to bitcoin’s earliest adopters believed Satoshi Nakamoto was pseudonym, so it came a shock that he was relatively easy to find and that Newsweek, rather than a tech publication, could identify him.
Anonymity has been a part of bitcoin’s core value since inception. Having an untraceable founder fit very well into its own creation myth: that technology can engender a level of public trust if it is open and accessible to anyone with the skills to operate it. It doesn’t matter that you can’t talk to man or woman who wrote the original code. Read it for yourself and, if you like it, run it for free. If not, don’t.
Bitcoin’s creation myth stands in stark contrast to institutions like the U.S. Federal Reserve. Founded in 1913 as a response to the Panic of 1907, its basic framework was set at a secret meeting of key bankers and Senator Nelson Aldrich. The setting – a remote island of the coast of Georgia. Participants got there in trains with the windows blacked out to prevent anyone seeing who might be aboard. Oh, and Aldrich’s daughter was married to a prominent member of the Rockefeller family. And he was Treasurer of the Freemasons chapter in Rhode Island. Yes, the Fed has become more open in the last century, but as far as creation myths go, it is about as open as a bank vault at midnight.
A funny thing happened to bitcoin’s price in the days after Newsweek “Outed” Nakamoto: nothing much. On March 6th, it was trading for $660-680 – about $8.1 billion in total value. As I write this note, it goes for about $640. That might sound like a large move, but in bitcoin land that is equivalent to an afternoon nap. Bitcoin’s founder has, by some accounts, 6% of all the currency as a legacy of his early involvement. This is not a liquid market, and that much visible supply should have depressed prices further.
And then there is the man himself, who now denies any involvement with bitcoin. He hustles reporters for lunch. He likes model trains. And, perhaps the most damning bit in the youth-oriented tech culture of today, he is 64 years old. At least his house appears to have a garage, tucked in at the back of the modest property. Aside from that, however, his oddball reclusiveness is distinctly at odds with the standard creation myth so many others have successfully travelled.
And therein lies the lesson from the last week: there’s a new myth in town, and it’s not about people anymore. Bitcoin’s power to hold the imagination of its users has nothing to do with its creator. The price action tells you that. If Newsweek’s man is really THE Satoshi, no one cares that he likes model trains and appears a bit confused. And if he isn’t, no one seems to care either.
That’s not to say that the standard “Person with a dream and garage” creation myth is obsolete. We’ll always love the plucky underdog with a clever idea. Rather, our faith in technology has reached a Gladwell-style tipping point, at least for some ideas. Bitcoin may be early to this new approach to the business creation myth, but it certainly won’t be the last. The next big thing – especially in peer-to-peer systems – may well come from a garage. You just won’t know who is inside.