Outside Context Problems

“An Outside Context Problem was the sort of thing most civilisations encountered just once, and which they tended to encounter rather in the same way a sentence encountered a full stop.”

– Iain M. Banks, Excession

My last piece on where prediction markets break down made me realize I hadn’t written about outside context problems here yet.

Outside Context Problems are the most interesting situation one can encounter, when considering pure innovation.

Sounds like a black swan…

They are not just a black swan. They have three characteristics:

• They are things nobody could have seen coming;
• Their implications are hard to recognize at first;
• And those most impacted are unable to deal with them because of their own context / nature.

This is not just disruption. Uber was disruptive, but it wasn’t an OCP - every country has rules about who could pick up passengers and charge for transportation. Both countries and tax operators knew it was a possibility. Countries just didn’t do anything about Uber early on mostly - I expect - because of inertia and because it was harder to stamp out a swarm.

What becomes really interesting to look for are those changes that are likely to generate outside context problems, or OCP generators - the things that have unforeseeable second and third order effects, like instant cross-border money transfers or widespread smartphone availability.

And a clear flag is something that makes you feel confused at first.

Some examples

We have lots of historical examples - primitive civilizations encountering modern weapons of war, societies that expect a newly-contacted group to play by their rules of engagement, how the U.S. political establishment was unable to deal with a populist who did not have an ounce of care for their norms - but there are a lot in the tech space as well.

Linux was an OCP - if you are Sun Microsystems or IBM, why would you take this random Finnish guy seriously when he posted some kernel code online? And even if a company like Red Hat decides to bundle together a bunch of tools and distribute Linux CDs, why would you think of them as a threat - or that they even have a chance to get out of the garage?

Bitcoin was definitely one, but cryptocurrencies have been exponentially less of an OCP the further away they are from Bitcoin’s inception. Consider Libra, for instance - by the time it got announced, governments could recognize it for the supranational currency it was and acted immediately to curb it.

Celestia was one too, and I suspect we haven’t yet seen the full impact of data availability-focused design in the blockchain industry.

Self-organizing swarms can be OCPs for centralized institutions and groups that are used to thinking that top-down monolithic leadership is the only way to get things done.

Companies or groups that capitalize on influence culture, like how Ukrainians used TikTok to galvanize support and document what was going on, were an OCP to anyone with enough money and bot farms (and Rubles) attempting to control the narrative on social media.

But why are they interesting?

Because Outside Context Problems are the most likely to reshape society.

Anything new is threatened by incumbents - whether they are governments or competitors - but OCPs are the least likely to be stopped early, because those who should feel threatened do not recognize them as a threat.

And, in the end, I have realized that the most fascinating paths are those that seem weird and alien when one first encounters them.

Published: 2024-10-21