Early Indications September 2017: Potpourri for $400, Alex

As I’m reading 200+ newsletters in preparation for Early Indications’ 20th anniversary next month, a few ideas are floating around. In no particular order:

1) Companies for the next 20 years

Looking back to when I started this exercise, such leaders as Digital Equipment, Sun Microsystems, Nortel, and Compaq have been bought and/or shuttered operations. Kodak and Nokia are a tiny fraction of their former size and influence. Circuit City and Borders are dead; Toys R Us is in chapter 11. Looking ahead 20 years, what companies can we bank on still existing, much less dominating their market, in 2037?  Short answer: Amazon, given a caveat, and some morphed version of Google.

Jeff Bezos is 53 years old. It’s not impossible to imagine him still running Amazon for two more decades, but if he does not, it will be fascinating to see what kind of succession plans he makes: absent its founder, I don’t know if Amazon can maintain its incredible innovativeness and creativity. I’ve never admired a company so much for a reluctance to copy industry leaders: I hate the term “best practices” because it all too often excuses managers from identifying and solving problems with original solutions. Given Bezos, I’d bet on Amazon still being a leader 20 years from now.

Even though its founder has similar maverick tendencies, Tesla is much harder to pick as a winner. Until Elon Musk and his team deliver all those pre-ordered Model 3 sedans with minimal hiccups, I can’t be confident in the operational acumen Tesla managers bring to basic execution. The scale of Musk’s bets is admirable, but as a friend of mine once said, “cash flow is as immutable as the laws of physics: get things going the wrong way, and you’re quickly swamped by the vortex.” Is Tesla a car company, a battery company, an energy company, a mobility company? Is Musk a car guy, a mass transit guy, a space guy, a social commentator guy? At some point these declarations will have to become clear. 

In the same vein, what will Dyson be without its founder? The electric car announcement is vague yet tantalizing, but is this a company for the longer haul?

As the world (including the US) becomes more urban, and new transportation patterns — including electric bicycles — emerge, where does that leave Wal-Mart? Also, the company’s founding generation is no longer in command, so how long can managers maintain the cost discipline, culture, and vision that made the company what it is today? At what point does today’s retail leader join A&P, Sears, Macy’s, and JC Penney as also-rans?

Apple is a puzzle. They reap high margins, run a phenomenal supply chain, and earn fierce customer loyalty, yet the market values the stock with a pedestrian P/E ratio (at 11.7, it’s lower than Kohl’s; Facebook’s is about 37). Once again, we see the effect of losing a visionary founder. F. Scott Fitzgerald quotably asserted that “there are so second acts in American lives,” yet Apple is on at least its third. How many more rebirths does the company have in it? One potentially bad omen: building a luxurious headquarters building. A good omen: the company’s impressive move into custom silicon, as evidenced by the insane A11 processor in the new phones.

With 5G wireless delivering the potential for Verizon and ATT to end-run the cable operators with residential broadband in urban and suburban markets, picking winners in the digital pipes business is tricky. Comcast and other cable companies are learning lessons with wi-fi that could carry over into 5G, which relies on smaller cells and thus requires more backhaul nodes in the architecture than today’s cell networks. Too soon to tell here.

I see speed and agility beating size and scale in more settings, and thus bet against IBM, GE, HP, and GM existing as independent companies 20 years from now. Much as Uber is fast and agile, meanwhile, I don’t see the company fending off all the competitors it will face, especially in the absence of a coherent and viable corporate culture: with 1.5 million contractor-drivers being the face of the company, they have to believe in and embody the company’s values. I don’t know how much this is the case elsewhere, but 90% of the Uber cars I observe here in our college town bear dual branding with Lyft. Thus Uber will be nibbled away and weakened from within by its founder’s toxic legacy.

Finally, what of today’s ad-driven eyeball aggregators, Google and Facebook? Much as I want Facebook to go away for the good of humanity, I don’t think it will. As for Google, the new focus on machine learning competence will position various Alphabet bets to win. Whether the company looks like it does today, I can’t predict, but count on a recognizable remnant to persist.

Banks have deep lobbying pockets and thus many friends in Congress, making insurgency in financial services extremely difficult. Both investment banks and retail institutions profit whether their customers do or not, and this state of things looks like it will be legislated as fact for the foreseeable future. (Recall the industry’s massive, organized resistance to anyone speaking officially for the consumer.) I expect more consolidation but have no idea which players are predators and which are prey.

Other companies I don’t think will make the 2037 opening bell: Fiat Chrysler, Sony, Samsung, Walgreens. I’m much more confident in Corning (good culture, and culture of innovation), Patagonia (along with the Swiss Mammut, one of the few independent outdoor companies not part of a conglomerate), and Canon (which has diversified far beyond cameras).

2) The place of technology in pop music

At the risk of sounding like the “get off my lawn” guy, I was thinking about how little the Internet and smartphone age has inspired musical references. Compare these world-altering technologies to airplanes, trains, radios, cars, records, TV, movies, photographs, and wireline phones, which appeared with great regularity in pop songs across many genres. We have yet to hear “Twitter blues,” “Friend me like you mean it,” or “using Google Maps to go see my baby.” 

Look just at the blues: you could fill a hall of fame with only railroad songs. Pound for pound, what else (except maybe romance, and I’ll still lay money on the iron horse) can beat this top 5: 

  *John Henry, 

  *“City of New Orleans” 

  *“The Midnight Special” 

  *“This Train Is Bound for Glory,” and, oh yeah, 

  *“Mystery Train” (recorded by everyone from Elvis, Clapton, Dylan, the Dead, and the Doors to a great YouTube nugget from Grace Potter). 

Honorable mention: “Waiting for a Train,” “Folsom Prison Blues,” “5:15” (The Who), “All Down the Line,” “Let It Rock,” “Lonesome Whistle,” “Night Train,” “Casey Jones,” “Crazy Train,” “Orange Blossom Special,” “Rock Island Line,” “Train Kept A Rollin,” and “Wabash Cannonball.” (That doesn’t even count “Take the A Train,” which is a great Duke Ellington song about a subway.) 

Automobiles are similarly richly represented. “Rocket 88” was a seminal R&B hit for many artists beginning with an uncredited Ike Turner, produced by Sam Phillips. Pickup trucks are a country music staple. Early rock and roll regularly featured cars (“Little Deuce Coupe,” “Pink Cadillac,” “Mustang Sally”). Prince memorialized his Corvette, Tracy Chapman her Fast Car, and Lucinda Williams Car Wheels on a Gravel Road. Artists as diverse as War (“Low Rider”), John Hiatt (multiple tunes), the Eagles (“Take It Easy”), Ides of March (“Vehicle”), and the Grateful Dead (“Truckin’”) all wrote great car songs. (And there are plenty of highway songs too: think of Dylan and AC/DC.)

The contrast to computer songs is striking. (Also, I distinguish between computers as technology and robots as fantasy: there are a LOT of robot songs that aren’t about computing.) First, there aren’t many, and second, the best go back a long way: Talking Heads’ “Life During Wartime” (1979) and Prince’s “Computer Blue” (1984). In a related vein, there’s also the great surf-guitar hit “Telstar,” about the satellite, dating from 1962 (UK: The Tornados) and 1963 (US: The Ventures). Radiohead released OK Computer in 1997, but how many people can name even one song from it?

Smartphones and social media have turned up in a fair number of hip-hop numbers, but I can’t assess their relative stature or staying power. Some appear to be continuations of the landline phone staples: will s/he call? Why won’t s/he call? Beyonce did address explicit videos in “Video Phone” (2009); texting shows up in more than a few scenarios, many of them drunk and/or regrettable. None feel anthemic. I couldn’t find anything apart from minor artists or parody bits regarding Facebook and Google. There are actually songs about Microsoft, but I couldn’t motivate myself to listen to any. 

I’m not sure what all that adds up to. Maybe mechanical things that make mechanical noises are more sonically evocative than silent silicon and glass. It does seem significant that such potent cultural symbols and presences have not inspired people to write songs. As to why and so what, I’ll leave that to others.

Early Indications August 2017: Reflections on 20 years

Twenty years ago, I went to work for a think tank run by Ernst & Young to lead research into online commerce. I had a robust travel budget and attended a lot of conferences: Internet World, Wall Street Journal Internet Summit, Vortex, Demo, and others. I wrote trip reports that developed a following among colleagues, so in October the Networked Commerce Update newsletter was launched. It was published monthly or twice-monthly, and featured book reviews, research updates, observations, predictions, and conference reports. It’s difficult to believe it’s been running, under various names, for 20 years come October.

So much of what we consider “internet” technology didn’t exist at the time. 

• Google launched the following year; AltaVista was the “cool” search engine, while Yahoo was still curated by humans. 

• Texting was virtually unknown in the U.S., though it was taking off in the Nordics. 

• Consumer GPS was still a few years away. 

• Wi-fi, MP3s at scale (Napster came along in ’99), and wireless cellular data were all moving from the lab into commercial reality. 

• Digital cameras stood alone and had underwhelming resolution: the Sony Mavica stored 640x480 images on a 3.5” floppy disk but was a big hit among real estate agents. (Kyocera introduced a Japan-only camera phone a couple years later.) 

• Wikipedia was preceded by Microsoft Encarta.  

• Facebook and Twitter were, to a degree anticipated by AOL.

• Computer monitors were heavy and large. The thought of whole cube farms with double 24” monitors was impossible due to both heat and weight.
• Apple was essentially dead in the water; the stock was under a dollar.
• Dialup modems (remember the sound?) were the primary means of connection in the U.S. 

All that said, 1997 had winners. Amazon IPO’d in May 1997: $100 invested then would have been worth about $64,000 at the 20th anniversary. eBay was cracking lots of codes followed by later success stories (including Uber) but had yet to IPO, nor had PayPal helped it scale. Mapquest was paving the way for later wayfinding services. Linux was alive and thriving en route to outlasting AIX (IBM), Sun’s Solaris, HP-UX, and others, becoming the free and open basis on which everything from a watch to a supercomputer could be built. Enterprise websites could already look to Cisco for the winning playbook; FedEx package tracking was one of the first real-time processes ported to a web browser.

Microsoft was such a big winner, particularly after Windows 95 proved to be the on-ramp to Internet browsing and email with its integration of the Internet Protocol communications stack, that the Clinton administration sought to break it up in the style of AT&T about 15 years earlier. The George W. Bush administration later reversed those filings, and the smartphone market eventually did what legal remedies did not: reduce Microsoft’s monopoly power.

Still, the winners are far outnumbered by companies that went away, got bought, or got bought then went away. 

-By 1997 Digital Equipment was in trouble even though they pioneered a 64-bit processor and their search engine was state of the art. Compaq bought DEC in 1998, only themselves to be bought by HP four years later in the wake of the tech-stock bust.

-Netscape’s superhero leadership team of co-founders James Clark (founder of Silicon Graphics) and Marc Andreesen (who cowrote the Mosaic browser at the University of Illinois supercomputing research center) and CEO Jim Barksdale (ex- ATT wireless CEO, ex-FedEx COO) was outmaneuvered by Microsoft’s bundling of Internet Explorer; it was also never clear what the browser business model was. Netscape was bought by AOL, which merged with Time Warner.  

-@Home was an early broadband provider launched by several cable operators in 1996. The company’s 1999 merger with the Excite portal (which had discussed acquisition by Yahoo a month prior) combined “pipes” and content in a disaster. The merged entity’s stock price peaked at $128 before dropping to $1 in late 2001. One of the company’s moves helped define the “Internet bubble” as it bought the online greeting card company Blue Mountain Arts for $780 million; that company was subsequently bought by American Greetings in 2001 for $35 million.

It really is hard to digest just how much of daily life is new since 1997: imagining a day without texting, Facebook, Twitter, Google, YouTube, smartphones, Apple IoS devices, glass keyboards, GPS, wi-fi, or flat-screen displays feels like harkening back to horseless carriages in 1930. 

What will be next? That is, what parts of life in 2017 will seem quaint and unimaginably primitive in 2037? I have two candidates:

• I have said many times that the car will change more in the next ten years than in the last 80. Many automakers are declaring their intention to shift to alternatives to internal combustion engines, many cities are embracing bicycles seriously (Seattle is successfully slashing the number of single-occupant vehicles), and autonomous technologies will benefit from the leaps being made in machine-learning hardware and software. What that adds up to I don’t know, but e-bikes will be a pretty significant piece of the mix, I’ll wager, especially in the world outside the U.S.

• Not only will the world be much more densely populated in 2037, en route to ~9 billion people by 2050, but it will be older as life expectancies increase on every continent. Thus I predict we will see new attitudes, accommodations, and applications of technology to the aging process. Exoskeletons, active prosthetics, and cognitive enhancements (possibly via augmentation similar to cochlear implants or pacemakers) will help address dementia, loss of mobility, and other consequences of long life. Rather than increase health costs with dramatic and expensive interventions soon before death, perhaps we will invest in quality of life over the longer term. I won’t go on the limb to predict the U.S. health care system’s blueprint, but do imagine that the current broken model will be replaced by something different.

Next month we'll take a closer look at those 20 years of newsletters, seeing where I missed big developments or made silly predictions.