Early Indications February 2022: Passing the Baton?

For several years, I’ve been concerned about the pace of innovation in the tech sector. There are many ways to measure this, of course, but one yardstick is new-company creation. That is, what new companies will be tomorrow’s corporate titans? After the launch of Facebook in 2005 (and its IPO in 2012), there aren’t many new U.S. companies that have moved the needle. Uber is still reported to be losing more money than they publicly acknowledge, in part because of non-standard accounting practices (see Hubert Horan’s ongoing dissection here). Airbnb could end up as a winner after having successfully navigated the drop in travel related to Covid — cars/transit and real estate/lodging have many fundamental differences. I don’t know enough about the various crypto startups to a) keep them all straight or b) predict a winner. (There’s also a philosophical contradiction between decentralized permission-less finance and a centralized gatekeeper that collects tolls.) Some companies that were bought in their infancy, notably YouTube and Instagram, might have emerged as substantial standalone businesses, but the histories of near neighbors Vimeo and Snap suggest otherwise.

So the short question becomes, where are the tech giants of the next decade? To study this, I looked at the Fortune 50 for the years 2000, 2010, and 2020. The list ranks companies by revenues rather than market capitalization, so goodbye Tesla. The methodology disconnects hype from actual customer-serving cash changing hands, as we will see shortly. My purpose in compiling the lists was to study the age at which a company entered the truly big leagues: if it’s typically on the order of 5 years, versus 25 years, from founding, that can help us identify the seed corn of the 2030 Fortune 50.

Here’s a quiz. In the 2020 Fortune 50, there are 8 tech companies. I counted Amazon but left off telcos, mostly arbitrarily, in part because of the monopolistic heritage enjoyed by AT&T in the 2000 list and in part by these companies’ lack of innovation given their role in managing plumbing. In alphabetical order, here they are:

• Alphabet/Google
• Amazon
• Apple
• Dell
• IBM
• Intel
• Meta/Facebook
• Microsoft

The quiz: rank them in order of revenues:

Amazon    $280b (#2 overall, slightly over half as much as Walmart) 

Apple        $260b (4)

Alphabet   $161b (11)

Microsoft   $125b (21)

Dell             $92b (34)

IBM             $77b (38)

Intel            $72b (45)

Meta           $70b (46)

Dell showed up far higher than I would have predicted, Facebook lower. IBM slipped from #6 in 2000, to 18 in 2010, to 38. 

The old cliche holds that it takes X miles to turn an aircraft carrier, and once you get a company (or other entity) to a certain size, momentum can take hold and prolong the demise. At the same time, the numbers can be harsh: Ford had lower revenues in 2020 than it did in 2000. GE famously was removed from the Dow Jones industrials in 2018: it slid from #5 in the 2000 Fortune list to 33 in 2020, when revenues were 14% lower than they had been 20 years earlier.

What about growing: how fast can that happen? Even though they pioneered the build-to-order model in the PC boom of the 1990s, Dell didn’t make the 2000 Fortune 50, ranking it lower than Compaq, Intel, and Motorola, that did. Despite having been the target of federal antitrust litigation in the 1990s, Microsoft fell outside the 50 in 2000, lagging Ingram Micro, Costco, and even USX (the former US Steel). As the decade of the 2010s illustrated, however, once the flywheel starts spinning, growth can be consequential. In 10 short years Apple moved from #35 to 4, Google from #102 to 11, and Amazon from 100 to 2. In none of these cases was acquisition the major revenue driver, unlike other sectors such as healthcare where big players consolidated. All of these companies were at least 20 years beyond their founding in 2020. Facebook seems to be on a similar trajectory if it can weather the current instability.

All of this is prologue to the original question: Of the companies launching after 2005, when will we see one in this august company? Let’s look at it from a different angle: what customer need did the previous champions meet? Apple is still riding the smartphone wave, expanding the revenue base to incorporate more services and points of access beyond the phone. Amazon satisfies the need for low prices, extreme convenience, and, in some segments, vast product assortment. Like Apple, Amazon is expanding from its core business, successfully augmenting retail with services (AWS) and now advertising. Facebook and Google now in some ways play closer to Disney as captors of human attention to serve their customers, the advertisers. Just as there is market failure in health care when the parties that pay are often not the parties consuming the products and services, so too might the division between advertisers’ needs and people’s tastes/behaviors reset the market. Meta is currently fighting the perception that it is no longer an essential aspect of billions of people’s daily life, for example. For all its success, it’s hard to see Reddit joining Walmart and Bank of America as a $50 or $100 billion company. The same goes for Zoom or Dropbox: is either video conferencing or cloud storage a feature, or a company? Meal delivery plays to some of the same consumer impulses as Amazon does, but ultimately there is only so much price elasticity (on the customer’s part) and margin compression (on the restaurant’s) that UberEats/GrubHub/Postmates/Doordash/Eatstreet can exploit. To turn an old food/economic phrase on its head, there’s no such thing as a free delivery.

So where does that leave us? The US-based venture scene, in tech plays, doesn’t have a lot to show in the last 15 years. But that’s the giveaway: looking internationally, the picture is considerably different. Spotify is an obvious point of interest, but the big story is in China. In alphabetical order, Alibaba (e-commerce and payments), Baidu (search and cloud), JD (e-commerce and AI), Pinduoduo (online farm fruit and produce), and Tencent (diversified holding company including games, messaging, VC, and others) suggest some paths forward. I say “suggest” because much remains unknown and/or problematic. Part of the issue is the complex relation between these companies and both their investors and their customers. At the same time, there are fresh ideas, executed at scale, with the potential for both extreme revenue growth and attractive profit margins were the model attempted outside China. JD and Alibaba are already Global 100 companies, Pinduoduo is only 7 years old but approaching a billion customers, and Tencent flirted with a trillion-dollar market capitalization early last year.

The outlier here is ByteDance, TikTok’s corporate parent. Unlike even the largest success stories in China, TikTok is global in a way that few companies can claim. The algorithmic cleverness, executed exceptionally well, means that TikTok can entertain its vast user base with content that costs very little to develop and addresses shifts in the cultural winds with speed that Netflix or Disney could never hope to approximate. Founded ten years ago this month, ByteDance is, I believe, the heir to the Microsoft/Dell/Google/Facebook lineage, albeit with the asterisk noted above: even though TikTok and the company’s other viral apps have succeeded both inside and outside China, governance of such a profitable and fast-growing entity is being invented on the fly. What was possible and legal in 2018 may not be now (see last summer’s newsletter on China’s data privacy draft regulations). Similarly, access to western capital sources is apparently being reconsidered, with an as-yet unclear endgame. Finally, the degree to which individual entrepreneurs can personally benefit also appears to be in a state of compression. Amid so much state-related uncertainty, to anoint ByteDance the king-in-waiting for global tech feels exceptionally premature. At the same time, if that uncertainty resolves primarily in entrepreneurs’ favor, such an outcome is fully plausible. At this point, I can foresee the passing of the baton, but the details of the transition are fuzzy indeed.

**************

Random tidbits from the Global 500’s top 100 for 2020:

• Ford earned more revenue than GM in 2020, but not by much ($5 billion, or about 4%), with Honda in between. The shock for me was seeing BMW only $10 billion behind GM.
• CVS Health and McKesson both rank in the top 12 of revenues worldwide, both of them exceeding Saudi Aramco. AmerisourceBergen (17) Cardinal Health (30), and WalgreensBoots (36) are nearly as big. Moving and selling drugs is far bigger business than making them: the top Pharma on the list, Johnson & Johnson, ranked 94th, then last November announced it’s splitting itself into two companies.
• The sun has definitely set on the British empire, as there are now only 2 companies in the top 100: BP (#18) and Tesco (99).
• Telcos are still major revenue factories: 6 companies land in the top 64, three of them in the U.S. — AT&T, Verizon, and Comcast.
• Banks don’t have lots of revenues, for whatever that’s worth: Home Depot outranks JPMorganChase, the top U.S. bank on the list.
• Whither the “national champion”: Germany is clearly heavily represented in automotive, but what role will Volkswagen and Daimler play in an electric-car future in which multiple cities are banning cars from the urban core? In Japan, the three major global players are Toyota, Honda, and Mitsubishi, the latter a more diversified play. The same question holds for BP, France’s Total, and Royal Dutch Shell (since last November, now just “Shell,” headquartered in London). In the Netherlands, meanwhile, the firm with the highest revenues is now Exor Group, the Italian Agnelli family’s holding company with no significant holdings in Dutch companies. The days of enterprises such as Rolls Royce, Renault, Fiat, Alstom, and even Airbus getting unquestionably favorable government treatment seem to be passing. In the U.S., GE is no longer too big to fail (it too is trivesting itself), and even Boeing has less leeway than it used to.

Early Indications January 2022: Bowling in Atlanta?

*In 2000, the Harvard political scientist Robert Putnam expanded a 1995 essay into a book entitled Bowling Alone. In it he contended that post-WW II America had witnessed the decline of a number of social rituals, including bowling in leagues, that had helped tie society together. Suburban houses were built far apart, and many lacked functional porches, so neighbors no longer chatted during evening strolls; many drove everywhere they needed to go. Television, meanwhile, turned the household focus inward rather than outward. Technology, in short, had a lot to do with Putnam’s theory as to why American culture was becoming more fractured and individualistic. Facebook, arguably more destructive to community values and practices than either cars or television, was still 5 years off.

*Last April, Chloe Zhao and Frances McDormand took home 3 Oscars for Nomadland, their lightly fictionalized adaptation of the nonfiction bestselling book of the same name. Real people who live out of vans and work at temporary positions, often at Amazon warehouses, played themselves or close facsimiles thereof in the film, which clearly struck a nerve with audiences. I’ve read that Amazon managers seek out these workers, who have old-school work ethics, to help set the tone in the facilities where intense time-based performance metrics can be a shock to younger employees.

*On January 18 of this year, Airbnb founder Brian Chesky announced — via Twitter — that he was becoming a different kind of nomad. Beginning in Atlanta, he was going to live in Airbnb rentals for extended periods. He did this to draw attention to and understand the reality of what the service was seeing during Covid: millions of people can live where they want and work remotely. One concrete manifestation of this trend in that Airbnb now includes wifi performance as a listing detail. In this and other ways, in addition to seeking out places to escape to or stay while visiting family, travelers now assess rentals for their support for remote work. One can filter potential rentals for “dedicated workspace” details, for example.

Clearly something big is going on here. Let’s start with some questions:

What’s the difference between being a nomad, a pioneer, or a migrant? That is, all three kinds of people move, but the pattern and focus varies a lot. US westward expansion always had a complex relation to the frontier — and to its human inhabitants — embedded in the romanticism and optimism. Some migrant workers follow crop cycles: when the harvest is complete, move south to a longer growing season. Nomads at both low and high wage levels are something different.

What does the increase in the number of nomads mean for home? We’ve seen a version of this movie for decades as “snowbirds” winter in Florida and summer back north. There are many implications of this pattern. Year-round Florida residents are subject to the political force exerted by part-time retired northerners who seek out low taxes, for example. Civic services suffer as a result. On the Outer Banks of North Carolina, meanwhile, huge numbers of summertime weekly renters’ tax payments subsidize schools that locals would not be able to afford otherwise.

What does a fluid definition of “home” mean for politics more generally? If I can live anywhere and everywhere, where am I invested? Where might I serve as a volunteer if I’m in Park City this month, Vail next, and Portland in the spring? Who of the local population is being priced out of the house that I’m occupying? Where do they live instead? Having police officers and teachers live in the towns where they’re paid is a vaguely good idea that becomes hard to implement for many categories of jobs in low-growth towns that are being overrun, especially those at the edge of wild spaces.

In a focused and highly consequential aspect of politics, there are huge questions related to taxation attached to nomadic living. If I work for Google in San Francisco but live in the Lake Tahoe area, potentially in Nevada, for extended periods, what are the consequences for both municipalities of my distance from the physical location of my employer? San Francisco’s city services are already in crisis, and the tax base is in transition as it moves from payroll to revenues as its basis. Going forward, how much does a company’s payroll matter for the city of its physical facilities? Will Truckee or Reno see a windfall, not only of sales tax revenues, but potentially payroll taxes paid by people who live there part of the year while working hundreds or thousands of miles away? Bay Area businesses pay salaries substantially higher than what is normal for most towns: Mountain View’s $120k average salary is almost exactly double Reno’s $61,000. Do the nomadic destinations take a percentage of wages that few if any local employers could think about paying?

Is there a danger of a tragedy of the commons? If people who live temporarily (as opposed to vacation, I should emphasize) in desirable locations, will they tend to be good stewards of the place or will there be behaviors to take the good parts without doing the other stuff: supporting the United Way; supporting churches and similar safety nets; supporting schools and other year-round infrastructure for the waitstaff, lift operators, plow drivers, and other people who can become invisible?

Speaking of Amazon, what’s the future of local retail in nomad-heavy locales? Will the delivery orders magically appear on the doorstep, to the detriment of store owners who have to buy in smaller quantities, pay high rents, and hire from a thin labor pool? Or can those retailers reinvent themselves to target a third population: locals, vacationers, and now the nomads, both high- and low-income versions?

Besides Airbnb and Amazon, who else is poised to capitalize on this trend? Local real estate agents will see more out-of-town buyers, I’m guessing, and prices are being further bid up in already-expensive towns (hello Jackson Hole). The service industries related to intermediate-term rentals such as cleaning services, household maintenance and repair, and meal delivery, could do well, but likely on a town-by-town basis: it’s hard to see a big roll-up for this kind of thing outside of the land grab we’re getting in the latter category. At the macro scale, how will private equity and venture capital fund new business models -- for housing, for transportation, for education, for retail -- that aim to catch this growing wave?

From the manager’s standpoint, what does it mean to be a boss if you may never meet your teammates in person? There’s been an explicit or implied return-to-the-office date at most companies for most of Covid, but we are now seeing signs that remote work will be permanent at many tech companies that cannot afford to lose the numbers of key workers who would defect if forced to reverse their remote ways. What happens next? Will I invest less in mentoring, in networking, in career development for my team if I only see them over Zoom? I hope the red herring of “laziness” has been put to rest after the last two years: everyone I know, and every study I’ve read, suggests employers are getting more hours of productive work out of remote workers than they did out of on-site employees. This isn’t to suggest that there aren’t costs to remote work: problem-solving, crisis management, certain kinds of innovation, and some kinds of teaching/training thrive in live settings. But the gain in lost commuting time, plus the lack of distractions, plus the difficulty in separating work and life when the office is the dining room table means that for many, at-home work is longer and often more stressful (child care only begins a long list of issues) than in-office work. Given these costs, how can and should managers respond? 

A key barrier to nomadic location is having kids in school. Given the challenges to something as rudimentary as the common core curriculum, I can’t foresee plug-and-play school districts nationwide. Instead, parents who move schools will see children who are taught long division three times and geometry not at all, or the equivalent. Will nomads meaningfully increase the number of kids who are home-schooled, wherever “home” might be this month? Given the polarization around masking and vaccination, as well as the logistical challenges faced by work-at-home parents of Zoom-schooled children, I would wager homeschooling is already on the rise, some of it semi-involuntary. For colleges, what constitutes proof of in-state tuition status, particularly as California (with its flagship system of higher ed) sees people moving out?

Returning to the bowling question, what happens to the bonds of community as they are weakened by the pandemic, by disinformation, by burdens borne unequally? Will Nomadland’s Linda or Bob, or high-earning tech workers, donate blood, referee youth soccer, or teach Sunday school? Zoom, Slack, and Teams facilitate remote work, but they’re less effective at community-building tasks that so far don’t lend themselves to satisfying remote performance. What constitutes critical mass? That is, how many 25-39 year-olds need to move out of a zip code, a school district, or a volunteer fire company, before the costs emerge? How many peak earners (45-54 years old) can leave an area before mentorship, the tax base, or local restaurants suffer? 

How will status signaling work? What are the hard (taxes) and soft (pecking-order) implications for those workers left behind, whether white- or blue-collar? What are the cues that replace parking spots, vehicles, office locations, ties and other apparel, and even haircuts as indicators of relative importance or rank? Will we see the emergence of virtual goods, much as in online games, that announce our priorities and value to our screen-mates? Might those be tied to our location? Does the Epic multi-resort ski pass come with virtual bling to tell my co-workers my status? 

That’s a whole lot of implications, reaching far beyond bowling leagues and television-watching to include schools, roads and commuting, housing, taxation, politics, and career development. We don’t even have current, clear language to describe all of these emerging behaviors or policy questions, much less experience enough to reach well-founded conclusions. As with so many other implications of our technology, our demographics, and now our pandemic, the world suddenly looks very different than it did only two short years ago.

Early Indications December 2021: Platform Proliferation

Two quick notes: 

1) November's newsletter was reprinted in edited form in the Boston Sunday Globe: https://www.bostonglobe.com/2021/12/11/opinion/metaverses-good/

2) In these stressful times, I hope the new year brings good news, both momentous and pedestrian, to each of you and your families.

Somewhere around 2005, we moved from the age of the website to the age of the platform. What Marshall Van Alstyne at Boston University (among others) calls demand-side economies of scale began to kick in for Internet businesses. The more people who join Facebook, or shop at Amazon, or watch YouTube videos, the stronger the incentive for a) other people to access the platform and b) advertisers to spend to get access to the growing, engaged population. For Uber and Airbnb, the flywheel effect is even stronger as the more riders/renters, the more drivers/property-owners, which in turn draws more riders/renters, and so on.

After 15 years of being both lightly regulated and extremely profitable, Internet platforms are being reined in through multiple regulatory efforts across the world. Facebook is running print advertising asking for regulation, and the EU has established privacy standards stronger than most anywhere else, at least on paper and for the moment. The evolving notion of “platform” from the days of Windows, through the browser wars of the 1990s, and into “the web as platform” thinking in Tim O’Reilly’s Web 2.0 framework has been heavily studied by business scholars including Annabelle Gawer (now at University of Surry) and her MIT doctoral advisor Michael Cusumano along with Van Alstyne and his co-authors. Another angle comes from communications and cultural studies, where Tarleton Gillespie of Microsoft Research and Jean-Christophe Plantin of the London School of Economics have published strong work. 

My focus today is on the physical world, where platform thinking takes on a slightly different shape. Here, people including Erich Joachimsthaler of the Vivaldi consultancy have differentiated between products and platforms, with the latter providing tangible benefits to both investors and customers through network effects, lock-in, and brand differentiation. At a workshop where we both presented, Joachimsthaler outlined John Deere’s now-controversial strategy of infusing heavy equipment with software and sensors. So-called precision agriculture connects tractor-mounted GPS with soil tests and other diagnostics to plant, spray, water, and otherwise treat crops more specifically than at the field level.

For a time, Deere tried arguing that farmers did not own the $500,000 implement they bought — until they purchased annual software license renewals. The right-to-repair movement arose among farmers who wanted to be able to keep their equipment running during critical windows of planting and harvest. To do so, some downloaded 3rd-party software, illegally, to hack their tractors, combines, and other implements. Interestingly, Apple, AT&T, and other tech companies showed up in Midwestern states to argue against the farmers, fearing a precedent that would spread right-to-repair to electronic devices. Late this year, perhaps to pre-empt regulatory pressure, Apple now allows customers to buy repair parts and try their luck at fixing broken iPhones (https://www.apple.com/newsroom/2021/11/apple-announces-self-service-repair/). For their part, Deere responded to President Biden’s executive order mandating right to repair by stating they supported most instances of the practice.

Platforms occur elsewhere in the physical world. Automakers are aggressively pursuing a practice called “communization,” often using platform nomenclature. The objective is to share parts and assemblies across vehicles that might look different in the showroom but enjoy economies from simpler supply chains, easier new-product development, and faster time to market. Starting in about 2005, GM’s Lambda platform (itself a variant on the previous-generation Epsilon) was shared by 3-row SUVs from Saturn, Buick, GMC, and Chevrolet. Beginning in the 2017 model year, Subaru began migrating _all_ of its models to the Subaru Global Platform (SGP). Straight-line stability, NVH (noise/vibration/harshness), and ride comfort are all said to improve. At Honda, the goal is to reduce model variation across its five global vehicles by 66% between 2020 and 2025. In some ways, this movement anticipates an electric future: a typical Tesla’s part count runs on the order of 10,000, with the drivetrain being substantially simpler than a typical internal combustion vehicle, whose part count approximates 30,000. Traditional manufacturers have begun reinventing themselves, and platformization is part of the plan.

On a smaller scale, a few months ago I saw a Twitter post on the topic of tools, but it’s now lost and no academic sources showed up, so I’ll start from scratch by talking about . . . batteries. All of the major power tool companies — DeWalt, Makita, Hitachi, Bosch, Ryobi, Milwaukee, — and many house brands sell cordless power tool systems. The batteries are interchangeable among tools, but not brands. (Interestingly, DeWalt, Craftsman, and Black & Decker are all owned by the same parent company.) Thus, when shopping for a cordless drill, which is typically the “gateway drug” to a given platform, one might reasonably compare torque, battery life, weight, or other objective statistics. As one finds other needs — flashlights, garden tools, many kinds of saws, grease guns, and so on — the original purchase has created path dependencies. The Hitachi drills I may have bought last year on sale work perfectly well, but Hitachi doesn’t sell a cordless grease gun. If I buy a second 18-volt tool from a different vendor (Makita, let’s say), now I have 2 chargers, 2 or 4 batteries, and lower option value than if everything were fully interchangeable.

Each power tool brand has a range of product decisions to make in the platform context: 

• What price range? Ryobi sells an 18-volt drill-driver kit for $50 at Home Depot; Hilti offers an 18-volt kit for $359.
• Given a price point, do we build in features, durability, or innovations (such as job site RFID tracking)? How does our brand convey our decision to the market?
• How wide is the application coverage? Carpentry, automotive, marine, lighting, gardening/landscaping only begin the list.
• How many SKUs are too many? Especially as supply chains are being strained, and most tools are made offshore, is there value in focusing on known strong sellers rather than chasing endless numbers of niches? Or does completeness of portfolio confer its own competitive advantage?
• What is our channel? With a large SKU count, physical retailers will be challenged to stock the right number and quantity of available products. At the same time, Stihl (makers of outdoor power equipment, much of which is also moving to battery power) has built a formidable network of small dealers, eschewing the big boxes entirely to move a small product line. Amazon, meanwhile, has launched between 50 and 100 private-label brands. Access to that audience comes with real risks, but as far as I could tell, no major brand has stayed off the site, um, platform. Hilti (from Liechtenstein), Festool (Germany), and Metabo (founded in Germany, now owned by Hitachi parent Koki Holdings now that Hitachi brand tools are owned by the US private equity giant KKR) are all available on the Seattle supersite — alongside CP CHANTPOWER, TODOCOPE, and Eastvolt, the Amazon brands of cordless tools. 
• What else can we turn into a platform? Milwaukee launched its Packout modular tool storage line in 2017 and keeps adding both small parts totes and larger static and rolling tool chests to the line. Interestingly, all the pieces I have seen are made in Israel: the engineering tolerances and/or polymer formulations may preclude Chinese sourcing. Black & Decker’s DeWalt brand, meanwhile launched two lines — TStak and ToughSystem — that each demonstrated growing pains. Since 2020, each is on a 2.0 nomenclature, with more robust locking hardware, backward compatibility, and other enhancements, but the two systems cannot interoperate, and the discussion forums are full of disgruntled contractors who gave up on the brand after the poorly-thought-out initial effort. The system approach clearly commands a price premium: the Milwaukee Packout 16-quart modular cooler sells for $109, while a comparable Igloo rotomolded (think Yeti hard side) 20-quart is the same price and 25% larger. 

Zooming back out to the bigger platform picture, given that Bosch makes both cordless power tools and batteries for e-bikes, what lessons are being applied to the younger market? Will bike batteries be at all interoperable, or will the power tool model carry over? Is my allegiance to the battery manufacturer (Phylion vs Bosch), the motor company (Yamaha vs Shimano), or the frame-maker (Specialized vs Giant)? Might my Bosch bike battery be able to swap with my cordless jackhammer battery, both of which come from the same company and run at 36 volts? At a larger level, electric cars, electronics, cordless tools, and e-bikes all rely on lithium-ion technology, and supplies of the required minerals — lithium, cobalt, and nickel — are all tight. Which markets have priority today and might tomorrow? Modern military hardware also requires significant quantities of cobalt as well — how will national security be invoked in the pursuit of rare-earth metals?

The decade of the 2020s could well be defined by the extension of platform thinking to residential construction, pharmaceuticals (mRNA models could point in that direction if you squint your eyes), entertainment (what’s the difference between a franchise/“universe” and a platform?), or education (check out Clay Shirky’s Revue newsletter). At the same time, just as the late 19th and mid 20th centuries saw backlash against the excesses of industrialization, so too will we see more scrutiny of platform models’ externalities. In any event, the race between innovation and new constraints, many long overdue (are too many Airbnbs a good thing for a residential neighborhood?), will bear watching.

Early Indications November 2021: Metaverses for good

By now everyone has seen multiple reactions to Mark Zuckerberg’s vision/rebranding announcement that posits that vast numbers of us will prefer life in a mixed-reality headset to face-to-face contact for significant periods of our waking hours. I can see the appeal for an ad-driven company: imagine having your eyes physically locked onto a television/monitor, unable to look away from what Facebook wants you to see. Instead of being able to control our field of view, vision would become more akin to hearing, which is hard to steer or focus: largely passive reception of whatever sensory input is within range. I won’t comment further; Benedict Evans wrote a great piece before Zuck’s announcement and he makes a solid argument.

Evans concludes by arguing that “the nature of our interactions with software, entertainment, experiences, displays and, yes, money, is still very early.” While something is going to happen in mass culture at this intersection (more likely, several distinct somethings), I’m going to go in a different direction. There is increasing attention being directed to various communities of people with conditions that formerly were characterized as disabilities. A reframing is afoot: there is now talk of “neurodiversity” (including autism, ADHD, dyslexia, dyspraxia, dyscalculia, dysgraphia, and tics), and “multiple abilities.” If we look at the core components of Zuckerberg’s vision and leave out cryptocurrency for the moment, there are many opportunities to extend the range of human experience to more people. Just as I believe Google Glass should have been directed at B2B applications like aircraft maintenance or art and architectural tours, so too a mixed-reality plus gamification plus social network plus mass culture mashup can do a lot for particular people in particular circumstances. This isn’t how either Silicon Valley or the assistive technology industry typically work, however, so the following is largely aspirational.

Strabismus is a set of conditions, including “crossed eyes,” in which both eyes do not align in the same direction at the same time. According to a recent Nature article, VR headsets were successfully deployed to diagnose the disorder. There is also a prescription app called Vivid Vision that helps correct strabismus. In contrast to traditional patching therapy that covers the strong eye to force the weak eye to catch up, the headset varies the assist to the weak eye, decreasing it over time at the same time that the decay in strong-eye signal strength also decreases. The same visual lock-in that makes VR scary for advertising is essential for therapeutic benefit. Once the therapy is designed, content can be modified for most age groups, and delivered either in a doctor’s office or at home. From a kid’s perspective, headsets are cool; eye patches are often “a battle,” as one doctor told me. VR would appear to be a clear win here, so how many more conditions can be addressed with this approach to display technology?

Everyone has been lost in a new city. I have a hunch Apple’s experience in both mapping and body-worn computing could position it for a leadership position in next-generation wayfinding. Now extend that ability to a vision-impaired person new to a city: a social layer of “here’s both where to go and why you want to head there” on top of mapping would serve both individual and social objectives. Who of today’s tech companies would make the effort to address that segment? Similar logic could apply to people with intellectual disabilities, using a metaverse-like cluster to deliver supported decision making, transportation training, and multiple safety nets. 

Another example: nobody really knows how many wheelchair users there are in the US. Estimates have historically run in the 1% range, putting the population at 3-4 million, a total that is projected to increase as the baby boomers hit old age. How many of those people would pay for a convincing meadow, a bustling cityscape, or a visit to an important site from their life? How could the VR layer be structured to increase rather than decrease sociability, whether in the same building or across distance? Again, who in either the assistive technology or VR/gaming industries would build and curate such experiences — maybe a Peloton-like experience for wheelchair users? The economic incentives, largely invisible populations, and requisite technical skills make it a tough ask from today’s providers.

How can we build expertise in and commitment to teen mental health via a rethought technology layer? Device/app abstinence is one path, but likely not a very promising one. Instagram does marked harm (especially in the realm of body image) according to the company’s own research, along with some acknowledged good. Teens themselves are fleeing the blue F (partially in favor of Instagram, to be sure), and the firm’s plans for a pre-teen “Joe Camel” service will disqualify them in the eyes of some parents. The consequences of our historical moment — climate change, racial injustice, and economic inequality are all urgent issues to many teens, our mismatch between human scale and planet-spanning platforms, and the speed of both information and disinformation put many lives and psyches at risk. The sportswriter Ivan Maisel just published a memoir of his son’s suicide, and as a parent, I’m overcome with both grief and gratitude. We can do better by our teens, so for every child who feels isolated, frightened, furious, or hopeless, how do we design headsets, gameplay, education, and social interaction to promote health rather than furthering a negative spiral? The goal is achievable but not under the assumptions of monetizing daily average users, locking those users to a given platform, or reposting platitudes. I don’t trust Facebook, or the National Federation of Teachers, or the Autism Society to get it right. Judging from TikTok, give some teens the tools and some air cover (maybe in the form of protected spaces of human scale), and they will outperform the aforementioned incumbents.

The potential use cases rapidly multiply. Foreign language instruction, the preservation of cultural heritage, enhanced enjoyment of essentially every art form from dance to sculpture, job and skills training — a “metaverse” approach could deliver multiple benefits:

1) A local chapter/organization could use an App Store model to scale a contribution to a much larger community. All politics may be local, but platforms could scale dispersed efforts to help the displaced, people with disabilities, the aged, the lonely, the different. In other words, all of us at some points in our lives. One key is to modulate the scaling: just because the Santa Fe chapter of a given inclusion/advocacy group builds something useful doesn’t mean every person in the US, or English-speaking world, or world with hip dysplasia, PTSD, or MS joins in one big tent.

2) The potential for isolation behind a headset (Facebook’s Oculus remains unacceptably goofy for many of us) must be balanced by new forms of participation and inclusion.

3) Immersive environments can break out of gaming applications into education, training, data visualization (CAVEs are old news), and others: maybe a grandmother could revisit the Woolworth’s, Macy’s, or Dayton’s of her childhood, for example, either with or without a commerce layer. 

4) I began by noting that a reframing of ability is underway. Metaverses could be an important part of this discussion. There is already a movement toward rethinking “assistive technologies” from being largely artisanal (hand-made custom prosthetics) to benefitting from network effects (shared, adaptable 3D printer files for those same prosthetics). These technologies are traditionally defined by their steel and rubber, but when will they become more routinely microprocessor-enabled: why not smart crutches? Finally, as assistive technologies move from being prescription items to sometimes becoming community assets, it will change not only the technologies but also the communities of people — of whatever abilities — that coalesce around their co-creation, their procurement, and their use. The phrase “Nothing about us without us” ("Nihil de nobis, sine nobis”) dates back 600 years to central Europe’s early constitutional democracies. Today, it is coming into wider usage within disability-based groups. What better use of emerging metaverse technologies and worldviews than moving toward more inclusive policy discussions, product design, and environmental modification — both virtual and physical? With some will and creativity, we can improve both the range of options for people of varying abilities, while also improving the processes whereby communities do so. The trick will be far less a matter of technology and far more a matter of redesigning our organizations to mobilize those emerging capabilities.

Early Indications September 2021: What’s ahead for the big Internet platforms?

In 2005, the World Wide Web turned 15, and both Facebook and YouTube launched us into the age of the platform. In 2020, Facebook and YouTube turned 15, and it does seem that we have hit another inflection point. TikTok, built from the ground up as a mobile-first, vertically oriented, behavior-modification exercise highlights YouTube’s legacy as a search-driven, horizontally oriented, desktop video repository. For its part, Facebook is trying to regain traction in the post-millennial demographic. The latest news — that a kid-focused Instagram would do for Facebook what Joe Camel did for cigarettes — shows how important audience acquisition has become at multi-billion-user scale. At a time when congressional hearings multiply, content businesses struggle with the realities of post-fact, polarized civic discourse, and “privacy” appears to be working as an Apple positioning anchor, what might we see from the platforms going forward?

1) How will entertainment and interpersonal connection separate?

TikTok is not built as a social graph. Growth for ByteDance does not rely on users getting their friends to sign up, which was Facebook’s growth hack back in the 2000s. Snapchat does not spread memes as its primary focus. Going forward, we might see a division of labor similar to the pre-Internet era: AT&T kept people connected while Disney and Viacom kept them entertained.

2) What’s the next hardware frontier?

Amazon has considerable traction with Alexa but no social media component. Facebook has invested heavily in virtual reality, with only nice markets adopting the technology. Apple is poised to offer glasses; Google could do so again. Google appears to be focusing its automotive efforts on self-driving, whereas Apple’s Project Titan remains super-secret. Self-driving is reported to be in the works, but it would be no surprise if instead we saw a dramatically upscaled CarPlay, essentially turning the car into a peripheral. A partnership between Tesla and, say, Facebook would be a surprise but not illogical. Amazon just launched household drones along with robots that integrate Alexa. In short, watches, glasses/goggles, bots, and automobiles could each help launch the internet platforms into new directions.

3) How do Chinese apps fare?

As we saw last month, Chinese Internet app companies are being focused by their country’s government, and the trend continues on a weekly basis. At the same time, enormous adjacent markets await. Well over a year ago the venture investor Turner Novak listed several product extensions TikTok could plausibly undertake given ByteDance’s existing competencies in steering consumer behavior. These included:

Longer-form videos

Music streaming

Gaming

Consumer finance

Education (note the attention to tutoring services in he Chinese governments recalibration of consumer-facing tech companies)

Messaging

News feeds

Enterprise software (a homegrown Slack competitor for China?)

Cloud hosting

Handsets

In-app purchasing of both virtual (such as badges) and physical assets (foods used in a cooking demo)

4) What can the US apps expand into?

Facebook tried and failed to launch a cryptocurrency. YouTube is trying to be Comcast on some days and NBC/Universal on others. Amazon owns NFL broadcast rights. Google is reportedly trying to sell search tools to ByteDance. Apple has a credit card that, combined with the brand’s emphasis on trust, could open doors into other financial services. (Such a move would support the company’s efforts to expand beyond hardware revenue.) It’s a broad brush, I realize, but I believe firms with more diverse revenue streams (Amazon) will fare better than pure-play advertising companies that traffic only in attention.

5) How will regulation play out?

Will Facebook be forced to divest WhatsApp and/or Instagram? What about Google and YouTube? Amazon and Twitch? 10+ years is a long time after the acquisition to unwind a deal, but there could be other dramatic departures from current practice. Short of divestiture, cross-app integration might be curtailed, for example: log into Facebook, but nothing you do there is transferred into Instagram, including the identity management process.

 

6) What’s ahead for content moderation?

It’s abundantly clear that social media personalities with big followings play by different rules than the rest of us. It’s also clear that mis- and disinformation campaigns grow more sophisticated and consequential every year. YouTube just took down a bunch of anti-vaccine videos, for example, but where does the platforms’ responsibility start and stop? In an age of highly politicized efforts to discredit science-based public policy as elitist attacks on personal freedom, what counts as free speech? In what venues? Apart from the enormous hairball of fact-checking, misogyny and racism continue to plague every major social media platform. Twitch is rolling out new tools, for example, while YouTube can’t define what hate speech is at the same time that the platform prohibits it.

Early Indications August 2021: What comes after maturity?

Back in the early 2000s when I attended a lot of tech conferences, there was a common and usually regretful discussion: is tech now a mature industry? Even though Facebook, YouTube, the iPhone, Uber, and Bitcoin were all in the future, there was already concern that the “old” insurgent Silicon Valley was somehow lost, and that the startup ethos — often romanticized — was giving way to regularized processes, HR departments, and boring stuff like earnings calls and firm shipping deadlines. If people were sad in 2002, what must they make of today’s environment? We see big funding for food delivery and other gig work companies, the many consequences of ad-funded software, and no U.S. tech companies of wide impact started in more than a decade (Uber launched in 2009).

Many major tech companies, I’m arguing, are now past mature, but finding a name for the state of play is less clear-cut. The biggest change is that tech is now a major aspect of geopolitics, with a raft of consequences starting to flow from that status. There are other signals as well. Let’s skim over a few of these before getting to the main theme.

1) No tech company with work to do wants to buy back stocks with its spare cash: engineering the share price rather than investing in growth worries me and a lot of other people a great deal. I can’t remember which business professor said it (probably several), but the paraphrase was that “buying back your stock tells me you’ve run out of fresh ideas.” At the same time, when you have the cash pile Apple does, there’s money for lots of things, including acquisitions, buybacks, and new product launches.

2) Any firm that tries to protect its business model primarily by lobbying sends a bad signal. We like the status quo, it seems to say, and we want to protect it with favorable legislation rather than having to compete and win in the market.

3) Buying big corporate headquarters sends more negative signals. Salesforce and Apple both make statements here. Amazon’s bake-off approach to “HQ2” created negative optics. To their credit, Microsoft is downsizing its physical office space and eschewing the “edifice complex.” Netflix spent big on movie production facilities, but that’s essentially a factory in their industry.

By far the biggest marker of post-mature status is geopolitical activity. The Trump administration took action in this domain (aimed at TikTok and Huawei) while the Biden administration is making noises about Amazon and Facebook. Beyond US presidential initiatives, several tech companies have had major geopolitical episodes in the past five years:

-Facebook proved to be a decisive “threat vector” for foreign influence in the 2016 elections
-Twitter became a key tool of the Trump presidency
-Google left China
-YouTube is used by extremist groups that post misinformation and violent content for recruiting purposes.

The most recent and farthest reaching actor in the geopolitical entanglement with the tech sector is the Chinese government. Alibaba’s Jack Ma (worth a reported $50 billion) actually disappeared for three months last November on the eve of his Ant Group's IPO; a company executive said he is now focusing on hobbies. Didi (a Chinese ride-hailing app company) went public in the US only to have its home-market operating status reined in soon thereafter, dropping its equity value substantially. TikTok parent ByteDance did not go public as many expected; instead, the Chinese government took a board seat on a ByteDance operating company, complicating the US app’s promises that stateside user data is not shared with the core team in China.

But blocking big gains in personal wealth, while ideologically coherent, is not the only thrust of current efforts. Last week the CAC (Cyberspace Administration of China) posted a draft of regulations designed to apply to “Internet Information Service Algorithms” and there is a _lot_ in the document. My first thought upon reading it: how will western governments respond to a regime widely characterized as authoritarian ostensibly taking the lead on protecting citizens from algorithmic abuses?

Here’s the document: http://www.cac.gov.cn/2021-08/27/c_1631652502874117.htm#. I’m relying on Google Translate and will gladly correct any readings that I get wrong given my reliance on an imperfect tool. All bold-face emphasis is mine.

The document gets very granular very quickly: article 2 states that “The application algorithm recommendation technology mentioned in the preceding paragraph refers to the application of algorithmic technologies such as generating synthesis class, personalized push class, sorting selection class, retrieval filter class, scheduling decision class and so on to provide users with information content.” This looks like it could be extended to include not only adtech but social media, ride hailing, meal delivery, discussion threads, and tutoring (another recent point of emphasis).

Article 6 paints with a very broad brush: I’m sure phrases like “mainstream value orientation,” “positive energy,” and “economic and social order” are carefully chosen and carry great weight. The paragraphs also appear to imply censorship of a wide range of content.  

“Algorithm recommendation service providers shall adhere to the mainstream value orientation, optimize the algorithm recommendation service mechanism, actively disseminate positive energy, and promote the upward improvement of algorithm application.
Algorithm recommendation service providers shall not use algorithm recommendation service to engage in activities prohibited by laws and administrative regulations, such as endangering national security, disrupting economic and social order, and infringing on the legitimate rights and interests of others, and shall not use algorithm recommendation services to disseminate information prohibited by laws and administrative regulations.”

Article 8 seemingly prohibits the dopamine-pump model that currently powers Facebook and TikTok: “Algorithm recommendation service providers shall regularly review, evaluate and verify the algorithm mechanism mechanism, model, data and application results, etc., and shall not set up algorithm models that induce users to indulge or consume in high amounts that violate public order and good customs.”

Article 14 appears to call for algorithmic transparency. “The provider of algorithm recommendation service shall inform the user of the situation of providing algorithm recommendation service in a significant way, and publicize the basic principle, purpose intention and operation mechanism of algorithm recommendation service in an appropriate way.”

Article 15 seems to endorse an opt-in rather than the dominant and delimited opt-out model.
“Algorithm recommendation service providers shall provide users with options that are not specific to their personal characteristics, or provide users with convenient options to close algorithm recommendation services. If the user chooses to close the algorithm recommendation service, the algorithm recommendation service provider shall immediately stop providing the relevant service.

The algorithm recommendation service provider shall provide users with the function of selecting, modifying or deleting user tags used for algorithm recommendation services.

Users who believe that the application of the algorithm of the algorithm recommendation service provider has a significant impact on their rights and interests have the right to require the algorithm recommendation service provider to explain and take corresponding improvements or remedial measures.”
Might that include an EU-like right to be forgotten?

Article 17 sounds like it is directed at rideshare and meal delivery.
“Where algorithm recommendation service providers provide work scheduling services to workers, they shall establish and improve platform order allocation, remuneration composition and payment, working hours, rewards and punishments and other related algorithms, and fulfill the obligations of protecting workers' rights and interests.”

Article 18 would seem to limit differential pricing of consumer goods, especially when it is based on user behavior (US airlines, take note):
“If an algorithm recommends that a service provider sells commodities or provides services to consumers, it shall protect the legitimate rights and interests of consumers, and shall not use algorithms to carry out unreasonable differential treatment in trading conditions such as transaction prices and other illegal acts according to the preferences, trading habits and other characteristics of consumers.”

Does article 20 mandate state oversight of the actual code base?
“Algorithm recommendation service providers with public opinion attributes or social mobilization ability shall fill in the name, service form, application field, algorithm type, algorithm self-evaluation report, content to be announced, etc. through the Internet information service algorithm record system within 10 working days from the date of service delivery.”

For all the breadth of these proposed measures, the financial consequences are light: fines range from 5000 yuan to 30,000 yuan ($773 to $4639). At the same time, even the EU has not proposed, much less implemented, any sort of public algorithmic oversight, an opt-in model for collection of user data, or prohibitions on hooking kids on apps while they are young: providers “shall not use algorithmic recommendation services to induce minors to indulge in the Internet.” Just this week, according to Reuters, "China has forbidden under-18s from playing [online] video games for more than three hours a week, a stringent social intervention that it said was needed to pull the plug on a growing addiction to what it once described as 'spiritual opium'."

I’m not a professional China-watcher by any stretch but I do know that the government strictly surveils the citizenry, in part via social media trace data. How do consumer protections relate to the ability of government to collect user data from Internet companies? How do these regulations relate to the Chinese government’s efforts to build its non-consumer tech sector: chip-making, autonomous vehicles, advanced manufacturing, and others?

In answer to the question posed by the newsletter’s title — “what comes after maturity?” — the answer most certainly is “regulation.” The next few years will be most interesting as the tech sector on most every continent will face state scrutiny, litigation, legislation, and taxation. That idealized garage startup is a distant memory.

Early Indications July 2021: Amazon Effects

As so often happens, three disconnected observations turned out to have a common theme. In order, I’ll connect the Twitch game-streaming platform, local real estate, and the reported decline of corporate R&D to the firm that has remade multiple landscapes. It turns out this is a timely discussion. As Congress and the executive branch debate whether and how to regulate the tech sector, they need to think deeply. What we are seeing is fundamentally new, and thus requires careful attention to the details of governmental oversight. Merely saying “Jeff Bezos is too rich,” or “Amazon is too big and therefore bad” may be politically popular, but it’s intellectually and economically sloppy. We need to develop new tools of analyzing social good and social costs, and new language to weigh the ratio of one to the other. In this age of hot takes and polarized discourse, that’s probably an impossible ask. Call me an idealist and I won’t disagree.

Twitch

Alongside Facebook’s acquisition of Instagram, Amazon’s purchase of the Twitch gaming platform was one of the smartest pieces of M&A I’ve ever seen. (Pop quiz: what is the _worst_ acquisition ever? My nominees will appear below.) The MIT professor T. L. Taylor makes an extremely important point about game streaming: TV used to be something people watched. Game streaming -- and I’m arguing, online video more broadly considered -- has transformed that relationship. Twitch is something people can watch, in a variety of ways, but more important, it’s something they _do_. Game commentary is arguably the most profitable category on YouTube, and Twitch has become a powerful niche site where gamers can watch, play, comment, interact with both gamers and watchers, or opine on non-game issues. Game designers are building to the platform, integrating the gamer community in both development and competitive aspects of their products. Communicating with others as they watch gameplay dates back to the hangers-on around arcade games, and the scale of the audiences in this virtual arcade are staggering: according to Twitchstats.net, at peak load about 140,000 channels (streams) are reaching 3.8 million viewers.

As a student of mine pointed out, meanwhile, Amazon won broadcast rights to Thursday NFL games in the league’s most recent media auction. He speculated that Twitch will be a facet of the Amazon streaming of the games. This could involve fantasy sports, snarky in-group commentary, and/or actual wagering at some point. It’s getting tough to track all of Amazon’s forays: pharmacy, grocery, drones and logistics, the MGM acquisition, the fast-growing ad business, cloud computing. Michael Porter's 1980s business school concept of an industry really doesn’t apply any more.

Urban archeology

I was strolling through downtown Syracuse earlier this week. A massive space used to house the flagship Dey Brothers department store from 1894 until 1992. Like many other downtown buildings, it hasn’t found its 21st century purpose yet: an art center seems to be at least one tenant, but the bricked-over windows and giant rusting awning over the main entrance highlight the contrast between the structure’s past vibrancy and today’s urban uncertainty.

In the 1950s -- sources disagree on the exact year -- Dey Brothers joined its main competitor Addis as early tenants in the Shoppingtown mall in the adjoining suburban town of DeWitt. Shoppingtown was originally an open-air mall but not surprisingly (given the Syracuse climate) converted to an enclosed space that celebrated a grand opening in 1975. In 1974, meanwhile, a 75-store mall opened about 3 miles further east of Syracuse in Fayetteville. It featured a carousel built in Europe, and Addis and Dey (they’d merged) opened a $7 million store in the 1990 expansion. That didn’t last long. Yet another mall, then named Carousel, opened to the west, closer to Syracuse proper.

By 1993 all Dey Brothers-related stores had closed. Fayetteville Town Centre was partially demolished and converted into an open-air mall. Shoppingtown currently sits empty, though a multi-use redevelopment plan was just announced this week. Carousel, by now the largest mall in the state of New York, was renamed Destiny USA by its developer Pyramid Companies, a huge mall operator in the Northeast US. Its $285 million in bonds were downgraded to junk status last month.

What does Syracuse real estate tell us about the future of retail? Amazon just opened two facilities here: one is a 3.8 million square foot distribution center in Clay (a northern suburb). If that number sounds big, it is: the only larger industrial structures, apart from similar Amazon buildings, are Tesla’s Nevada battery plant at 13.6 million, and the Boeing facility in Everett, WA where they used to build 747s. The other local Amazon facility is a 112,000 sq ft “delivery station” in DeWitt, the same town that boasts a currently empty Shoppingtown mall. That building will host a fleet of local delivery vehicles, standing as one of more than 500 such Amazon sites, according to one consulting firm’s estimate. It’s a neat inversion: Shoppingtown was built for cars to converge on the mall, whereas a delivery station is designed for [mostly electric] delivery vehicles to disperse into the community.

The decline of corporate R&D?

A colleague forwarded me a paper out of Duke’s Fuqua school of business. Entitled “The changing structure of American innovation: Some cautionary remarks for economic growth," the paper analyzes the decline of corporate R&D as measured by PhDs hired, patents, publications, and other measures. There's a decided lack of appetite among corporate shareholders and managers for maintaining modern-day successors of GE Research, Bell Labs, Xerox PARC, or IBM Research. (A high-profile example: under pressure from an activist investor, DuPont shut its R&D lab in 2016, despite a distinguished history of publication and even a Nobel Prize.) Universities were theorized as taking up the slack, but the paper casts doubt on the efficacy of this approach.

Although Google gets considerable attention in the article and Microsoft's commitment to publication is highlighted, Amazon is barely mentioned. Given global competition, neither publications nor patents are obvious activities for a company making serious gains in data center management, algorithmic efficiency, machine vision, codebase maintenance, and many other areas. That is, I think private-sector R&D is delivering concrete innovations but they aren't being announced or shared in traditional channels. Google's Tensor Processing Unit chips, optimized for machine-learning tasks, come to mind. Amazon has developed its Graviton, designed for data-center efficiency, in the same custom silicon space. Both chips are proprietary.

Cloud computing hardware has evolved to the point where racks of specialized devices, not general-purpose servers, are the unit of analysis. While much of this material is open-sourced, it is not included in the article's critique of corporate R&D. (See ocp.org) Finally, huge advances in algorithmic science have been achieved, often by academics hired by Facebook, Google, Amazon, and elsewhere, but they aren't always made public.

This migration of academic talent into industry is fascinating for many reasons. Money is obviously a factor: Uber hired away essentially an entire Carnegie Mellon autonomous vehicle lab -- 40 people -- in 2015. But resources are also a draw: instead of spending weeks or months writing grants to get data sets, computing time, or post-docs, researchers inside the big platform companies have access to effectively infinite computing power, no teaching expectations, no committee work, and no career-dependent need to publish in journals with acceptance rates in the low single digits. The Duke paper quotes an astonishing yet representative statistic: inside Google, researchers use the JFT-300M dataset (300 million images, 375 million labels). Academic researchers aspire to use data sets similar to Stanford's Imagenet, which had at last report about a million images. Which setting will generate big-data insights more readily?

While I think the Duke authors are onto an important question, the differences between software and hardware or chemicals are not sufficiently addressed, I don't think. Facebook can roll out an algorithmic refinement tonight; Bell Labs or IBM faced a 3-5-year lag, at least, between lab insight and commercialization. Similarly, when China's "Big 3" of Baidu, Alibaba, and Tencent (soon to be joined by ByteDance) operate under a different set of financial, subsidy, regulatory, and ideological assumptions, global competition plays out differently than GM vs Volkswagen or Dow vs BASF did back in the day. National patents don't make the competitive sense thy once did.

*******

Given the many facets of just one company, talking about "Big Tech" as some kind of homogeneous oligopoly doesn't make sense. Just addressing advertising (and therefore privacy) alone, Amazon, Apple (yes Apple), Facebook, and Google are all intense competitors, operating in a "Wild West" environment due for some rules of the road. Comcast, Verizon, and another dozen companies deserve scrutiny in that same discussion. Moving to logistics, Amazon competes head to head with FedEx, UPS, USPS, and others. Have that discussion too, on its own particular merits, possibly asking pointed questions about universal service, subsidies, etc. Then do cloud computing, maybe addressing data portability, with Amazon, Google, IBM, and Microsoft in the room. If private-label retailing is a concern, of course Amazon is involved, but so is every major grocery chain, many apparel companies, and Target and Wal-Mart. The point is simple: address corporate competitive issues in specific terms rather than with cheap and empty posturing.

(My personal, completely unscientific hall of shame of bad acquisitions: GE/Alstom, Microsoft/Nokia, eBay/Skype.)  

Early Indications June 2021: Making sense of short-form online video

As I edit what started as a book about YouTube into a book about online video more broadly, I join many others in trying to figure out TikTok. Given that the videos max out at one minute, you can watch a lot of them in a few hours. It’s worth noting that I cannot watch them natively: given that TikTok is heavily app-centric (there is a web version, but it’s a secondary channel compared to smartphone/tablet installs), I don’t trust the company with my personal and behavioral data. Just this week CNBC quoted former employees that ByteDance (the Chinese parent company) and the US TikTok operation worked very closely, sharing user data back and forth. I don’t have a “burner” smartphone to load the app onto, so can’t experience the addictiveness of the For You Page, the machine-learning-powered customization algorithm.

That said, what does one find in clips that run 15-60 seconds apiece? Fast cuts are the norm, as are clever visual effects: creating videos in the app gives the author access to a substantial palette of dissolves, filters, and other tools. Some other video apps even advise creators to edit in TikTok before uploading elsewhere. Catchy music (or music that is thought to be catchy for the target audience, which is rarely people like me) is often a potent part of the experience, which I noticed quickly. Even among “best of” complications, stereotypes abounded: pets and babies are cute, old people are clueless, boldly fluids and sounds are thought to be funny. For some reason, shots of people singing or dancing on escalators draw huge viewership. Men often perform in drag (consisting of wearing a towel or cloth napkin as a shawl): racial and gender stereotypes are a common theme from many angles. There’s still a lot of lip-synching and dancing, which were the original focus of the service.

Genuinely original content does percolate up. Rube Goldberg machines can be impressive and fit the medium perfectly. How-to videos can teach something interesting and useful in 60 seconds, including home-made bath bombs and drinking glasses made from empty wine bottles.Gender reveals (some that thankfully involve no pyrotechnics) show up, as do letter-openings: one Black person was captured as she got the DNA results that gave her an ancestral homeland as opposed to the centuries-old name of a slaveowner. One woman crocheted plastic shopping bags and shipping materials into blankets for the homeless.

These appear to be the exception. Millions of people apparently like to puppeteer their pets into dance-along videos. Teenage topics predominate: the dumb things teachers say and do, makeup tips or complaints, drunken antics that look less hilarious in the morning. Pranks and pratfalls show up a lot, as do dad jokes and moms who are good sports and/or wanting into their children’s world. Much of it was frighteningly stupid and often cringe-worthy.

Where did this wave of content come from? TikTok’s timing was perfect, launching as it did in 2017 just as Twitter’s Vine service was shutting down after four years. What then was Vine? Like TikTok, Vine insisted on short videos: six seconds apiece. The fit with Twitter (which bought rather than built the service) makes logical sense, with one exception: six seconds makes it impossible to affix ads to the short-form efforts. Absent a revenue stream for the service and monetization for the creators, Vine never overcame poor economics.

What Vine did do, however, was teach both creators and viewers a new visual and experiential vocabulary. It was called a generation’s inside joke, and many prominent Vine personalities went on to replicate their success on YouTube, Instagram, and elsewhere. This vocabulary was seized upon, and built upon, by TikTok creators who studied what had worked in a six-second world. For all the questions about TikTok’s data practices, the fact that Snapchat, Vine, nor TikTok was owned by the Zuckerberg empire made them popular among those who entered their teen years after Facebook had reached the over-45 demographic: sharing your latest stunts or jokes with your aunt or grandmother lacked any semblance of a “cool” factor. 

What could people do with those six seconds? Again, much of the environment has to be viewed through the lens of a 13-20-year-old. Very few of the people seemed to live in a 40-hour work world; schools, malls, parks, cars, and apartments are familiar settings. Pop songs are familiar soundtracks, although the action could be anything from a cartoon to a puppeteered animal to someone lip-synching in an incongruous location or context. One key was facial expression: something visually stunning followed by a shot of raised eyebrows, sidelong glances, or millennial ennui fit the medium well. As on YouTube, pranks gone wrong and deliberate pratfalls show up often. Road signs and display advertising with letters covered over can easily fill six seconds. 

Why does this matter? At 6 or 60 seconds, short-form videos are perfect time-fillers while waiting on hold, in line, or at a bus stop. Memes, a key currency for this demographic, can travel extremely quickly in such an environment. For the creators, the time limitations and editing suites heighten certain forms of talent: just as black-and-white still photography or iambic pentameter force artists to master a delimited medium, short-form video exposes those who can set up and deliver a joke, or create a visual impression, or set a mood with no time for throat-clearing. At the same time, the big money for creators still lies on YouTube, from what I’m told and have read: I’ve seen TikTok used as a lead stream to drive traffic to the youTube page of the same creator.

Look at the last 20 years: AOL Instant Messenger, MySpace, Facebook (Farmville), Tumblr, Instagram, Snapchat, TikTok. Every new crop of adolescents needs to find its method of rebellion and differentiation, so as the TikTok demographic ages, and kids outgrow Roblox, expect to see some new form of app-powered expression within the next 2 or 3 years. Both Facebook and Google are launching TikTok copycats. Some candidate components: environmental sustainability, post-Covid shared nostalgia and PTSD, maybe a Disney effort that takes hold. I can’t see a subscription model succeeding with people who lack credit cards, so ads will have to pay for it in the short term. Maybe there will be a geospatial layer (remember Pokemon Go?), and I guarantee it will be snarky. That’s one constant among people this age and I can’t imagine it changing any time soon.