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Google: The Information-First Conglomerate

By - November 21, 2014
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Larry Page on the cover of Fortune, Nov. 13 2014

Last week Google CEO Larry Page got the Fortune magazine cover treatment, the latest of many such pieces attempting to quantify Google’ sprawling business. The business press is obsessed with answering the question of whether we’ve reached “Peak Google.” (Clearly Fortune’s opinion is that we have not, given they named him “Businessperson of the Year.”)

“Peak Google” is what I like to call a “contagious misconception” – it seems to make sense, and therefore is worthy of consideration. After all, we’ve seen IBM, Microsoft, and other companies hit their peaks, only to drop back as they face the innovator’s dilemma.  Search is past its prime, Google is a search company, ergo – Peak Google.

But as the Fortune piece argues (and yes, I’m quoted, for what that’s worth), Google has a lot more going on beyond search. And while it continues to milk that multi billion-dollar quarterly profit center, it’s built five additional billion-dollar businesses – some of which are directly related to its search empire, but others that are not. Google Apps/Cloud, YouTube/Play, Android, Ventures, and Adtech are already past the billion-dollar mark. Huge businesses in waiting include plays in home automation (Nest), healthcare (Calico), transportation (Chauffeur/self driving cars), and connectivity (Fiber). Beyond that group lie a dozen or so potential blockbusters in energy, robotics, AI, wearables, and the unknown moonshots behind the curtains at GoogleX.

It’s that stunning breadth of scope – what Fortune calls the company’s seemingly limitless ambition – that has caused a prolonged internal debate around Google mission statement:

“To organize the world’s information and make it universally accessible and useful.”

Page has been floating trial balloons about expanding Google’s mission statement for nearly two years. When Tony Faddell, CEO of Nest, announced Google’s acquisition to his staff in January of 2013, Page took the stage and took questions from the stunned audience. One staffer asked Page why Google had any interest in a home automation company – it seemed quite orthogonal to Google’s focus on search, apps, and mobile. According to sources at the event, Page answered by acknowledging that Google’s mission statement may not be large enough to contain his company’s ambitions.

Since that first admission, Page has been testing out the idea of an expanded mission, and with Fortune he aired his ambivalence in public, telling Miguel Helft that “it’s probably a bit too narrow.” And on first blush, that seems right – what does a thermostat have to do with organizing the world’s information, anyway?

Actually, quite a lot.

When you look at Google through the lens of what I call “information first” businesses, things start to make a lot more sense. By that measure, Google is not only an information-first company, it’s also the world’s first information-first conglomerate – starting or buying businesses in every market undergoing the transition from “matter first” to “information-first.”

We see the transportation business shifting to information first, for example. The currently maligned but nevertheless extraordinary Uber is proof of it, but so is Zip Car, Tesla, and the entire autonomous car industry. The true value of these new kind of businesses is in how they understand information flows in the transportation markets, then execute new approaches to old problems (how do I get from here to there?) using novel and/or more efficient methods based on information technologies. Uber doesn’t put cars (commodities) or drivers (means of production) first – it puts information processing first. The cars and driver then reorganize to the new information flows and – voila! – a $17 billion company is born in four years. Uber proves that if you solve difficult information processing problems in traditional markets, you can create world beating value. Airbnb, DocuSign, Lending Club, and many more are further examples of the same thesis.

So what markets are ripe for transition to an information first framework? Well, let’s break down what makes for a “ripe” market. I think there are two key attributes of a market ready to be radically shifted by an information-first approach. First, a market where there’s liquidity of poorly organized and processed information. In other words, there’s a ton of data, but it’s not well organized or computed. Think about the world wide web in 1998, for example. Sh*t tons of information, terribly organized and lacking a processing layer. Google came in and – voila – a multi billion dollar company was born in five short years. Secondly, look for a market currently controlled through centralized chokepoints, but with the potential to be rapidly reorganized if and when consumers gain control. Again, look at search – before Google, portals like AOL and Yahoo ruled the web. Everyone went to a chokepoint to “see what was on the Internet.” After Google, consumers took control of their own web surfing.

So…what markets have both data liquidity and are currently controlled by centralized chokepoints? Well, let’s look at mobile. Tons of data, terribly organized, controlled by the chokepoints of carriers and OS vendors. Check! Or, how about healthcare? Oh hellz yeah! Energy? Yep! Connectivity? Most certainly! Markets where there’s not yet liquidity of information, but there’s about to be – home automation, food, retail – are also ripe for reinvention.

The world is turning into information, and that information wants to be organized, accessible, and useful. I don’t think Google’s mission needs to change at all. Whether or not they knew it at the time, Google created a manifesto that I believe will prove to be dead on in the context of an economic shift to a information-first paradigm. And when the history of this era is written, I’d wager that Google will be seen as the first information-first conglomerate to both identify and exploit that shift.

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The Web Will Kill Apps

By - November 17, 2014

wired web dead coverLots of the “apps are killing the web” meme going around these days, with the latest batch of casket sealant come from no greater validator of commonly agreed upon wisdom than the Wall St. Journal. “The Web Is Dying; Apps Are Killing It” argues Christopher Mims, and it’s hard to argue with him given the preponderance of current evidence.

I disagree.

I am in the midst of a long stew on the future of mobile, it’s taken me through deep links and intelligent links, to the future of search on mobile and beyond, and I’m nowhere near finished with either the reporting or the writing – so I can’t definitively counter the Journal’s argument – yet. But I feel it in my bones – apps, what I’ve disparagingly called “chiclets” – are not the model of how we will interact with information, services, or the world via mobile. The best of the web – open, low cost to entry, no gatekeepers, end-user driven, standards-based, universal namespace, etc. – will prevail.

Why am I so sure of this? Because just about every single person I’ve spoken to – some three dozen or so, to date – are convinced we’re in a secular shift from the app model to….something else, something new, something better. I had a great meeting today at the mobile search startup Jack, for example, with people who are super-qualified to have opinions on the matter (ex Facebook, Excite, Apple, et al, backed in a quiet $6mm round early this year by John Lilly and Reid Hoffman at Greylock). And they are not alone – the caliber of people I’ve encountered who share my point of view is extraordinary. Something big is brewing, and I’m deep into figuring out how to frame it. It’s  a big story, and I don’t know if I can tell it as well as it deserves to be told. But I’m going to try, and if you’re reading this, well, it’s your job to course correct my attempts.

Stay tuned. The web as we knew it ten years ago may be “dead,” but its core values and framework are alive, kicking, and poised to once again disrupt the current oligarchs of mobile.

Whither the Public Commons? Enter The Private Corporation

By - November 05, 2014

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(image) From time to time a piece reminds us that we are in a slow, poorly articulated struggle over what we hold as a public commons. That was the case with Vanity Fair’s Man and Uber Man, a profile of Uber’s Travis Kalanick by Kara Swisher. Swisher deftly captures Kalanick’s combative approach in prosecuting what he calls Uber’s “political campaign” to beat established regulated markets in transportation, a campaign he believes he must win “98 to 2″ – because the candidate is a product, not a politician. In short, Uber can’t afford to win by a simple majority – this is a winner takes all scenario.

This gives me pause, and I sense I’m not alone. On the one hand, we praise Uber for identifying a huge market encumbered by slow moving bureaucracy, and creating a service markedly better than its alternatives. That’s what I’ve called an “Information First” company.  On the other hand, we worry about what it means when something that was once held in public commons – the right to transportation – is increasingly pushed aside in favor of private alternatives. Messy as it may be, our public transportation system is egalitarian in its approach, non-profit at its core, and truly public – as in, bound to the public commons through government regulation.

Are we sure we want to outsource our commons to private companies? I think that’s the existential question we face as a society. I wrote about it three years ago in a post What Role Government? From it:

Over the past five or six decades, we’ve slowly but surely transitioned several core responsibilities of our common lives from government to the private sector. Some shifts are still in early stages, others are nearly complete. But I’m not sure that we have truly considered, as a society, the implications of this movement, which seem significant to me. I’m no political scientist, but the net net of all this seems to be that we’re trusting private corporations to do what, for a long, long time, we considered was work entrusted to the common good. In short, we’ve put a great deal of our public trust into a system that, for all the good it’s done (and it’s done quite a lot), is driven by one core motivation: the pursuit of profit.

The question of the role we wish government to play seems even more pressing given the advance of largely private services such as Uber. We are in the midst of a heated social conversation around the topic, and we see the edges of it when silly insta-startups pop up to privatize public space such as parking spots. In my longer piece, I identify a series of areas where we’ve outsourced formerly public “features” of our lives to private companies. The trend has only strengthened since, and I don’t expect it will flag anytime soon.

So perhaps instead of “What Role Government,” or “What Commons Do We Wish For,” the question we need to ask ourselves is this: What kind of a corporation do we want? If we are going to have corporations play a larger and larger role in what we formerly understood to be the public commons, we might want to we spend a few cycles asking ourselves what kinds of behaviors and values we want our companies to exhibit?

Come to think of it, that’s kind of why I started NewCo last year. It strikes me that we’re just starting to have a conversation about those corporate values. I laid out some of this in What makes a company a “NewCo”?, to wit:

Driven by capitalism’s central motive – profit – corporations have become one of the most powerful actors on the global stage. Besides government, no other institution in society has amassed as much wealth, power, and control as the corporation.

But at their core, corporations are just people. And over the past few decades, in parallel with the rise of the Internet, those people have begun a quiet revolution that has redefined what a “corporation” can be.

The global economy is transitioning from hierarchical models of command and control to more networked and flexible approaches. A new kind of organization – one that measures its success by more than profit – has emerged. We call these companies “NewCos.” As the networked, information-first economy has taken hold, NewCos are building innovative, purpose-driven new ways of doing business.

A NewCo views “work” as more than punching a clock or doing a job. The people behind these companies believe work can equate with passion, community, and a force for positive change.

 

It’s fascinating to watch the debate over Uber play out – is it a good actor, or a bad one? Is its CEO a driven role model or a bully? Or is it, perhaps, still figuring out what it really means to have the public trust? Once you’ve won that trust,  well, maybe that’s when the real work begins.

Living Systems and The Information First Company

By - October 11, 2014
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A map tracing the information flows within Uber’s San Francisco market.

One of the great joys of my career is the chance to speak at gatherings of interesting people. Sometimes it’s an unscripted, wide ranging conversation (like during Advertising Week, for example), but other times it’s a formal presentation, which means many hours of preparation and reportage.

These more formal presentations are opportunities to consolidate new thinking and try it out in front of a demanding audience. Last month I was invited to speak in front of group of senior executives at a major bank, including the CEO and all his direct reports. I was asked to focus my remarks on how new kinds of companies were threatening traditional incumbents – with a focus on the financial services industry, as you might imagine.

Now, I’m not an expert in financial services, but I do know how to ask questions, and I’ve been watching as the core assumptions any number of markets, from media to transportation to hospitality, have been upended by Internet upstarts like Buzzfeed, Uber, or Airbnb. So I started preparing for this talk by interviewing half a dozen or so senior executives at the bank. I was prepared for defensive answers, but instead found myself pleasantly surprised – not only did these executives acknowledge a threat, they also spoke eloquently about the self-created barriers which blocked their ability to respond. Some of these barriers were regulatory and therefore out of their direct control, but many were organizational – this bank had been in business more than 100 years, and its DNA was pretty deeply set.

There’s no dearth of literature and leaders with strong points of view about corporate change – Clayton Christensen’s Innovator’s Dilemma  is the classic, and there are plenty of others – Downes’ Big Bang Disruption and Moore’s Crossing the Chasm come to mind. But I’ve not made my living writing about corporate disruption, nor do I expect I ever will. As much as these kinds of books lay out specific and intelligent management lessons, I didn’t want to dole out second hand advice – after all, if the banks wanted to hear that, they could have asked Christensen, Downes, or Moore.

So preparing for this talk forced me to do exactly the kind of hard work any writer both fears and relishes – coming up with something original to say.

So I started to think about why it is that large enterprises fail to innovate. What was it about new, digital companies – which I’ve come to call “NewCos” – that allows them to so quickly pose significant threats to the incumbents in their respective markets?

It struck me that corporations – which by US law enjoy the status of personhood – act much like organisms in biological systems. Some are fitter than others, and every so often you see punctuated equilibrium – a quick reset of the ecological landscape. Further, it struck me that we’re in the midst of such a phase shift as we become information – a theme I’ve written about quite a bit (and the core thesis of my long-unfinished book).

That got me pondering the role of information in companies. I wondered, what is the role of information in biological systems? A bit of Googling reminded me of living systems theory, which I last encountered reading Kevin Kelly‘s What Technology Wants, which posits that technology itself is a living system. But I found myself pursuing a narrower path: What if we understood corporations as living systems? Might there be an insight or two to gain?

Living systems theory is the work of biologist James Grier Miller. From the wikipedia entry: “Living systems are open self-organizing living things that interact with their environment. These systems are maintained by flows of information, energy and matter.”

Bingo – there it was, right in front of me – a new way to think about corporations. The first thing that struck me in this definition was the use of the word “open” – most large enterprises are not open in most senses of the world. But most interesting was the framework of understanding flows of information, energy, and matter in a corporation. Immediately, I came up with a hypothesis: most corporations are organized to maximize their use of energy and matter, because those are the most expensive parts of their businesses. NewCos, on the other hand,  place information at the center of their business.

Put another way, NewCos are “information first” companies.  They map the flows of information in a market, and organize themselves so as to exploit or leverage those information flows, even if the flows are “potential information” – information used in a new way, a manner which may be more efficient, productive, or valuable. Put information first, and let that determine how best to organize energy and matter. Industrial era-companies, on the other hand, value their hard assets first (energy, matter), and only view  information  as a way to organize or protect those assets.

I’ve been wandering the halls of theory for a while here, so some examples are in order. I’ll start with everyone’s favorite disruptor, Uber. What has Uber done? Well, it’s stared long and hard at the information flows of the transportation business, and it’s created a service that re-imagines how, by leveraging information flows, it might go about more efficiently organizing the energy (people, gasoline) and matter (automobiles, roads) in that market. Uber is an information first business, whereas taxi commissions, rental car agencies, and even automobile manufacturers are energy and matter-first businesses.

Or let’s look at another market: hospitality. Hotel companies are energy and matter-first businesses – they look at the world as a collection of places where expensive hotels might be built, and they then spend a lot of energy and money convincing the market to come to their hotels. Airbnb focused on information flows first, and created a new approach to organizing the energy and matter of the hospitality market: it uses information to organize people (energy) and matter (people’s homes).

Once I started thinking about companies as either “information first” or “energy and matter first,” I began to see information first companies all over the place. This wasn’t hard, because I’ve been spending the past year looking at applicants for NewCo festivals around the world. GrubHub, for example, takes an information first approach to take out dining. Casper takes an information first approach to the design, manufacturing, sales and delivery of mattresses. DocuSign is obliterating paper with it’s information-first approach to trusted signatures. Hampton Creek is a classic information first company in food. On and on and on – the theory is perhaps too neat, but neat it was nevertheless.

Then I wondered – what are the information first companies in financial services? After all, I needed to bring this theory home with a strong example native to the folks who I’d be speaking to. And that’s when I remembered Earnest, a NewCo I had visited during our San Francisco festival.

Earnest

And man, does Earnest bring the point home in spades. In my talk to the bank, I laid out how Earnest’s “information first” approach allows it to entirely rethink the lending landscape. First, I explained how Earnest works: It builds an information-rich profile of a prospective lending client, using APIs from LinkedIn and the client’s own bank account. In his NewCo presentation, Earnest CEO Louis Beryl explained that the company uses more than 100 parameters of information to make a lending decision, and models that information against ever-more intelligent algorithms. It’s a process that is familiar to every information-first company, from Google to Uber, GrubHub to NetFlix.
Earnest 1

Let’s compare Earnest’s information-first approach to the traditional lending practices of most US firms. These companies lend money based largely on an outsourced information source called the FICO score.

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As you can see, these businesses are built on a relatively thin information flow – and most of it is outsourced to another company (FICO). Lenders tend to organize around three things: Lead generation (marketing cost), conversion (to a loan), and collections. Defaults are a cost of doing business. But Earnest’s approach focuses on identifying qualified clients, then servicing them in an information first manner. While still new, Earnest’s approach radically changes the game – it charges 50% less for a loan, and has no defaults to date. Time will tell if Earnest executes its game plan well enough to become a major disruptor in the financial services sector, but the company’s already convinced Andreessen Horowitz and several other major VCs to invest $15mm in its first round of financing.

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This post represents my first “thinking out loud” about what it means to be an information-first company, and it’s in no way complete. The concept isn’t original per se, but I think might add some structure to the terminology that has bedeviled our industry for years. So often we talk about “tech companies” who “leverage big data” to  “disrupt” incumbent players. I like the idea of calling these businesses “information first” companies – because in the end, any company can put information flows first. Get that right, and the energy and matter will follow.

Every Company Is An Experience Company

By - September 28, 2014
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Illustration by Craig Swanson and idea by James Cennamo

Some years ago while attempting to explain the thinking behind my then-startup Federated Media, I wrote that all brands are publishers (it was over on the FM blog, which the new owners apparently have taken down – a summary of my thinking can be found here). I’d been speechifying on this theme for years, since well before FM or even the Industry Standard – after all, great brands always created great content (think TV ads or the spreads in early editions of Wired), we just didn’t call it that until our recent obsession with “native advertising” and “content marketing,” an obsession I certainly helped stoke during my FM years.

Today, there is an entire industry committed to helping brands become publishers, and the idea that brands need to “join the conversation” and “think like media companies” is pretty widely held. But I think the metaphor of brands as media creators has some uneasy limitations. We are all wary of what might be called contextual dissonance – when we consume media, we want to do so in proper context. I’ve seen a lot of branded content that feels contextually dissonant to me – easily shareable stories distributed through Outbrain, Buzzfeed, and Sharethrough, for example, or highly shareable videos distributed through YouTube and Facebook.

So why is this content dissonant? I’m thinking out loud here, but it has to do with our expectations. When a significant percentage of the content that gets pushed into my social streams is branded content, I’m likely to presume that my content streams have a commercial agenda. But when I’m in content consumption mode, I’m not usually in a commercial mode.  To be clear, I’m not hopping on the “brands are trying to trick us into their corporate agendas” bandwagon, I think there’s something more fundamental at work here. There are plenty of times during any given day when I *am* in commercial context – wandering through a mall, researching purchases online, running errands in my car – but when I’m consuming content, I’m usually not in commercial context. Hence the disassociation. When clearly commercial content is offered during a time when I’m not in commercial mode, it just feels off.

I think this largely has to do with a lack of signaling in media formats these days. Much has been made of how native advertising takes on the look and feel of the content around it, and most of the complaint has to do with how that corporate speech is somehow disingenuous, sly, or deceitful. But I don’t think that’s the issue. What we have here is a problem of context, plain and simple.

Any company with money can get smart content creators to create, well, smart content, content that has as good a chance as any to be part of a conversation. In essence, branded content is something of a commodity these days – just like a 30 second spot of a display ad is a commodity. We’re just not accustomed to commercial content in the context of our social reading habits. In time, as formats and signaling get better, we will be. As that occurs, “content marketing” becomes table stakes – essential, but not what will set a brand apart.

Reflecting on my earlier work on brands as media companies, I realize that the word “media” was really a placeholder for “experience.” It’s not that every company should be a media company per se – but rather, that every company must become an experience company. Media is one kind of experience – but for many companies, the right kind of experience is not media, at least if we understand “media” to mean content.

But let’s start with a successful experience that is media – American Express’ Open Forum. If I as a consumer chose to engage with Open Forum, I do so in the clear context that it’s an American Express property, a service created by the brand. There’s no potential for deceit – the context is understood. This is a platform owned and operated by Amex, and I’ll engage with it knowing that fact. Over the years Amex has earned a solid reputation for creating valuable content and advice on that platform – it has built a media experience that has low contextual dissonance.

But not every experience is a media experience, unless you interpret the word “media” in a far more catholic sense. If you begin to imagine every possible touchpoint that a customer might have with your brand as a highly interactive media experience – mediated by the equivalent of a software- and rules-driven UX – well now we’re talking about something far larger.

To illustrate what I mean I think back to my original “Gap Scenario” from nearly five years ago. I imagined what it might be like to visit a retail outlet like Gap a few years from now. I paint a picture where the experience that any given shopper might have in a Gap store (or any other retail outlet) is distinct and seamless, because Gap has woven together a tapestry of data, technology platforms, and delivery channels that turns a pedestrian trip to the mall into a pleasurable experience that makes me feel like the company understands and values me. I’m a forty-something Dad, I don’t want to spend more than 45 seconds in Gap if I don’t have to. My daughter, on the other hand, may want to wander around and engage with the retail clerks for 45 minutes or more. Different people, different experiences. It’s Gap’s job to understand these experience flows and design around them. That takes programmatic platforms, online CRM, well-trained retail clerks, new approaches to information flows, and a lot of partners.

I believe that every brand needs to get good at experience design and delivery. Those that are great at it tend to grow by exponential word of mouth – think of Google, Facebook, Uber, Airbnb, or Earnest (a new lending company). When marketing becomes experience design, brands win.

There’s far more to say about this, including my thesis that “information first” companies win at experience-based marketing. All fodder for far more posts. For now, I think I’ll retire the maxim “all companies are media companies” and replace it with “every company is an experience company.” Feels more on key.

Thoughts On Alibaba

By - September 21, 2014

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(image WSJ)

A caveat before I think out loud, quite possibly getting myself into a running battle I know I can’t win: I’m not a public market stock investor, I’ve never been one, and take the following ruminations at the price they’re offered: IE, free.

But this Alibaba stock debut doesn’t smell right to me, and it’s not the company- which is certainly a huge success story inside China, driven by a scrappy founder with a laudable (if manicured) personal narrative.

That said, Alibaba’s star turn smells of collective greed, with a hefty side of whistling past the graveyard.

I wouldn’t be writing this post if I didn’t have some knowledge around the deal, at least as it relates to the culture of access enjoyed by those with relationships to investment firms. I’ve missed a TON of great deals over my career, mainly due to my being a journalist (or acting like one, as it relates to holding stock) for a large percentage of my working life. But over the past few years I’ve carefully gotten into investing, mainly in early stage startups. I don’t look to invest in IPOs, but every so often, about twice a year, they get offered to me.

This is what happened with Alibaba. I was given the opportunity to – possibly – invest a small sum in Alibaba about a month ago. I figured it was a no-lose deal, so I said “sure” and I didn’t give it much more thought.

But as the IPO drew near, I reconsidered that decision. Not because I thought the stock was going to tank right after the IPO  – I knew there was far too much money at stake, at least in the short term, for that to happen. No, I second guessed myself because I realized I honestly don’t understand the company, or the powers that control it. I pinged the fellow who had offered me the chance to invest, so as to recant my investment. But in the end, it didn’t matter. His fund didn’t end up getting an allocation of precious “at the open” stock anyway.

I can only imagine what it must have been like running that allocation, deciding who amongst all the wealthy, connected individuals and firms would get Alibaba stock at the opening price. It’d be like doling out rigged lottery tickets – everyone’s a winner! One thing I am sure of – it wasn’t a fair process, and I almost ended up benefitting from it by happenstance. So here’s why I am concerned about Alibaba, in no particular order:

1. Greed. The company was considered, by everyone I’ve spoken to, a “sure bet” that would “pop at the open” just like the Internet stocks of old (and it did!).  And yet, everyone that I have spoken with also believes that Alibaba is an offering that encourages the kind of negative Wall Street behavior none of us really want to see happen again. The book closed early. The stock priced above its initial range and moved up by nearly 40% on its first day of trading. Financial institutions, uncertain if they were going to get the allocations they wanted, started currying favor and hustling and pleading and whining. There was a frenzy of money making activity going on, and it felt like…pure greed. Alibaba is the ultimate insider’s stock – pedestrian retail investors did not get access to shares at the opening price, and most likely they will be the sheep to whom the wolves of Wall Street quickly sell (if they haven’t already). Insiders – wealthy people with access to early distribution of IPO shares at the open, have already made their fast buck. And the ultimate insiders have made a huge killing: a consortium of big banks poured $8 billion into Alibaba this June at a $50 price, a quid pro quo if ever there was one for giving a Chinese company access to the US markets. This kind of behavior adds questionable value to our society. I don’t doubt that everyone who held pre-IPO or at-the-IPO shares will make money, in fact, I’m sure of it. And that smells of a rigged game.

2. Shallow understanding. If you’re reading this, and you bought the stock at $93 (roughly the price of its first public trade, up from $68), tell me – have you ever used Alibaba’s services? Do you really understand the company? I doubt it, because Alibaba is a Chinese company. Most of us here in the US don’t speak Chinese, or have a reason to use Alibaba’s services. But for some reason we all seem willing to buy into the “Chinese eBay,” or the “Chinese Facebook,” as if throwing those successful public companies’ reputation over Alibaba’s frame somehow equates to quality. It’s a “bet on China,” as most of the press puts it. Certainly that sounds good, given the country’s growth and early stages, but it leads me to wonder… will most analysts who are covering the stock have done core due diligence on Alibaba – the kind where you go to the market in question and talk to customers, suppliers, and regulators? That would mean they have access and understanding of the culture that controls Alibaba, and I’m pretty sure that culture will not ever allow such diligence to occur (more on that below). What bankers and analysts will tell you is they’ve run the numbers that Alibaba has given them, and they are fantastic. Then again, so are the numbers on Chinese GDP growth – and most well informed people I’ve spoken to say those numbers are unreliable. (Oh, and by the way, if you think the $81 billion China just injected into its own economy was a shrug, I guess you should buy Alibaba without concern). Which leads to…

3. Controlled by a corrupt government. Do you know how China works? I don’t, but I’ve talked to enough folks who have lived and worked in China to get a pretty clear picture: The economic and government culture does not hew to US standards, to put it mildly. And like every other company in China, Alibaba is ultimately controlled by the whims of the Chinese government. It’s something of an open secret that Chinese corporate culture is definitionally corrupt by US standards. So…does listing it on the US stock markets change this fact? I could be wrong (see my caveat at the top), but I don’t believe it does. At least when companies are corrupt in the United States, we have a free and open press, and a democratic rule of law, to keep them in check.  One could reasonably argue that it’s a supreme proof of our capitalist system that now Alibaba is public in the US, so it will now have to play by US regulations. I wish I could buy into that narrative, but I sense all we’ll really get is a company well versed at playing our game, rather than a company that is an active builder of value in our society and in other free markets.

Let me put this another way: Here are a list of Internet leaders who decided to forego China, because the government has made it nearly impossible for them to do business in the way that built our capital markets: eBay, Yelp, Twitter, Google, Facebook….and that’s just off the top of my head. So by buying into Alibaba, we’re buying into a system that has, through government fiat, denied innovative US companies growth in the world’s largest market, then capitalized that fiat into a stock it’s now selling back to us. Again, that just seems wrong.

4. Hazy growth outside core markets. Many observers are expecting Alibaba to come into the US and other large markets, and either buy or compete its way in, so as to fuel its long term growth. This I find to be difficult to believe, on many levels. Sure, Alibaba could try to buy…Yahoo!, Yelp, Twitter, hell, maybe even Box or Square or one of the other heavily funded “unicorns.” But…does anyone really believe it can *manage* those companies to success post transaction? To get a sense of how odd that sounds, imagine Google or Facebook buying a slate of Chinese companies and then managing them well. Sounds pretty risky to me.

Anyway, I’ve gone on long enough, and undoubtedly I’ve managed to piss off any number of friends and colleagues across multiple industries. So let me repeat: I’m no expert in Chinese markets, nor am I a professional public market stock investor. I’m just an industry observer, making industry observations. Caveat emptor.

A Big Day For The Internet

By - September 10, 2014

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Today scores of big companies are taking symbolic action to defend the essential principles of an open Internet, and I support them. That’s why, on your first visit here today, you’ll see the “spinning ball of death” up on the right. For more information about the Internet Slowdown, head here.

We’re Innumerate, Which Is Why We Love Visualizations

By - September 02, 2014

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This weekend I reviewed my notes from a few weeks of late summer meetings, and found this gem from a  conversation with Mike Driscoll, the CEO and co-founder of data analytics firm MetaMarkets. MetaMarkets helps adtech firms make sense of the reams of data they collect each day (hour, minute, second…). Most of this data is meaningless without some kind of pattern recognition and interpretation, Driscoll told me. He then used a great metaphor, one that resonated given my post earlier last week that Writing is Code, Reading Is Visualization.

When we read, Driscoll noted, we both ingest the words and simultaneously “see” a story. Stories, of course, are how we understand the world. Reading pre-supposes that a story is being told – we don’t read texts full of random words and letters, literate texts are formed so as to impart knowledge. Reading presupposes literacy. We read the text and, assuming the writer is reasonably skilled, we “see” what the author intended – a narrative story is delivered and received.

Numbers, however, are different. Very  few of us are highly numerate – we can’t “read” numbers and see stories from them in our heads. In short, most of us are innumerate – we can’t see a story by looking at numbers. Computers are excellent at reading numbers, of course, but they are terrible at telling stories. This is why people who can do both at the same time – like the cast of The Matrix,  the “Rain Man,” or advanced mathematicians of any stripe – seem so cool and alien to us.

Alas, for the rest of us, we don’t “see” much of anything when we look at a text made up of hundreds or thousands of numbers. Numbers on a page are mute. But once those numbers are run through a visualization filter, they transform into stories – visual narratives that, with a bit of practice, become highly informing. And this is why “data scientist” and “data visualization” are two of the most promising careers these days. We’re awash in data, but we lack the code to make meaning from it.

As you can tell from the graphic below, there’s an extraordinary amount of information in the programmatic adtech ecosystem – orders of magnitude more than in our current financial system.  Driscoll’s firm turns that raw information into meaningful narratives for his clients. I have a feeling that’s a very good business to be in going forward.

 

MetaMarkets Adtech Data vs. Financial Markets

Programmatic marketing is “the most complex marketplace the world has ever created, in terms of both transactional scale and richness,” says Mike Driscoll, CEO MetaMarkets.


“Facebook Is a Weatherless World”

By - August 30, 2014

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This quote, from a piece in Motherboard,  hit me straight between the eyeballs:

Facebook…will not let you unFacebook Facebook. It is impossible to discover something in its feeds that isn’t algorithmically tailored to your eyeball.

“The laws of Facebook have one intent, which is to compel us to use Facebook…It believes the best way to do this is to assume it can tell what we want to see based on what we have seen. This is the worst way to predict the weather. If this mechanism isn’t just used to predict the weather, but actually is the weather, then there is no weather. And so Facebook is a weatherless world.”

- Sean Schuster-Craig, AKA Jib Kidder

The short piece notes the lack of true serendipity in worlds created by algorithm, and celebrates the randomness of apps (Random) and artists (like Jib Kidder) who offer a respite from such “weatherless worlds.”

What’s really playing out here is a debate around agency. Who’s in control when you’re inside Facebook – are we, or is Facebook? Most of us feel like we’re in control – Facebook does what we tell it to do, after all, and we seem to like it there just fine, to judge by our collective behaviors. Then again, we also know that what we are seeing, and being encouraged to interact with, is driven by a black box, and many of us are increasingly uneasy with that idea. It feels a bit like the Matrix – we look for that cat to reappear, hoping for some insight into how and whether the system is manipulating us.

Weather is a powerful concept in relation to agency – no one controls the weather, it simply *is*. It has its own agency (unless, of course, you believe in a supreme agent called God, which for these intents and purposes we can call Weather as well.)  It’s not driven by a human-controlled agency, it’s subject to extreme interpretation, and it has a serendipity which allows us to concede our own agency in the face of its overwhelming truth.

Facebook also has its own agency – but that agency is driven by algorithms controlled by humans. As a model for the kind of world we might someday fully inhabit, it’s rather unsettling. As the piece points out, “It is impossible to discover something in its feeds that isn’t algorithmically tailored to your eyeball.” Serendipity is an illusion, goes the argument. Hence, the “I changed my habits on Facebook, and this is what happened” meme is bouncing around the web at the moment. 

It’s true, to a point, that there’s a certain sterility to a long Facebook immersion, like wandering the streets of Agrestic and noting all the oddballs in this otherwise orderly fiction, but never once do you really get inside Lacy Laplante’s head. (And it never seems to rain.)

The Motherboard article also bemoans Twitter’s evolution toward an algorithmically-driven feed – “even Twitter, that last bastion of personal choice, has begun experimenting with injecting users’ feeds with “popular” content.” Close readers of this site will recall I actually encouraged Twitter to do this here: It’s Time For Twitter To Filter Our Feeds. But How?.

The key is that question – But How?

To me, the answer lies with agency. I’m fine with a service filtering my feeds, but I want agency over how, when, and why they do so.

I think that’s why I’ve been such an advocate for what many call “the open web.” The Internet before Facebook and mobile apps felt like a collective, messy ecosystem capable of creating its own weather, it was out of control and unpredictable, yet one could understand it well enough to both give and receive value. We could build our own houses, venture out in our own vehicles, create cities and commerce and culture. If anything was the weather, it was Google, but even Google didn’t force the pasteurized sensibility one finds on services like Facebook.

As we like to say: Pray for rain.

 

Writing Is Code, Reading Is Visualization

By - August 29, 2014

Yesterday I stumbled onto a fascinating PBS Newshour interview with book designer Peter Mendelsund, well-regarded for his cover treatments of titles ranging from George Dyson’s Turing’s Cathedral to The Girl With The Dragon Tattoo.

Mendelsen argued that when we read, we visualize the text, each of us creating a different reality in our minds. Those co-created images – created by both the author and the reader – are unique and vital to the process of reading – and by extension, to our ability to imagine and to create.

In the the interview, Mendelsund is asked about our image-driven culture – there were more than a trillion photos shared last year, according to Chute, a “visual revolution” company I’ve recently joined as a Director. We’ve become a society of image sharers – the very act of sharing is celebrated – and image creators – to the point where “selfie” has made the dictionary and “food porn” is a thing.

But as we snap and share, share and snap, we must remember the value of the mind’s innate ability to create images from code* – the code of writing. Words are pure symbols capable of painting entire worlds across our mind’s eye. And the extraordinary thing is each of sees something unique when we encounter the written word, yet we all understand the same code.  “The idea of imagining things ourselves…this world we occupy when we’re reading… is more valuable than ever,” Mendelsund said, referring to our image-addicted culture. “There are few other places – maybe other than when we are dreaming – where we get this feeling of occupying a metaphysical realm.”

I plan on reading Mendelsund’s What We See When We Read this weekend, I’ll post a review here if this short burst proves insufficient….

*Of course, musicians and coders also “see” and dream in code, and famously, the cast of “The Matrix” “saw” through dripping lines of code into the visual reality painted by the film’s antagonist AIs.