Research Note: Next Big Things - 2.0 vs Globalization

I've been thinking a lot lately about where 2.0 should go.

Now, before you read this, remember, my definition of 2.0 isn't technological: to me, it is about the new economic possibilities markets, networks, and communities are opening up.

So here's what I've been mulling over for some time now.

2.0 vs media is pretty much over. 2.0 (very decisively) won. We have imploded the insatiable death star of lameness at the heart of the media industry - the one that chewed up every good idea and replaced it with a mass-marketed, boardroom-approved, star-saturated simulation of itself. Though most journalists, industry analysts, execs, and venture guys won't realize it until there are billions of dollars in the bank and new Ferraris in the driveway, it's game over for media 1.0.

If you're under age of 30, you know exactly what I'm talking about - because you're living it.

At this point, you're going to say - was that it? That was all?! No, not at all - plenty of startups will continue to be born and profit enormously. But from the point of view of innovation, the radical stuff - the value chain imploding, industry reshaping stuff - has now happened.

Or you're about to leave a comment about the "tricky" business models issue, which is really the same question in reverse. So let me talk about it a bit more deeply for a moment. The truth is that business model innovation at the edge is not so hard. There, it's value creation that's the hard part. When it comes to 2.0, business models happen - they're the products of deep, consistent experimentation.

But the key insight is that once you've created the value, if you do experiment, you will more than likely learn how to capture it - that's an almost inevitable function of persistence, risk, and reward (viz Google, Myspace, Skype, etc). Though the question may be tricky, it is, in fact, loaded deeply in your favour.

OK. Back to the larger argument. Now that 2.0 vs media is over (or at least winding down), we have to figure out what's next. Here's what I think.

2.0 was a product of hipsters. Hipsters are concerned with things like music, fashion, dating, and films - and so 2.0 targeted media first. Now, our whole community has to grow up a bit.

Today, we're ignoring new markets which are where the principles of 2.0 can drive enormous growth and profits - and where they can create some serious, durable, meaningful value. And by we I mean almost all of us - from open source guys, to venture guys, to creative commons folks, to entrepreneurs, etc. I mean almost everyone thinking about 2.0 in the Valley/NYC/Tokyo/Paris/London.

Globalization is unleashing a deep tide of squalor and misery (highly recommended link), which most of us pretend we're ignoring - we avert our eyes at the laborers on the street corner waiting for work, or the guy in the back of the cafe down the street who we know works 100 hours a week for little in return.

I'm as guilty as anyone; last year I went to the cornershop down the street from LBS to buy some cigarettes. There, I discovered the guy that owns/runs it - an old Indian guy - was shouting at (and possibly had just finished beating) a woman who was obviously a menial laborer from India, who couldn't speak English and barely had the skills to survive in Western society.

I told him off, but I should have reported him to somebody who could have regulated him a bit.

The point I want to make is simple. This vast ugliness that globalization is exposing is an enormous market gap for 2.0 - for markets, networks, and communities to create value by really unlocking the potential of globally mobile capital - rather than letting owners of that capital amplify their returns by literally beating the time, effort, dignity, and life out of poor people.

That's still a bit too complicated. Let me try and make it even simpler. Globalization creates wealth at the cost of the social, the cultural, and the human. 2.0 creates wealth by amplifying the social, the cultural, and the human. For the next wave of entrepreneurs, this will be the market gap where profits are to be discovered.

Remember my anecdote? I think there are enormous numbers of ways a simple market, network, or community could have prevented the ugly scene I chanced on in the cornershop - and by doing so, could have created new value and expanded the pie for everyone.

Let me try and express it another way. Where can connectivity - not bandwidth, but connectedness to resources, insitutions, other people - create the most value?

I think, right now, the answer is where people who are ruthlessly exploited because they're disconnected from their homes, their families, the states, each other, and, to be honest, almost anything but sheer labour - where the social, human, and financial costs of these deeper kinds of disconnectedness from all the kinds of capital (social, human, financial, etc) are enormous.

This is why, for a while now, I've thought that Kiva is hands down the most revolutionary startup I've seen for ages - it is awesome because it hints at the enormous possibilities in harnessing the principles of 2.0 on a global scale, and to create value where value counts most.

I think that's going to be at least one of the Next Big Things. I think the challenges will be big, too. VCs will have to learn how not to mess this one up; entrepreneurs will have to learn about markets they've never considered before; and the rest of us will have to put on our thinking hats again, and come up with ideas that speak to the rest of the world, instead of just the geeks, beancounters, and hipsters.

Post a Comment