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Tuesday, September 05, 2006
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.
Comments:
no comments on business models, just to say that is a brilliant post, briliant also in a beautiful way.
ok so i'm new to BG but have been reading and digesting the threads for a couple of days... when you talk about 'edge competencies' can we also have the dialog about 'edge incompetencies'. in the media sector where does 2.0 place the value on experience, taste, longevity of content..... surely if we all grab on to the long tail and ride it to a world of user created content and away from the Blockbuster mentality - where is the opportunity for the development of art that raises the cultural bar rather than shimmy under it?? or does that go the way of patronage.... I am in the music business working on new ideas to invert the model and all these 2.0 theories apply perfectly to the distribution model but the problem we run up against time and time again is in content development - who decides who gets heard and who pays?
Can we apply these 2.0 principles to finance? What about microlending for alleviating poverty? What is the model for VC 2.0?
Interesting post and I like that you indicated where this should go in relation to the huge market gap. Let’s hope that it does for everyone’s sake. Have you seen any successful examples of this?
I like the notion of 2.0 vs. Globalization. I want you to extend further, even just imaginarily, the picture you draw of how the "economic possibilities created by networks and communities" can create value by working against, e.g. the horrid situation in the Espresso article you link to (foreign workers in Puglia). Please extend yourself in this direction; your thinking is valuable.
Are you exploring your instincts, or holding back your more solid thoughts? Chartreuse also posted on this in "The Real Internet Revolution (it ain't happened yet) http://chartreuse.wordpress.com/2006/06/08/the-real-internet-revolution-it-ain%e2%80%99t-happened-yet/#more-631 I think his post and I suspect yours is actually about the Industrial Revolution, not Web 2.0. Technology has changed a lot for a lot of people and it will keep doing that, but it's a continuum. The ability to get people out of a subsistence existence will happen one small step after another, not suddenly overnight. And, the biggest obstacle isn't technology (or it's correlating economics), it's attitudes and beliefs. There must be some great 400 year old Shakespearian quote about yearning and pain and falling short because of your own shortcomings.
The Economist seems to think there's a lot of entrepreneurial potential in Africa. This story goes well with this post, I think. http://www.economist.com/business/displaystory.cfm?story_id=7879918
Hi Alberot, I'm glad you liked the post. that example is like the 1.0 - I am hoping there will bbe a 2.0 :) Nate, I will write a follow up to try and clarify, I think a lot of ppl esp in the States didn't get this one. Maria, That's a very good question, in fact, I will front page it for a longer discussion. Murray, Of course, that is one of the markets - think Kiva. VC 2.0 is a very interesting question, which I hope to post on soon Hi Jacob, Kiva, Shaadi maybe...will have to think abt that some more. Hi Tom, I'm gonna be thinking abt this a lot :) Hi Lloyd, I actually disagree - it's not abt tech, it's about economic possibility. Let's say we give a village in the 3rd world the greatest tech in the world - I think in fact, what they might need more are simple markts/nets/communities... Hi Eric, Thanks for the link - it's a good one. Hi Phil, I'm glad you liked it. Thx for the comments guys.
Awesome Post I actually think the next big thing is Professional Services - Globalization is its vehicle. As to how that applies to 2.0? Obviously the most successful services will be personalized, P2P and on-demand - and web 2's the foundation for all that.
Kiva. Wonderfully philanthropic and masses of potential, but IMO - at this stage in its development at least - it's primarily a wasted opportunity. (I argued this at http://qurl.com/bhbhb when I first came across Kiva - as ever, happy to be corrected if I'm missing something there.) Kiva's one of the smallest parts of the potential P2P global liquidity market, the part where people just give their money away. If it - or someone like it - gets an interest rate involved, that's when it'll realise its real potential.
I think of this as mainly a SmallWorld vs BigWorld competition. Globalization has so far been driven by BigWorld rules, which is natural since so much of it is based on "managed markets" (e.g. subsidies, trade restrictions) rather than real open-ness. As your personal experience demonstrates, this is an issue at "home" and not just in the ThirdWorld. link
Good stuff, I definitely agree that the bulk of value that the '2.0' perspective brings will be outside the tech community. What's your perspective on the idea of glocalization in respect to this 2.0 vs. globalization discussion. Thought up in the 80s and recently repopularized by friedman's world is flat, it seems in principle globalization 2.0 IS glocalization, where local economies are individually connected on a global scale in a distributed fashion rather than large multinational's centrally pulling them together. And in response to Seamus, if you reject Kiva because it doesn't offer an interest rate on its return, than you pretty much reject the idea of philanthropy as a whole. Kiva is philanthropy 2.0, not finance/banking 2.0. There are the 2.0 finance plays like prosper.com, fundable, zopa, etc. but the thing is if you want to apply that model to the places & people kiva tries to help, you wouldn't be able to charge interest at an acceptable market rate as other investment alternatives will put your money to work more efficiently. Kiva needs to appeal to the 'philanthropy' side of their lenders brains for now and its doing a great job. Maybe as things progress there will eventually be a massively distributed global network economy and money will efficiently reach all that needs it, but for now Kiva is a pragmatic 2.0 model the world needs more of.
Yes, this is one of the next big things. The developing world this year surpassed the combined GDP of the developed world and through programs like this people will create their own future.
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