Thursday, March 16, 2006
Somebody, please. I am so
backed up on email because it is such a retarded way of interaction. And you're probably there too - maybe email overload will be 06's feed overload.
It's interesting how kids have adapted by basically, well, never using email in the first place...
It occurred to me while reading this fascinating thread from folks who work at McDonald's hacking dishes, that if you take edge competencies to the limit, a possible future for McDonald's is exactly this: a place where you can go and hack together your own fastfood; like...uhhh...a Google for food.
The Banality of the Market, pt 4
Jeff N thinks my recent posts have simply been saying "America is stupid and it sucks, you should have a European accent". Now, I think that's a (way) unfair reading from someone I have a greal deal of respect for and I think is really cool, so let me try and summarize my argument.
I'm pointing out that econ is very good at explaining many things; but in America the language of econ dominates everyday life and everyday business - which it was never meant to do.
We misuse it in two ways:
1) We have no idea what the hell we're talking about. This is Bush sending the country into penury, with half-baked mumbo jumbo to back him up.
2) We fail to factor in the various kinds of capital into our understanding. If we want to use the language of the market to understand things, that's fine - but too often, we ignore the fact that there are many kinds of capital, of which financial capital is, today, the one that's being devalued the fastest.
So our decisions often have unintended consequences: right now, we are essentially trading financial capital (which is then being mortgaged to China) for social and cultural capital.
But we pretend like those forms of capital don't exist. Of course, they do. The loss isn't just felt in terms of binding us together now; their present value is the sum of the innovations that flow from them, and that's lost, too.
Let me use an example to illustrate. The cost of Wal-Mart killing your local mom and pop bakery isn't just terrible food, no more friendly chats, and unemloyment. In fact, Wal-Mart offsets your loss in quality with scale economies, creating value.
Actually, the real economic loss is more subtle, and much more pernicious: we lose entire sets of people deeply committed to what they do, which is where real creativity ultimately flows from. We lose people with skin in the game, and replace them with workerbots. The guys at your local bakery were makers of tiny cultures, not just producers of goods. Which do you think will be more valuable in a world of Chinese/Indian/etc hypercompetition - scale economies, or creativity driven by passion and commitment?
Now, in Europe, people recognize that social and cultural capital are deeply important and valuable forms of capital.
Does that make us Americans stupid? Possibly.
But Europeans are stupid in another way; there, there are no structures to make capital productive (ie, venture capital, etc). Put another way, it has tons of creativity, but because no one thinks about how to make it productive or useful, value is foregone.
The trick for the future, I think, if we (all of us) want to maintain our rapidly dwindling innovative capacity, is to be able to avoid both kinds of stupidity.
Wednesday, March 15, 2006
Lots of feedback/friction on "jargon". Guys, you might want to check my presentations
if you're kind of lost.
Antistrategy of the Week
"...EA's ambitious goal is to create more such innovative, internally developed games while lessening the company's dependence on professional sports and Hollywood movie franchises."
Wow - actually making cool games instead of being beancounters? How ambitious!
Just imagine if they started doing this years ago, when it was obvious that their strategy was in deep decay.
Tuesday, March 14, 2006
The Corporatization of 2.0
OMG. I am so
totally creeped out by USA Networks new social networking site "Show Us Your Character" (it's in Beta!).
It's somewhat nauseating to see see such a grossly corporate appropriation of the social. Expect about a million more of these (this means you, Tagged); leave it to the market to give us 15,000 Frankensteins in imitation of the real thing.
Lucky for us Show Us Your Character won't last long; USA's got the formula totally, completely wrong.
More is More and Less is More
Shorter version of my post below about Seth's "too much blogging".
Like Scott says, it's not that there are too many bloggers blogging too much - it's that the filters we have right now, as much as we luv them, well, kind of suck.
In my newer work, I call these concepts more is more, and then less is more. For content guys, more is more. For filter guys, less is more.
But the point is that each depends critically on the other. The whole "less is more" etc thing is a bit of a false dichotomy, and it's time we exploded it.
I appreciate a Web 2.0 sanity check as much (more) than anyone else. Hopefully, I've been responsible for more than my fair share.
But this kind of thing is (way) over the top:
"...Thatï¿½s the first indicator that this was a teeny-weeny deal. When people sell-out in a big-money acquisitions, they usually canï¿½t help but tell that trusted someone, who tells another trusted someone, who passes the word onto another trusted someone and so on until a pretty reasonable picture emerges as to roughly what was paid.
The fact that no-oneï¿½s bragging on this one, suggests that, well, there ainï¿½t much to brag about.
More telling though is that Iï¿½ve been chatting to a company who is a significant player in this whole web-office space and they swears blind theyï¿½ve not even had a nibble from Google. Not a single call, e-mail or overture. Nada.
...How much is a ï¿½reasonable subscription feedï¿½. If you look at paid services like Trumba or BackPack weï¿½re probably talking about $50 per year. So best case, weï¿½re looking at revenues around the $50,000 per year mark. Weï¿½re not even close to covering the four Writely salaries at those levels."
Positive hysteria (a la the TechCruch commenters) is as counterproductive as this kind of negative hysteria.
For those to whom it's not obvious...
First, "teeny-weeny" is very much in the eye of the beholder. Even if Writely went for $5m, the Writely guys each made >$1m. That's not too bad for a few months of work.
Second, worrying about pricing deals like this in terms of some kind nebulous independent revenue multiple misses the whole point. It's the combined picture that counts. Google (etc) buy them because they instantly realize fairly significant synergies from a user base, because they want to learn/capture technology, or simply because they want the people.
Third, XYZ company you luv probably didn't get the call because they don't have any of the above.
Despite the hype about the Knight Ridder deal, the price multiple (1.5x revenues) isn't atrocious relative to the precarious strategic situation of the entire industry.
Though it's low relative to other media markets, and especially for the 2.0 crowd, the last big newspaper acquisition was probably Tribune + Times Mirror, at a multiple of about 2.15 - and that was at the height of the boom.
Usefulness and The Banality of Business
Seth says that bloggers blog too much; that they're littering an "attention commons".
This is a deeply interesting statement, which gets to the heart of all the problems with American business (and culture) - doubly interesting because it comes from Seth.
There's this curious notion in America: everything must be useful
. This is why, at heart, there's little, if any room, for thinking; for the long-term; for the creative.
It's the naive culture of the market taken to an absurd extreme: the old economists' notion of utility. By itself, utility is deeply insightful. It lets us understand decision-making and the microstructure of value creation in powerful ways.
But it's no basis for a society, or a culture. The useful, too often, is the banal. Strip-malls, freeways, suburbs, fast food, sitcoms - all these things are useful; but they're also deeply banal.
What's "useful" to the too often myopic and narrow discussions that happen in boardrooms has deep, pervasive hidden costs; in America, these are the death of social and cultural capital. Put another way, usefulness is the enemy of creativity.
And, ultimately, it is creativity that is going to be the single source of tomorrow's strategic advantage. Utility is the enemy of strategy in a world where coordination is cheap; a world where the cost of bringing new products and service to market is melting, where global hypercompetition is accelerating, where global supply chains can be accessed and reconfigured in hours - not years.
The shift to this world - what I call the post-network economy - is why innovation is becoming both the single reason for firms in Europe and the US to exist; and why innovation seems, today, more difficult, confusing, and costly than ever.
It's not just that focusing so heavily on the useful makes America a deeply, inescapably boring
place to be; it's also that the last hundred years of American business have been about building structures to make myopically focusing on near-term utility as efficient as possible. It's no surprise, then, that America finds itself confronted by a gap in innovative capacity: usefulness, too, has its costs.
More to the point: should we see the new world of micromedia as a limited resource; a commons, like Hyde Park, or a fishery? Are we really having externalities on each other when we blog, podcast, and vlog?
I think Seth's post is this kind of misuse of economics. The genius of micromedia is that it blows apart the notion of distribution of a scarce resource. The whole point is that attention is no longer a commons; now, it's about individual expectations and preferences.
Attention is only a commons when distribution is scarce; that's when I end up having to share space with Nascar fans, militarists, and religious fundamentalists. That's essentially how Fox News, cheezy Hollywood flicks, and advertorials happen. That's
when other people tread on my attention; people I wouldn't want to get within shouting distance of in real life. But in a mass media world, we literally have to share the same space.
And this is the heart of the problem. Too often in America we use the tools of economics and the language of the market to try and understand everything. But these tools require care and knowledge, like a surgeon's scalpel. They also require other tools, to guide them, just like a surgeon does.
Unsusrprisngly, we end up misunderstanding and misusing them, and reaching conclusions that are valid in the short term, but completely, obviously, totally unsustainable, because their hidden costs are far greater than their obvious benefits - and the result, too often is the banal; strip malls, freeways, Wal-Mart.
Does it really take a PhD in economics to understand that strip malls and discounters kill the social and the cultural dead, or that Wal-Mart's strategy is built around essentially being subsidized by the consumer (viz, by not paying even the most basic of benefits)? How is it possible that an entire nation can't see what's under its nose?
For the same reason that Seth thinks we're littering an attention "commons" when we blog - we've been fooled by thinking too narrowly, because the language of the market and the concepts of economics, used without care, limit our vision: we've been fooled by economics.
Monday, March 13, 2006
Europe vs Innovation - Counterpoint
I couldn't disagree more with M's post below. It's a good argument, but it misses very real sources of value creation.
In a sense, it's the standard (Milton, not Tom) Friedmanite argument about why Europe "doesn't innovate". Is that really true?
At a simple level, yes. Europe needs structures which create more liquid markets for entrepreneurship, sure. But that's a very small part of the next great economic game, truth be told; and Eurocrats are working to build them, in their own ponderous way.
But to focus solely on entrepreneurship is to miss the bigger picture. I think Europe is poised to be the world's next fountain of innovation; far more so than the US. Here's why.
Europe has two huge capital stocks that no one else in the world does: social and cultural capital. These are the fundamental drivers behind the innovation clusters M talks about
Now, measures like GDP don't capture the value created by these capital stocks because, in Europe, social + cultural capital = creative industries; the goods in these industries are difficult to protect, and so rents are appropriated, most often, by people outside Europe. Europe's challenge, then, is to capture a share of the value it's innovative capacity creates.
Leave aside, for a second, the fact that living in the States is, by any realistic measure of social or cultural value, deeply inferior; leave aside for a second the fact that the Friedmanite argument completely misses the fact that markets can't solve public goods problems like healthcare, and so...welll...Americans die because they're poor and sick.
Let's focus on a more concrete, less emotional argument. The bigger point I want to make is that the Friedmanite argument misses the fact that markets, often, kill culture and the social dead.
Put another way, the simple fact is that the world's cultural innovations are invented in Europe, and diffuse outwards from there. Europe is still the world's media, fashion, art, culture epicenter.
Just think about the wasteland the American "market" for media - really, a collection of monopolistic markets - has created; contrast it with, I don't know, the Beeb, the CBC, RAI, etc. That's a a very important comparison - because those dynamics are the future of all
Consider how many of Hollywood's great actors and directors aren't American. Consider the fact that Hollywood's blockbusters, for the last ten years, have been essentially European (or Japanese) exports. Consider how many great fashion designers are American (no, Ralph Lauren and P Diddy don't count). Consider the fact that reality TV - the present and future of TV - is a European export.
The point is simple: knocking Europe is to completely miss the reason people love to live there.
Yes, M's argument is right in one respect. America is a giant market. But that's all
it is - nothing more.
Is that what India and China want to be? Are they willing to pay the price America is paying - a society fraying at the seams? Anti cultures, where the life revolves solely around consumption and production? An economy where the market is chewing up and spitting out every
form of capital, in the insatiable quest for near-term returns, and so the center can't hold?
This is a very real economic point. It's not mine alone. In fact, you might be surprised to find out the much of it is found in Zingales and Rajan's phenomenal Saving Capitalism From the Capitalists - two finance profs at the Chicago GSB, the erstwhile high church of market driven innovation.
The point is that Europe is more than a just a market - it has societies and cultures which are deeply distinct (and often in opposition to) the market.
In fact, if you read the tea leaves a little bit, it becomes fairly obvious why this valuable: this is going to be the only real source of advantage in a world of hypercommoditized products - mass produced with little love or emotion in India and China. Who else is going to imbue these products with meaning, create experiences, etc?
Make no mistake. It is this redefinition of consumption that is the next wave of innovation. Engineering and rationalism have their day; the friction has been sucked out of global supply chains. Innovation 2.0 is squarely, fundamentally about social and cultural capital.
America isn't losing it's innovation advantage because it lacks scientists or engineers. By any measure, it still leads the world by an enormous, tremendous margin in scientific output.
America is losing it's innovation advantage for a far more elemental reason - one so simple, and antithetical to markets, Americans can't really see it, much less discuss it. Because America has robbed Peter to pay Paul - mortgaged it's social and cultural capital for less durable, less valuable financial capital - it is less and less able to innovate in a world, where, suddenly, the economic is deeply enmeshed in the social, the cultural - and the creative.
At heart, that's the source of Europe's genius: it is, fundamentally, the most creative place in the world.