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Rent-seeking

The Exponent podcast is back! And there’s a lot of news regarding pressure to change existing App Store pricing models.

it seems incredibly worrisome to me anytime any company predicates its growth story on rent-seeking: it’s not that the growth isn’t real, but rather that the pursuit is corrosive on whatever it was that made the company great in the first place. That is a particularly large concern for Apple: the company has always succeeded by being the best; how does the company maintain that edge when its executives are more concerned with harvesting profits from other companies’ innovations?

via Stratechery and Exponent

Plus, after shipping Fortnite outside of the Google Play Store, Epic Games is moving in on Steam with a new game store and taking a smaller cut of sales.

Developers receive 88% of revenue. There are no tiers or thresholds. Epic takes 12%. And if you’re using Unreal Engine, Epic will cover the 5% engine royalty for sales on the Epic Games store, out of Epic’s 12%.

via Unreal Engine Blog

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Collapsing Context

Does Jaron Lanier follow blogs? Where does he get his news? How does he learn about Meltdown/Spectre?

 

Word of mouth was the original form of communication. Before there were books, people could only tell stories to share information. The collective hive mind of civilization would do their best to spread knowledge equally from one person to the next. Verification of stories could only be carried out collectively as groups of people could ensure what they believe was true. One could add Individual color a story to show creativity but ultimately lead to deviations from the original idea.

Fast forward to books. Once we mastered the skill of preserving information in physical objects the amount of our collective knowledge exploded. We could remember things across generations, and even without coming into contact with the person or people who first transcribed their ideas. We could pull from philosophers, physicists, mathematicians, composers, playwrights, and doctors to develop deeper ideas and advance our understanding.

What is the hive mind in the world of books? It was still among the people reading these works who pulled from their own experiences and created their own interpretations. Remixing their learnings into new forms of intelligence.

Today is another progression. We go beyond having all the knowledge in the world documented and at our fingertips, to peering into the minds of everyone on the internet. Social media, like Twitter, amplify ideas only for an instant, as the next thing comes along and yanks at our attention.

(This is no different than before when we spread stories across the world, or documented our understanding of nature.)

We go where the thought leaders go. And when rapid reactions and quick wit are incentivized, we miss out on the deep thinking required to keep progressing forward. As Lanier mentions, where are all the Woodward and Bernstein’s these days? Deep investigative journalism is becoming a thing of the past. Instead our big stories take the form of the aggregate. Pulling the voices of all perspectives involved. And taking down multiple people.

Continuing the thought, how can one create new ideas and seek blue oceans? Part of the success of the web (an any technology for that matter) is the externalities spawning new industries out of the original innovation. Like cryptography, it takes a lot of work to come up with a solution, but once public, the idea is easily verified. It’s the “why didn’t I think of that moment” you get when watching Shark Tank.

So how can we do it? Why is music from 90s and 00s so similar in sound? Are we bound to digitally rehash all of history? To find out, lets think about some of the new ideas stemming from web 2.0.

Well one more digression. To do so, lets start with some digital rehashes: Airbnb -> hotels. Lyft -> taxis. Wikipedia -> Encyclopedia. Ebay -> Thrift store. Amazon -> Bookstore, grocerystore, restauraunt brick and mortar. These are all hugely successful companies that replaced what existed before. I think what’s missing from Lanier’s manifesto is the added value web 2.0 tech brings to previous implementations. However, he does highlight what’s lost in the transformation. (there is more to talk about here, but I’m getting off track)

What is new thought. Is a review of a book just adding to the noise? How can we ever learn if we do not discuss our thoughts and opinions with others? There is value to rehashing work if the idea can stand for something greater. A new version of Unix? Ok sure. But openly available for all to improve and understand? This is novel and moves society forward. Lanier is concerned with the side effects of open culture and I agree with him on the aspect of sustainability (via employment, how do you make a living working on open source?), but how do we build cathedrals if we don’t have the tools?

Part of Lanier’s concern stems from the abstraction of humankind. Kevin Kelly’s one book theory, for example. And it is important to maintain human individuality and creativity. So how do we keep from abstracting the person behind the creation as we move to an aggregated world? People no longer know which studio produces a movie or TV show, unless it’s from Netflix. Netflix advertises their creations, and everyone else’s are abstracted to a title, image, and caption.

Context Collapse

There is a recent episode of the Ezra Klein Show with Lanier. Instigated by the release of Lanier’s new book, the two discuss all sorts of things including VR, music, Facebook, blogs, and podcasts. The most intriguing thread was on the topic of social media’s influence in collapsing context of the things people create. They didn’t know who coined the term, but it seems to have been either danah boyd or Michael Wesch (see below), although it might as well have been Lanier.

The basic idea is this (as nicely described by Joel on Software):

Here’s what happened with the 140 characters. You would start out having some kind of complicated thought. “Ya know, dogs are great and all? I love dogs! But sometimes they can be a little bit too friendly. They can get excited and jump on little kids and scare the bejesus out of them. They wag their tails so hard they knock things over. (PS not Huskies! Huskies are the cats of the dog world!)”

Ok, so now you try to post that on Twitter. And you edit and edit and you finally get it down to something that fits: “Dogs can be too friendly!”

All the nuance is lost. And this is where things go wrong. “@spolsky what about huskies? #dontforgethuskies”

Ten minutes later, “Boycott @stackoverflow. @spolsky proves again that tech bros hate huskies. #shame”

By the time you get off the plane in Africa you’re on the international pariah list and your @replies are full of people accusing you of throwing puppies out of moving cars for profit.

The context for Joel’s thought is his decision to give up Facebook and Twitter for 2018. (Isn’t it odd how things come in threes? Reading Lanier, Context Collapse, Joel on Facebook & Twitter). His reasons for doing so are exactly what Klein and Lanier discuss in the podcast. You just lose the human connection when everything we say and do is mashed up, chomped into a sound bite, and thrown around far outside the initial context for the idea.

And I realize I’m constantly doing that know. I haven’t quite figured out how to include quotes and references to others when developing new thoughts and creating new things. I have to keep exploring. Which leads to…

A basis for further understanding

A quick search lead me to this post from danah boyd on coining context collapse. danah boyd talked about the term back in 2013, referencing her thesis from 2002. So the idea, while not new, was new to me. This topic is a rabbit hole, and I have just scratched the surface. I need to go off to read, watch, and listen. I will return soon.

from danah:

From Michael Wesch:

P.S.

I’ve fallen victim just now. I scoured the web for an hour following links to uncover new and interesting things to read. Then I took it all out of the context I was in and distilled my findings into a nice tidy list. I’m grappling with how the onslaught of Ben Thompson’s Aggregation Theory can mesh with avoiding context collapse via boyd/Lanier (the three should do a podcast together). Does pulling together sources and finding key themes inherently strip the human side of what people create? Or are we bound to keep mashing up ideas. Certainly all new things come from the history that preceded, but how do we balance this growing from this influence with remembering where we came from?

To do research, you take all the mind space of the internet open 100 tabs, make some progress, then save it across all services to pick up again tomorrow. Just with this topic alone, I scattered material to YouTube, Kindle, Instapaper, iBooks, and OneNote. What in the world!? How do people keep any semblance of a train of thought when the best technologies are designed to keep us stretched in multiple directions. Where does the context remain after distilling your work into buckets and silos? This frustrates me, With all the learning one can do on the internet, why is it so unnatural and inhuman? What if the internet was set up more like college, where thoughts and ideas are shared amongst new learners and experts, instead of like a kindergarten classroom where things may be haphazardly thrown everywhere with no sense of where they came from?

There is more to this thread, but I need to dig deeper. I have my materials and my thoughts. Now I just need to stay focused. Keep my mental state and remember the context of where it all began.

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Articles Technology

Catching up on Stratechery

My Instapaper reading list was piling up. Nearly half of the articles were from Stratechery, so I decided to knock them all out at once (well, over the course of a day or two).

https://stratechery.com/2017/goodbye-gatekeepers/

From Weinstein and movies to the NYTimes and YouTube

In a world where the default news source is the Facebook News Feed, the New York Times is breaking out of the inevitable modularization and commodification entailed in supplying the “news” to the feed. That, in turn, requires building a direct relationship with customers: they are the ones in charge, not the gatekeepers of old — even they must now go direct.

YouTube produces an astounding amount of fame.

YouTube represents something else that is just as important: the complete lack of gatekeepers. Google CEO Sundar Pichai said on an earnings’ call earlier this year that “Every single day, over 1,000 creators reached the milestone of having 1,000 channel subscribers.” That is an astounding number in its own right; what is even more remarkable is that while Hollywood has only ~3,500 acting slots a year (including all movies, not just major studios), YouTube creates 100 times as many “stars” over the same time period.

https://stratechery.com/2017/tech-goes-to-washington/

Did he say 330 million?

https://stratechery.com/2017/why-facebook-shouldnt-be-allowed-to-buy-tbh/

Requiring Facebook to offer its social graph to any would-be competitor as a condition of acquiring tbh would be a good outcome; unfortunately, it is perhaps the most unlikely, given the FTC’s commitment to unfettered privacy (without a consideration of the impact on competition).

https://stratechery.com/2017/stitch-fix-and-the-senate/

Negative churn

existing customers were increasing spend by more than the revenue lost by those leaving

https://stratechery.com/2017/pro-neutrality-anti-title-ii/

The most famous example of an ISP acting badly was a company called Madison River Communication which, in 2005, blocked ports used for Voice over Internet Protocol (VoIP) services, presumably to prop up their own alternative; it remains the canonical violation of net neutrality. It was also a short-lived one: Vonage quickly complained to the FCC, which quickly obtained a consent decree that included a nominal fine and guarantee from Madison River Communications that they would not block such services again. They did not, and no other ISP has tried to do the same; the reasoning is straightforward: foreclosing a service that competes with an ISP’s own service is a clear antitrust violation. In other words, there are already regulations in place to deal with this behavior, and the limited evidence we have suggests it works.

https://stratechery.com/2017/free-daily-update-light-touch-cable-and-dsl-the-broadband-tradeoff-the-importance-of-antitrust/

The equation is straightforward: there is wide consensus amongst economists of all political stripes that regulation imposes costs on both innovation and society through regulatory capture; I would prefer to avoid bearing that cost until we are certain it is necessary, particularly since the evidence to date suggests after-the-fact regulation is working.

The question that must be grappled with, though, is whether or not the Internet is “done.” By that I mean that today’s bandwidth is all we all never need, which means we can risk chilling investment through prophylactic regulation and the elimination of price signals that may spur infrastructure build-out (that being the elimination of paid prioritization).

If we are “done”, then the potential harm of a Title II reclassification is much lower; sure, ISPs will have to do more paperwork, but honestly, they’re just a bunch of mean monopolists anyways, right? Best to get laws in place to preserve what we have.

But what if we aren’t done? What if virtual reality with dual 8k displays actually becomes something meaningful? What if those imagined remote medicine applications are actually developed? What if the Internet of Things moves beyond this messy experimentation phase and into real-time value generation, not just in the home but in all kinds of unimagined commercial applications? I certainly hope we will have the bandwidth to support all of that!

The problem with regulating broadband in this way, though, is that the definition of acceptable broadband is much more of a moving target. As Marc Andreessen memorably put it on Twitter:
@mattyglesias @binarybits Because sewers and electricity are far more static markets than broadband. You don’t shit 10x as much every 3 yrs.
— Marc Andreessen (@pmarca) February 23, 2014

https://stratechery.com/2017/the-pollyannish-assumption/

Documenting why and how these platforms have power has, in many respects, been the ultimate theme of Stratechery over the last four-and-a-half year: this is a call to exercise it, in part, and a request to not, in another. There is a line: what is broadly deemed unacceptable, and what is still under dispute; the responsibility of these new powers that be is to actively search out the former, and keep their hands — and algorithms and policies — off the latter. Said French Revolution offers hints at fates if this all goes wrong.

https://stratechery.com/2017/disney-and-fox/

This is a remarkable look at how Disney could leverage 21st Century Fox to compete against Netflix in the years ahead. One of the most insightful articles with a clear line of how we could get to a future where Netflix and Disney are massive content aggregators.

The best sort of acquisitions, though, are best described by the famous Wayne Gretzky admonition, “Skate to where the puck is going, not where it has been”; these are acquisitions that don’t necessarily make perfect sense in the present but place the acquirer in a far better position going forward: think Google and YouTube, Facebook and Instagram, or Disney’s own acquisition of Capital Cities (which included ESPN).

 

The problem now is obvious: Netflix wasn’t simply a customer for Disney’s content, the company was also a competitor for Disney’s far more important and lucrative customer — cable TV. And, over the next five years, as more and more cable TV customers either cut the cord or, more critically, never got cable in the first place, happy to let Netflix fulfill their TV needs, Disney was facing declines in a business it assumed would grow forever.

 

… differentiated content is Disney’s core competency, as demonstrated by its ability to extract profits from cable companies.

 

   Consider the comparison in terms of BATNA (Best Alternative to a Negotiated Agreement): for distributors the alternative to not carrying ESPN was losing a huge number of customers who cared about seeing live sports; that’s not much of an alternative! Netflix, on the other hand, can — and is! — going straight to creators for content that viewers can watch instead of whatever Disney may choose to withhold if Netflix’s price is unsatisfactory.
Clearly it’s working: Netflix isn’t simply adding customers, it is raising prices at the same time, the surest sign of market power.
Therefore, the only way for Disney to avoid commoditization is to itself go vertical and connect directly with customers

Will it go through?

If one starts with a static view of the world as it is at the end of 2017, then there may be some minor antitrust concerns, but probably nothing that would stop the deal. Disney might have to divest a cable channel or two (the company’s power over distributors would be even stronger; basically the opposite of the some of the concerns that halted the Comcast acquisition of Time Warner), and potentially be limited in its ability to make operational decisions about Hulu (Disney would have a controlling stake after the merger; Comcast was similarly restricted after acquiring NBC Universal, but there the concern was more about Comcast’s conflict of interest with regards to its cable TV business competing with Hulu). The Hulu point is interesting in its own right: Disney could choose to focus its streaming efforts there instead of building its own service, but I suspect it would rather own it all.

That’s it for now. Keep reading. Keep connecting.