- Putin + Erdogan – cosying up to each other with the recent gas deal, but also just copying each other – president and PM switch, leveraging state religion, consolidating power…
- Uber + Spotify – an announcement that got lost in the recent Uber PR fiasco, but fun idea none the less – listen to your playlists in your Uber car! Although completely superfluous and frivolous.
- Evernote + WSJ – Evernote, still the most useful app ever created, is testing out new things – one of them is to get context info from Factiva. Theoretically useful, but not sure in practice
- Tim Cook + Dr Dre – Apple makes a vert anti-Jobs move, with its biggest purchase ever.
- Ello + Threadless – the anti-Facebook announces its plans to make revenue, and it involves selling T-shirts!
- Amazon + Twitch – Amazon buys little known video playing broadcasting network
- Burning Man + Grover Norquist – Grover Norquist goes to Burning Man, in a further sign that, in fact, everyone goes to Burning Man.
- GoPro + Drones – Everyone puts their GoPro on a drone, and GoPro eventually announces that they will just make their own drones.
- Putin + Depardieu – Depardieu, in a foie gras stupor, decides he has had it with French taxes, and gets a Russian passport
- Doritos + Taco Bell – Taco Bell launches the height of consumer innovation – a taco with a Doritos-flavored shell. The Internet loses it.
Technology is not the solution, Bill Gates said in the FT last year. It’s a surprising statement coming from a man who has made his billions pushing Clippy on people, but in the world Gates inhabits now, in terms of the big challenges facing the world, he’s right that technology can only get us so far.
Similarly, Peter Thiel’s VC firm, Founders Fund, famously has as its motto that “We wanted flying cars, instead we got 140 characters”. It’s become a truism to say that most new applications that we get in the world are solving first-world problems, or really a subset of first-world problems, the problems of 20-year males in big cities. Hence, this is why we get new apps like Washio – Uber for laundry.
As much as these apps are easy to make fun of, if we look further ahead in the future, the problem seems set to just become worse. Almost all technological progress we make is creating competition in places where there earlier wasn’t any, is driving returns to capital and is commoditizing what earlier was precious and had value.
The sharing economy is a good example of the latter – commoditizing. On one hand, it seems like a good thing that we are creating value out of earlier unmonetized assets – empty apartments, idle cars, unemployed people. However, given the endless supply of these, the economics are terrible both for the suppliers of the new good and the old one. Looking at e.g. Uber, the supplier of the old good – the taxi driver – gets put out of work due to the cheaper competition that he can’t compete with, and the supplier of the new good – the Uber driver – gets paid very little for his efforts. The only one making additional income is the company, Uber in this case. You therefore end up with a net loss to the economy. For Airbnb, the same logic applies.
Amazon’s Mechanical Turk is a more egregious example. By breaking a task up into tiny pieces, the value put on people’s time can be set extremely low, such as 10 cents/task, regardless of how long it takes.
The other factor of technology is how it creates competition where there was earlier less. Again, this is good in small doses – when breaking up a monopoly, for example. Good examples are Aereo tackling cable companies or Solar City taking on utilities. Certain industries need to be shaken up. But since technology drives returns to capital, and to scale, there is no such thing as a small dose. Globalization, for example, driven by improved communications technology, doesn’t stop until all countries compete for the same resources. Likewise, automation doesn’t stop with blue-collar workers, it is now the white collar workers who face a slow extinction.
I remain an optimist regarding technology futures overall (at least compared to Elon Musk, who now believes we might be summoning the demon with AI), but it’s becoming harder and harder to see how the combination of a growing population, a new economy with less, and less well-paid work, increased competition between and within countries, and governments with unsustainable debts, will work out.
Having recently spent more time in the US than in Asia, I’m finding it fascinating to compare which services are available here in the US compared to Asia.
What we’ve seen over the last years is how easy it is to replicate online services that don’t require infrastructure other than broadband lines, wherever you are in the world. There are even companies for which this is their entire business model (looking at you, Rocket Internet).
In Asia, decent broadband in most places has therefore allowed companies to do things that are pure online, such as sell flight tickets, advertise their brand on social media or market online gaming. However, what we don’t see much of yet is pickup of the services where the online world meets offline, actual products, such as the main sharing economy services Uber and Airbnb and location-based services.
If we look at the location-based services first, Foursquare and other check-in services never took off in Asia. Similarly, Yelp and other recommendation services have not seen any big usage. For these ones, it seems it is not the physical infrastructure that is missing, but rather the human infrastructure. There is probably a lack of trust in the the recommendations of strangers and a distrust of trumpeting one’s location to the world. This will take a long time to change. Airbnb will probably fall on this same lack of trust and habit.
For the Uber and Uber for X services (as detailed very amusingly on Re/code here), however, these seem much more ripe to soon take off. There is no reason why pizzas should be only thing that could be delivered to your house. As this recent article detailed, India’s dabbawallas are a wonder of efficiency in their delivery, that even FedEx is envious of. Motorcycles that navigate crazy traffic is a mainstay of Hanoi/Bangkok/Kuala Lumpur.
Someone recently said that, in order to know what the middle classes will use in a few years, we should look at what rich people are using now. This has been true for going out to restaurants – now an activity for all, and now Uber – personal driver for all. The Asian middle classes are developing rapidly, and there’s no reason why they wouldn’t want what their current rich classes have.
I was disappointed recently when I realized that Zeel, “the Uber for massages” is not available in Washington DC (of course it’s only in LA and Miami). But given Asian audiences love of massages, I would advise them to go to Bangkok next.
Never thought I would say this, but I actually like this piece from Grover Norquist on Reuters. His idea is that Republicans should use the sharing economy to take back the urban demographic from the Democrats. It’s worth reading.
It is not on the strength of the argument that I would advocate looking at the piece – his basic argument is that the sharing economy is created by democrats in the Bay Area, a classic Democratic area, and it will clash with unions, another strongly Democratic group. This sounds like it could be a clash, but it probably won’t happen, since neither the Democrats in California nor the young liberals using Uber and Airbnb would turn against the Democrats in the short term even if Lyft doesn’t get a license in all cities.
The aspects which I find more interesting with the piece is that of the politics of tech. Tech and Silicon Valley were apolitical for a long time, churning out new products and not getting involved in the politics of the Hill. This started to change a few years ago, with armies of Google and Facebook lobbyists descending on DC to lobby for skilled immigration and driverless cars regulation.
Tech and innovation present a new way for Republicans to create a new interesting narrative for themselves. Republicans have for the last few years moved away from their historical role of being the party of intellectual leadership and become the anti-intellectual party instead. The role of defender of innovation on philosophical grounds could be a fruitful path to connect with young voters on a deeper level.
Innovation is tightly linked to free markets, and the lack of unnecessary regulation. We all want to the future where we read a book while being driven to work by our driverless car and get our sandwiches delivered by Amazon Prime Air drones. And with the Democrats being tied down to a lot of status quo-keeping regulation, that future is probably more of a Republican future.
Given the recent Whatsapp acquisition, with its (according to some) crazy valuation, and a recent FT article on crazy valuations of tech stocks, I thought it might be a good time to look at the upcoming batch of potential large tech IPOs, their most recent valuations, and see which ones might be the first ones to list.
- Spotify: Spotify, the Swedish online music streaming service, has made a number of moves recently that hint on an upcoming IPO. Just this week, it acquired the company behind one of its music recommendations algorithm, which was seen as tying up a loose end pre-IPO, and drew up a credit line. It was last year valued at $4bn based on equity sold, but will probably be valued higher when it goes public. Likelihood of 2014 IPO: High.
- Square: Square, also known as Jack Dorsey’s “other” company, has an implied valuation of $5bn, and was earlier rumored to have an IPO this year. It is seeking to make “receipts sexy” (good luck!) and to upend store payments (much needed). Lately, it has been suggested this IPO might not come this year. Likelihood of 2014 IPO: Low.
- Dropbox: Dropbox, the cloud file storage service, just got valued at $10bn (!), so it definitely leads the valuation game of the next bunch. It has a large and growing user base, and the users really like the brand, but it’s hard to justify that price tag for a company with such small barriers to entry. All they have right now is a lead in building an (admittedly strong) consumer brand. There might also be some built-in inertia for users to move once it’s installed on all their devices. Likelihood of 2014 IPO: High.
- Box: The B2B cousin of Dropbox. Also likely to IPO this year. Seen as a rival to Dropbox, both who gets top IPO first and in terms of dominating the cloud. For now, they still focus on different customers, but are likely to overlap at a later stage. Valued at $2bn in December. Likelihood of 2014 IPO: High.
- Uber: Valued at $3.4bn in the fall when Google took a stake, which is huge (Lyft, its fellow car service, is valued at $700 million). Currently solving the problem of getting people from point A to point B, but in the future, might become a platform for solving many other similar day-to-day problems. Has a nice, “Google-like” approach to solving business problems. Expanding rapidly in Asia and everywhere. Has said IPO is still far off. Likelihood of 2014 IPO: Low.
- Weibo: Before posting profits recently, valued at $7bn. After disappointing results, now a perhaps more reasonable, albeit still huge, $5.1bn. Known as “China’s Twitter”, it should theoretically have a huge potential, with the regular Twitter blocked, but its growth has been stalling and users have been moving to WeChat. Needs to IPO soon. Likelihood of 2014 IPO: High.
- Markit: An innovative financial information provider. Competing with Thomson Reuters and Bloomberg. Looking to IPO later this year, with a valuation of $5bn. Revenues of $861 million in 2012, so more established than some of the other companies on this list. Temasek took stake last year. Likelihood of 2014 IPO: High.
- Alibaba: The Chinese ecommerce company will probably be the biggest IPO of them all, with its dominant position in the Chinese ecommerce market, which is forecast to be worth $420bn in 2020. Valued at $153bn. IPO has been rumored to happen for quite a while, and will probably happen this year. Likelihood of 2014 IPO: High.
- Snapchat: Famously turned down Facebook’s $3bn offer last year. No talk of IPO recently. Valued at $2bn now. Likelihood of 2014 IPO: Low.
- Pinterest: The online scrapboard, and now the third biggest social network. Valued at $3.8bn late last year. Not likely to IPO anytime soon, perhaps more likely to be acquired by someone instead. Likelihood of 2014 IPO: Low.
- Airbnb: The sharing economy darling, and a classic Blue Ocean Strategy (leveraging the previously underutilised and zero-valued resource of empty apartments).Valued at $2.5bn last year. No immediate signs of IPO. Likelihood of 2014 IPO: Medium.
- Xiaomi: “China’s Apple.” Valued at $10bn. Has said won’t IPO in 5 years. Likelihood of 2014 IPO: Very low.
- Palantir: The big data/security company. Valued at $9bn. Has mostly stayed under the radar, and might stay that way for the foreseeable future. Likelihood of 2014 IPO: Very low.
Any other one you look forward to? Let me know in the comments or @malcmur.