The creeping divorce of interest and capital

There always seems to be big events in August. The level of gold has hit its record levels and sits smugly in vaults around the world. The high prices that have been paid for gold are a signal that there are no better investment homes for the money. The volatility we’ve seen teases out and amplifies the fundamental (and often balancing) characteristics of our nature. This has been a big display of capitalism in action.

Capitalism suggests that capital and other factors of production, combined with the wisdom of crowds will find the most efficient utilization. It is the question of how the wisdom of crowds allocates the capital that we will now consider. Let’s think about what the typical private investment looks like: Overwhelmingly this is likely to be an investment, either advised or self-advised, into the stock market. Would it be fair to argue that these investors are bound only by their capital with these companies? If this is true then the ‘investment’ is simply a purchase of securities based on some belief that the value of the company will appreciate. This could actually already be defined as speculation rather than investment – perhaps this is actually the blurry distinction between the two? If the only contribution is capital, then surely this should be recognized as speculation rather than investment. An increasingly capitalist system would see a transition from passive investments to an arrangement where more is demanded from the investor in terms of value added factors. Rarely is the question asked  “what comes with your money”?

New start-ups begin with partnerships that very often demand a higher level of participation than simply capital contribution. Examples of this are ‘angel investments’ and a large part of venture capital. Beyond these stages of company formation, all further capital infused usually comes without representation or other benefits (ignoring voting rights since they arguably represent a governance control rather than a form of value added contribution). Many start-ups do seek value added money infusions and the popular BBC television programme called the ‘Dragons Den’ does show aspects of competition between the investors beyond monetary investment. However, the extreme world in which all investors are forced to participate in their investments could be case of overkill. Like most solutions, the answer lies somewhere in the balanced middle.

Since the major transport (canal and rail), industrial (steel and mass production) and technological (micro-chip followed by dotcom) revolutions , we have moved towards a model of a divorce between people and their capital. The owners of the capital have decreased their participation in the investment and now see their function as that of laying their wager only. Is it fair to say that this is an abdication of responsibility? I fear the ease at which money may be perceived to be made will reduce the overall effectiveness and net output of our current economic paradigm. Large swings in wealth occur on the stock market but does this change in the wealth of the investor represent a change in the value that either the winner or loser is personally bringing to people? Perhaps my goal here is to  encourage an understanding of what an ‘investment’ reasonably ought to entitle and to call for a reality based appreciation of the value of  contributions made by investing.

I do believe that ultimately the Technium leads us on its inevitable arc over the long term but here and now in the shorter term, there’s plenty of time for deviance. Capitalism is not the end but a step towards a closer alignment between dedication and capital.

Progress comes in long term cycles

Mania’s always indicate some revolutionary change to the technium. Revolutions are a bit like cosmic explosions in that they leave us with an abundance supply of core fundamental stuff from which we can use and make more complex stuff which is helpful in making yet more complex stuff. Yet these boom and bust cycles that very often are based on a core infrastructure leave long term capacity for new technologies to build with.

The ‘canal mania’ in Great Britain in the 1790’s became a frenzy of joining any two sources of water. There was little standardization in dimensions or routes of the waterways and this poor overall coordination and synchronization was also symptomatic of route planning of the ‘railway mania’ of the 1840’s. Following the Carnegie Steel revolution in the 1870’s,the 1900’s was the age of oil and the automobile all made possible following in the new age of mass production initiated with the Model T Ford in 1908. It is important to recognize that this age didn’t end with The Great Depression, begun in 1929. This did mark a shift in the economic, political and social paradigm to this new age. The extensive road and electric supply this left the USA was of enormous benefit during WWII and was the platform from which the now mature economy was able to build from and upon. This successful economy was driven by an enormous domestic mass consumption market leading to the ensuing years of complete global dominance. The depression years were barren, but during this time the new technologies were waiting for the time they could be deployed en-masse.

The Dot Com bust at the turn of the century left us using only a few percent of the total fiber optic cable that had been laid. However, in almost all these examples, it takes a crash before the new infrastructure to become deployed into society and our lives. It is almost as if technology development is faster than our acceptance of it, and this can be argued since the companies developing them are doing so for economic reasons, whereas society at large do not have such a powerful motive.

If you could in the 1960’S buy five cars for the price of one computer and in the 1990’s twenty computers for the price of one car we can see how the technology of the previous incumbent revolution becomes ubiquitous and the focus is on the next new leap.

The internet is an infrastructure that is supporting a growing family of new infrastructures that themselves support businesses and service. Over the coming decades it will be important to drop the label of ‘internet company’. After all any company that used the road network built in the US during the first half of the 20th century would not be labeled a product of the boom that caused  Great Depression.

To be bullish on the future implicitly implies and is implied by being bullish on tech. The new tech.

You can’t make decent content if you’re in a suit

Following a very interesting talk on ‘Social Media’ at the British Chambers of Commerce, the après was fascinating in its actual focus. It seems the whole world wants to get information out. Every business recognizes that they need to be involved in social media and needs to get their message out. There were repeated questions in search of examples of winning social media strategies which may be cloned. Everyone wants new ways of creating interesting Twitter fodder and YouTube fun. The stampede to create content is underway and in full charge.

When large groups of non-media companies are discussing creating a Twitter-post agenda then something doesn’t quite feel right. Energy and focus on getting information out may actually turn out to be like effort spent alchemizing.

Would companies be better off reversing the flow and try to seek information? By this I mean ideas, advice and guidance for better products, streamlining of services and enhancing user experience? At least one sub-goal of any company is to make better products or services to enhance future profitability. What better is there to beginning to achieve this than to seek opinions from the users or potential users.

Car companies should focus on building better cars not blogs. How many people buy a Blue car because the Blue Company has the best blog? Of course companies need to produce quality, well presented information, but if they are competing to win attention to satisfy some measure or sales metric then it becomes hollow and frustrating – especially when it serves no purpose and the content is clearly sub-par.

It does become a rather fruitless struggle for non-media companies to compete in the content business. Social media is not new. Word of mouth has been around since one came out of the other, but only recently has the grandiose ambition of industrial companies winning attention for more than their purpose of marketing become common practice.

I’m not arguing against content, I’m just arguing on who should produce it. Data is for companies to produce, but surely content should be from the fans. Wise companies will listen to their fans and detractors. Any efficient economy or company will have resources seek their most productive niche. The best content providers shouldn’t be wasted on making a blog for the Blue Company and neither should the Blue Company try to dominate our time to just sit on their blogs. They have to serve a purpose. You really can’t make content worthy of attention while you’re wearing a suit. Neither should you try.

 

Googled: End of net neutrality by stealth

Google will soon begin to pre-load a page which their algorithm deems the most likely you will choose from their search results. This is a great idea and will save time for everyone.

However this does come with theoretically embedded risks to a principal Google believe in. In particular net neutrality. If Google control the speed at which sites may be accessed this will have a significant impact on where users go and indeed whether they stay at the site (likely if pre-loaded) or go (likely if not pre-loading and the site is slow to appear).  What if Google began to prioritize pre-loading to those that have paid for it to be? Would this world be net neutral?

Information Revolution

In order to fund renovation in the early 16th century to the St Peter’s Basilica, special pardons of written forgiveness began being sold by priests throughout Germany. Official absolution was found and granted through the purchase of these ‘indulgences’.

A saying attributed to Johann Tetzel, a priest who begun selling these in Germany, says that “As soon as the coin in the coffer rings, the soul from purgatory springs.”

The German priest and Professor of Theology, Martin Luther, aghast when he saw these letters amongst his parishioners in 1517 wrote to his superior and included what became known as his ‘Ninety Five Theses’ in opposition to this practice and other practices of the Catholic Church.

History tells that this writing was also nailed to the door of Luther’s Church door. Several months later the original script, which was written in Latin, was translated into German and printed by a number of printers using the technology that Guttenberg had created to first print the Bible in 1455.

Here the Protestant Reformation and the family tree of a completely new world history was born.

The cost of that picture from Soho

There seems to be a Soho in every trendy corner of the world and of course in these places there’s a lot of hi-tech gadgetry on show as part of the regalia. We had a really nice window seat that let you look right up the street and into the restaurants along it. Up the street walked Elvis and as he approached the restaurant right across from where we sitting it was hard not to notice a guest usher him in and tip him well to sing to his friends. Elvis did his rocked his pelvis as the friends all clapped and cheered all except the usher who sat uncomfortably to record the stunt on his phone. The big question this poses is can we have fun without taking a picture to prove it? That picture will remind people of the fun Saturday in Soho but from one person’s lens it will be forever a missed opportunity. Though, maybe it was a sacrifice.

The tech boardroom: Now and then

Online content is exploding and traditional media and other start-ups still haven’t found a successful self-sustaining business model. There are cycles of motivation for content production, originally it was for communication but following the industrial revolution and the need to sell surplus production, advertising as an industry was born.

It has been claimed that Popeye was brought to life to relieve a persistent spinach surplus and to support the spinach farmers during the late 1920’s. Here a self-fueling media production was able to carry a message and grow.  The same was true with soap operas and a growing proportion of content is coming from the product providers directly.

New York venture capitalist Fred Wilson comments that recent boardroom themes are focused on “driving repeat usage and retention” referring to sites which are trying to move from traffic conduits to sticky destinations. There’s a real battle for attention being fought out.

This does however beg us to ask if this useful to anyone. From recent valuations of some high-profile start-ups from California to China, everyone wants a piece of social. From angel capital to venture capital it’s all being pumped into anything with a link to web social. The other key factors of production are being diverted this way too in man hours and productivity. It’s impossible to know if these resources would have been better in another scientific field but then maybe they’re just assembling the building blocks of a yet unimaginable innovation. After all, who’d have first imagined that silicon would have led to this?

The Economist also asks if we’re living in a bubble. This is at least some recognition that fear is growing, but the other vital ingredient for bubbles is exuberance and this seems only to be increasing. The current crop of tech top-dogs are now well established with functioning business models, cash flow and even profit, unlike their counterparts of the dot com generation. Perhaps the reason for this difference is the cost of starting-up. In the 90’s the cost of existing on the web has dropped from millions to a few thousand dollars now. No start-up now would host their own servers and soon we may all well be living in the cloud anyway. Now the downside to having-a-go may not be leveraged bankruptcy. There is a real democratization and real freedom for anyone to achieve. However the other major difference between then and now is the predominant underlying revenue generating model. The Dot Com boom was filled with companies like WebVan and Boo who were trying to bring real world products to the web. They were attempting e-commerce businesses. The big survivors of this era are companies like eBay and Amazon which understood The Long Tail markets the web would allow; i.e. giving massive reach without the associated costs of inventory.

Now linking this to the daily skirmishes in the boardroom that Fred Wilson discussed, we understand why repeat usage and retention are such important reportable metrics to the tech companies of today. This time around, the businesses are almost entirely dependent on advertising for revenue.

There is no doubt that the market leaders have changed the world and for the better too. As Google and Facebook carry the torch we all follow, it is important to recognize the danger of losing the focus of why users come to you. Boardroom meetings should predominantly be spent focused on what is genuinely useful and that makes things better for users. That’s the job.

Search in 2084

The transmogrification of search to be coded as the most individually relevant begins a very dangerous route towards 1984.

There is a troubling hidden risk that the people who proclaim and defend liberty are blinkered by the immediate gratification of personal relevancy in search which in the long run will have to weaken the foundations of our free society. Enough statistics, especially self-fueling data can lead to the conclusion that some data is neither wanted nor needed. Perhaps data from the opposition party fits here? But then maybe we’ll be shown it doesn’t. We all know that there’s no sound made from a falling tree if there’s no one to hear it.

Perhaps a solution to the question of “Is search going to be what we like?”, and Eli Pariser’s TED presentation “Beware online “filter bubbles”  is to invoke a choice, where personal relevancy can be switched on or off in pure search. Sure, let the personalized adverts hit me as they wish, this seems to be the price to pay for access to the world’s information, but never let us forget where pawning our free right to access information may lead.