The Opinion Pages
Hillary, Jeb, Facebook and Disorder
MAY 20, 2015
Thomas L. Friedman
For a presidential campaign that has started so early, it’s striking how little most of the candidates want to engage with major issues of the day, let alone the future. Hillary Clinton won’t take a clear stand on two big issues she helped to negotiate as secretary of state: the free-trade deal with Pacific nations and the nuclear deal with Iran. Jeb Bush’s campaign seems stuck on whether he is or is not his brother’s keeper. Marco Rubio was for comprehensive immigration reform before he was against it. While Senators Rand Paul and Bernie Sanders are motivated by clear ideologies, the others, so far, evince much more compelling ambitions to be president than compelling reasons for why they should be.
That can’t last. Just follow the headlines. We’re in the middle of some huge disruptive inflections in technology, the labor market and geopolitics that will raise fundamental questions about the future of work and the social contracts between governments and their people and employers and employees. These will all erupt in the next presidency.
What are the signs of that? Well, my candidate for best lead paragraph on a news article so far this year goes to Tom Goodwin, an executive at Havas Media, whose essay March 3 on Techcrunch.com began:
“Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.”
There sure is. We’re at the start of a major shift on the question of what’s worth owning. What all of the above companies have in common is that they have either created trust platforms that match supply and demand for things people never thought of supplying: a spare bedroom in their home or a seat in their car or a commercial link between a small retailer in North Dakota and a small manufacturer in China. Or they are behavioral platforms that spin off extremely valuable data for retailers and advertisers or they are behavioral platforms on which ordinary people can generate reputations — for driving, hosting or any skill you can imagine — and then market themselves globally.
This is a result of the exponential growth in computing power, storage, networking, sensors and software generation and interoperability, which is allowing us to both gather massive amounts of data and apply software to that data to see patterns at a speed and scope unknown before. And it is taking friction out of so many things at once: from hailing a cab to reserving a room in someone’s home in Timbuktu to buying groceries to learning from anyone anywhere to designing an airplane part on a 3-D printer in a week instead of six months. Complexity is becoming free.
A recent study by the Oxford Martin School concluded that 47 percent of U.S. jobs are at high risk of being taken by smart machines and software in the next two decades. And what is interesting, notes James Manyika, a director of the McKinsey Global Institute and co-author of “No Ordinary Disruption,” is that, contrary to expectations, “knowledge workers at the middle and the top” may be more threatened than those doing physical work. For example, The Associated Press now uses computers, not reporters, to generate more than 3,000 financial reports per quarter. This can free up workers to do more creative work, but they have to be trained for it.
On geopolitics, we still have great power rivalries, but the most relevant divide in the world will no longer be East-West, capitalist-communist. It will be the World of Order versus the World of Disorder, as environmental, sectarian and economic pressures are pulverizing weak and failed states. Every day now you read about people fleeing the World of Disorder for the World of Order. Rohingyas, a mostly Muslim group, from Myanmar and Bangladesh are trying to get into Thailand and Malaysia; Africans and Arabs are trying to cross the Mediterranean to Europe; Central American parents have sent thousands of their kids to the United States. Israel’s government has started sending letters to 45,000 Eritrean and Sudanese refugees — who walked, rode and sailed to Israel in search of order and work — telling them they have 30 days to accept $3,500 in cash and a one-way ticket home or to an unnamed third country in Africa or face prison, The Washington Post reported last week. Last year, the U.N.’s refugee agency said there are more displaced people worldwide — some 50 million — than at anytime since World War II.
But here’s the rub: We don’t know what to do. We used to rely on empires, colonizers and dictators to control a lot of these places, but we’re now in a post-imperial, post-colonial and, in many places, post-autocratic age. No one wants to touch these disorderly zones because all you win is a bill. And most are incapable of democratic self-governance. Who will control these areas? What if the answer is nobody? It will be one of the big leadership challenges of the next decade.
So, to paraphrase Trotsky once more: Our presidential candidates may not be interested in talking seriously about the future yet, but the future will be interested in talking to them.
The Battle Is For The Customer Interface
Mar 3, 2015
by Tom Goodwin
Editor’s note: Tom Goodwin is senior vice president of strategy and innovation at Havas Media.
Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.
Since the Industrial Revolution, the world has developed complex supply chains, from designers to manufacturers, from distributors to importers, wholesalers and retailers, it’s what allowed billions of products to be made, shipped, bought and enjoyed in all corners of the world. In recent times the power of the Internet, especially the mobile phone, has unleashed a movement that’s rapidly destroying these layers and moving power to new places.
The Internet is the most powerful mechanism we can imagine to match perfectly individuals that need something, and people with something to offer. The moment started slowly by reducing complexity and removing the middle layer in the late 1990s. From insurance to early PC makers like Dell to travel agents, this time seemed to be an age where “direct” became a desirable moniker. This time seemed to favor scale and efficiency over service or brand, for commodities like insurance cover or processing power, the overheads of sales, marketing and retail footprint were stripped away.
By 2015 things changed. The balance of power between the different service layers is a jostle for control. Price-comparison sites first seemed to provide welcome traffic to airlines before airlines tried and failed to starve them of their business and promoted their own apps and websites as the preferred route. But it was too late. Services like Ocado once offered a symbiotic relationship with supermarkets, yet now supermarkets fear the power that such companies get when they get closer to the customer. In this age, the customer interface is everything. There are two approaches.
Full Stack Companies
Full stack companies like Tesla, Warby Parker, BuzzFeed, Nest or Harry’s seek to ensure control by owning all layers. From R&D to marketing, from distribution to sales, these companies do it all. It’s a great way to keep profit in the family, yet it’s harder to scale and build.
The Interface Owners
The new breed of companies are the fastest-growing in history. Uber, Instacart, Alibaba, Airbnb, Seamless, Twitter, WhatsApp, Facebook, Google: These companies are indescribably thin layers that sit on top of vast supply systems ( where the costs are) and interface with a huge number of people ( where the money is). There is no better business to be in. The New York Times needs to write, fact check, buy paper, print and distribute newspapers to get their ad money. Facebook provides a platform for us to write our own content, and Twitter monetizes the front page of newspapers, which happens to now be the Twitter feed.
Our relationships are no longer with the service providers. Our mobile operators seem like dumb data pipes while WhatsApp provides the services we value and can monetize our attention.
The Interface Is Where the Profit Is
The interface layer is where all the value and profit is. Withings scales can cost five times than other weighing solutions because the addition of an app makes it smart health management, not just weight measurement.
Phillips Hue lighting can make 1,000 times more profit than a colored light bulb because it’s a home emotion system. Sonos beats any other music system I’ve tried because the experience of music while using it is delightful.
The value is in the software interface, not the products. It’s not just the smart home. Uber provides average cars in a premium way; Seamless makes the most disgusting of greasy kebab joints appealing and makes its margin from both sides. iTunes for many years took virtually all the profit made in the entire music industry by being just the thin software between the hard work making tunes and the money selling them.
Big Battles For the Customer Interface
The Internet age means building things is nothing other than code. We’re going to see a non-stop battle to leap ahead of each other. And also get more wide, Twitter may have started out as a microblogging platform, but it’s now aiming to be a way to exploit its audience to distribute TV content. Facebook’s attempts with news content now make it a news channel and thanks to Autoplay video, soon a way to watch TV content. Snapchat’s discovery features turned the IM platform into a way to consume TV content.
[So it all comes back to TV?]
In the modern age, having icons on the homepage is the most valuable real estate in the world, and trust is the most important asset. If you have that, you’ve a license to print money until someone pushes you out of the way. So the question becomes, what are you going to do to stay there or get there? And once there, how do you exploit it?