Category: Innovation

Meet the New Boss…

One of the most persistent self-images of Silicon Valley internet giants is a role as liberators, emancipators, “disintermediators” who’d finally free the creative class from the grips of oligopolistic music labels or duopolistic cable moguls. I chart the rise and fall of the plausibility of that narrative in Chapter 3 of my book. Cory Doctorow strikes another blow at it today:

[T]he competition for Youtube has all but vanished, meaning that they are now essential to any indie artist’s promotion strategy. And now that Youtube doesn’t have to compete with other services for access to artists’ materials, they have stopped offering attractive terms to indies — instead, they’ve become an arm of the big labels, who get to dictate the terms on which their indie competitors will have to do business.

Ah, but don’t worry–antitrust experts assure us that competition is just around the corner, any day now. Some nimble entrepreneur in a garage has the 1 to 3 million servers now deployed by Google, can miraculously access past data on organizing videos, and is just about to get all the current uploaders and viewers to switch to it. The folklore of digital capitalism is a dreamy affair.


Fusion and the Firm

Lockheed Martin claims it is closing in a fusion reactor. Such claims pop up often enough to be dismissed. Yet as the Economist notes Lockheed Martin is asserting that its design could be viable in 10 years rather than previous claims by others which tended to be 30 years. One random, nice thing about being at GA Tech is that when I first read about the claim, I happened to meet a PhD student who was studying nuclear engineering on the campus tram. He confirmed that the approach is known. He was skeptical but agreed it was promising. And that is where the firm comes in. Apparently Lockheed Martin has gone public, because to get the design to production will require the help of folks outside the firm. The researcher, Dr. McGuire, “thinks his design could deliver a 100MW reactor (able to power 80,000 homes) of about 7 metres in diameter, weighing less than 1,000 tonnes. Indeed, smaller versions might fit on a large lorry.” It may be a pipe dream, and with oil on a free fall, investment in new energy sources may seem less attractive. Still, if the idea is percolating in private and public arenas and the payoff is a clean, less expensive, renewable energy source, that would be amazing. I recall just after President Clinton left office and was on Letterman, he said if he were an oil country, he’d be thinking of energy, not oil, as the industry of the the future. Rather smart insight. Seems others are paying attention, but that works too.


Hello Stigler: Google Trusted Stores, Amazon, and Price Discrimination

Hello, Stigler. Matchmaking and advertising are Google’s forte. It has upped its game. Never to leave things as they are, Google has been rolling out a trusted vendor system. I noticed the service for a company that I cannot recall. Not a good sign for the company, but then again I don’t notice Amazon third parties either. If Google can use algorithms and other options such as requiring applications by vendors to be part of a trusted network of retailers, that change could be huge. There are, however, some issues.

First, Amazon should keep an eye on this program as it might be the first one to challenge Amazon’s excellent third party system. For that to be a true threat, Google will have to find a way to protect customers. Amazon has been great, in my experience, when it comes to protecting me while I deal with sellers far away and sometimes dubious. It does not give away my credit card etc. So if a lemon is in play, Amazon covers me. I assume it takes a fee for being the broker. Google customer service may have to evolve, if it is to match Amazon. A series of online, automated loops that end up hitting walls will make me stay with Amazon. But as Google gets better at identifying good sellers and protecting consumers, the service may work well. In addition, the play should feed into Google’s foray into ecommerce. Again if it can aid in delivery and resolve poor third party service, Google could do quite well in this space.

Second, will search results be influenced by participation in the program? On the one hand, I’d love results that lead to better sellers. Heck if Amazon or eBay ratings figured into Google results and improved knowing whether an ad or listed result was trust-worthy, that’d be great. Then again, right or wrong, I expect Google watchers/haters/worriers will argue that Google has promoted results unfairly. As long as a company can go through certification, it seems that argument should fail. I imagine Amazon, eBay, and others require some level of clearance to be in their system. Regardless of purveyor, it seems systems that are relatively low-cost (or maybe free except for time to fill out forms) to join and then are monitored should be embraced. In other words, Yelp etc. are near useless to me. Crowds are not as smart as folks think. As the great agent Kay in Men in Black said, “A person is smart. People are dumb, panicky dangerous animals and you know it.” More ways to improve how each of us, separately, evaluates options would be welcome, and plays to the way we each are capable of being smart. Options that limit us and feed echoes of dubious sources, behaviors, and beliefs, I’d like to avoid.

So we’ll see whether Google can one-up Amazon in connecting buyers and sellers. If so, I may buy more LPs and who knows what from folks I will never meet. And prices should be more competitive. Of course, that will be so until Christmas hits. Then as happened this year, prices may go up. But hey, Amazon listed the MSRP and connected me to a retailer whose markup combined with Amazon shipping worked for a gift to my niece. That was great. Wait, did I just agree with perfect price discrimination?!!? Damn, you Goog! and Amazon! Or is that Happy Holidays! I got what I wanted without fighting through stores.


Goliath aka Google aka No Surprises in Hollywood versus Silicon Valley

This just in: Hollywood hates/fears/plots against Google! The Sony security breach and following leaks have yielded many insights, sort of. If anyone thought Hollywood executives were discrete, that was naive and now debunked. If anyone thought most people knew not to use work email for personal business, that too is shown false. (I am continually amazed at how many law professors have thought it “odd” or “paranoid” that I use different emails for work and non-work communication). And yes, Hollywood aka the copyright industry is quite savvy and plots ways to go after its competitors and/or threats. The revealed emails do show the details of the plans and that there was a code word, Goliath, for Google (which I take as a place holder for Silicon Valley). All of which seems very Dr. Evil. But let’s be clear. Strategies to go after state attorneys general or legislators and to push negative news stories are endemic. They are endemic to Hollywood, telecoms, Silicon Valley, Wall Street, pharmaceuticals, and really any major industry. I am not saying that these practices are great or that policy is well-made from them. But they are real and should be understood. And, for those interested in the open Internet debates there are some other lessons. If you thought SOPA was the end, think again.

Vigilance and support for many companies and groups that support your issue (regardless of what it is) matters. The game is afoot. It will not end. Disclosure moment: Yes, I worked at Google in the policy group, and I have also worked on a political campaign. And one thing that I know from my experience and research (check Jessica Litman’s work on the copyright industry for a great lesson in this industry’s ability to play the game) is that if ideas come from only one entity, they seem weak. For better or worse, trade groups, NGOs, etc. matter. I prefer those that are independent and offer some nuances, but overall the concerted voices of many can be powerful. No matter what issue you wish to see succeed, backing only one entity dilutes the power of the idea or makes it seem like one company or group is crying over its lot in life. Some other post may get into the public choice issues here. But for now, the Sony leaks show that nothing much has changed. “The sun also ariseth, and the sun goeth down, and hasteth to his place where he arose. The wind goeth toward the south, and turneth about unto the north; it whirleth about continually, and the wind returneth again according to his circuits.” Ecclesiastes, 1:5-6.

Hollywood will always lobby for its interests and so will everyone else. “So it goes.”


Let the Games Begin! Lightsabers, 3D Printing, and Jedi Skills

Toys are a big area for 3D printing, and now someone is printing prototype lightsabers from a fleeting image in a trailer for the new Star Wars movie. As Gerard and I argue in Patents, Meet Napster: 3D Printing and the Digitization of Things, “Advances in 3D printing technology are launching an Industrial Counter-Revolution, and the laws governing the way things are made will need to make peace with the reality of digitized objects and on-demand fabrication.” These Hollywood-inspired designs may end up a case study for the ideas and issues we raise in the article. After all, Lucasfilm had a history of strong IP enforcement as does Disney, the new owner of the Star Wars franchise. And George Lucas is famous for having negotiated the merchandising rights to Star Wars and making a fortune from that revenue stream. There is, arguably, much at stake.

So will Disney try to stop this fun? If so, who will the target be? Thingiverse, a repository for 3D printing files? FDM, the company that makes the printer hardware? The source of the PLA filament (the materials for the object)? What about the tinkering that has come from just a brief view of the new lightsaber (it has a crossguard which has caused online debates about that design)? The designers at le FabShop offer:

As Makers, we couldn’t help but try to find out by ourselves if this “crossguard” design was a good configuration or not… So we decided to build one, with our army of 3D printers. Of course, the “darkness” of the movie sequence and the lack of details on the weapon itself left a lot of place for imagination and interpretation.

A dozen of 3D printable lightsabers being already available for download on internet, we decided to make one that would be completely customizable. The modular system we invented makes hundreds of configurations possible. From Yoda’s lightsaber to Darth Maul’s.

To me that sounds like some creative work and cool ways to let people play with designs to come up with a range of lightsabers. Of course, others might disagree (as I might if I were the corporation trying to make money selling the merchandise).

Then again, as we say in the article, “Advances in 3D printing technology are launching an Industrial Counter-Revolution, and the laws governing the way things are made will need to make peace with the reality of digitized objects and on-demand fabrication.” So maybe the Disney/Lucasfilms folks will work with these tinkerers and fans. Streamed official lightsabers might be possible. Or a customized lightsaber shop at Disney stores or even in licensed partnership with le FabShop would be great. If so, someone like me is more likely to order that specialized toy for me and for others as a gift and thus rely on expertise and safe materials a bit more than designing my own lightsaber.

Wait, designing my own lightsaber? That was evidence that Luke’s Jedi skills were complete. Maybe I need to get to work on that. Thank you le FabShop!


Data, A/B Testing, and Sales

A company called Adore Me that was founded in 2010 now has sales ($5.6 million) to rival La Perla has done well in part because they use data and A/B testing. Rather than rely on the intuition of photographers and designers, the company takes versions of an offering and shows them to consumers to see what works. Here are the surprising claims. Blonds don’t sell well. A picture of a model with her hand on her hip will sell less than if she places her hand on her head. According to Fast Company:

Through its research, Adore Me has found that the right model matters even more than price. If customers see a lacy pushup on a model they like, they’ll buy it. Put the same thing on a model they don’t, and even a $10 price cut won’t compel them. Pose matters as well: the same product shot on the same model in a different posture can nudge sales a few percentage points in either direction. Another test found that a popular model can sell a more expensive version of the same garment.

Adore Me also has a plus sized model (although I am sure that others can tell me best whether the company’s definition of size 12 and above is a good one) and presumably will see whether folks may buy more lingerie from someone with a body other than a Barbie-esque one. Of course they may find that the image machine controls how we shop, but I am curious to see whwther they will find ways to challenge and tweak what resonates with consumers. Now that may be unlikely as the author of the article, Rebecca Greenfield, wrote “Scrolling through the site, the models could all be related—long legs, olive skin, dark hair, insanely hot.” Yet when it came to race, the article suggests that pose, styling, and the emotional connection with the photo mattered more than race for selling a given item.

As with all data, the practice raises some difficult questions. Seeing how people behave can help sell. Assuming that one’s offering does not influence how people behave is a mistake. The ethics of what one does with data about buying habits and current preferences is a topic for another post and many papers are being written on the topic. For now, be aware of the practices. For Facebook thought it was cool to run thousands, if not hundreds of thousands, of tests on users. As Ian Ayres noted, people can use Google Ads to see what titles work best for a book. So maybe we care more about emotional manipulation than the variation in ad content. Maybe we care more about whether we see ads for the same item and same price as others than whether that ad is highlighted in red, blue, or green. Maybe we should know that poses and lighting can influence our desires and buying habits. Although business experiments are not new, how they are done and for what purpose forces us to re-examine practices. Along the way, we will re-visit markets versus manipulation versus power versus nudging versus culture versus shaping as we better see what is happening and then ask why and whether about those outcomes.


She Blinded Me With Science – Redux

Scientists/musicians at Cambridge have made a cover of Thomas Dolby’s She Blinded Me With Science (video below). As Cambridge News explains, the “video features a number of young women scientists including a material scientist, laser physicists and an epidemiologist. All proceeds from the song will go to ScienceGrrl, an organisation dedicated to celebrating and supporting women in science.” Seems like a cool project. The video could be a start to featuring more women in science (By my count there are five women in the video, which may be a function of how many can be highlighted in a short format). I hope so. My reason is simple. Some of my favorite people at Google were super-smart, fun to work with, visionary, and taught me huge amounts about science and professionalism and oh yeah, they happened to be women. That they are not known for their excellence beyond a small group and that women think science and math options are not open for them saddens and baffles me. Maybe the fact that my mom is a doctor colors my world. Or maybe it is the fact that I studied with female peers in grade and high school on math and science (including Calc I and II) and they were as good as any male I studied with. Or maybe it’s because so many women in law school and academia impressed and continue to impress me by pushing me to think and speak better as well as teaching me about law, science, technology, and so much more. To me the idea that women are somehow less able to work in certain fields is just nutty, or better said, insane. So in the Thanksgiving spirit, I am thankful that some science folks with some musical skills have offered their update to Mr. Dolby.

Side note: Dolby is one of my favorite musicians . His Golden Age of Wireless has some great tracks (check One of Our Submarines if you want a haunting ode to technology and lost empire). That said, The Flat Earth is brilliant. I think of it as an album that I can listen to start to finish and enjoy each song. The title track is great. I prefer the studio version to this one, but you can get a feel for the song and the lyrics perhaps the best part:
“please remember…
the Earth can be any shape you want it
any shape at all
dark and cold or bright and warm
long or thin or small
but it’s home and all I ever had
and maybe why for me the Earth is flat”

In other words, we can make the world we want.

Plus the idea of the Flat Earth Society amuses me.


Will The Disruptors Be the New Dominants?: On Uber, AirBnB, and other seeming upstarts

Loving your online, decentralized model may not work when you care about safe drivers, clean rooms, and other real-world issues. Claire Cain Miller brings up this problem in today’s New York Times. She points out that AirBnB and Uber are trying to follow “a religion [from] Silicon Valley: Serve as a middleman, employ as few people as possible and automate everything. Those tenets have worked wonders on the web at companies like Google and Twitter. But as the new, on-demand companies are learning, they are not necessarily compatible with the real world.” I agree. In The New Steam: On Digitization, Decentralization, and Disruption, I point out that “transactions costs related to safety, quality, property rights, contracting, and knowledge may be more acute in a digitized, decentralized world.” Ms. Cain Miller (apologies if Miller is the preferred last name), hits on some great points about the differences between the types of harms in the online and offline world. As she looks at it, the lack of humans is a problem for the reality of the services and relates to politics: “The belief that problems can be solved without involving people is probably why many of these companies did not meet with regulators and officials before starting services in new cities.” I think there is something more going on here.

Yes, the big firms in the space will engage in lobbying, but part of their story (and practice) will have to be about how they meet the issues of labor, safety, and more that they affect. As I put it:

[E]ven with digitization, economic questions will remain, but we must understand what they are and why they persist to see what the future may be. Douglass North captures a paradox that goes with transaction costs. Greater specialization, division of labor, and a large market increase transaction costs, because the shift to impersonal transactions demands higher costs to: 1)measure the valuable dimensions of a good or service; 2) protect individual property rights; 3)enforce agreements; and 4)integrate the dispersed knowledge of society.26 Standardized weights and measures, effective laws and enforcement, and institutions and organizations that integrate knowledge emerge, but the “dramatic increase in the overall costs of transacting” is “more than offset by dramatic decreases in production costs.” Digitization forces us to revisit these issues. With digitization, we are seeing an abundance of person-to-person transactions, but with the problems of impersonal transactions.

In simplest terms, AirBnB , Uber, et al. may face some rocky times, but there is a good chance they will figure out how to address the current issues and end up being the dominant firm, not the small disruptor. As Ms. Cain Miller notes, AirBnB has added hotlines and insurance. Uber has also increased its insurance requirements. If the disruptors continue to address a decent amount of the issues North calls out, my bet is that “this era of disruption and decentralization will likely pass and new winners, who will look much like firms of old, will emerge, if they have not already.”


Makeup as the Killer App for 3D Printing?

A woman named Grace Choi seems to have come up with a way to 3D print “lipstick, lip gloss, eye shadow, blush, nail polish, brow powder—pretty much everything except foundations and face power” at home. Her company, Mink, uses FDA approved inks (vegetable or edible). The goal is that a consumer could take a picture or using an online image of the makeup, the software would match the color and print out just enough makeup for that application. If the prototype holds up, this product could be one to bring 3D printers into many homes. But is it the killer app for all of 3D printing?

Put differently, a fair question that comes up when I talk about 3D printing is will it really be a device in every home? The answer depends on what one means by the question. First, at this point, you need a different 3D printer for different outputs (e.g., makeup or something in plastic as opposed to metal or ceramic). If Mink takes off, yes, a type of 3D printer could be in many, if not a majority, of homes. But as Gerard, others, and I have said, this device is not a replicator. So until a 3D printer is able to have multiple mediums in one printer, the spread of the devices will probably vary depending on the medium of the output. As such the killer apps for each medium will be specific to the device. That said, Mink may have a larger importance for 3D printing and home technology.

Mink could be a sign of where home inventors and makers are headed. Ms. Choi hit on her idea and took about a month to work through 20 printer prototypes, sort the ink issues, and have her working Mink printer. Granted she is a Harvard MBA and apparently has family support, but her approach could lead to new players in her field and others. As reported by CNBC, Ms. Choi, “Much of the make-up sold by high-end labels starts with the same base substrates, or ingredients, as cheaper ones.” This point is part of what motivated Patents Meet Napster. The core things needed to make many products are easier and easier for anyone to obtain. If Mink is priced at $300 to start as promised, that price will likely drop over time. If women adopt the technology and then tinker with it to improve on the hardware or the design colors, they may be inspired to launch their own companies and tinker with other technologies to get there. Like car and computer enthusiasts, cosmetic enthusiasts may find that playing with making what they want and love can lead to new products and businesses. And if that happens at scale in one sector, it may spur adoption in others. So maybe 3D printed makeup is not a pure killer app for 3D printing, but maybe it does not have to be to still have some great effects.


CUT THE CORD!! HBO without Cable

O frabjous day! Callooh! Callay! It is about time! HBO has announced it will offer a streaming service in 2015. Earlier claims about the need for cable to market and to work with the cable industry seem to have fallen away. The claim is that there are 80 million homes that do not have HBO, and HBO wants to fix that. Can you say Netflix? Netflix subscriber numbers were flat today. Still, if HBO goes over the wall, I imagine that Showtime and others will too. So I may just succeed in cutting the cable. Atlanta has decent digital signals (though there should be more). The most interesting thing to watch: ESPN’s next move. It has a hold on cable a Brazilian jiujitsu master would respect. But if ESPN decides to go with a direct pay model, it could pick up many new viewers, especially the ones who are used to watching the special college version of ESPN they have for free while at some schools.

These markets may also be quite different. Some may prefer the ease of watching the pre-programed madness that is cable. Heck, if I am channel surfing and see that Ocean’s Eleven is on TNT, I will watch with commercials even though I own the blasted DVD. Oh yes, laugh. Because you know that you do it too. May not be Ocean’s but fill in the blank with Bridget Jones or whatever floats your boat; there is something oddly comforting or easy about finding a program in a guide and selecting it. It seems like a low-grade information overload problem. Rather than reaching for the DVD or searching Netflix or Amazon, having someone else narrow the options tips us into odd choices like watching that same movie for the umpteenth time with God help me commercials!

In any event, I hope the HBO experiment works. I know unbundling may threaten many offerings. But the current costs of cable are absurd and the best content is on just a few channels. I don’t think the new golden age of T.V. will suffer in this new world. It could grow as more people are reached with niche shows (that is how I see things like Breaking Bad and other winners that don’t need huge viewership to succeed). Subscriber shows should be a real thing soon. As I said before, Firefly could have been saved today, because enough viewers would likely have fronted the costs to get a 10-13 episode season. Add in many have the patience to just buy the series and binge, or stream on Netflix or Amazon or HBO, and maybe shorting cable companies is smart.