Wither the Silicon

[don]

Internet Giants Foster, and Threaten, Innovation Economy

By JONATHAN WEBER

Published: November 20, 2010

Among the business people gathered in San Francisco last week for the annual Web 2.0 Summit, there was little doubt that the second Internet boom will be just as transformative as the first. The connected pocket computer (otherwise known as a smartphone) and the social Web have created monster new markets, as more than one speaker noted, and the money is flowing accordingly.

Much of that money is flowing to the Bay Area, home to what are arguably the four most important companies of today’s consumer Internet: Google, Apple, Facebook and Twitter. Apple and Google are the second and sixth most valuable public companies by market cap in the country, respectively. The other two are commanding private-market valuations in the billions.

But the business contours of the industry are still taking shape, and how they evolve over the next couple of years will go a long way toward drawing the new economic geography of Silicon Valley.

Will the Internet be dominated by a handful of highly controlling giants, each operating huge technology platforms that dictate the nature and pace of innovation? Or will there be a more decentralized, chaotic environment, in which companies of all sizes rise and fall based on their ability to build great products and create relationships with consumers and business partners?

Apple’s iPhone and iPad, Google’s search-and-advertising service and Android mobile operating system, and Facebook and Twitter have all emerged as towering forces commanding verdant landscapes of technical, social and business innovation. For many start-up companies, this creates a moment of great opportunity: iPhone apps, Facebook games and Twitter add-ons have already produced a lot of very successful businesses.

Zynga has become one of the fastest-growing company in the history of the Internet economy by building social games on Facebook. You don’t have to walk far in San Francisco’s South of Market district to find engineers who have built highly profitable iPhone apps or are poised to cleverly tap the tens of millions of messages sent daily on Twitter.

But the platforms can exert tremendous control if they choose, wiping out entire tiers of upstart companies simply by implementing a new feature. Plan to create a distinctive interface for Twitter? What happens when Twitter decides, as in the case of the Tweetie iPhone app, to buy one of your competitors and make it the “official” product?

Evan Williams, the Twitter co-founder, was asked on stage last week what areas were safe for third-party developers, and he wasn’t able to give very clear guidance, noting that the company in its early days had not envisioned itself as a platform for others. Mark Zuckerberg of Facebook was a little more forthcoming — no Facebook-built social games are planned — but not much.

Apple, meanwhile, has exercised iron-fisted control over iPhone and iPad apps. As many developers have ruefully discovered, the company may simply refuse to approve your app product for no particular reason.

The maneuvering among these giants, and the business opportunities provided by their new platforms, have been very, very good for people with the right skills (or, as The New York Times reported this month, for San Francisco landlords with the right buildings). Google just said it would give everyone in the company a 10 percent raise; competition for talent is getting more heated by the day.

And if this second Internet boom seems less frothy than the first, that’s mainly because it’s not riding atop a strong national economy like the first boom in the late 1990s. Even so, within the industry there is already talk of boom having crossed over into bubble. Whatever you want to call it, there is a huge amount of money and energy pouring into the Internet start-up economy right now.

But it’s not hard to envision a day when the platform companies, powered by the enormous amount of highly specific personal information that they collect from their customers every day, begin to mature and show less interest in innovation than in harvesting the fruits of their dominant market positions. (See Microsoft circa 1995, or I.B.M. circa 1980). That will not be a happy moment for the Bay Area’s innovation economy.

http://www.nytimes.com/2010/11/21/us...anciscobayarea

[c1ue]

Re: Wither the Silicon

There's tons of money floating around for Web 2.0 - but so far the income hasn't been proportionate.

Much as Web 1.0 survivors turned out to be those with existing cash flows to redirect to themselves (Ebay - newspaper classified, Google - local print advertising/yellow pages, Amazon - mail order retail), so too will Web 2.0 survivors have to find existing cash flows to redirect, or create new ones.

So far, besides Zynga, there aren't any large ones.

There are, however, innumerable niche positions. But the giants' aren't very good at capitalizing on large numbers of these.

Only via an access tax will they make money: Apple via its platform, Google via its Android and forced Gmail access/advertising. But it is unclear how much this difference this will make to their bottom lines.

More importantly, for the first time, people are spending as much time on mobile browsing as they do on traditional PC/laptop platforms.

Will this make a difference?

I think so...

[Starving Steve]

Re: Wither the Silicon

Just from a distance, what has come out of all of the decades of hundreds of billions of dollars for "high-tech"?

Yes, the internet and the toy telephone, but what else has come out of Silicon Valley? Yes, chips.......2G, 3G, 4G, and maybe someday 40G, who cares?

What about a cure for cancer? What about a water-car that might cross water? What about a car-plane that might fly? What about having people grow wings? What about having people grow new body parts?

Yes, some of this is coming out of Silicon Valley, but sad to say, not much......

Yes, we have the automated-teller in the banking industry. Yes, we have toy phones for the latte-drinkers. Yes, we have cyber-banks, if you still have faith. There are cyber-stores, if they deliver. There are cyber-land titles, if you have faith.

But for half-a-century of activity in Silicon Valley and in Seattle, what does all of this really amount to?
How much better are our living-standards now, compared to what our living-standards were in 1960?

And I am not asking about any mystical or spiritual crap, just tell me in real terms, how much better-off now are we than we were fifty-years ago?

[jpatter666]

Re: Wither the Silicon

Just from a distance, what has come out of all of the decades of hundreds of billions of dollars for "high-tech"?

Yes, the internet and the toy telephone, but what else has come out of Silicon Valley? Yes, chips.......2G, 3G, 4G, and maybe someday 40G, who cares?

What about a cure for cancer? What about a water-car that might cross water? What about a car-plane that might fly? What about having people grow wings? What about having people grow new body parts?

Yes, some of this is coming out of Silicon Valley, but sad to say, not much......

Yes, we have the automated-teller in the banking industry. Yes, we have toy phones for the latte-drinkers. Yes, we have cyber-banks, if you still have faith. There are cyber-stores, if they deliver. There are cyber-land titles, if you have faith.

But for half-a-century of activity in Silicon Valley and in Seattle, what does all of this really amount to?
How much better are our living-standards than they were in 1960?

Silicon Valley is about information. Speed of and access to that information.

By those standards I'd say it's been pretty damn successful.

[Ghent12]

Re: Wither the Silicon

Silicon Valley is about information. Speed of and access to that information.

By those standards I'd say it's been pretty damn successful.

Agreed.

What the hell is a library? It's another wifi hotspot if it knows what's good for it. I can't imagine a time when you had to actually go to a centralized repository for even minor detailed information about anything, even though that era existed during my lifetime.

On a more serious note, the major activity that Information Studies students at the University of Oklahoma Bizzell Library are doing is digitizing the historic paper records. That gives the old records near immortality and essentially anyone can access them--all thanks to the Silicon Valley. Very successful indeed.

[D-Mack]

Re: Wither the Silicon

I wonder if I will be able to store all digital pictures my family ever made. Some are on CD-R's mostly without a label somewhere, some are on old computers and others are still on flash cards. A minority has been printed.
I have the feeling this generation's electronic informaton won't stand the test of time.

[Starving Steve]

Re: Wither the Silicon

The Google search-engine is another great achievement of Silicon Valley. But how about if just a few-million dollars were spent on such a simple thing as inventing tires for a bicycle that simply never go flat, yet absorb shock, provide traction on a road surface, and do not waste energy? Think of what that simple invention might accomplish for mankind?

And how about a high-speed trans-continental passenger rail-service across North America? Think of the blood clots in people's legs that might be avoided?

And how about digitizing medical-records, worldwide? This is coming soon, but why did we have to wait so long for it to come--- and it still has not even come?

And how about atomic energy, everywhere? Think of how the cost of electricity would be reduced--- like penny-cheap kilo-watt hours of electricity? Think of what penny-cheap electricity might do to lower the cost of filtering and pumping sea-water to provide for the water needs of people in arid lands?

And back to the boat-car? It is a simple idea, really! Volkswagen did it fifty-years ago, so why don't we have a boat-car now?

A car that flies? Not a proto-type produced, but how about a mass-produced flying-car?

How about a five-speed, 4-cylinder diesel motor for a car, built-tough to last for 200,000 miles, trouble-free?

Yes, there have been great achievements in micro-electronics, but why has there been so little achieved outside of data-processing?

Yes, in the developed world, the human life-span has lengthened, but not much over the last half-century. Why is that?

Yes, food tastes better now than food used to taste fifty-years ago. But water quality and water pressure is lower now than fifty-years ago in many places in North America. Why is that?

Energy costs more now, in real terms, than fifty-years ago. Why is that? Urban land costs more now in real terms than it did fifty years ago. Why is that?

How many hundreds of billions of dollars have gone into micro-electronics? How would our lives benefit by 5G technology? I mean, let's get serious here: My old land-line telephone works far better than any new cellular-phone could ever work.

[jpatter666]

Re: Wither the Silicon

The Google search-engine is another great achievement of Silicon Valley. But how about if just a few-million dollars were spent on such a simple thing as inventing tires for a bicycle that simply never go flat, yet absorb shock, provide traction on a road surface, and do not waste energy? Think of what that simple invention might accomplish for mankind?

And how about a high-speed trans-continental passenger rail-service across North America? Think of the blood clots in people's legs that might be avoided?

And how about digitizing medical-records, worldwide? This is coming soon, but why did we have to wait so long for it to come--- and it still has not even come?

And how about atomic energy, everywhere? Think of how the cost of electricity would be reduced--- like penny-cheap kilo-watt hours of electricity? Think of what penny-cheap electricity might do to lower the cost of filtering and pumping sea-water to provide for the water needs of people in arid lands?

And back to the boat-car? It is a simple idea, really! Volkswagen did it fifty-years ago, so why don't we have a boat-car now?

A car that flies? Not a proto-type produced, but how about a mass-produced flying-car?

How about a five-speed, 4-cylinder diesel motor for a car, built-tough to last for 200,000 miles, trouble-free?

Yes, there have been great achievements in micro-electronics, but why has there been so little achieved outside of data-processing?

Yes, in the developed world, the human life-span has lengthened, but not much over the last half-century. Why is that?

Yes, food tastes better now than food used to taste fifty-years ago. But water quality and water pressure is lower now than fifty-years ago in many places in North America. Why is that?

Energy costs more now, in real terms, than fifty-years ago. Why is that? Urban land costs more now in real terms than it did fifty years ago. Why is that?

How many hundreds of billions of dollars have gone into micro-electronics? How would our lives benefit by 5G technology? I mean, let's get serious here: My old land-line telephone works far better than any new cellular-phone could ever work.

Many of the points you make are technologically feasible (as you state) and have been for some time. They do not exist yet for social, political and occasionally economic reasons.

On the other hand, think of the untapped brilliance lying dormant in so many countries around the world because those individuals never had the chance to access information for education -- or to communicate their own viewpoints and ideas to the world. Many of them do now -- and more are added each day. This is one of the few things that gets me truly excited about the future.

You're looking at individual trees. I'm looking at the forest.

[Ghent12]

Re: Wither the Silicon

The Google search-engine is another great achievement of Silicon Valley. But how about if just a few-million dollars were spent on such a simple thing as inventing tires for a bicycle that simply never go flat, yet absorb shock, provide traction on a road surface, and do not waste energy? Think of what that simple invention might accomplish for mankind?

And how about a high-speed trans-continental passenger rail-service across North America? Think of the blood clots in people's legs that might be avoided?

And how about digitizing medical-records, worldwide? This is coming soon, but why did we have to wait so long for it to come--- and it still has not even come?

And how about atomic energy, everywhere? Think of how the cost of electricity would be reduced--- like penny-cheap kilo-watt hours of electricity? Think of what penny-cheap electricity might do to lower the cost of filtering and pumping sea-water to provide for the water needs of people in arid lands?

And back to the boat-car? It is a simple idea, really! Volkswagen did it fifty-years ago, so why don't we have a boat-car now?

A car that flies? Not a proto-type produced, but how about a mass-produced flying-car?

How about a five-speed, 4-cylinder diesel motor for a car, built-tough to last for 200,000 miles, trouble-free?

Yes, there have been great achievements in micro-electronics, but why has there been so little achieved outside of data-processing?

Yes, in the developed world, the human life-span has lengthened, but not much over the last half-century. Why is that?

Yes, food tastes better now than food used to taste fifty-years ago. But water quality and water pressure is lower now than fifty-years ago in many places in North America. Why is that?

Energy costs more now, in real terms, than fifty-years ago. Why is that? Urban land costs more now in real terms than it did fifty years ago. Why is that?

How many hundreds of billions of dollars have gone into micro-electronics? How would our lives benefit by 5G technology? I mean, let's get serious here: My old land-line telephone works far better than any new cellular-phone could ever work.

I don't understand some parts of your railing against information technology, especially the medical record complaint. Some of the other things seem to have no point. Why would you want a flying car? So you can suffer low fuel efficiency except during 300-mile treks? What type of market could there be for such a product? Same for the boat-car.

The diesel engine and other stuff may be worth looking into, but maybe not.

Energy costs? Well 50 years ago there was not as much demand.


Do you know what Silicon Valley has provided? Things people wanted--lots of things they wanted. With relatively minimal government intervention/help, the Information Revolution took hold and fundamentally altered the way we live our lives and conduct commerce. While you may not see much value in this particular investment of hundreds of billions of dollars, but hundreds of millions of people do because they still pay for it.

[Munger]

Re: Wither the Silicon

I wonder if I will be able to store all digital pictures my family ever made. Some are on CD-R's mostly without a label somewhere, some are on old computers and others are still on flash cards. A minority has been printed.
I have the feeling this generation's electronic informaton won't stand the test of time.

Within 5 years everything will be stored in datacenters, replicated at least 3 times on geographically dispersed RAID hardware. These copies are checked, and if one gets corrupted it is refreshed. They will likely never be lost.

Amazon S3, for example, boasts 99.999999999% durability and 99.99% availability. I.e., 1 out of 10,000 stored items will be corrupted every 10 million years. Gen Y and younger post all of their stuff on flickr or facebook. Will probably be retained forever, for better or worse.

Your CD-Rs and magnetic storage, on the other hand, will NOT last. Go grab yourself a free dropbox account and put your pics on there before they are lost forever. www.dropbox.com (dropbox uses Amazon S3 for its storage service).

Along with peace of mind, dropbox offers other nice features, such as automatic syncing across multiple computers and devices. I.e., each of your computers and phones has a "Dropbox" folder, and whenever you drag something in there from one device, it will appear on the folders of all the others' automatically.

[Starving Steve]

Re: Wither the Silicon

I don't understand some parts of your railing against information technology, especially the medical record complaint. Some of the other things seem to have no point. Why would you want a flying car? So you can suffer low fuel efficiency except during 300-mile treks? What type of market could there be for such a product? Same for the boat-car.

The diesel engine and other stuff may be worth looking into, but maybe not.

Energy costs? Well 50 years ago there was not as much demand.


Do you know what Silicon Valley has provided? Things people wanted--lots of things they wanted. With relatively minimal government intervention/help, the Information Revolution took hold and fundamentally altered the way we live our lives and conduct commerce. While you may not see much value in this particular investment of hundreds of billions of dollars, but hundreds of millions of people do because they still pay for it.

A boat-car could get me from Victoria to Vancouver, BC without a ferry fee. Each way across the Strait of Georgia, I could save around $80. British Columbia Ferries wouldn't like my boat-car, but who cares what BC Ferries might like? In fact, I think so many boat-cars could be sold in this province that BC Ferries just might have to compete, for the first time in its history.

A flying-car would be great for traffic grid-lock. Those cars would sell like sausages in and around every major city of the world. A flying-car would also be great to cross bodies of water. Thus, no-more ferry-fees and no-more traffic grid-lock. Plus no-more speed traps and no-more deer crossing the road.

If you could engineer these products, maybe SS would like to buy shares in your company.

[Ghent12]

Re: Wither the Silicon

A boat-car could get me from Victoria to Vancouver, BC without a ferry fee. Each way across the Strait of Georgia, I could save around $80. British Columbia Ferries wouldn't like my boat-car, but who cares what BC Ferries might like? In fact, I think so many boat-cars could be sold in this province that BC Ferries just might have to compete, for the first time in its history.

A flying-car would be great for traffic grid-lock. Those cars would sell like sausages in and around every major city of the world. A flying-car would also be great to cross bodies of water. Thus, no-more ferry-fees and no-more traffic grid-lock. Plus no-more speed traps and no-more deer crossing the road.

If you could engineer these products, maybe SS would like to buy shares in your company.

A boat car and a flying car do have certain advantages, but they also have noticeable disadvantages. While the car is not going over water or through the air, it would simply be an inefficient regular car (think of the gas mileage of large truck or SUV, except without the hauling capacity or people capacity since it's already hauling a boat hull and/or wings). I don't know the particulars of your trouble with BC Ferries, but I suspect that such a market is far too small to be worthy of investment.

[oddlots]

Re: Wither the Silicon

Just some thoughts about my own random walk (TM) through this particular revolution.

Some of it I "get," some of it I don't.

What I (think I) get:

- Smartphones: I was all over this early on as the chore of managing contacts across platforms (at the time, computer / cell / landlines) struck me as a sheer waste of time and energy with no payoff (it was just a dumb chore, ripe for automation.) Bought the Palm phone as soon as it was available here and loved it. (It's hard to remember but it was a really great product at the time. They got the "phone-first" aspect of the challenge right right off the bat. I could find almost any number while driving in about 4-5 keystrokes. Much as I love my iphone it doesn't measure up to that performance. As a phone to use while driving even with a hands-free device it's a real hazard.)
- On Demand Content, Audio Edition: I'm a recent convert to podcasts principally because I've suddenly realised that all my traveling time can be redeemed thanks to a 32 gig iphone that I can simply jam full of stuff - music, lectures, language instruction, great journalism. It's like discovering another 3 to 4 hours a day. Awesome.
- Apps: there are a handful of apps that have simply vaporised annoyances like trying to find a service or contact in a rush (yellow pages: sounds stupid but it is a very well executed app; bloomberg etc.)
- Blogs (but that's 1.0 - sorry don't really follow this stuff per se.)
- Texting: funnily enough this has become very useful as a more immediate version of e-mail. The joke of course is that e-mail was texting when it was more about business but now that we are swamped with e-mail texting is the only way to get anyone's attention.
- Cloud Computing: awesome. (No more USB drives or other media to share documents and all the annoyances of managing them. For anyone using iphones i suggest dropbox.)

What I don't get:

- Social Networking: this really is a mystery to me. I don't find socialising a chore but this seems like nothing but. All the sense of forced participation and so little real connecting with people. It would appear that I'm one wired hermit.
- Twitter: complete mystery. If I already felt overwhelmed with e-mail this strikes me as a techicolour nightmare. In fact, if there's one thing I'd like to know from an ituliper it's this - what's it for? Has anyone found it indispensible? Why?
- I could go on... Flickr... but generally it reminds me of my most obnoxious moments, like when I'm talking to my parents and I have an overwhelming desire to yell into the phone: "What the f do you do all day. Can you not just get to the point?" (I never actually say that, but yeah, it's still bad.)

As the (directly) above suggests, I think it's kind of worth reflecting on how one integrates this stuff into one's life. I often come home to find my wife and child glued to monitors... and sit down and check itulip. It's clearly awesome in so many ways, but it's also very, very compulsive.

[Chomsky]

Re: Wither the Silicon

Agreed.

What the hell is a library? It's another wifi hotspot if it knows what's good for it. I can't imagine a time when you had to actually go to a centralized repository for even minor detailed information about anything, even though that era existed during my lifetime.

On a more serious note, the major activity that Information Studies students at the University of Oklahoma Bizzell Library are doing is digitizing the historic paper records. That gives the old records near immortality and essentially anyone can access them--all thanks to the Silicon Valley. Very successful indeed.

I make my living in part by spending time in centralized repositories of information that contain archival material that will never be digitized. That said, Google Books has revolutionized my field, and my own practice.