Good Morning and thank you for having me. It’s a pleasure to be here. I’m going to talk to you about a lot of things this morning but I wanted to start with something that I’ve been immersed in for the last decade – and that is the news business.
The New York Times is regarded internationally as the newspaper of record. Every day for the last 164 years, it’s pages have contained all the news that’s fit to print. But every year, the cash it gets from these pages goes down. This is the base of their 52 story World Headquarters in Midtown Manhattan. In 2008, The paper made plans to borrow $225 million against this building, to ease a potential cash flow squeeze as the company grapples with tighter credit and shrinking profits.
The Chicago Tribune calls itself the World’s Greatest Newspaper. Having won 5 Pulitzer prizes in the first decade of the 21st century. It may well be. It’s currently the 8 th largest paper in the US It is part of the Tribune Group of papers. On June 25, 2008, the Tribune company announced they had hired a real estate company to entertain bids of the sale of both the Tribune Tower in Chicago, and the Times Building in Los Angeles.
This is the World Headquarters for The Gannett Company It owns US Today, The largest newspaper in America Circulation has been falling for the paper. In 2009, they saw their largest drop in the company’s history, losing 17% of their readers in a single year. The story is the same for all newspapers. In many circles, the hope is that falling print revenues will be offset with online revenues.
But as this chart shows, even though online revenue is growing, the revenues from print are not being replaced by online dollars. Newspapers, are in fact, replacing print dollars with digital dimes. But the decline of the newspaper business is not just a problem for the papers because most original reporting is done by newspaper reporters. Unless it’s coming from the traffic copter, you won’t see much original reporting from radio. And the information Television gives you is more impressionistic and less informational.
In fact, if you read the front page of the newspaper, you would have gone through more words than if you listened to a half hour TV broadcast news show. Conversely, it would take 29 hours to read a daily edition of the Washington Post aloud. So the death of newspapers is deeply problematic for a society that is democratically based. Without an informed populace, we as a world will make bad decisions. We are witnessing the re-wiring of our global sensory apparatus. Hopefully it is not the unwiring of our senses. Either way, this is the re-engineering of the supplly chain of information.
So why is this happening? What is draining the coffers of traditional newspapers? Well, it wasn’t so long ago that if you wanted to buy or sell something you’d list it in your local paper in the classified section. In fact, the millions of listings that appeared daily were the bread and butter, the foundation, of most newspapers. That all changed when Craig Newmark, operating out of a small house in San Francisco decided it could be done for free. This was the birth of Craigslist and was the death of the newspaper cashcow.
Now Craigslist is 5 times the size of the entire US newspaper industry. So there’s your answer. Craigslist killed papers. Competition for adverstisers – in this case advertisers like you and me with a spare sofa or need for yard help – killed the papers
In media, the strength of your business is based on the amount of collective attention you can aggregate and package to advertisers. Attention – your attention – is ultimately the basis for all value in the media world. So Craigslist is siphoning off revenue and sites like Facebook are stealing away our attention by the millions. It’s the Internet. The monopoly for our attention has been broken. Simple.
So you could say that what has put newspapers, and the news business, in their current state is simply a more competitive environment so it’s only natural that they decline, relatively speaking. But perhaps there’s more to it than that.
This is Carol Bartz, the former CEO of Yahoo. She was recently fired over the phone by her board in an embarrassing public fall out. Yahoo, one of the presumed beneficiaries of this new digital world, is also failing. Usage is dropping, revenues are sickly, the stock is way off it’s highs
This is Tim Armstrong, the charismatic young CEO of AOL. He’s quarterbacking a desperate attempt to reinvent the company as it tries, in vain, to revive the company’s fortunes. He’s been on a buying spree, snapping up the top technology blogs, Arrianna Huffington’s wildly successful, HUFFPO and pouring millions into hyper local reporting. But in spite of that revenues are not materiallizing and the company’s prospects look exceedingly gloomy in the coming years.
I’ve spent the last 20 years of my life breaking and rebuilding industries Up until 1 year ago I ran NowPublic. Together we took ownership of the news agenda and gave to the people. We let people write, report and promote the stories they thought were important Grew to over 200,000 citizen witnesses and reporters worldwide Sold the company to the richest man in Colorado Still re-imagining, disecting and re-building business
Which brings me to the point I want to make. It is not only the changes in our news consumption patterns that is undoing the news business. These changes are themselves symptoms of something deeper. They are symptoms of changes to the very way we innovate and change. It may sound like I’m repeating myself but innovation is itself changing and this is what I want to explore today.
* TECHNOLOGY * Since the mid 90’s the way companies come into existence has been altered by a number of powerful forces and dymanics Technology is different Social relationships have changed The economics of innovation are radically altered Institutions of trust are unrecognizable
The world of technology is very different than it was even 5 years ago. Mobile devices & Tablets are becoming ubiquitous This graph show the growh forecasts for traffic sent through mobile devices across the globe. The units are millions of terrabits per month. You can see that mobile device useage in every continent is exploding and growth shows now sign of slowing down. In 3 years, the traffic in Japan is expected to exceed traffic levels for the entire planet only last year. As researchers at MIT have stated, The Mobile Device Is Becoming Humankind's Primary Tool
Things used to be separate from information but now we have the Internet of Things These are smart, currency capable devices The Internet of Things refers – in geekspeak -to uniquely identifiable objects (what you and I call things) and their virtual representations in an Internet-like structure. They take on a virtual life through things like Radio Tags or BarCodes. Now we also have QR codes, unique patterns that our cell phones can recognize as meaningful. They have an identity online, just like you and I do.
Smart physical objects can do things like understand meaning and importance of surrounding sound and other patterns Pay for things Know when a specific person or their device is close by Transfer stores of value, like phone minutes, or information like contact details Work together to act as an extended central nervous system Recognize patterns that were previously invisible The coming era in technology will be defined by the large scale emergence of smart things.
Open Source software is like software that nobody owns. Well, technically we all own it. Therefore we don’t have to pay for it. This is Linus Torvalds, the inventor of Linux, an Open Source Operating System that you can download and use, commercially, for free. The Open Source Revolution he helped to lead has spawned many imitators. The collective contribution of these Open Source innovators has meant that you can build a website, essentially for free. No longer do you need to pay for your operating system, your database, your content management system, your web browser, your photo editing software. You name it, there is a free version of everything. Open Source has changed the software business, liberated code and put those who are able to use it in control of things they never dreamt of.
Cloud Computing is something you hear a lot about. Cloud computing is the delivery of computing as a service -- like electricity. In other words, you don’t need to buy computers with big powerful processors, you just plug into the cloud and use their computers … and only when you need to. You’d be surprised at how much that saves. Cloud computing has changed the way we build internet technology because scalability is built into the original prototype.
No longer do we have to plan for success or failure. No longer do we need to buy massive amounts of computer hardware so that we’re prepared to handle an unexpected traffic spike. If we get hit with the need for more computing power we simply tap into the cloud and the cloud provides on demand processing power and charges us accordingly. When we no longer require the cycles we simply give them back to the cloud. Data is also living in the cloud. My email is no longer on my desktop, its in Gmail. My music is no longer on my ipod or laptop, its on Apple or Amazon’s servers, ready to be accessed when I need it. My enterprise data is no longer in my office, it’s in Google Docs or in Dropbox, a remote storage tool that is being used by tens of millions of people.
So things like Cloud Computing, Mobile Devices, The Internet of things and Open Source are brand new technologies. * SOCIAL RELATIONSHIPS * But that’s not all that has changed. Our Social Relationships are fundamentally different. And this is not a minor issue. We are social animals. You are who you know. But did we even know ourselves before? Certainly others didn’t know us so well.
Now our implied, hidden, public and private relationships are now more visible. … Whether we like it or not MIT recently discovered that they could determine the sexual orientation of a facebook user with a high degree of accuracy based purely on a person’s social relationships. You may not have told the world you’re gay but your friends have outed you, just by being your friends, or even friends of friends. You are being tagged in photographs you didn’t take. Your social graph is not only mapping your relationships but is recording and publishing the story of your life. This mans appreciation for intense drama has forever been preserved with many other spectacularly embarrassing moment on a site called awkward family photos. - I have no idea whether he is gay.
This man never knew that we might one day see how much he loved his poodle. And that, my friends, is genuine love. That’s more than a best friend.
Parents are posting phtotos and videos of their children that will remain online, certainly in Google’s cache, for the span of their lives Employeers, prospective and current, are able to scrutinize workers personal habits, appearance, social habits, personal views, political affiliations, job histories and personal stories at any time. Many companies require employees to remove any reference to alcahol in any of the photos of them online, whether they posted them or not.
Here’s a touching tribute to the sanctity of motherhood. Somewhere, someone is mortified at how embarrassing parents can be, even before they are technically your parents. And with services like Facebook, you can export your existing social graph – what facebook calls your life – into any other new web service. You social life has never been more public and more tranferable.
Hopefully you have something nice to wear. Yes, now relationships are mapped in a multitude of ways including work, social, familial, historical, educational, Based on taste (what do you like), Based on your expressions (what have you said/tweeted/ranted on/morned/supported/railed against) Digital identity has become identity. Brand ME can be be larger than ME. It certainly gets more attention if measured in impressions. Afterall, I can only be in one physical place at a time. Referral networks, shared friends, people you ‘should’ connect with, are underpinning the development of relationships 2.0
So with all the changes in Technology, with all the shifts in how we understand and document our social lives, what else has changed lately? Well the economics have never looked like they do today. Cost of building a company in 1991 millions Cost of building a company in 2001 hundreds of thou. Cost of building a company in 1991 thousands Why? Because of open source, Cloud, Web 2.0 sharing culture Now you can leveraging 2.0 infrastructure. Don’t build video capability. Just plug in Youtube. The Speed of intelligence – with llinked in, google, and other research tools you can know more about your future business in minutes than you could have in weeks in older times.
So the way we innovate has changed because of New technology Different kinds of social relationships Changing economics But there’s a another change that we’re seeing. In the news business, it is not these forces that are really killing it. The thing that has been most destructive to their business is that thet locus of trust has also changed. Ask yourself… Who do you trust? Companies? Not likely? Government? Probably not? Journalists? Increasingly no. Who’s left? Your friends.
News networks have been replaced by social networks. Studies show that the stuff people read online is based almost entirely on what your friends send you. If you’ve visited a link, it’s likely a function of your social graph and not the nightly newscast. The agenda is being set by who you know and not what is important. Assuming there was ever a difference. Entree is now electronic.
This is dissolving the hold that central message planners – like governments – have New types of trust are supporting the creation of new relationships in new ways that reflect the true nature of our social lives. And these new social networks have gone international. As The Middle East is showing, these new networks fo trusted communities have implications.
So where else is trust transforming business? Well just ask any advertiser and they’ll tell you the best advertising is word of mouth. It’s an obvious point but you trust your friends. But word of mouth now has a megaphone and the whole globe is within earshot. What we now call viral marketing is just plain old word of mouth advertising attached to the power of the internet.
As a result, traditional advertising becoming obsolete. - Another problem for traditional media, BTW. Television is the last bastion of health within the advertising world and the next time you watch TV, see what assumptions you can draw about who watches it. You can tell by the things they’re selling. This is not the audience of tomorrow.
OK. So change abounds? What’s the big deal? How does this translate? How does this affect me? How do changes in Technnology, Social Relationships, Economics and Trust change the world? How does this impact banking and money? Well, in very general terms, more innovation will result in… Well – more innovation.
For every one entrepreneur in 2009, there will be 100 in 2012 They will be able to change things more radically, more quickly. They will be reaching more markets faster at lower costs. And the compound effect of each one of these factors means the the world will become more unrecognizable, faster. Let me walk you through the ways that will happen.
Let me ask you…. How long does it take to build a company? 20 years? 5 years? 1 year? 3 months?
How about 1 weekend? These young software developers, designers and enterpreneurs are participating in one of the thousands of Startup Weekends that happen around the world. The idea is that in 54 hours you can come up with an idea, form a team and build a company. In many cases, the teams fail but in others, people come together and build a product. Some do market research to prove it’s viability. Others actually get to market and a few even start making revenue.
When these companies finish the weekend they may connect with investors who give them some seed capitol to develop their idea further. If you can get so far in a weekend, imagine how much you could do in a full week, an entire month, or dare we dream a whole year? Everyday, in some city or town, somewhere in the world, there is an entrepreneur trying to change the world.
This picture is from San Francisco, where a local technology conference staged a hackathon, inviting coders to come in for a day and build something cool. 700 computer programmers decended and coded around the clock. Companies have been born this way GroupMe was built at a hackathon and was recently acquired by Skype for $50 These numbers are unprescedented.
This is GrowLab. It’s the lab I run in Vancouver. Every year we choose 10 companies to come and set up shop in our office to learn from our mentors, get guidance, develop their plans and market their companies. After 3 months we intoduce them to investors and watch to see how they will change the world. We are not alone in this pursuit. There are hundreds of such labs – accelerators, incubators – across Europe, North America, Asia, Africa and everywhere there are computers.
Entrepreneurs are the new rockstars In New York, Entrepreneurs are replacing celebrities as the fodder for magazine covers. After all, if the current system is broken, it makes sense that the heroes of today are those inventing the solutions. And this activity is not unpopular with government types
As the macro economic forces that are reshaping global commerce – as wealth is being globally redistributing, governments and industry are reacting by funding more economic development, more change, more entrepreneurial zeal. Cities arealready competing against one another to become start up centers. New York wants to be the World’s Next Top Digital City. They’ve even got a new Chief Digital Officer.
So all of this is good news for tomorrow’s disruptors. It has never been easier to get funding as a new entrepreneur. Yuri Milner, a hugely influential Russian technology investor has promised to give $150,000 to every company that comes out of Y Combinator, a Silicon Valley based technology accelerator. Milner doesn’t even want to see the companies. He knows that some of them will pay off. For young talented entrepreneurs, facing daunting employment prospects with traditional work, would be irrational to ignore the incentives of startup life. I don’t think this is the case but some are even making the argument that we have entered a seed stage bubble where early stage company valuations are irrationally high.
And in the future it will be even easier to innovate more radically than you can right now. A good analogy is the family. They say that nobody is born into the same family. The first born is – for a time - the only child. By the time the second and third child is born, the family dynamic is completely different. The same is true for technology companies. The world Yahoo dominated was different than the world Google came to dominate. The world facebook is now dominating is different than the world Google owns. But what remains constant is the idea that new companies build on the shoulders of those that came before them. Your next company will be researched on Google, marketed through facebook, branded through twitter and perhaps, with some good luck, bought by Yahoo.
Because each of these drivers I’ve identified don’t only exist isolation. They work to multiply each other. More entrepreneurs More money Can do more with less Result is faster rate of innovation at lower cost Means more disruption Sum is greater than the whole of it’s parts.
So, in the world of communications the change is becoming obvious. Marketing has changed. Word of mouth is now the only word This means that for a new company, the cost of marketing can be zero if you are super cool Ownership of the message is now distributed like the ownership of the news. So you may be able to build your brand online but you will never own it. As soon as the inhabitants of the social graph turn against you, you will suffer. Just ask the leaders of Algeria, Tunisia, Iran, Libya, Syria, Greece and Egypt
And that greater synergy is change all aspects of our life. This is the mechanical turk. Also known as the automatic chess player. The first chess playing machine. The Mechanical Turk astonished audiences with it’s ability to robotically play chess but ultimately was revealed as an elaborate hoax The supposed robot was in fact, operated by it’s inventor from within a hidden chamber in the machine.
Oddly this online spreadsheet is related to the mechanical turk. Several years ago Amazon rolled out a service using the same name. They chose the name because their service lets you send tasks to their ‘mechanical turk’ and they’ll magically return the completed task. They simply outsource it to someone who can do what a machine can’t. Amazon is doing to information, what Chinese industry did for assembly. They recognized that sometimes human power works better than machines. So if you need someone to review the accuracy of 400 phone records simply send it to mechanical turk. This spreadsheet actually converts a plan, in this case an event plan, into discreet events that can be ‘smartsourced’ to mechanical turk.
But Amazon’s service is not the only one that’s changing the way the world works. Odesk – a competitor - has a similar service that lets you connect with help around the planet. So work is becoming fragemented, global and distributed to people through new networks of trust that never previously existed. In this new competitive landscape we will find out who is exceptional now?
So work is different. But before you work, you probably go to school. If you’re a student graduating from University this year, then chances are the job get – if you get one at all - did NOT exist when you started school. The work you may or may not land represents a job that is less than 4 years old. So the training you received was designed and developed before your job was born. The speed of change is not only hard on the old. It is, in fact, hardest on the young. But if school can’t keep up with work then what are we training people for?
Meanwhile the cost of education is skyrocketing. Student debt is at an all time high. They say it may represent the next big credit problem. Maybe students should attend a world of conferences for the same price Maybe the world needs more artists? Perhaps the most valuable talent you can have is to be able to develop and articulate a vision. Technology will meet you at the end of your tenure and help you build your dreams faster and cheaper than was possible when you first started dreaming.
Maybe accelerators competing with schools now. In Silicon Valley, VC’s are paying students to drop out. Recognize any of these dropouts?
So stepping back and looking at things from a higher elevation we can see that the real changes are not about money or technology but are about the value of our knowledge, our training and the way we work. It’s fair to say that many of the friends you know are the people you work with and the people you went to school with. But as work and school change, we are forming new social circles. These relationships format the Intersection of shared interests and concerns They are fundamentally different with different mixes of expriences from across the globe Geographically based support structures & infastructures don’t necessarily apply
Which brings me to my final thought. I’d like to leave you thinking about money. What is money?What is currency? Currency is a Medium of exchange Currency is media - Represents stored value, not information Been metal backed, gold based but at the end of the day, currency is all about trust. And today trust lives in social networks. Not God, The Queen, The Banks but the people we know
Earlier I mentioned Y Combinator, one of the most successful technology accelators in Silicon Valley. If you look at what people who are applying to Y Combinator the search topic that is most popular is bitcoin. Bitcoin is an open source project to develop a decentralized peep-to-peer network that tracks and verifies transactions. Bitcoin is a contender to become the new money. If you visit the isolated farmhouses in rural Kenya you’ll be served food on a mud and grass floor. When you leave it is customary to tip the owner. This can be done by transfering digital currency through your mobile device. Just a cigarretes were used as a store of value, a currency, during the second world war, transferable phone minutes are exchanged as units of payment in Africa and across the world. The basis of currency, the networks of trust, the means of transfer and the institutions that stand behind them will all be different by the time your sons or daughters complete their secondary schooling – if they’re still into that.
So it comes back to innovation. I can’t tell you how the universe will unfold but I can tell you that it will unfold in ways that are more different than you expect and that those changes will happen faster than you ever imagined. So stay curious. Thank you.
Implications <ul><li>More companies doing more in a compounded manner means that: </li></ul><ul><li>Relationships to markets have changed – direct </li></ul><ul><li>Nature of work has changed – fragmented, global, intensily competitive </li></ul><ul><li>Education is changing – obsolete, 4 years in old economy training </li></ul><ul><li>Work, School & economic relationships are the basis of a social life. Social circles are being re-drawn </li></ul>