It’s 2020, and there
were a lot of things that I wanted to write in 2019 that I never finished. Luckily,
I can write one post and cover many of them under the guise of writing predictions
for the next decade.
Rise
of the Splinternet
A significant trend of
the last decade has been users engaging not with the general internet, but in
walled gardens like Facebook, Pinterest and other applications. The number of
blogs linking to each other has fallen off, the number of users on curated apps
have grown much more. The declining relevance of a global internet is happening
on a geographic level and as more discussion moves out of public spaces.
Geographic Splinters
The rise of China’s
internet ecosystem inside their great firewall is another example of a space on
the internet that has been walled off from the rest of the world. And inside
China’s walled garden there are walled gardens within walled gardens. Alibaba
and Tencent have relatively separate ecosystems. Despite both investing
prolifically in China the companies that have taken money from both are few and
far between. China’s ecosystem makes discovery difficult relative to other ecosystems,
new companies cannot easily buy Facebook or Google ads to reach customers,
which may be why super-apps like WeChat and Meituan-Dianping work well in the Chinese
ecosystem while outside of China every wannabe super-app is still only really
able to make money at the thing they are best at. Competition is hard, and
while competition in China is fierce, the winners are not always related to who
can serve their customers best. As one Chinese VC put it, “We like aggressive founders,
ones who can get their competition thrown in jail.” However, in more open
ecosystems where winners are determined by consumers, it is tough to be the
best across multiple services.
This is not to say that
winning Chinese companies did not also furiously focus on their customers by
quickly copying what is otherwise working for other companies. It’s just that
they do all this while also facing less competition from other sources as many
of their competitors are absent for political reasons.
In the face of general unrest,
China has been stepping up their internet censorship. While foreigners can use a
sim card as a VPN and large corporations have their ways around the system, China
is throwing some domestic VPN providers in jail and the ability to access
internet from the rest of the world in China is getting more difficult by the
year. China’s creation of an internet walled garden, and the tech ecosystem
that has sprung up inside their garden, has inspired other countries. Iran and
Russia have followed suit enthusiastically. India has been taking a playbook
from China and shutting down the internet in politically volatile areas like Kashmir.
India has also seemingly
used the threat of shutdowns against companies like Bytedance to force them to
have a sizeable presence in the country, either because they need to have
someone they can talk to in person about the problems of their platform or
perhaps with the goal of transferring knowledge and skills to their local
workers. India’s tech sector has produced a few big winners by selling companies
to outsiders, but the number of homegrown tech startups that have found business
models that can generate positive cashflows rather than act as strategic assets
for companies looking to enter India have been few and far between. With so
many tech companies still having to compete with Facebook, Google and the like
there is a temptation for politicians to skew the playing field in favor of local
companies. When India passed a law preventing e-commerce companies from selling
products from companies in which they owned an equity interest they skewed the
playing field to support local SMBs. There will likely be pressure to do more
for the domestic tech scene.
Vietnam has also started
down the path to mimicking China. They passed new cyber security rules in 2018
that require internet giants keep data generated by users within Vietnam inside
Vietnam’s borders. Depending on how it is applied and how foreign companies
react, they will either be excluded from doing business in Vietnam or will have
to open a sizeable presence in the country.
The developing world is
not the only group of countries getting in on this game. When Europe passed General
Data Protection Regulation, companies were faced with the choice of annoying
all their visitors with popup notifications about cookies and implementing
other regulations, or not being allowed to operate in Europe at all. So far
most of the companies have cooperated with the EU, and a new category of
compliance jobs was created. But the EU also seems close to implementing policies
or implementing so many regulatory fines that create costs that make it too expensive
for tech companies to operate in Europe. At some level of cost companies will choose
to opt out. The resulting splintering might Balkanize the developed world
internet in a world where the developing world is already splitting up.
Personal Content Going Offline
The 2010’s brought about
another odd scenario. Content is relatively valuable. It helps create the brand
of a person or company. It can help with search engine optimization as others
link to useful pieces. But today, people are actively deleting content they
have created. It is now considered best practice in some circles to
automatically delete twitter comments, old reddit comments and to privatize Facebook
posts (or even simply delete Facebook). And when they create new content
online, it is more often in places where the masses cannot see it.
The first widespread
acknowledgement that comments created career risk arose when Justine Sacco got fired
for making a joke on Twitter that spread far beyond the followers she meant to
target. Today, every high-profile political appointment or really any person
who enters the limelight will have their past views scrutinized by their
adversaries or by content creators hoping to generate some rage clicks. There
was a particularly notable case of Leif Olson, a lawyer appointed to a role in
the Trump administration whose public joking about anti-Semites were purposefully
taken out of context by Bloomberg Law reporter Ben Penn to make a story. This
was notable because Penn was actively operating in bad faith, passing on screenshots
that looked incriminating to the department where he was going to work when the
full context made it very clear he was laughing at anti-Semites rather than being one. Benjamin Penn celebrated Leif’s temporary resignation and then went silent
after Penn received blowback for effectively fabricating a scandal. Bloomberg
Law later issued a correction. But Leif was only open to this attack because he
had content on a Facebook page open to the public.
Given that jokes will be
taken out of context, views that were acceptable during their time will be
compared to today’s zeitgeist and found wanting, and the increasingly common
practice for this information to be sent to employers with the implicit threat
that if they do not act the employer will also be attacked, having personal
content accessible on the internet is riskier than ever. In the face of this,
many people have decided that engaging publicly just isn’t worth it. Some
people have opted for pseudonyms. There are entire ecosystems of finance,
energy and government professionals commenting anonymously on current events.
Mitt Romney chose the nom de plume Pierre Delecto simply to follow relevant
Twitter conversations without excessive scrutiny around where he was getting
his news. That we know what his username was indicates that this method has
significant risks, although in this case the only part of the story that
resonated was about the name he chose. Pseudonyms are particularly popular on
Reddit, an internet portal that is only behind Google and Youtube in traffic but
where monetization is much more difficult because of the nature of its users.
Other websites have
rejected anonymous commenters. People who have something to say are often only
speaking because they disagree. And between spam and trolls it becomes logistically
difficult to police commenters. The main benefactors of a relatively curated
comment section are the readers who are looking to see how the author’s points might
be challenged or expanded upon. The usefulness of the comments is usually inversely
proportion to the size of the community commenting. A very small subreddit will
have experts happily engaging with neophytes, while a place with a large
commentator base will often put discussions around tribal dynamics first and
foremost. The economics blog Marginalrevolution.com has managed to keep a
relatively high signal to noise ratio in their comments despite a significant
readership (at least one of the authors really doesn’t like the comments, but that’s
part of the point of having comments), and that may be due to how they hide the
fact that there are comments on the main page. The more comment sections close,
the more important forums such as Twitter or Facebook feeds become.
In school we were warned
about misbehavior going on our permanent record. It’s not clear one even existed
(And if it did, my elementary school never figured out I was the one who stuck
the wires in the electrical socket in the library), but the internet has become
a permanent record that people care about. If jokes from five years ago weren’t
making it hard for people to direct movies, host the Oscars or work at a random
company that does social media screening, then people wouldn’t care. But there
are real life implications to having casual conversations on your personal record,
so people are opting out. They are exiting the public internet. People have
private slack channels, Whatsapp groups, FB messenger chats, iMessage groups, WeChat
groups (where the internet isn’t watching but the CCP is), email threads,
Twitter DMs, newsletters, Discords, etc. There is no clear winner of the second
conversation space, but its growing popularity is also a retreat from the open
discourse that was once more significant on the internet.
Text, Video & Audio – Separate Conversations
It’s pretty easy to be sent
a link to an article, read it, find a few more related pieces and some online debates
around them and come to an initial understanding about an event in a reasonable
time frame. But that isn’t how the next generation is engaging with certain ideas.
A lot of debate and discussion is occurring on Youtube. In order to understand
a situation, you would have to sit through thirty minute videos (play them at
2x) and multiple responses. It’s exhausting, and that might be the point. If
you want to look at the most accessible version of this drama, check out Philip DeFranko’s
Youtube channel. Video discussions and print discussions on subjects are
happening in parallel and do not necessarily intersect. And this is part of the
point, young people avoid interacting with older people by choice and video is
their way to do this. It’s the tech enabled version of a loud bar that scares
away older patrons.
One area that is more age
neutral is podcasts. Right now, podcasts are another way for people to talk
about things and it doesn’t seem like people get attacked in a way where they
would if they tweeted or were quoted in an article saying the same things they say
on podcasts. You can say things about people you could never say on Twitter or
in blog format. This makes for a golden age of podcasting that might not last as
long as we would like. The inevitable pressure to find ways to share content
and increase engagement is going to mean more ways to spread clips from shows –
and perhaps more importantly, people are going to get used to consuming
bite-sized audio clips. When the ease of sharing a clip goes down, so does the
ease of sharing an out of context clip, or an in context clip that was a truth
that is offensive to the wrong people. Once people know they are going to be
attacked for what they say, we may lose much of the free-flowing conversation
that occurs and be left with people who excel at PR speak.
A Couple Cold Wars Heating Up
The Ideological Cold War
It’s no secret that
politics are becoming more polarized around the world. The far right and far
left are become more influential in many countries around the world. In the US,
congressional voting patterns have born this out and many centrist candidates
end up not seeing re-election as they know they would not survive a challenge
from primary voters. The start of political violence has broken out between violent
antifa communists and actual fascist far-righties in various cities. Threats of
violent protests, or actual violent protests, have been used to shutdown
speakers. But these events have so far remained on the fringes of society.
People are being
personally attacked, figuratively more often than literally, for their politics
in ways they were not previously. Joaquin Castro courted controversy when he
tweeted a list of 44 local Trump donors and the local businesses they ran (six
of whom had previously given him or his brother donations). But to see the
future of where the decade might lead us, we look to China… This is not usually
as good an idea as many people in tech would like you to think, but in this case, what
is going on in Hong Kong is particularly relevant. What is still mildly controversial
in the US is standard practice in the current Hong Kong protests. In a move
called the yellow economy, protesters are using apps that lets them know which
businesses are in favor of the protests so they can support them and ignore the
so-called blue businesses that are owned by people who support the CCP and current
establishment in Hong Kong.
It isn’t much of a
stretch to imagine parallel red and blue economies emerging as the decade moves
on and presidential election years are likely to accelerate these bifurcations.
Each year, companies are asked to make public statements on divisive political
ideas, and currently the default color for consumer companies is blue. Right
now, with notable exceptions such as Nike, most companies are more focused on
avoiding controversy (and overreacting to Twitter mobs) and hoping that red and
blue consumers will both want to buy from them.
But going forward, as
partisan antipathy increases, it is easy to imagine campaigns by either side to
increase their boycotts of companies that lean too far in the wrong direction.
It is easy to imagine apps that track different types of coded spending,
letting people know how many dollars they must donate to the democrats to cancel
out the financial support they gave to the GOP. This number could be displayed right
next to the amount they need to spend on carbon credits to cancel out the
impact of their air travel. We could even imagine leaderboards where people
compete for ideologically pure consumption habits.
The above story isn’t
likely to come true as described, but some version of it is unfortunately too
likely. Also possible is increased usage of secret blacklists by companies, whether
to track people who made too many righty statements or to track new employees
whose lefty activism makes them significant litigation liabilities. This might
be a space where censorship-proof decentralized tools prove useful, though not
in a way that is necessarily helpful for society.
The way we might avoid
this future is if centrist coalitions become more viable politically. But if
the trend towards extremism continues, the above scenarios become more likely.
The China Cold War
One of the few places people
have given Trump credit has been in his shift towards treating of China as more
of a potential adversary. Whether Trump stays or goes, the adversarial shift
towards China is going to be one of the most enduring parts of his presidential
legacy. It’s unclear if this would have happened as quickly under a president
who answered more directly to the US business community, many of whom are still
making or hoping to make money in China. But enough companies have been burned
by seeing technology transfers to China create their future competitors as they
are kept out of China’s market that even the US business community is increasingly
skeptical of China.
Politically, the reasons
for opposing China are almost overdetermined. The voices who claimed that
access to world markets would democratize China have been proven decisively wrong
over the past decade as Xi centralized and increased state power. Add in China’s
treatment of Uyghurs in concentration camps, Falun Gong organ harvesting, the breaking
of the one country two systems pledge with regards to Hong Kong, China’s military
expansion to try to claim the South China Sea, and efforts to influence and effectively
colonize less developed countries via the Belt and Road Initiative and behind
the scenes bribery and there is every reason to start pushing back on China’s
agenda.
One notable advantage of
China’s soft power in this developing cold war is their near total capture of America’s film
and television industry. People in Hollywood are worried about ever offending a
totalitarian regime, lest they end up on a blacklist that prevents them from
working on movies that are hoped to be released in China. It is notable that
none of the new action movies have the villain played by a Chinese government
official, despite many real-life scenarios that could inspire these types of
stories. Absent large mistakes made by China in Hong Kong or large groups of filmmakers
who give up on ever getting their films into China, it is hard to see how China
will lose its grip on the industry.
The US has started
preventing technological acquisitions from Chinese investors with stricter
applications of CFIUS. Silicon Valley hasn’t fully caught up yet to these developments,
there are a few people who facilitated the transfer of technology to China who
are still hailed as inspiring venture capitalists and not as enablers of a totalitarian
police state.
There will be a continuing
fight between governments who want cheap telecom technology and are willing to expose
their infrastructure to the Chinese and those who want to stick to systems that
implicitly allow surveillance by the US and its allies.
Grad schools still see China
as a source of students with extremely high test scores to fill up their
programs. But as shown by the recent case of the grad student arrested from Beth
Israel Deaconess Medical Center in Boston, they are now being tracked a bit
more carefully to prevent transfers of technological secrets back to China. Still,
many of these students are patient enough to wait out their time, and with the
US making staying in the country difficult it is an easy choice for many of them
to take this knowledge back to China where they will find higher status opportunities than their
alternative options in the US. The Trump administration is already looking more
closely at students applying to study robotics, aviation and high-tech
manufacturing. If the cold war with China heats up, it is only a matter of time
until more research funding is explicitly tied to the student researchers being
mostly US citizens, or perhaps just directly excluding Chinese graduate
students. That this hasn’t happened may be due to the reliance of low tier
colleges on foreign Chinese students paying full price. If all 363,000
foreign Chinese students are paying around $40,000 a year, that is almost $15
billion dollars going to colleges that the establishment has no easy way of replacing.
The Bureau of Industry and
Security announced in 2018 that they were considering implementing controls over
technologies like AI and autonomous vehicles the way they control weapons technology.
Their prospective
list includes, biotech, position, navigation and timing technology, microprocessor
technology, advanced computing technology, data analytics technology, quantum
information and sensing technology, logistics technology, 3D printing,
robotics, brain-computer interface, hypersonics, advanced materials and
advanced surveillance technologies.
In 2019 they added
five technologies to the Commerce Control List.
Discrete microwave transistors (a major component
of wideband semiconductors), continuity of operation software, post-quantum cryptography,
underwater transducers designed to operate as hydrophones, and air-launch
platforms.
To start out 2020, they put
restrictions around exporting AI for analyzing satellite images.
We should expect more of
the technologies mentioned above to become controlled technologies. (Incidentally,
Dan Wang is one of the better people
to follow if you are interested in the China/US technology trade war and
regulation space). The choice to implement controls on something as broad as
machine learning technology would send a shockwave through the industry. The
satellite rules are an interesting test case. Many of the people working on technologies on the prospective list in US companies are Chinese nationals, educated at US universities.
If the licensing program around deemed exports does not make it easy for them
to get licenses it will result in many of these experts going back to China to build
tools over there. To the extent that there are competitive ecosystems, forcing
people out of the US ecosystem and back to China might not be a long-term win
for the United States. On the other hand, employees at companies like Google might
be less quick to criticize working on tools that help the United States Defense
Department if the ones loyal to the Chinese government are no longer working
there and able to sign employee petitions.
The Subscriber Economy
Businesses have always
realized that financing purchases for consumers allows them to extract more
from their customers. That has become institutionalized in subscription only
business models as things that used to be sold once with upfront fees are now
primarily funded via subscriptions. What started with software is now applied
to exercise bikes, tractors and even baby monitors (Nanit). How far this can be
taken, where else we will see it and its general impact on society are
all open questions. A lot of early stage investors say they do not want to fund
any new hardware company that doesn’t have a subscription element, so this
trend is not going away. The cars that people supposedly own are becoming
increasingly more difficult for unauthorized third parties to fix. In the
1980s, Margaret Thatcher made a point to increase home ownership significantly
in the UK to create more capitalists. Today, homes in major metropolitan areas
are more out of reach than ever and if new business plans work then even appliances
won’t keep working unless their real owners are paid a fee. In the long run, a
society with lower levels of ownership risks fueling a wholesale rejection of
capitalism.
Another reaction might
be a return to dumb devices. There is a hole in the market for well-functioning
dumb hardware that people can own, repair and do with as they please. While I
appreciate the convenience of many smart devices, I find myself rooting
for dumb devices even as many forces are arrayed against them.
Can’t Buy
Me Status (Everybody Tells Me So)
The explicit rise of the status economy has been one of the
major events of the past decade. Eugene Wei chronicled many of the emerging dynamics
in his Status-as-a-Service
essay. Suffice to say, what many people thought was a joke with Klout (obviously
not a joke in retrospect, and it got acquired for $200 million) has become an
obviously important factor in our modern economy. People are creating careers
out of being popular and pushing products, from the Kardashians and other influencers whose fans follow their recommendations with purchases to founders
who are popular on Twitter and thus able to raise at much higher valuations
from VCs, the internet has created a space where people can turn their status
into money.
No, no,
no, noooo
For much of history, people have also turned their money
into status. In the olden days, people married into nobility or outright bought
a title. In the modern age, people endow prizes or institutions to be named
after them. Slightly less wealthy people serve on the boards of these high
status and highly resourced institutions and contribute to their finances. It
is typical for someone who made money in their life, even if it was in a way
that society finds distasteful, to launder their reputation by getting their
name onto a new or existing respected institution. The Ford Foundation, Carnegie
Mellon, etc. One hundred and fifty years ago, Leland Stanford benefited from Chinese
migrants willing to work for less than whites to build his railroads. Today, Asian
students need to have much better than the average scores compared to others who
make it into the school he started (Stanford wasn’t the school directly under
litigation, but they filed an amicus brief supporting the rights of
institutions like their own to continue to discriminate against Asian Americans).
Bill Gates was perceived as the enemy of most nerds in the 1990’s due to his
aggressive business practices, but thanks to the effective philanthropic work
of the Gates Foundation, he is almost every nerd’s hero in the 2020’s.
One of the more notorious recent cases of status laundering
was Jeffrey Epstein, who helped raise money for MIT’s media lab and people
might have therefore assumed he must not have done such horrible things if respected
institutions were still interacting with him. (I believe it’s obligatory to
mention at this point that he obviously didn’t kill himself.)
The universities have remained central in the establishment
status system, and despite their many types of dysfunction it has been hard to
replace them. Many professional certifications also require going through the university
system, and it is hard to find talented young people by other means. What makes
the process difficult is there needs to be a reciprocal transfer of status
between the institution and the people who have passed through the institution.
Harvard could primarily teach juggling, but as long as people thought it was
the same institution that has their impressive
alumni, the ambitious students who want to be associated with that group
would continue lining up. All Harvard or any other top college needs to do to keep the system going is
continue to accept people who are likely to be impressive. They just need to make sure the parts of the class that are legacy or
meritocratic are large enough to outweigh the drag on their brand that occurs
if they focus on students with other characteristics. By legacy I do not just
mean the children of successful alumni, but also other children of politicians,
stars, industry leaders or other powerbrokers. Meritocratic can mean test
scores, grades, competitions and research projects but also other accomplishments
like a flourishing acting career. Movie star alumni are good branding even if
they have scandals later. Kevin Spacey is still pretty good for Juilliard’s
branding while Enron’s Jeffrey Skilling is not great for HBS.
So where does this leave people who want to replace these
institutions? They have to realize that reputation gets built in a feedback
loop between the institution and its members. First the institution gives
credibility to the member, but then some of those members give much more
credibility back to the institution. Paul Graham did this well with YC. First,
his business accomplishments and his essays earned him a significant amount of
status and people took those going through the YC program more seriously. When
some of the YC companies worked out, they added more status to the program than
they got from it. Money is only the first step. If the money isn’t put to work
attracting people who might pay an order of magnitude more status back to the
institution then attempts to build new high status institutions will be very
hard.
A lot of people that want replace educational institutions
aren’t thinking clearly enough about the status angle. There isn’t a good flywheel
to attract high school students away from colleges without offering them a
substantial amount of money. It is likely that top tier colleges will continue
to dominate the high-status landscape in the 2020’s. There will also be more institutions
of higher learned that shoot themselves in the foot like Evergreen, mismanage
their money like Sanders’ Burlington College, and others that are too dependent
on a flow of subsidized loans or Chinese students paying full tuition like many
low tier colleges.
As an aside, the basic way to fix the student loan crisis is
as follows – revert the bankruptcy law that made it impossible to declare
bankruptcy on student loans. Bankruptcy is not a great thing, so people who
paid off their loans won’t be angry, and people who really need to escape their
debt will now have a way. Then add in some measures to make schools accountable
for the bankruptcies they are causing and call it a day. Hopefully this will be
the political compromise that the debt forgiveness/free college types can agree
on with the hard money conservatives.
The
Rise of the Neurotic
This is not so much a new trend as it is something that has
been happening since the 1950’s. In 2000, Jean Twenge published The Age of Anxiety? Birth Cohort Change in
Anxiety and Neuroticism, 1952-1993. She found that the average child psychiatric
patient in 1957 had similar anxiety scores to normal children samples collected
between 1970 and 1988. This looks to be a trend that is either accelerating
and/or we are seeing the normalization of behaviors prompted by extreme levels
of anxiety.
But the past decade already saw an acceleration of sorts.
Microaggressions, a new category of social offenses, became a significant subject
this decade. Yale fired some otherwise exemplary faculty-in-residence,
Professor Nicholas Christakis, after his wife Erika Christakis, an expert on
child psychology, sent out an
email with offensive statements such as
As a
former preschool teacher, for example, it is hard for me to give credence to a
claim that there is something objectionably “appropriative” about a
blonde-haired child’s wanting to be Mulan for a day.
And…
Even
if we could agree on how to avoid offense – and I’ll note that no one around
campus seems overly concerned about the offense taken by religiously
conservative folks to skin-revealing costumes – I wonder, and I am not trying
to be provocative: Is there no room anymore for a child or young person to be a
little bit obnoxious… a little bit inappropriate or provocative or, yes,
offensive? American universities were once a safe space not only for maturation
but also for a certain regressive, or even transgressive, experience;
increasingly, it seems, they have become places of censure and prohibition.
Yale’s kowtowing to its students was widely seen as a
mistake at the time, but these types of reactions are becoming more normalized.
To see where the future might lead, we might look to DSA meetings and the Yale
quad where some people claim that clapping hurts them so everyone should use
jazz hands instead. As for the people who find jazz hands creepy? Some people apparently
get left behind by history.
Hormesis is the idea that a little bit of stress makes people
stronger (Hormesis is frequently incorrectly attributed to noted popularizer
Taleb in the name of antifragility, but these are separate concepts). As a society,
we are removing early stress from children’s early years. When they finally
face people who even simply disagree with them and the values they have been taught,
they don’t know how to react outside of ad hominem attacks, frequently
believing that if they identify their opponent as part of another tribe they have
won the argument, and complaining to the authorities.
There are other factors that might be making our society
sicker. The maximalization of empathy, the type that puts a person in the mindset
of another that is suffering, is not necessarily a healthy thought pattern. The
need for compassion for other humans is obvious, it’s less obvious that letting
people imagine themselves suffering leads to rationality or a healthy psychological
mindset.
A Google n-gram showing the rise of the concept of empathy,
which has increased along with our age of anxiety:
Large families and close-knit groups are also on the
decline, replaced by potentially better matched but amorphous relationships that
people can easily exit. The prevalence of ghosting, the idea of just never
talking to someone again, makes exiting bad relationships easier but also makes
other existing relationship more fragile. On the one hand, it is easier than
ever to find a new partner online. On the other hand, it is easier than ever
for people’s partners to find a new partner online. And instead of seeing and
interacting with friends every day, people count on likes and notifications
from social media to reassure themselves that their relationship status is intact.
On top of all of this this, going back to the adults at
Yale who were kicked out of their jobs by anxious students, people are shown
that broadcasting their problems in a certain way gives them power over others.
It would be a wonder if society wasn’t getting more openly neurotic.
The
Rise of Gaming
Gaming is a huge industry. For how big it is, it has stayed
on the relative periphery of our culture. That is partially because an interest
in gaming is still coded as an activity that is more low status male. But with
the ubiquity of smartphones, everyone is gaming now, and it is obvious that PC,
console and mobile games are huge multi-billion-dollar industries.
Gaming
Regulation
The big scare of past decades was about whether simulated
violence leads to real violence. To the extent that violent people played violent
video games, it was obvious that the worriers were mixing up correlation and
causation and activists like Jack Thompson were making such bad arguments that he became an
internet meme before the concept of memes became primarily associated with
pictures with text that get widely shared on the internet. It wasn’t that games
calmed down, and we might see a new wave of puritanical censoriousness trying to
clean up games in the coming decade. Even a relatively tame game, such as Dota Underlords, derived from a Warcraft
3 custom map called Pokemon Tower Defense
can have themes that some parents would want to protect their kids from. A line
that stands out in my mind when using the insane arsonist character, is when he
sometimes says “Nothing is more rewarding
than the feeling you get when the body stops moving” after you win a round.
But there are other avenues for those looking to regulate
gaming. Some people are worried about gaming addiction. Korea already implemented
a Cinderella law, doesn’t let kids under the age of 16 play between midnight
and six o’clock in the morning. But that wasn’t enough for some mental health
professionals in Korea, who saw games as a cause of problems among young men,
and they lobbied the World Health Organization to add an internet gaming disorder
to its International Classification of Diseases. The WHO announced in 2019 that
it will include the disorder in the its 2022 ICD.
To the extent that better games are effectively creating Nozick's hypothetical experience machines that allow people to opt out of society, it will be
interesting to see if yet another war will be waged against people doing what
they want to do to themselves. If that war is waged, it is likely to be as effective
as other types of prohibition.
In an area where activists might have more success, consumer
activists are worried about how certain games monetize their users by encouraging
gambling. The primary gambling mechanism is loot-boxes. These are in-game
chests that contain random items, some of which sell for a premium on the
secondary market. Customers, some of them young children using their parents’
credit cards, buy loot-boxes until they get the item they really wanted. This
generates far more revenue than if the company had simply charged a direct price for the item. Loot-box regulations have been passed in a variety
of countries, and given the tendency of legislatures to both protect
children and push back on gambling business models this is a trend we should
expect to continue. It is likely that a freemium model of gaming, in which
gamers get the basic game for free but have to subscribe to earn achievements
and cosmetics, will become more of the default method for monetizing games when
loot boxes are banned.
Where there is a secondary market and an active esports
scene, it is also popular to bet these digital goods on the outcome of esports
games. A lot of the gambling happens in the gray market, as companies are
hoping that by betting with skins instead of money they will be allowed to skirt
existing laws or at least enforcement of laws. Gaming companies, who might be
liable due to the skins only being marketable on their website, have started
pushing back against these sites themselves.
Esports
- the Sport of the Future?
There are two ways to look at esports:
1. An activity that will grow to be as large and as valuable
as the NBA, NFL or at least the NHL.
2. A distribution mechanic, branding exercise or loss
leader for games that can be played repetitively. Less employees are needed to
create and slightly modify an hour long game than is needed to create content
for new 40 hour+ AAA games.
Right now, the people who benefit the most from esports are
the gaming companies. The question is if sponsors can grow beyond the endemic
sponsors like energy drinks, computer hardware and streaming services into more
mainstream advertisers to cover the production costs, team salaries and prize
pools needed to sustain an esports ecosystem.
Different gaming companies are taking different approaches.
Blizzard seems to be trying to build a gaming league that looks similar to the
NBA, NFL or NHL while Valve is focused more on major tournaments that promote
their game. Riot is somewhat between Blizzard and Valve, where they have a
league but aren’t as tied to the traditional model that Blizzard is trying to
capture. Of these companies, Blizzard, with its very high franchise fees, might
be the only company directly profiting from their foray into esports. Riot and
Valve seem to be investing significant amounts of money into their competitive scenes as a
way to engage their player bases and sell them more in-game digital goods.
Streamers
Streamers are a combination of influencer, reality TV and
the Harlem Globetrotters. The most popular streamers at the end of this decade
play first person shooters, and grew their popularity playing battle royale
style games (Fortnite). Battle royale games have one person facing off against
99 random players, and they are generally not organized by skill. In these
conditions, a player in the top percentile can pull off moves that make their
opponents look sillier than the Washington Generals.
As they amassed viewers that rival that of a modern TV show, streamers have been recruited by platforms, either those trying to
break Twitch’s dominant hold on the space or Twitch itself. Microsoft’s Mixer
made waves when it recruited top talents like Ninja and Shroud, but it is unclear
if viewer loyalty is enough to create a Howard Stern to satellite radio moment
from Microsoft’s significant investment. With the competition to attract
talent, it’s unclear if the companies in the streaming space are profitable, and the current business models might not see profits for some time. But right now, the major players now have very deep
pockets and are willing to use them.
1. Amazon is willing to subsidize streamers on their Twitch
platform by letting Amazon Prime customers subscribe free (Giving the streamer
income in return for emoticons) to one streamer each month. They also pay major
streamers and esports events directly to remain on their platform. Users are
pretty locked into the streaming live chat experience, and smaller creators
really like the subscriber dynamic that has given them a relatively steady
income. Twitch has also locked in mindshare with their custom emoticons/memes –
if you don’t go on Twitch much but recognize Kappa (also an unrelated European clothing brand), Pogchamp, 4Head, BibleThump
or Monkas you are seeing Twitch memes in the wild.
2. Microsoft has been spending money to recruit major
streamers to their platform. But so far these streamers see their viewership drop
by more than an order of magnitude, so other than the cash payouts things are not really working out for the recruited streamers.
3. Youtube is still dominant in hosting content but not in gaming live-stream viewers. This is despite their live-streaming being technically
decent. They are still missing the live chat experience that draws viewers to
Twitch but exclusive streaming contracts stick to streaming and acknowledge that
every relevant influencer needs Youtube to host their permanent content.
4. Facebook has done exclusive deals with esports orgs like
ESL, but viewers were not happy with the laggy stream or the chat experience. They
have a greater shot at being more relevant in the next wave, as Oculus is well
positioned to be the default hardware if VR becomes a dominant way for people
to experience streaming events.
Behind these major players are the far more numerous minor
players. Some of the minor players rise to prominence via their esport
achievements – people want to watch the best. While top streamers have to
decide how to monetize their popularity, competitive esports players often have
to decide between being a career streamer or being competitive. When top players
stream in casual matches, their competitors often stream snipe them to get
information not available to normal opponents. There are a variety of ways for
them to handle this, but the bigger trade-off occurs when their streaming
schedule intersects with the demands of rigorous training. In team games,
teammates who don’t have streaming to fall back on might also resent the
competitive player who is spending time investing in what is essentially an in-case-we-lose
insurance policy. Some players have managed this balance, but a greater
majority have opted into the steady income of being a full-time streamer.
In the next decade, a lot of people who dropped out of
college or put their careers on hold to play games will find themselves falling
behind in game to younger players with faster reflexes. They will have to see
if the demand for their content and other skills can sustain a long-term career.
The biggest hurdle is moving outside of their primary game, where the bulk of
their fans come from. The game streamers who have viewership across multiple
games have derisked a significant aspect of their future income, while single
game players are at risk of dropping off the map when the game the specialize in
falls in popularity. It is likely that we will see new jobs emerge in these
spaces as this is an emerging media space that is attracting just as many
eyeballs as some of the most popular shows.
Are
You Ready for a Remix?
One sad prediction, for those who might have hoped gaming
would show us a path to the future beyond the endless sequels and prequels ending
up on Hollywood and on our televisions today, is that we are going to see even
more repeated content in the gaming space. Making games is expensive, and
anything that can be done to derisk games is going to be done. This isn’t new.
Farmville, the first major success on social, was really just a remix of
Harvest Moon. League of Legends is a version of Dota, modified to increase the
twitch gaming and remove aspects that overly complicate the game.
For games that are new, one common pattern to expect to
continue is that second movers can win big if they release faster cartoony free-to-play
version of a newly popular games. League of Legends beat out Heroes of Newerth
in this manner in the genre created by Dota and Fortnite beat out Public
Battlegrounds (PubG) in the battle royale genre. EA fast followed with Apex
Legends, which seemed to do relatively well even if it never became as large as
Fortnite.
A source of game ideas that is still probably underappreciated
are the custom map games from the days of Warcraft 3 and Starcraft. Riot’s
Teamfight Tactics (as well as Dota’s Underlords) emerged after the studio Drodo
released a game called Autochess, modeled after Pokemon Tower Defense, a custom
game on the Warcraft 3 map. Just as Craigslist was a map for hundreds of
startups, the custom games on WC3 and SC can be a map for game developers
looking to do something that gamers previously liked.
There may be some truly new experiences with VR coming this
decade, but so far everything has been basic first person shooters with
controls that are a little more annoying and which can make people who play for
long hours of time kind of dizzy (Gaming addiction might be solved by forcing games
to use VR, similar to how alcoholics are given disulfiram to make them sick if
they drink). However, the new Oculus is selling well and Valve is making
Half-Life: Alyx in VR. So it might very well be the decade of VR, though that
is what people thought most other decades.
Societal
Long Tails and Societal Bifurcation
In 2006, Chris Anderson wrote The Long Tail, a book about
how the internet solved distribution for consumers. And their actual demands
for less common products that fit their needs means that there will be millions
of markets for dozens of products rather than dozens of markets of millions of
products.
For
too long we’ve been suffering the tyranny of lowest-common-denominator fare,
subjected to brain-dead summer blockbusters and manufactured pop. Why?
Economics. Many of our assumptions about popular taste are actually artifacts
of poor supply-and-demand matching—a market response to inefficient
distribution.
He was certainly right about the fractionalization of
pop-culture. The last big cultural event was Game of Thrones. This massive hit
had 13.6 million viewers watching its finale. This is great for a premium cable network
like HBO, even if the creators had no idea how to write a story when they weren’t
using GRRM’s cliff notes and badly mauled the show’s brand in their rush to
finish their work. However, this number is less than half of the 30 million
viewers pulled in by an average showing of Seinfeld in the 90’s.
At the same time, it’s never been a better time to be a
niche media consumer. Anime, vampire shows, documentaries, procedurals, fake healthcare
advice and other genres are being cranked out in record numbers thanks to
the streaming wars. Disney, Netflix, Amazon and the established media are
racing to create content that will encourage consumers to sign up to their
subscription services.
And this long tail doesn’t just apply to media. It expands
to other parts of culture. Going on Reddit, people have very different
experiences based on what they want to see. One person can get leftist
propaganda, makeup advice, relationship advice and track the MtG professional scene
while another person might see things aimed at Trump fans, League of Legends,
Rocket League and subreddits dedicated to their favorite TV shows. Going on
Twitter people curate similarly unique content. There are even blocklists
available to be shared. Everyone is becoming exposed to only what they want to
be exposed to.
This trend will only accelerate as platforms themselves are
acting as if they must pick sides. Reddit admins are trying to find excuses to
shutdown subreddits with abnormal political perspectives, while Twitter finds reasons to
kick off their platform anyone who can’t or won’t properly pronounce the latest
shibboleth or who suggests to journalists losing their jobs that they learn to
code. Gab, formed in opposition to Twitter with the intent of being a free
speech platform, revealed that their main issue with Twitter censorship was
that they were not censoring the right people.
Notably, Twitter has not shutdown Trump, despite calls for
them to do so. It will be interesting to see if campaign finance laws address a
future where certain politicians are allowed on internet platforms that give
them valuable reach if their opponents are not allowed to use those same platforms
to promote their candidacy. This is already happening on a small scale with local
candidates who have violated certain rules, but when it happens in a major
election the internet platforms will face significant political blowback the first
time the people they oppose get power.
Are you are
only really cancelled if you let them cancel you?
One aspect of social bifurcation is the rise of cancel
culture. Extremists on the left try to shutdown righties, and righty partisans
try to give them a taste of their own medicine, with noticeable less success.
One thing that has been underrated this past decade is that most people were
only cancelled after they let themselves be cancelled. Trump is the politician
who blew this open, he didn’t let any allegation, true or false, bring him down.
The people most at risk from cancel culture are the individuals and
institutions who have enthusiastically wielded the tools of cancel culture.
In the next decade, we should expect to see more very public
fights. Lawyers tell their clients to save their statements for the court room,
but the court of public opinion is stronger than before and it is vital to come
out swinging against false allegations that other people see as credible.
Making a lukewarm apology and then disappearing from public life is the
equivalent of ceding the field to your enemies.
For those looking for a non-Trump model for how this plays
out, Carlos Ghosn’s very
public pushback on the allegations made against him by Japan’s prosecutors
and Nissan will serve as a template for others who have been unjustly accused.
Some
Other Tech Trends
There have been a few other tech trends that are either
ending or accelerating into 2020, it’s been a long essay so I’ll try to keep it
short.
SaaSy
New SaaS companies have been enabled by the rise of cloud
computing, and the transition of old school businesses into SaaS businesses has
been a boon to tech companies as markets have rewarded SaaS companies with
higher multiples. These companies are more capital efficient, but eventually
markets will realize that SaaS businesses don’t always grow as much as they
hope and the multiples will contract.
Amazon’s competition with SaaS businesses will also start
to impact the market and there is a chance that other major players come in and
try to compete significantly on price across multiple open source projects.
More projects will modify their licenses to prevent this type of competition.
Remote
Workers
As real estate prices in major metro areas remain
ridiculous, this is a trend that will only accelerate. Remote companies were
less popular because not that many people had seen functional remote companies.
Now that there are more examples of success, and with more example the funding
for additional remote companies will be easier.
Money
Losing Business Plans
What is going to get harder are businesses that lose money
until they somehow win the market. Many of them are growing without product market
fit, and they are disguising it by giving their customers $1 for $0.95 and
selling VCs on the growth. With Softbank pulling back from funding these types
of companies (both because they are choosing not to and because their ability
to raise future massive funds is in question) and public markets punishing
companies like Uber, it will be harder to execute this strategy. What will be interesting
to see is what happens to the companies who were running a playbook to attract Softbank
or Softbank-like money. There may be a lot of blood in the water the first
couple years of this decade.
Bootstrapped
companies
There should be even more bootstrapped companies in the 2020’s.
The companies that don’t raise at increasingly large valuations won’t get as
much press – both because they won’t seek out press and because there will be
less public news like funding rounds to talk about – but since a highly functional
SaaS company can be cashflow positive from a very early timeframe, it is
feasible that a few very successful companies will be able to fund their growth
internally, independent of the funding ecosystem.
The
Crypto
A decade is a long time. And while the demand for grey market
money is only going to increase, governments are probably going to catch on to
the fact that crypto players are enabling all sorts of things that they would
prefer not to be enabled. The price isn’t likely to crash until it looks like
the various off-ramps from crypto into the legal economy start closing, and
that won’t happen until there is a major geopolitical event.
There are a lot of other projects in the works, many of
them will be interesting tools or networks where having a trusted institution
(ie, a company) coordinating things and reducing transaction costs might improve
the experience significantly. The largest demand for blockchain will come from
government officials who don’t know that databases can be auditable without it
and the people who are using blockchain as a selling point to modernize an old-school
industry.
The Old
Economy Tech Funding Arbitrage
Thanks to Andreessen, everyone knows that software is eating
the world. One strategy for tech people has been to go after an old economy
space and raise at tech valuations. They can slowly build out an old economy company,
perhaps a bit more efficiently thanks to fewer legacy systems, and keep raising
at tech multiples to revenue. Then they go public and valuations rationalize to
match the actual fundamentals of their business. The founders win, the early
investors win, a few late stage investors might not win, and the public markets
definitely don’t win. Although WeWork didn’t go public, it was otherwise shaping
up to be one of the platonic ideals of this motif.
This is a pattern that played out a lot in the 2010’s and
should continue to play out in the 2020’s. This strategy will only work because
there will also be tech enabled companies that will take over sizable portions
of these industries and it will remain difficult for many of the players to
tell the difference between real tech disruption and VC funded customer subsidies
at scale.
Mobility
and Cities
The rate at which people move has been consistently
falling, and cities are being more poorly managed than ever. This comes down to
the long run results of the idea that housing is an asset that should appreciate
significantly and politicians who are beholden to their current constituents, not
their futures ones. So politicians in many major metropolitan areas came up
with a compromise of building restrictions combined with rent controls or rent
subsidies.
This worked well for current residents until it became
apparent that their children would not be able to live in the city they grew up
in, and other people who want to work in their city need to spend hours
commuting which drives up labor costs significantly.
On top of this failure, there are failures to both take care
of and police the behavior of the homeless, many of whom are mentally ill. With
no options for affordable housing due to lack of supply, no options for
incarceration for many who commit crimes of various magnitudes due to both a
lack of desire and a lack of ability to incarcerate them at an affordable cost,
and no ability to get them committed, and in the case of San Francisco no desire
to move the homeless out of the city’s main business districts, many people are
starting to think about how they can do cities better.
In the US, there is more interest than in a generation in
developing new cities. They are likely to be developed in states that can make
a credible commitment to make it easy for people building for the long term.
States like California and Illinois don’t merely have significantly more corruption
to navigate, but their precarious long-term pension situations should give
pause to anyone thinking of building something in their state wary that their
assets will eventually be looted to pay for promises made by local governments.
With the United States broadly allergic to concepts like a congestion
tax, traffic in major metropolitan areas is only going to get worse. Places
like San Francisco think they can fix things by replacing car lanes with bus
lanes without making it safe for commuters to want to try public transportation.
It is telling how the only major transportation solutions that have worked in
SF have been company shuttle buses, and these solutions have been opposed by many
locals. Alternative transportation systems are being attempted to get people
into and around cities, but these solutions will function much better in cities
designed for their use than they do in currently existing cities.
Conclusion
There are more topics I
want to address... from attention spans, to healthcare to the future of various rent seeking economic models more generally. But I am coming up on 10,000 words so I should probably put them in separate
posts.
As usual, none of these ideas
belong to me. They are free to spread however they spread. But it is 2020… So if
you, my dear reader, happen to know someone that I also know, you should
attribute any questionable view espoused in this essay to them unless they agree
to immediately publicly denounced me and apologize for ever interacting with me.
We must let the public witch-hunts
continue as they lead us to a more empathetic society.
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