Newco Shift | Covering the biggest shift in business and society since the industrial revolution

Tech’s Gifts Are Tough to Measure

The future’s bright — but we’re counting it all wrong. Forget about the fate of that iPhone headphone jack! Sometimes it’s important to zoom out to the big picture. Google’s economist Hal Varian has been looking at technology’s economic impact over the long haul, and remains upbeat. In a brief paper for the International Monetary Fund’s Finance and Development, Varian outlines five areas where connected tech (primarily, networked smartphones) will keep introducing big new opportunities: Data collection and analysis, personalization and customization, “continuous improvement” through experimentation, novel types of contracts, and better coordination and communication. These sound like the same sorts of Good Things the industry has been promising since the early days of the personal computer, but Varian argues, convincingly, that we’re ramping up fast now that these trends are moving into every crevice of our businesses and lives. On the plus side, we keep reaping unexpected benefits and lifestyle improvements as these changes snowball. On the negative side, our systems for tracking and measuring economic activity have been left behind in the dust. Econometrically, we’re flying blind into the future. If Google doesn’t figure this one out for us, maybe there’s a startup we haven’t yet heard of that can.

Airbnb vows to build anti-discrimination into its platform. Last winter, after a study found that hosts were discriminating against African American users of Airbnb, the company commissioned an internal investigation and vowed to do better. Today Airbnb released the full report (PDF) and details of a plan of action, including a “community commitment” hosts and users will need to affirm and other interface changes designed to make discrimination more difficult (The New York Times). To some extent, Airbnb is just reflecting bad behavioral patterns that exist in the larger society, and the report admits that “no one company can create an alternative universe” that magically wipes human minds free of bias. But it’s entirely possible to build a platform that provides cues to better behavior and boundaries that bar socially damaging practices. Airbnb says it’s going to try — and the world will be watching carefully.

Theranos Diagnosed With Apple Disease

By scott-rosenberg

The tragedy of Theranos. As the media’s attention today turns to the latest iPhone unveiling, here’s a morality tale that suggests the perils in over-imitating Apple. A Wall Street Journal investigation was the proximate cause of the downfall of med-tech startup Theranos, which once promised to revolutionize the blood testing business. But a new look at the story of the company’s implosion (Vanity Fair) suggests that Theranos founder Elizabeth Holmes built the firm on sand from the very start by choosing a path of secrecy rather than transparency. Holmes’ emulation of Steve Jobs extended to more than the superficial shared preference for black turtlenecks; like Jobs, she applied control-freak tactics to prevent rivals, neutral third parties, and even Theranos employees themselves from obtaining information about the company’s products. That meant that, when the Journal finally raised questions about its work, Theranos had no defenders. If Theranos was as bogus as it now appears, maybe there was never much to defend. Either way, the lesson for the rest of us couldn’t be clearer: Don’t trust anyone’s revolution unless the data is shared, the science is reviewed, and the conversation is open.

The Clinton campaign’s strength in numbers. If this year’s two presidential campaigns were startups, Trump’s would be the one that prefers winging it to wonking out. Clinton’s, meanwhile, would be the one that lives and dies by data. A profile of her campaign’s director of analytics, Elan Kriegel (Politico), shows how thoroughly statistics drive the Democratic candidate’s efforts — the timing of email campaigns, the houses that on-the-ground volunteers visit, the targeting of postal mailers and online advertising and TV campaigns. Trump famously scorns deep-diving into data, while Clinton has organized her entire effort around a “culture of testing.” In a few weeks we’ll know which candidate bet right. (If you’re betting against data smarts, though, hope you’re wealthy enough to take the loss.)

Nobody Covered the Wright Brothers

By scott-rosenberg

No one ever said changing the world was easy. If you believe that your work can actually put a dent in the universe, you’d also better be prepared for the universe to take its time figuring out what you’re up to (Collaborative Fund blog). From the automobile to the telephone, from the Wright Brothers’ flight at Kitty Hawk to Tim Berners-Lee’s invention of the World Wide Web, the innovations that end up transforming our lives often go unheralded when first introduced. That’s something to ponder as we return to our post-Labor Day labors: “Changing the world” is one thing, “convincing people that you’ve changed the world” is something else. If you hope to accomplish a mission, you need patience as much as you need brilliance.

Patagonia’s secrets of sustainable success. Patagonia started up in 1957 and spent decades growing and refining its approach to sustainability before most businesses had ever heard of the term. The company’s founder, Yvon Chouinard, told one of the classic tales of patient innovation in his 2006 memoir, Let My People Go Surfing. In an interview on the book’s 10th anniversary (FastCoCreate), current Patagonia CEO Rose Marcario talks about the company’s success at achieving profits while sticking to its ideals, and says its biggest challenge today is holding onto those ideals at scale. For instance, as a global brand with $750 million in sales, Patagonia needs a lot of organic cotton — but only 2 percent of the world supply is organic right now.

Takeaways From a Startup’s Flameout

By scott-rosenberg

What we can learn from WrkRiot. Late paychecks, forged payment receipts, unverifiable claims on a founder’s resume — the complaints that emerged around a job-search startup called WrkRiot, after a former employee posted an anguished account, sounded like a company implosion in the making. And indeed WrkRiot has gone dark since Penny Kim’s story went viral and the New York Times wrote about the saga. What happened at WrkRiot will be a matter for its stakeholders to untangle now. For the rest of us, it’s a reminder that ideals alone don’t insulate the world of NewCos from deception and possible fraud. For greener employees who haven’t lived through a down cycle yet, here’s a chance to learn a lesson that veterans already know: Look around when the easy money begins to dry up, because that’s when rot gets exposed.

Jeff Bezos’s airplanes are coming. First, Amazon’s growth pushed Fedex and UPS to grow, too. Someone had to make all those deliveries! But now Amazon is building up its own fleet of planes (dubbed Prime Air), trucks, and an Uber-like on-demand delivery network called Amazon Flex (Bloomberg). Does the Seattle giant want to put the other guys out of business? Jeff Bezos says no — Amazon just needs more delivery capacity than the existing networks can supply. The 2013 holiday-season mess, when UPS faltered under the peak load of Amazon deliveries, taught the company it needed to bulk up its own delivery muscles. But its scale and logistical prowess will be hard for competitors to match. Smaller upstarts will end up looking for ways to complement Amazon — to do special things for customers that a monster-size retailer simply can’t.

Twilight of the Imperial City?

By scott-rosenberg

High rents close doors. In the 1950s, urban planners thought we had to disperse big-city populations to suburbia to protect them from nuclear attack. Then they assumed traffic and inner-city decay would drive people out to “edge cities.” Then they imagined that telecommuting would empty out downtowns. Instead, of course, we have watched as towns like San Francisco and New York turn into “imperial cities” so popular that most of us can’t afford to live there (The New Yorker). Such cities are no longer where you go to make it, but rather where you go once you’ve made it. More housing would help, but it takes a daunting amount to put a dent in sky-high rents. Yes, entrepreneurs and job-seekers will spread out over time to a broader range of regional centers — but that’s a slow process. The failures of foresight of previous generations of planners suggest how hard it is to intervene and remedy such problems. But it’s tough to sit back and do nothing while our cities, once drivers of opportunity, turn into engines of inequality.

Google’s Waze will turbocharge carpooling. Remember when people called Uber and Lyft “ride-sharing services” with a straight face? Both companies, of course, turned out to be more about ride-hailing — they were new-model, distributed taxi services, and despite efforts like Lift Line, that’s mostly what they’ve remained. Now it looks Google will take a run at a true ride-share offering beginning this fall (The Wall Street Journal). Through Waze, its real-time route-finder, it will help users connect with drivers who are already going their way, and charge them fees that are more like “chipping in for gas” than taxi fares. Uber and Lyft, presumably, won’t stand still. This whole business of using our phones and networks to better organize how we get places still has plenty of twists and turns before we figure it all out.

GE Bets on the Software Biz

By scott-rosenberg

How GE is becoming a software company. Software, as Marc Andreessen famously puts it, may be “eating the world,” but GE is looking to chow down on some code (The New York Times). Having pivoted away from its concentration on finance back to its manufacturing roots since the financial crisis of 2007–8, the industrial giant has opened a software division in San Ramon, Calif., aimed at developing a digital operating system for factories. One key application is a predictive maintenance system named Predix that processes sensor data to manage systems’ repair schedules and make them more efficient. GE figures it better build an open platform for this stuff before some newcomer does — and that means the company not only has to attract employees but also must win developer mindshare. It’s an unfamiliar road for the old-line manufacturer — but GE sees no other option. It’s mind-blowing to think that GE is trying to apply agile software thinking and lean-startup methods in its business of mammoth gas turbines and airplane engines. As the Times notes, in these markets, it’s hard to see how a “minimum viable product” could ever fly. Still, GE CEO Jeffrey Immelt says of the firm’s software investment, “It’s this or bust.”

Big Data is our new big daddy. As we hand over ever-larger shares of our personal and political decisionmaking to algorithms, we are turning data into a new kind of godlike authority, writes historian Yuval Noah Harari (The Financial Times). Where humanism taught us to trust the guidance of our inner compasses, “Dataism” counsels that we follow the pointers that emerge from our information systems. As we dissect the inner workings of the human machine and discover the mechanisms that drive our organisms, we will come to see our selves as data-driven, too. Such a world has no room for free will, but it can’t answer what Harari calls “the hard problems of consciousness,” either. Data can tell us how we’re doing, but it still can’t tell us what we should do with the time of our lives. You can view your gut as a calculating device or as an ineffable ecosystem; either way, it’s what you are going to go with.

Lawsuit Profiteering: It’s Legal. It’s Smart. But Is It Right?

By scott-rosenberg

Startup formula: Big data + lawsuits = profit. Legalist, a startup founded by two Harvard undergrads that launched at Y Combinator’s summer Demo Day this week, tries to figure out who’s going to win business lawsuits — then bankrolls the winning side to collect a share of the award or settlement (Business Insider). Yes, this is similar to what Peter Thiel did to Gawker, except he was out for revenge, not returns. Maybe it’s just a total coincidence that one of Legalist’s founders is a Thiel Fellow. But the company’s concept shares the financier’s traits: It’s appealingly radical in its thinking, and disturbingly casual in its disregard for collateral damage. Once upon a time, Legalist’s business model was known as “champerty,” and was against the law. Today it’s called “litigation finance” and has become a growth sector. Hedge funds are already investing in lawsuits, so why not apply some big-data-fueled, deep-learning-powered smarts to win such bets? Maybe because that’s just begging for a backlash. A sustained public outcry might could get federal, state and local governments to reform their legal systems to make them less easily influenced by infusions of cash. That’s an outcome we could get behind.

Is Vanguard un-American? A lot of investors like index funds because they charge low fees and therefore deliver higher returns in the long run. The folks at brokerage Sanford C. Bernstein & Co. want you to know that such “passive” investing, however attractive it may look, is actually anti-capitalist and probably un-American, too (Bloomberg). They’ve written an article — titled “The Silent Road to Serfdom: Why Passive Investing is Worse Than Marxism” (but curiously unavailable on their website) — that attempts to make a moral and social case for the value-add that active investment managers provide. “A supposedly capitalist economy where the only investment is passive is worse than either a centrally planned economy or an economy with active market led capital management,” they write. Of course, this is one big hypothetical; nobody has advocated outlawing stock-picking fund managers, and there will always be people who think they can beat the market. Mostly, it sounds like Bernstein & Co. are frustrated that so many investors have finally started taking the market’s common-sense cues and abandoning the active funds along with the high fees they charge.

The real reason this elephant chart is terrifying

By kaila-colbin

This is the second in a series to show why it’s so essential for all of us to understand the implications of exponential technologies, and why we’re hosting the SingularityU New Zealand Summit in November. The first was an introduction to exponential technology in comic form. This one’s a bit more intense. Enjoy!

I give a lot of presentations about exponential technology. Here’s a brief summary (feel free to skip ahead…):

The presentation is designed to be a shock-and-awe wake-up call about the nature of exponentially accelerating technology and its implications. In it, I quote a now-infamous figure from Frey and Osborne: 47 to 81% of jobs as we understand them could be under threat from technology within 20 years (acknowledging there are differences of opinion on this).

And then I show the crowd a recent headline: Apple’s Foxconn factory in China just fired 60,000 people and replaced them with robots.

Ants and the Superintelligence

By brad-feld

I’ll start with my bias — I’m very optimistic about the superintelligence.

Yesterday I gave two talks in Minneapolis. One was to an internal group of Target employees around innovation. In the other, I was interviewed by my partner Seth (for the first time), which was fun since he’s known me for 16 years and could ask unique questions given our shared experiences.

I can’t remember in which talk the superintelligence came up, but I rambled on an analogy to try to simply describe the superintelligence which I’ve come up with recently that I first saw in The AI Revolution: Our Immortality or Extinction. I woke up this morning thinking about it along with one of the questions Seth asked me where my answer left me unsatisfied.

GDP Is Dead. What’s Next?

By scott-rosenberg

Stick a fork in the GDP. Much in our world depends on the Gross Domestic Product — the central yardstick by which we gauge whether a nation’s economy is growing or shrinking, healthy or ailing. But GDP is flawed and outdated, and now governments and economists are trying to figure out how to replace it (Bloomberg). The problems with GDP are legion: it misses key changes in income equality, technological change and living standards. It has a hard time capturing the impact of economic activity once it moves online. The GDP numbers that get headlines on initial release are almost always wrong and end up being substantially revised. If this was how you were measuring your family’s or business’s economic well-being, you’d want to replace it, fast. The trouble is, if you threw GDP out the window tomorrow, economists don’t seem to have many ideas of what you could use instead. Fortunately, this is precisely the kind of problem that so many other strong trends today — from deep-learning AI systems to networked sensors to digital cash — ought to help us solve in the long term. For now, when it comes to macroeconomics, we’d better get good at flying blind.

The elusive formula for a downtown renaissance. Some aging Rust Belt cities manage to reinvent themselves as welcoming turf for NewCos, and others don’t. Success “requires more than a good coffeehouse” (Toledo Blade). Toledo, Ohio launched a campaign a decade ago to retain and attract college-educated workers and new small businesses. With new museums and other amenities and a reasonable cost of living, the city has made some progress. But holding on to talented locals drawn by other towns and regions remains a struggle. Cities like Toledo still need to reverse a reputational deficit years in in the making; people need to know that they have, not only good coffee, but jobs, and downtowns that are no longer “dumps.”

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