“The Web as I envisaged it, we have not seen it yet. The future is still so much bigger than the past.” –Tim Berners-Lee
MEDIA
Taxing Progress – Silicon Valley Examined 18
On the Silicon Valley Examined podcast, Robert Hendershott and Don Watkins discuss the so-called billionaire tax and how taxing unrealized capital gains could impact Silicon Valley.
INSIGHT
Markets Matter
Don Watkins and Robert Hendershott
Exploration leads to innovation. But how do explorers know when they’ve hit gold?
If you’re trying to get to the moon, you’ve succeeded once you’ve put a man on the moon and returned him to earth. If you’re trying to create a vaccine to stop a pandemic, you’ve succeeded once you’ve created a safe, effective vaccine.
But progress isn’t about one-off feats of engineering or invention. By and large it is about enhancing the ability of human beings to live longer, healthier, happier lives. And knowing whether you’ve done that is really hard.
You create disposable underwear. Is that progress? You create a new digital currency. Is that progress? You create a two-wheeled scooter and call it the Segway. Is that progress? You create a new kind of restaurant that blends the convenience of fast food and the quality of a sit-down restaurant and call it fast casual. Is that progress?
There’s only one way that consistently discovers the answer. The market. When people make free buying and selling decisions, guided by prices and profit, that becomes the ultimate arbiter of whether a would-be innovator is truly creating value. It’s the gold-standard test of progress.
Why the market? Because no matter how much due diligence a company does, no matter how much market research it does, no matter what plans the company makes, there is no way to know before product launch whether people will want what they’re selling.
Consider some ideas that seemed like no-brainers and ended up failing spectacularly once they faced a market test.
In the late 90s, Bic announced a line of disposable underwear and pantyhose and consumers said, “No thanks.”
Coke famously spent years developing and taste testing New Coke, only to end up with one of the biggest flops in business history.
Amazon put its Fire phone through its rigorous development process and it still failed. “Even the best process can only improve the quality of your decision-making,” write former Amazon executives Colin Bryar and Bill car; “no process will make the decision for you.”
Well, why not? What problem is it that markets can solve and nothing else has so far?
One way to answer that is to look at the history of tablet computers.
One of the earliest precursors to the first breakthrough tablet, the Apple iPad, was the Apple Newton, released in 1993. The Newton was marketed as a “personal digital assistant” that would allow you to store phone numbers, manage your calendar, and take notes using cutting-edge handwriting recognition software.
It failed spectacularly. Why? That wasn’t fully clear, but pundits pointed to its high price tag, limited functionality, and unreliable handwriting recognition capability. The Simpsons famously parodied the Newton: a character makes a note to “beat up Martin,” which the Newton translates to “Eat up Martha.”
As they say: it’s funny because it’s true.
Flash forward a decade and Sony produces something much more recognizably close to a modern tablet: the Sony Airboard.
The Sony AirBoard integrated 802.11a/b/g WiFi with a maximum data transfer rate of 15Mbps, at that time. As its original product brochure says, “The 800×600 TFT LCD color display can be used as a television display panel and can perform other tasks such as video, Internet browsing/streaming video, e-mail, and digital photos, all without a PC. The AirBoard can be controlled & navigated via touch panel.” The AirBoard Wi-Fi system used Hi-Bit Wireless designed by Sony to achieve high data transfer rates.
It, too, failed. Why? Here the reasons were even less clear-cut than with the Newton. Again, the price point was relatively high—$1,300—but it’s hard to believe that with the right functionality, price would have been a deal killer. More likely the problem was that the functionality didn’t justify the price.
And that’s not fully Sony’s fault. In 2004, there was simply much less you could do with a tablet. There wasn’t a lot you could stream on the web. WiFi was slower and a long way off from being ubiquitous. And far from the gorgeous, high-resolution LCD displays that would exist a few years later, the picture quality couldn’t rival TVs.
It wasn’t until the arrival of the iPad that Apple was able to prove that there was a market for tablets. And it’s interesting to note that Apple actually released the iPad in the face of massive public skepticism. Even after the success of the iMac, the iPod, and the iPhone, most commentators said, “Who needs a computer that can’t fit in your pocket and doesn’t have the functionality of a laptop?”
But the market said otherwise. Apple had hit on the right combination of price and functionality. Tablets, the market finally decided, represented progress.
The lesson: Every product involves a complex set of inputs and features, costs and benefits, limitations and capabilities. Every time a company puts something on the market, it’s running an experiment: is this package, taken as a whole, valuable—and is it more valuable than the available alternatives?
Business engages in exploration. Markets empower that exploration by providing crucial feedback through sales, profits, and often stock prices. Through this feedback, markets deliver discovery, which creates progress.
Markets matter because they let innovators know when they have indeed innovated.
QUICK TAKES
Artificial solutions
Henry Kissinger, Eric Schmidt and Daniel Huttenlocher have an interesting piece in the Wall Street Journal pondering the future of Artificial Intelligence.
AI will compel even more fundamental change: It will challenge the primacy of human reason. For all of history, humans have sought to understand reality and our role in it. Since the Enlightenment, we have considered our reason—our ability to investigate, understand and elaborate—our primary means of explaining the world, and by explaining it, contributing to it. For the past 300 years, in what historians have come to call the Age of Reason, we have conducted ourselves accordingly; exploring, experimenting, inventing and building.
Now AI, a product of human ingenuity, is obviating the primacy of human reason: It is investigating and coming to perceive aspects of the world faster than we do, differently from the way we do, and, in some cases, in ways we don’t understand.
This isn’t quite right. As we’ve talked about, AI expands the power of human reason. But what the authors do get right is that this new tool will require a lot of thinking and adaptation on our part. It’s a good thing that this is already starting to happen.
But call me skeptical when it comes to their specific recommendations:
Another effort ought to expand the consideration of such questions beyond developers and regulators to experts in medicine, health, environment, agriculture, business, psychology, philosophy, history and other fields. The goal of both efforts should be to avoid extreme reactions—either deferring to AI or resisting it—and instead to seek a middle course: shaping AI with human values, including the dignity and moral agency of humans. In the U.S., a commission, administered by the government but staffed by many thinkers in many domains, should be established. The advancement of AI is inevitable, but its ultimate destination is not.
This comes perilously close to trying to centrally plan AI—in particular, to have the government decide what values should be embedded in AI. From an Ingenuist perspective, the better path is to open the road to exploration and discovery.
The government should be engaged in the discussion of the future of AI insofar as there are issues of health, safety, and freedom. But deciding what it means for AI to respect the dignity and moral agency of humans? Washington can leave that to the rest of us.
Crash different
Apple is reportedly planning to have iPhones detect automobile accidents and automatically dial 911.
Crash detection uses data from sensors built into Apple devices including the accelerometer to detect car accidents as they occur, for instance by measuring a sudden spike in gravity, or “g,” forces on impact.
The feature would mark the latest move by Apple and its competitors to use motion-sensor technology to build safety functions into their devices. Apple introduced a fall-detection feature in its smartwatch several years ago that senses when wearers have taken a hard fall and dials 911 if they don’t respond to a notification asking if they are OK. The company this year added a feature to the newest version of its iPhone operating system that assesses the walking steadiness of users.
Back in the late 90s Bill Gates said that “The advance of technology is based on making it fit in so that you don't really even notice it, so it’s part of everyday life.” The future is here. Now we take for granted how often computers save our lives.
The most important thing we can invent
I’m surprised by how often people recoil at discussions of life extension technologies—not new drugs that add a couple years to your life, but technological solutions that could dramatically expand our lifespan by decades. Perhaps indefinitely.
Balaji Srinivasan makes a simple but novel argument that it’s precisely life extension technologies that are the most important technologies we can invent.
The goal of technology, he observes, is to reduce scarcity.
Think about how a breakthrough is described: faster, smaller, cheaper, better. All of these words mean that with this new technology, one can do more with less. In the digital world, Google made information on any topic free to anyone with an Internet connection, and WhatsApp made it free to communicate with anyone. In the physical world, innovations like the Haber Process or the Green Revolution allowed us to produce more with less. In a real sense, these technologies reduced scarcity.
I might quibble that the goal is to create abundance. But setting that aside, he goes on to note that “mortality is the main source of scarcity.”
If we had infinite time, we would be less concerned with whether something was faster. The reason speed has value is because time has value; the reason time has value is because human life has value, and lifespans are finite. If you made lifespans much longer, you'd reduce the effective cost of everything. Thus insofar as reducing scarcity is acknowledged to be the proximate purpose of technology, eliminating the main source of scarcity – namely mortality – is the ultimate purpose of technology.
Balaji ends by sharing evidence that this is “actually feasible today. It’s been shown that we can extend healthy lifespans in mammals – and even reverse aging to bring people back to youth.”
I’m heard similar claims in the past, but never bothered to look into them. Balaji’s take on the importance of life extension makes me more curious.
I’m dreaming of a white summer
So it’s really hot. And you don’t want to be really hot. Solution? You could buy an air conditioner. Or apparently you could buy some really, really white paint.
Ruan’s creation has two key components that make it so white. The first is different sizes of a particle called barium sulphate, which is common in paints, varnishes, and cosmetics. It also has a high concentration of these particles that reflect 98.1% of sunlight while emitting infrared heat. Typical paints, in comparison, are between 80 and 90% reflective of sunlight.
For those of us who aren’t science geeks, this basically means, according to a release from Purdue University, that “Because the paint absorbs less heat than it emits, a surface coated with this paint is cooled below the surrounding temperature without consuming power.”
Your standard white paint can’t make surfaces cooler than their surroundings because it gets warmer rather than cooler. Using the new paint to cover a 1,000-square-foot roof, according to a paper published by Purdue researchers, could mean a cooling power of 10 kilowatts. Ruan says this number is more powerful than the air conditioners most houses use.
It will be interesting to see if people value the cooling properties of the paint more than the value of not living in the world where every building is covered in uber-white paint.
Chain reaction
My wife assures me that we have to finish our Christmas shopping, like, today because of the global supply chain problems that have emerged thanks to COVID (and government policies are making it harder to adapt to COVID).
Anyway, Ryan Petersen makes that case that, even in the computer age, the physical world still matters, and the physical world isn’t doing so hot.
For all we may talk about software eating the world, it’s clear (and became a lot clearer during the PPE shortages of the early pandemic) that the physical world still matters. From a logistics standpoint, the mobility of goods and the exchange between trade partners is what enables innovation. Tech pundits may talk about going from atoms to bits or bits to atoms, but it’s the interplay between the two that makes the world go ‘round. And amid a frenzy of global trade demand, the world’s shipping infrastructure is starting to break.
One of the most important factors causing today’s problems, he argues, is lack of standardization. After discussing how standardization of shipping containers made the global supply chain possible, he observes the modern global trade network is badly in need of a different kind of standardization:
Our computers, laptops, tablets, phones, and more can all connect quickly to the information we seek thanks to standardization. And while today’s global trade network is kind of like an internet of physical goods, it’s missing a standard like HTTP. The same way data passes between devices via the internet, goods pass between ocean ports, airports, warehouses, and other entities to reach their final destination. Without a logistics standard to act as a request-response protocol, all the players — suppliers, drayage, ports, warehouses, buyers — have to stitch their networks together manually.
Information gets lost; layers of redundancy, designed as backups given low visibility, slow the exchange: connections end up being very brittle. Let’s say there’s a shipment scheduled to arrive in Long Beach on Tuesday. But which terminal exactly and what pier number? What time is pickup? How long before late charges are incurred? Finding these answers is labor-intensive and imprecise. Logistics managers end up consulting different sources on websites, via email, or in person.
Which leads back to his original point: that it’s the interplay of bits and atoms that prosperity and progress depend on. Software can help us standardize the global supply chain in ways that can solve these problems.
Until next time,
Don Watkins
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