Next Billion Seconds
Book: The Next Billion Seconds. Mark Pesce.
“What happens after we’re all connected? When I asked that question, seven years ago, well over eighty percent of all Australians had their own mobile, and the bulk of the nation had signed up for broadband Internet access. The answer led me on a journey through the future of media, education, politics, and now, economics. In July I started to set down the outcomes of my research in a book titled THE NEXT BILLION SECONDS. A billion seconds is just a bit over 30 years – a generation, if you will – and it’s my belief the billion seconds from 1995 to 2026 will be as important in the history of human affairs as the birth of language, seventy thousand years ago. Being connected means being something new. We, here in this room tonight – along with everyone else on the planet – are in the middle of this transition, halfway between what we were, and what we will become. That’s always been true, but just now the transformation of our civilization has gone into overdrive, because all of the frictions which kept it chugging along at a lazy pace are evaporating. We’re moving into a superconducting phase of development, with no resistance holding us back. Stripped of all baggage, we’re accelerating wildly, unpredictably, into a future which looks almost nothing like the recent past.
The hyperconnectivity created by the mobile dramatically improves an individual’s ability to earn a living. To own a mobile in Bangladesh or Peru or Nigeria means you have a capability to earn more to keep you and your family alive. This effect is completely obvious, so everyone in the developing world has been acquiring their own mobile handsets. In the decade from 1999 to 2009, we went from half the world’s population never having made a phone call to half the planet owning their own mobile. We’re now well past that point. There are over six billion mobile subscriptions and almost five-and-a-half billion individuals using mobiles right this minute, and, if current growth patterns are maintained, in five years’ time everyone on Earth – over seven billion people – will have their own mobile.” (http://blog.futurestreetconsulting.com/2011/10/06/hypereconomics/)
Hyperconnectivity, and the frictionless free fall of markets
Mark Pesce and Robert Tercek:
"the law of supply and demand amplifies under the influence of hyperconnectivity. We are more likely to go to those who can provide a room or a ride or a piece of code cheaply. In short order this brings us to the ‘race to the bottom’. In an environment freed from the frictions of the marketplace, there is no room for rent-seeking or even the kinds of labor practices which keep developed economies stable. When I pit my $75/hour rate against someone in Pakistan asking only $30/hour, how do I survive? And if I cut my rate to $35/hour, does someone else offer the same service for $15/hour?
At the moment, Uber sets the rates for its drivers, preventing a race to the bottom. But Uber is just software. Someone will come along and create a similar piece of software, one which allows transaction participants to negotiate the price – just as Zaarly does. As these designed-in frictions are designed away, the market opens to economic forces accelerated to the speed of light, and all price supports sustained by market frictions begin to collapse.
The frictionless free-fall of markets doesn’t end with the individual labourer. Businesses born out of hyperconnectivity, aggregating demand and supply – firms such as eBay, Uber, and AirBnB – face another round of disruption. The connectivity which made eBay possible also allowed the firm to centralize its aggregation, bringing all buyers and sellers to a single website, where their traffic could be channeled, and a tariff placed on all transactions. In the virtual marketplace of eBay, sellers pay ‘rent’, in the form of a transaction fee, a cost passed along to the buyer.
Centralization is a form of market friction, in that it grants whomever controls the central point the power to act as taxman, tollbooth, and censor. Apple has been notorious for the strict controls it puts upon apps available for iOS devices, which must be purchased through its centralized iTunes store. If your iPhone app does something Apple doesn’t like – or considers a potential competitive threat – Apple has the power to deny you access to its centralized retail channel. Because the hyperconnectivity of Apple’s iOS devices would normally allow peer-to-peer exchanges of software and other items of value, these market frictions had to be engineered into the operating system.
The market frictions of centralization become harder to maintain as we become more hyperconnected. The recording industry profited enormously in the transition to digital recording, because of the friction associated with the distribution of hundreds of megabytes of music. As compression techniques improved, and broadband spread throughout the developed world, the barriers to peer-to-peer distribution of music progressively collapsed.
We are now sufficiently hyperconnected that it is not only technically possible to build a peer-to-peer competitor to eBay, but inevitable, as hyperconnectivity tends through time to remove all frictions in the market. The frictions that eBay uses to generate revenue are being smoothed away by a diffuse, distributed, decentralized, global aggregation of buyers and sellers, less bazaar than switchboard, more MapReduce than website. The same fate will inevitably befall Uber, AirBnB, even Zaarly – any business seeking to conduct aggregation-based arbitrage. Hyperconnectivity does not support the inefficiencies needed to make these businesses a continuing success. They are all intermediate forms, leveraging the brief moment between the disconnected and hyperconnected worlds.
Every commercial entity, whether an individual offering up labour and expertise, or an organization offering products and services, will soon present themselves through an interface that removes all of the frictions of the business transaction.
Let’s use Kogan as an example. With appropriate APIs to the manufacturers of LCD panels, television electronics, electronics assembly, and transport, I could have a TV built-to-order. This may seem like a bit of work, but once someone has put together a particular supply chain, by mashing-up the appropriate APIs, that supply chain can be shared. I won’t have to do much more than call up that supply chain widget on my mobile, and press ‘order’.
Seen in this way, the transportation logistics provided by Uber, materials offered on eBay, and a design consultancy facilitated by Freelance.com are no longer destinations in themselves, but APIs, each offering a specific element in a production value chain. The recipe which strings them all together, turning an idea into reality, is the innovation, an innovation which can only emerge where friction has been been removed in every component of the recipe, via an API.
Like everything else within the culture of hyperconnectivity, these recipes will be shared within communities of expertise. People who care about televisions will trade recipes to cook up custom models; people who care about coffee or cookware or carpeting will be able to do the same thing. Being part of a community of expertise gives you access to all the production value chains associated with that community. This is already true: consider how hobbyists trade tips on where to find particularly obscure bits of mechanism, recordings, and so forth. But enough friction still exists to keep these production value chains very short. As that friction disappears, these production value chains grow long enough to span the whole distance from raw materials to finished product.
A hundred years ago, when Henry Ford established his River Rouge assembly plant, he needed nothing more than iron, sand, coke and raw rubber. From these basic ingredients, he manufactured millions of Model Ts, because River Rouge encompassed a production value chain able to refine, fabricate and assemble every part of the automobile. We are at the threshold of a similar, individual Industrial revolution: as businesses publish their APIs, customers gain unprecedented control over the means of production. A given customer can optimize for price, delivery time, carbon footprint, or any of a countless number of variables, crafting a production value chain which precisely meets their needs.
As more businesses present themselves as APIs ready to be wired into production value chains, the need for a frictionless medium of exchange will become more pronounced. Just as PayPal came along to take eBay global, a hypercurrency will arrive on the scene just as we need it, because there will be a universal demand for it.
As capital migrates from friction-filled national and international finance markets into hypereconomic frameworks, institutions dependent upon those frictions will be threatened. Banks will not be able to collect interest. Governments will not be able to tax – customs duties and user fees look to be the only ways governments can generate revenue. Courts will not be able to seize assets. The peculiar arrangement of laws and regulations which keep our economic system stable will grow increasingly meaningless. Governments and courts will try to follow capital flows into hypereconomic zones, only to learn that their mechanisms of control and enforcement are poorly matched to such a fluid environment." (http://blog.futurestreetconsulting.com/2011/10/06/hypereconomics/)
How Connectivity is Changing Power Relations in the Classroom
"The power relations of education have reversed. The student can instantly summon parents – or any professional – to support any efforts to resist the teacher’s negativity. Teachers can’t throw their weight around anymore, because students can now hold those power games in check with powers of their own.
Where a teacher is trying to hector a student into learning, but encounters resistance – as might be the case with that underperforming student – this new balance of powers brings the educational process to a halt. The teacher has lost any ability to coerce, which means the student could now freely revel in ignorance. This deadlock persists for as long as the student’s relations are willing to countenance that state of affairs. We can be dumb with power.
Conversely, teachers can no longer pass their own ignorance off as truth. Another set of relations connects students to bodies of knowledge far greater than those which any teacher could ever hope to encompass, the collected wisdom of the species. Omnipresence veers close to partial omniscience.
Inside the confines of the classroom, with a restricted range of curriculum material under study, it has become possible for a student to be at least as well informed, moment-to-moment, as the teacher. “All knowing is doing, and all doing knowing.” A student who knows more than the teacher will inevitably act on that knowledge, pulling aside the curtain of pretense, revealing the small and frightened Wizard of Oz beneath.
The classroom is microcosm and rehearsal for all of the power relations of public authority. Employers, police officers and religious leaders each embody different aspects of this power relation. Although these power relations are generally less obvious than the alpha-male / alpha-female of other hominids, they are no less significant. We like to know where we stand in relation to others, so we can present ourselves accordingly.
The instant omnipresence of the mobile has scrambled all our power relations, overthrowing some while rewriting others. Since the broadcast of the video of Rodney King’s beating by the LAPD, all police have evinced a hostility to videography, because revealing power undermines its authority. Connection pierces the veil of power, removing its mystery, rendering it impotent.
The new power relations of the classroom already extend throughout the entire world. Now that perhaps a billion and a half people carry networked video cameras in their pockets, the opportunities for a sudden turning of the tables have multiplied furiously. Each connection holds within it the possibility of a challenge to authority. The mobile provides a lever long enough to move the world.
This fundamental reconfiguration of power relations has been even less remarked upon than the sudden upswing in human connectivity. This redistribution of power comes as the inevitable consequence of our sudden omnipresence. The teacher can not control the students; the dictator can control the restive populace; no one will do as they are told. There is no control anywhere. When we picked up the mobile we had to surrender the cudgel." (http://thenextbillionseconds.com/2012/03/08/18-lever/)
How Uber is Changing Limousine and Transportation Economics
"Limousine drivers like Charles love Uber, too. Before the service launched, those drivers would spend half their time doing nothing, idling their hours while waiting for the next pickup call to come in. Drivers now add Uber jobs to their regularly scheduled pickups, nearly doubling their earning power within the same eight-hour shift. Mobiles have given limousine drivers the same economic acceleration that mobiles gave the fishermen of Kerala fifteen years ago – creating a highly efficient market which satisfies an increased demand, dramatically improving the earning potential of everyone connected.
Economists recognize that when a sudden change in market dynamics produces a burst of new wealth it encourages people to enter the marketplace. A ‘gold rush’ begins, as everyone looks for a way to vacuum up some of the new-found fortune. Most markets have ‘barriers to entry’ – to be a fisherman, you need a boat and rigging and nets and a crew; to be a driver you need a rather pricey limousine. These barriers make it difficult for the market to become immediately overcrowded, but the lack of competition increases the incentive for everyone already participating in the market to maximize their productive behavior. The more productive you can be within a closed but growing market, the more you will earn.
For Uber drivers, this means putting their limousines where they’re most needed. But they’re not alone in this, so the busiest parts of the city are also those with the greatest supply of drivers, which means drivers still have to wait for jobs. Even closed markets can be locally oversupplied – particularly where participants within a market can smell all the money to be made.
Uber drivers run a companion version of the smartphone app that Uber customers use. This app allows them to bid on pickups, but does not reveal the location of any of the limousines around them, competing for the same business. Uber’s drivers have less information than Uber’s customers. As a consequence, limousines tend to cluster, because drivers don’t know that they’re all converging on the same small – and presumably lucrative – area.
My driver Charles has a solution for this dilemma: he owns two mobiles, and runs both Uber apps. The driver app delivers pickup requests, while the customer app reveals the locations of any limousines nearby. “One evening I came into the city,” Charles reports, “and there were four limousines within a block.” Knowing this, Charles moved on, finding another, under-served area of the city, and got plenty of work.
Uber may not want its drivers to know about the location of other drivers, but it wants to reveal that information to its customers, so drivers simply poke holes in the wall that separate the two sides, peering through, and learning where to position themselves for greatest profit. The drivers use all information on offer – from every source – to give themselves the greatest advantage.
Charles says he’s one of the few Uber drivers using his smartphone to give him the inside track with a degree of omnipresence. It’s a technique new to him, and he doesn’t say whether he thought it up himself, or if he copied it from another driver. Either way, as Charles’ success becomes more visible, his peers, watching what he does, will copy his keys to success. What he knows will be replicated throughout the fleet of drivers until this exceptional behavior becomes pervasive and normal.
Soon, Uber will either need to provide drivers with all of the information drivers provide to Uber, or every Uber driver will use two mobiles, one for orders, and another for omnipresence. As drivers learn more about one another, they learn how to avoid economically damaging behaviors, such as clusters. The drivers self-organize, spacing themselves throughout an area in a way which generates the greatest economic advantage for each individual. They will act as a unit – as if they all answered to a common mind – although they have no central command, accept no controlling influence, and simply work to maximize their own financial interests. This emergent behavior – seen first along the Kerala coast – is the inevitable consequence of connectivity." (http://thenextbillionseconds.com/2012/03/13/19-loop/)
Mobility and the Restoration of Emotional Connectivity
"The mobile has become the visible manifestation of the emotions evoked by our connections. Although, unlike the tendrils of the Pandorans, they have not burrowed their way beneath into our biology, we carry our mobiles everywhere. We use them to link with one another, consult the spirits of the ancestors (through their writings), and, as we watch feeds and updates scroll by, tune into the whispers of the global mind. We may imagine ourselves separate, but we yearn to link with all, dissolving in a sea of love.
Tribal humanity, constantly connected across a lifetime, knew this connectivity intimately. Take a tribal human out the tribe and, stripped of the emotional presence they have always known, they lose their resilience, like toddler abandoned. The urban revolution brought the focus to smaller units of extended families, then the industrial revolution shattered that extended family into a spare, tiny nucleus. Just as this process reached its uttermost extent – with absolute individuation – the mobile created a new quality of connection. We now recover our original tribal connectivity, but at global scale.
The bond between mother and child has been touched by this hyperconnectivity. Dr. Genevieve Bell, Intel Fellow and Anthropologist-in-Residence, recorded an unexpected instance of this transformation in a South Korean classroom. Interviewing students whose parents had given them mobiles with GPS-tracking features – so parents could know precisely where those children are, every moment of the day – Dr. Bell asked these children if they felt comfortable under the steady gaze of constant parental surveillance. One child pointed toward another child in the room, saying, “She doesn’t have one of these phones. Her parents don’t love her enough to care where she is.” The child instinctively located the emotional relationship within the device.
Dr. Sherry Turkle, who has studied the relation of children and computing for a generation, has noted that children no longer differentiate from their parents as quickly or completely as before, and points to the mobile as the cause. When a child heads off to university, they now call the parent every day (sometimes several times a day) seeking information, advice, or just a sympathetic ear. The hard boundaries which previously marked entry into adulthood have grown fuzzy, because mobile omnipresence places the parent everywhere the child has a need.
Although Turkle believes this most recent phenomenon might represent a retardation of the processes of adulthood and individuation, it actually marks a return to the prelapsarian state before the utter individuation of late urbanization. Until quite recently – perhaps a hundred years ago – parents rarely separated from their children. Everyone remained within the same village – often within the same household – throughout an entire lifetime. This relation has been suddenly recovered, a reversal of a century of cultural patterns which created the knife-edge of instant adulthood. Children and parents now reside in a connection mediated by the mobile, omnipresent and continuous." (http://thenextbillionseconds.com/2012/03/22/22-love/)
- Re-intermediation through Customer Aggregation, example Kogan consumer electronics in Australia
“ ... forever at the mercy of the weather, insects and crop blights, suffered from ‘informational asymmetry’ in the marketplace: the buyers have always known more than the sellers, using that information to their advantage. Hyperconnectivity has disrupted that informational arbitrage.”