Napster, Uber, AirBnB, and Bitcoin VERSUS Regulation

If you have Netflix and are a 90’s kid, watch the documentary Downloaded. The Napster documentary takes an interesting look into how a technology (peer-to-peer file sharing) single handedly brought the music industry to its knees. While watching it, I couldn’t help but think of two things: 1.) Shawn Fanning is the man (founder of Napster) 2.) several other industries are experiencing the same level of disruption today (taxi industry – Uber, hotel industry – AirBnB, and I would argue the financial payment industry – Bitcoin).

To give some quick background, when Napster came around, it was the music industry and its constituents that refused to understand and embrace the technology, and instead decided to sue the technology to high-heaven. This ultimately led to the downfall of Napster within two years of its humble beginnings, where its community reached as many as 60 million users (ridiculous). The music industry was colluding, i.e. all major labels were price-fixing the price of CDs at $15. It was the failure of an industry to innovate and diversify their business models that caused this technology to hurt revenues so much.

Now to today, all of the recent legislation and legal battles that this new wave of startups is facing, is similar to what Napster went through. Granted, technically, people were stealing music through Napster, but, the technology itself (peer-to-peer file sharing, decentralized file systems) was able to scale and could have been repurposed for a more legal use. The taxi industry, in one municipality or another, is fighting to keep Uber out. They are always finding these laws that have been setup over time that in some way shape or form make taxi-like services that aren’t sanctioned cab companies illegal. (Side rant: two reasons I despise our government. Too many laws; solution: for every law that we add, we get rid of another. Laws that are too protective of industries that disincentivize innovation. Technology is our friend, not our enemy). I feel like Uber has fought its way through a fair amount of regulation, legally, and will thrive.

The others AirBnB and Bitcoin are still in their infancy and possibly their first iteration of their service. The documentary brings this fact to light, where, although Napster failed, many copy-cats and enhanced legal versions of the technology popped up. Despite Napster failing, the technology and service survived, and ultimately thrived over the next decade (i.e. Spotify, Pandora, etc.). Despite the diminished success of AirBnB and Bitcoin, relative to Uber, don’t think that the technology will go away. Other startups will iterate and learn what worked and didn’t work for AirBnB and Bitcoin, and create a product that works. (Side note: I feel AirBnB will be successful, but it has much more legal mumbo jumbo to fight through, and ultimately change. Bitcoin is the wave of the future, yup.)



Finding The Answers in Big Data

Ah, BIG DATA. In the last few years there haven’t been bigger buzz words than those. If you haven’t heard of it, then I hate to break it to you, but everyone and their mother have been talking about it, look at the Google searches over last ten years.

2014-08-26 21_31_01-Google Trends - Web Search interest_ Big data - Worldwide, 2004 - present

Working at an artificial intelligence startup, we’ve seen our fair share of clients/prospects looking for an alternative to all of the dashboards out there (Tableau, Domo, etc.). With these dashboards (just a fancy word for all of the data and charts about your business on one screen), they don’t scream at the user what they should know, or what business decisions need to be made next based on all of their current data. It takes interpretation and people are afraid to get the answers wrong.

As we continue on this path of “sensor-ized everything”, people and businesses will be able to collect more data on themselves and about others, to possibly influence decisions. Regular consumers with their FitBits and businesses with rewards cards and cookies in their websites; all of that data is now at their fingertips, but the question is, how do we turn all of that into actionable items? But more importantly, the correct actionable items?

Today companies are working to figure out how to interpret all of this new found data and how to act correctly upon it. Sure, you can throw all of the correlations, relationships, and other fancy stats at these new data sets and find which one leads more directly to increased sales. But the funny thing is, there is rarely one answer to this question. What people need are instantaneous perspectives and explanations as to what all of this means to their business without having to interpret the correct answer, and to have those explanations change as the data changes, to better help businesses understand the current state of their business.

The way I see it, there are a couple of answers to the “big data” problem:

1.) Businesses need tools to not only aggregate all of their old and “new” data, but a way to communicate that data, and its every changing properties. The only way to do that is through hiring people to dig into and communicate all of this data. But that is hardly feasible, given the capital needed to hire the necessary talent. That’s where artificial intelligence comes in.

Now, let me rant a little bit. Artificial intelligence can mean numerous things, and it means something different to everyone. “Deep learning” is one practice of AI, “machine learning” is another. People associate “algorithms” with AI. Heck, you could even classify the first chess program that beat a person as AI.

What’s different about today’s AI, however you want to classify it, is it can begin to understand the outcomes of it’s analysis and communicate it. That’s where Narrative Science comes in. When the world starts collecting more data, businesses should have systems/applications in place that allows the data to speak to us, instead of employing more resources to look at dashboards to give us the same insight.

Oh, and the second answer to “big data”, in my opinion, is good ol’ common sense.

Listening to the Masters of Wall Street

Recently I stumbled on Bloomberg’s new podcast series, “Masters of Business”, hosted by Barry Ritholz. I usually write these posts to pass along some financial tips, explain my view on the market, or tools to manage your retirement savings. But this podcast series is surprisingly easy to understand, and is great for n00bs to finance, or finance geeks. I highly recommend giving each of these a 30 minute listen. I’ve put my highlights/valuable lessons below each. If  there was one over-arching theme, it’s that some of the most successful Wall Streeters didn’t know even know what a stock or bond was, until their late 20’s. Then with a little discipline and willingness to learn, they were able to become multi-millionaires/billionaires.

Jack Brennan (CEO of Vanguard)

Professionals win with ease, amateurs win by reaking havoc

Active investing (most mutual funds) vs. Passive investing (ETFs) – Wall Street always “hopes” that hedge funds will beat the market, but that’s turning out to be very difficult, even with hedge funds have the “smartest men in the room”. All pointing to very little reason to invest in mutual funds/hedge funds, especially with fees.

Single biggest change in finance/Wall Street over the last 35 years – passive investing options (ETFs). Today, there are  ETFs available for people to implement low-cost and outstanding investment strategies/programs

Decent financial advisors are worth 2-3% of fees a year, but if you knew nothing else about funds and picked the lowest cost funds, your odds of outperforming (net of fees) are radically in your favor

Mike Mauboussin

Active fund managers are necessary for the market, but that doesn’t necessarily translate into beating the market consistently.

The three things to learn from successful investors:

1.) Have a very defined investing process and stick to the rules (never breaking them). Focus on process, not outcome

2.) Think long-term (trade less frequently)

3.) Believe that they have an edge (for example, investing in the least loved asset classes every year)

 Jeff Gundlach (More advanced, for the finance geeks)

Tesla’s reinvention of the battery space could radically change how we live. The battery that powers Tesla, could end up powering your home, removing the dependency on public utilities.

Sentiment is a very powerful trading tool

Favorite Stand Up Monday – Mike Birbiglia “You’d Be Surprised”

For my 100th (technically 101st) post, one of the comic’s I haven’t posted about yet is Mike Birbiglia. He’s not only a great comedy writer, but also has a knack for acting and filmmaking. If you’re looking for a brutally honest, yet funny movie, I highly recommend his 2012 movie “Sleepwalk with Me”; which is an intimate look into a young comic doing anything he can to make it big.

This whole clip is great, but my favorite joke I’ve heard in a while starts at the 3:30 mark.


Understanding Innovation……From the History Channel

This weekend I caught an episode of “The Men Who Built America” on the History Channel. The particular episode was about Andrew Carnegie, who began the “Age of Steel”, who started the Carnegie Steel Company; ultimately minimizing production time for building-grade steel from two weeks to 15 minutes.

Certainly a better process as well as a better understanding of the chemical properties of steel helped them mass produce it, and inevitably build out of America at rates never seen before. But it wasn’t smooth sailing to convince people that steel was the next material to build better, stronger, and bigger buildings, leading to the invention of the skyscraper.

His three main hurdles:

1.) Finding a better process to manufacture high-grade steel

Lesson learned: Research and development are the keys to the next innovative breakthrough. Easy problems to answer don’t make anyone money (besider the pet rock and Flappy Bird). Hard problems to solve have the biggest payoff.

2.) Convincing railroads, construction companies, and consumers that steel was the next precedent in buildings

Lesson learned: Marketing your new idea and trying to sell it sometimes makes you feel like a mad man talking to yourself in the corner of an insane asylum. It takes much longer than you think to persuade consumers, even the early adopters, of this new view/idea. Patience and persistence prevail when you’ve done adequate research and development.

3.) Going in all in when you feel the market is “turning”

Lesson learned: Once you begin getting traction in the market, don’t be afraid to be aggressive with your spend, because it will be “now or never” to make your vision a reality.

The Second Industrial Revolution (Part 1 of 2)

Much like machinery replaced people’s jobs in factories, or at the very least, changed their job, computers and software will do the same for the services industry (think of desk jobs, or anything not in farming or manufacturing) . Companies are constantly testing/experimenting with new technologies and how they integrate into current production processes. Over time, best practices are broken down into smaller steps which technology can handle. Then it becomes easier to automate each of those components, much like machinery altered how manufacturing plants produced products. Think about it, in the industrial revolution, machines were bought and people’s jobs were changed to accommodate the new machinery, then as time goes by, you start to productionize tasks around the machines, to scale and make the machines as efficient as possible.

It’s interesting to note that the share of American employment in manufacturing has declined sharply since the 1950s, from almost 30% to less than 10%. At the same time, jobs in the Services industry soared, from less than 50% of employment to almost 70%. It’s inevitable, therefore, that firms would start to apply the same experimentation and reorganization to service industries.

The “machines” (computers and software), are not only becoming smarter, but they also have access to far more data than any human could sift through. The combination of big data and smart machines will take over some occupations wholesale; in others it will allow firms to do more with fewer workers. Some examples of jobs that could be replaced. Accountants may follow travel agents and tellers into the unemployment line as tax software improves. Machines are already turning basic sports results and financial data into good-enough news stories. And legal services is slowly being codified and productionized.  A taxi driver will be a rarity in many places by the 2030s or 2040s.

The productivity gains from future automation will be real, even if they mostly accrue to the owners of the machines…. On my next post I’ll post my thoughts on what these effects will have on the economy going forward.

Stubbornness Kills Innovation……And Future Profits

At Narrative Science, we’re bringing a revolutionary and new technology to market that ultimately leverages the advancement in processing power and data throughput. The progress in these two areas have been steady and predictable for some time, and they’ve helped businesses manage the massive amounts of data that they are able to collect. When talking to prospective clients, some of the decision makers seem to not understand that they’ve invested millions in the infrastructure to collect this data about their customers and operations, but now they have no way to “harvest” the data and the insight that lies within it. To draw comparisons, what if a farmer spent tons of money on machinery to plant more crops, but they still had to harvest their crops by hand. See a problem there?

Which brings me to my point, stubbornness kills innovation which ultimately leads to bigger profits, through cutting costs or new revenue streams.  Maybe it’s ignorance about innovation, I’m not sure. Either way, not willing to have open mind about how technology can revolutionize your business, or even gain a competitive advantage against competitors, will lead to your demise. Even if you are the best at what you do, becoming complacent enough to decelerate innovation even the slightest will allow new competitors to come into your space, or rethink how things can be done better than today. The classic example of this is Kodak. They refused to believe that people would ever shift away from printed pictures back in the 80’s and 90’s. And the sadly funny thing is this shift didn’t happen overnight, it took decades, and a new generation, to fully cement the shift away from film rolls and print pictures. Yet Kodak failed to innovate and embrace the changing world around them, unlike their competitors. After 30 years of stubbornness and corporate struggle, Kodak filed for bankruptcy in 2012. Not to mention, they killed tens of thousands of jobs along the way.

Ultimately I think that’s the real point that needs to be emphasized here, if you fail to improve or change even parts of your business alongside the innovation in technology, you’ll be left behind (and so will your employees). That’s why it blows my mind some days when prospects I talk to continue to fail to explore what emerging and new technologies can do for their business. When they say no, we’ll just talk to their competitor 🙂

Favorite Stand Up Monday – Dan Levy “Weird Porn” and Greg Fitzsimmons “Marriage Advice”

Some up and coming comedians (Dan Levy) and some old-timers Greg Fitzsimmons. Greg is one of those guys you see on weird shows like VH1’s “Top 10 Weirdest Music Videos of the 80’s”. Anyways, both recently has some great bits and tips about porn and marriage. Which pretty much go hand in hand.