What’s Next (?)

It’s time we move past all this nonsense about Coal and Tariffs and focus on what’s next. Other countries are, especially China. Some smart folks like those at the Roosevelt Institute are thinking about the issues of AI, automation, jobs and policy. Their report “Don’t Fear The Robots” is an interesting read. Whether you fear or fear not, it’s time to start paying attention.

More than an Industrial Revolution?

I’m curious to know how you are thinking about our time. How are you counting what “age” we are in and what do you call it?  Is this the fourth industrial revolution? The fifth technical revolution? The era of the Cyber Machine?  The immediate prelude to the singularity?

I tend to think about it as the start of the third big explosion of human power – the third time everything will change.

In the Agrarian transition, starting 5,000 years ago, we removed ourselves from the food chain. We set ourselves apart biologically. For the first time we weren’t dependent on our natural surroundings for sustenance. We usurped biology to produce our own food, with domestic crops and animals. We went from nomadic to settled.

In the Industrial transition, starting 250 years ago, we removed the limitations of biological strength. With steam, internal combustion, electric motors, and chemical thrust, we availed ourselves of seemingly limitless power. We mechanized farming and developed mass production of goods. We put the equivalent power of 100s of horses in our carts, 1,000s in our boats, and propelled ourselves and our goods on land and sea. We learned to fly and soar to the outer reaches of the solar system.

Just as profound, I think, is this new transition. I’m not sure what to call it. If “AI” weren’t such a maligned term I might call it the AI transition. In this transition we remove mental limitations supercharging our ability to make discoveries, organize sharing on a global scale, customize products and processes for units of one while driving incremental costs to zero. This transition holds out the promise that everything can be abundant and universal, that the only scarcity will be human attention.

The transitions that removed us from the food chain and freed us of our physical restraints upended existing economic roles and models. They fundamentally changed our human experience and world view. Each yielded a step function in life expectancy and population growth.

The only other transition I can think of that may fall in this category is the use of fire for cooking. Evidence shows that cooking of food enabled us to unburden the brain in a way that lead to the development of the prefrontal cortex and rationality.

But for now I’m sticking to my big three – Agriculture, Industrial and whatever this thing is. What do you call it?

The Smart Phone is Eating the World

The day is coming when all I carry is my smart phone and Driver’s License. Mark Andreessen didn’t quite have it right. It’s not software but the smart phone that’s eating the world.

For me, it started 17 years ago when I bought a Kyocera 6035. That smart phone ate my day planner. Better yet if gave me email any time any place without having to get out my laptop and find a network connection. My phone’s next big meal came with the iPhone in 2007. I got mine in Oct of that year and haven’t carried a music player since. Subsequent iPhones ate my camera and my Mio610 portable GPS device. I got rid of my travel wallet in 2009 with advent of reliable e-tickets for airlines.

Last year I changed my wallet, from a trifold to a slim card case and a money clip. As most all transactions go to plastic, I find myself carrying my money clip less and less.

What’s left to eat? I’m using ApplePay more. I suspect we’re not far from eliminating credit cards. So that leaves my ATM, my Health Plan ID card, loyalty cards, and receipts.

Software has already eaten these things but not yet the smart phone; that’s what matters. What Andreessen misses with his software comment, is that the user experience trumps the automation. Sure it requires both to work, but I’m not dropping all my credit cards until it is easier not to have them.

Smart money should be on card-less ATMs, punch-less loyalty programs, paperless receipts and mobile-health. With that, life is but an iPhone and Drivers License. And whose to say we can’t eventually have card-less government ID.

Exponential Medicine

I spent last week at the Exponential Medicine Conference (xMed) in San Diego, put on by the Singularity University (SU). SU is a group dedicated to the notion that Moore’s Law (number of transistors in a dense integrated circuit doubles approximately every two years) will soon result in computing capacity that eclipses the computational capacity of the collective human brains on the planet. This is referred to as the singularity; a concept advanced by Ray Kurzweil. It will change the way we do everything including healthcare.

In the course of the conference I had a couple of ah-hah moments.

1) Physics is science built on first principles while medicine is an observational art

This first “ah-hah” came in a conversation with Dr. Catherine Mohr who trained as an engineer before going to Med School. When I asked her the biggest difference between engineering and medicine, she observed that engineering is built upon first principals. We know definitively how materials behave and have a complete understanding of physical dynamics (at least at the human scale). Medicine on the other hand is essentially observational. We don’t yet have first principals for biological systems.

2) Health sensing and health data will be ubiquitous and zero cost

The second “ah-hah” came from pattern recognition; today’s healthcare looks a lot like the early commercial Internet. I started an Internet email company in 1993 when the Internet was first becoming commercialized. The Internet was born from telecom and institutional computer centers. In those environments bandwidth and computing power was scarce and precious. But the models and companies that won on the Internet assumed that bandwidth and computing were ubiquitous and zero cost. That’s why we have Instigram, and Kodak is dead. The winning models of Health Care will assume sensing and health data are free.

Combine 1 and 2 and you get the real ah-hah – medicine is experiencing exponential advances emerging from observations, correlations and analysis of ubiquitously available data. The pace of change will only increase. As Vinod Khosla put it: technology will replace 80% of what doctors do.

Our experience at SweetSpot Diabetes Care reflected this trend. Standards of care for diabetes are moving from measuring HbA1c three times a year, to measuring blood glucose levels every minute and combining it with blood pressure, caloric intake, pulse rate, activity, etc. Smart analytics turn thousands of data points into actionable insights and visual indications reflecting the specific metabolic dynamics of each individual. This informs medications, behaviors and potential interventions.

We don’t yet have the first principles of what causes diabetes, but the art of care is rapidly transforming. It’s getting easier to live well and long with diabetes, as with most other diseases. That’s what xMed is all about.

#StopTheSlowLane – The Net is a Social Necessity

It’s time to rally again to the cause of net neutrality. We need the net to be open. We need the pipes not to discriminate against content. But, more, we should shift the debate. This is fundamentally about the role of the net in our lives. It is time we get to the core issue:

THE INTERNET IS A SOCIAL NECESSITY

We need the net, like we need water and electricity. You can’t function as a productive member of society without Internet access. So we should start talking about bandwidth and access as a fundamental social underpinning of our health and welfare.

In that context, tying access and bandwidth to content is obviously a mistake. It is fundamentally wrong. Not just because it allows large companies to control and distort what is carried, and more importantly, what is not carried on the net. It undermines the utility of a basic component of social fabric.

It is similar to allowing Walmart trucks to have dedicated lanes on our highways. The parallel argument would be: the majority of Americans shop at Walmart and the resultant efficiencies would help the majority gain better access to the goods they want. And because it would allow Walmart to optimize their trucks in ways they couldn’t if the roads weren’t integrated with their trucks…which benefits everyone due to fuel efficiencies, safety, etc.

But, it would be fundamentally wrong, and the reason has nothing to do with those arguments. It would be wrong because access to our roads is a fundamental social necessity. Individuals and business depend on road access to function in our society. Discriminatory access undermines our socio-economic system.
Today we’re utilizing the efficiencies and advantages of the net and net connected devices to re-engineer everything we do. This is already having tremendous impacts on our quality of life. Private companies, government, and individual social interactions use the net to transform themselves for the better. Web commerce, the Federal Paperwork Reduction Act, Meaningful Use initiatives for medical records – examples could fill volumes; there is not a single aspects of society that is not being transformed by the net.

Net access and bandwidth are too fundamental to be cooped by private interests for competitive advantage. Of course private interests and private capital are needed to effectively build and evolve the net. But we need to think of it like we think of electricity and water. Our lives would look very different if we let GE match their power plants to their electrical appliances. If in the 1950s GE had developed and people had accepted a system that guaranteeing optimized power from GE plants to GE appliances, we might have had better washers and dryers in our homes for a time. But it would have inhibited the development of virtually every powered device in our homes today.

We need policy that ensures everyone has net access and encourages continual increase of indiscriminate bandwidth. We can’t allow bandwidth to be tied to content. We can’t restrict the content that any part of internet carry. We need to translate privacy, property rights and commerce laws to net infrastructure. This is perhaps one of the most important policy imperatives of our generation.

Scale…It’s the Hard Thing

I just read Ben Horowitz’s excellent book, The Hard Thing About Hard Things. It reminded me how hard it is to scale a high-tech growth company. I’ve been involved in four ventures that made the leap to scale. When it is done in short period of time – inception to $100 mil in revenue in 5 years – it’s a bit like a jump to hyperspace…Hollywood can only describe it as streaks of light. Ben does an excellent job of analyzing and articulating all the elements of scaling a business. It’s really hard, but as last years Unicorn Club discussion highlights, it’s really rewarding.

Building high growth Tech companies to scale is the Portland’s next big economic challenge. The acquisition of Simple by Spain’s BBVA is the latest example of Portland’s ability to build successful tech companies. But even Simple is an order of magnitude from the bench mark of high tech scale – $1B in valuation.

Five years ago Portland undertook a concerted effort to build a vibrant tech startup ecosystem. Resources, public  and private, rallied around multiple efforts, formal  and informal. The results have been impressive. Startup tech jobs are indeed leading Oregon out of the recession. Over a dozen active incubators are helping to mint dozens of viable Portland companies each year.

Can Portland companies now make the jump to scale? It’s going to be harder than sparking the initial startup ecosystem. Portland benefited from the fortunate confluence of several factors that provided a fertile environment for startups. Portland has been a desired destination for collage educated young people  for more than a decade. The recession set the stage for individuals and institutions to take risks on new ventures and local capital was willing to provide modest seed funding required to fuel fledgling ventures.

But the primordial stew to spark the creation of scale companies is a different matter. Starting with the talent; the smart young people migrating to Portland may be able to move up an incubator fueled learning curve to succeed in a Startup, but As Ben points out, expertise and experience required for scale is a much higher standard. It’s much harder to grow organically. And, unlike the SF Bay Area, Portland doesn’t have a pool of successful scale companies to draw upon.

To date Portland has shown little appetite to take the risk required to scale a company. Like my own venture, SweetSpot, many Portland companies are finding early exits rather than driving to scale. The list is long – GetListed, Geoloqi, RNA Networks, CroudCompass, SmallSociety, SecondPorch, StepChange, Instantiations, Giftango, Meridian, Preka, Rumblefish, Simple, Vizify. While these demonstrate great success in Portland’s ability to mint Startups, they also show our lack of ability to grow companies to scale.

A viable growth company can always find capital. But, as I’ve written about earlier, it’s more expensive in Portland than areas. Portland has a number of growth companies that have accessed expansion capital – Elemental, Urban Airship, Puppet Labs, Janrain, Act-On Software, Jama. We’ll see which are successful at jumping to scale.

Expertise, talent, appetite for risk, and access to capital are just the table stakes to execute at scale. They just get a company to the table of contents of Ben’s book. Then the hard things begin.

I think more than anything, Portland needs to find the desire to scale. My first experience with Portland’s Startup ecosystem is indicative of the old attitude that is still too prevalent. I left my last Bay Area job in ’07, ending a weekly commute to Palo Alto. In my last year, the company doubled revenue with a top line above $100 mil. In Portland I started working on a business plan for mobile application venture. When I pitched one of Portland’s most active Angel groups, a fund partner told me the plan had no credibility because I showed a revenue curve that went from zero to $100 mil in 5 years. I was told to be taken seriously, I should instead show a 5 year pro forma to $20 mil, for none of their investments had ever gotten anywhere close to $100 mil in 5 years.

I find it refreshing every time I talk with Luke Kanies at Puppet Labs. Puppet is in a multi-billion dollar market place and to Luke success is nothing short of leadership in that market. That’s a standard for scale. A few more Lukes and a perhaps an IPO could turn the tide for Portland.

The Smart Phone is the Truly Personal Computer

The inherent identity of a mobile phone is the most important aspect the emerging mobile centric world. Unlike the desktop world, the phone is truly one user-one device. It’s always been tied to a person’s phone number…the way you get in touch with them. The PC, whether a laptop or a desktop, has never been personal like a smart phone; it’s just single user.

For smartphone apps, this is a subtle but vital difference. PCs are often only used by one person, but that’s not the central use paradigm. Browser based applications always require a login. Apps on your smart phone only require a set up. From then on the apps know it’s you. Windows and Macs do have log-ins and key-rings and other conveniences for filling-in passwords, but this subtle shift in UX is important. For app developers, mobile allows much more intimate engagement.

I most appreciate the importance of this one-person, one-phone paradigm when using our shared kitchen iPad. Pads and Tablets have yet to work this through. The apps assume only one person is using it, easier on the apps, harder on the iPad users.

We are only just beginning to appreciate the power in mobile. It’s an extension, an enhancement, an augmentation of the person. This is already changing communication. It is only just beginning to change how we find things, find out about things, interact with things, and buy things. It’s what makes the cloud meaningfully interactive. It’s what will make the Internet of things useful.

Bill Girly’s recent post, Transitioning to a Mobile Centric World, does a great job of articulating the importance and power of mobile identity and engagement.

When I was in High School, I heard Alan Kay make the absurd and provocative statement, “a computer wont truly be personal until we are wearing it.” We are now living in Alan’s world.

The Mother of Invention

Our future is Urban. Urban centers are growing and rural areas are shrinking. It‘s an amazing opportunity to reinvent how we live when we add 2.5 billion people to cities in the next 25 years.

It’s mind boggling how fast China is urbanizing – 21 million people per year are moving to cities. That’s the population of the 9 largest US cities. Imagine creating the equivalent housing, infrastructure and services that exist in New York, Los Angeles, Chicago, Houston, Philadelphia, Phoenix, San Antonio, San Diego and Dallas every year for the next ten years.

If necessity is the mother of invention, China is faced with the mother-of-all invention. I doubt their future cities will be developed on historic western models. I suspect we’ll see very interesting invention coming out China in the next few years.

Don’t Be Fooled, VC Trends are UP not Down

Too much of the VC discussion focuses on low 10-year average returns – basically zero – and the deinvestment in Venture Capital as an asset class with the number of firms declining precipitously.

We’re at the beginning of an explosion of wealth creation from startups bringing mobile, social, cloud computing, connected things and big data to every aspect of our lives. The impact of these technologies and resultant shifts in business, commercial practices and consumer behavior is greater than that from desktop computing and the Internet. And like all swift technology adoption startups, not incumbents, will drive the change and reap the rewards.

To measure this impact, exit values are what matters. The upward trend of wealth creation is clear even before you adjust for strong countervailing factors: the over commitment of capital caused by the late 90’s exuberance; the concentration of IT spend for Y2K; and the retreat of capital from the Tech IPO market. When adjusted you see a liquidity ratio returning to 4+ and exit values trending to $80B with no top in sight.

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Mark Siegel at Menlo Ventures has it right, “this bodes well for returns going up”.