My talk for TechStars at Techweek Kansas City in October 2018. While this is a talk based on my book WTF?, it is fairly different from many of the others that I've posted here, in that it focuses specifically on parts of the book that contain advice for entrepreneurs, rather than on the broader questions of technology and the economy. As always, look at the speaker notes for
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Networks and the Next Economy
1. Networks and the Next Economy
Tim O’Reilly
@timoreilly
oreilly.com
wtfeconomy.com
Tech Week Kansas City
October 11, 2018
2. How is the economy changing?
What are the implications for business?
What does technology now make
possible that was previously impossible?
What work needs doing?
Why aren’t we doing it?
wtfeconomy.com
3. We have to let go of the maps that are steering us wrong
In 1625, we thought
California was an island
4. In 1977, we still thought robots might look like this
22. The algorithms decide “who gets what – and why”
Markets are outcomes. A better designed
marketplace can have better outcomes.
But it can be enormously disruptive for
existing participants.
23. Algorithms become a battleground
Security: “That word does not
mean what you think it means.”
24. We are all living and working inside a machine
25. “The Uber app is the drivers’ workplace,
as much as the city where they’re driving
is. Each decision about its interface
structures drivers’ interactions with Uber
the company as well as Uber the
transportation marketplace.”
Alexis Madrigal, The Atlantic,
“Uber Drivers are About to Get a New Boss”
27. If we want to understand the future of business and the
economy, we have to understand these platforms
28. Networks and the Nature of the Firm
“The existence of high transaction costs outside
firms led to the emergence of the firm as we
know it, and management as we know it….The
reverse side of Coase’s argument is as
important: If the (transaction) costs of exchanging
value in the society at large go down drastically
as is happening today [because of networks], the
form and logic of economic and organizational
entities necessarily need to change! The
mainstream firm, as we have known it, becomes
the more expensive alternative.”Esko Kilpi
29. A language for networked marketplaces
Network effect: the value of a network is
proportional to the square of the number of
possible connections
Scale effect: bigger is better (but not always)
Feedback effect: the more data you collect from
the marketplace, the more you can learn, and the
better the services you can provide
Two-sided market: different classes of users
being matched up: searchers and advertisers,
drivers and passengers, homes and renters.
30. Asymptotic Networks
“The reason Lyft is able to compete with
Uber is that even if they have fewer drivers
in many cities, both platforms are still able
to guarantee a ride with an average wait
time of 4 minutes. Neither can improve by
adding more drivers to a city.”
James Currier
31.
32.
33.
34. “A business model is the way that
all of the parts of a business work
together to create competitive
advantage and customer value.”
- Dan and Meredith Beam
35. Who Do You Want Your Customers to Become?
Henry Ford didn’t just rethink
the automobile and the
factory, he rethought the
work week, and the reasons
why people might want to
drive.
36. A Business Model Map of Uber
A magical app that lets drivers
and passengers find each other
in real time
A networked marketplace of
drivers and passengers
Customers who trust that they
don’t have to drive their own car
Augmented workers able to join
the market as and when they
wish
A matching market managed by
algorithm
37. What makes an app “magical”?
1. It seems unbelievable at first.
2. It changes the way the world works, so that the
unbelievable comes to seem inevitable and normal.
3. It results in an ecosystem of new services, jobs, business
models, and industries.
40. It’s very hard to beat an entrenched platform
at its own game
41. Technology has a fitness landscape
In my career, I’ve watched a number of migrations to new peaks, and I’d like to share with
you some observations about what happened, and why. And then we’ll talk about some
lessons for companies like Google, but also for the overall economy.
Apple
Personal
Computer
Big Data
and
AI
Smartphones
42. The Rules for Success Change
IBM: Maximize competitive advantage by control over hardware
Microsoft: Maximize competitive advantage by control over software
Google: Maximize competitive advantage by control over data and marketplaces
Apple: Maximize competitive advantage by integrated control of hardware, software, and
marketplace.
In each case, companies playing by the old rules lost. Or did they?
43. Generosity takes us to the next peak
Tim Berners-Lee, 1990
The World Wide Web
Linus Torvalds, 1991
Linux
Big Data
and
AI
Tim Berners-Lee, 1990
The World Wide Web
Linus Torvalds, 1991
Linux
52. The runaway objective function
“Even robots with a seemingly
benign task could indifferently harm
us. ‘Let’s say you create a self-
improving A.I. to pick strawberries,’
Musk said, ‘and it gets better and
better at picking strawberries and
picks more and more and it is self-
improving, so all it really wants to do
is pick strawberries. So then it would
have all the world be strawberry
fields. Strawberry fields forever.’ No
room for human beings.”
Elon Musk, quoted in Vanity Fair
https://www.vanityfair.com/news/2017/03/elon-musk-
billion-dollar-crusade-to-stop-ai-space-x
54. O’Reilly Media
● Providing learning for almost 40 years
● Trends called – Open Source, Web
2.0, Maker Movement, Big Data
● 500 employees, thousands of
contributors
● 5,000+ enterprise clients, 2.3m
platform users globally
● 17 global technology events serving
20k individuals and 1,000 sponsor
companies
61. O’Reilly’s Platform-Centered Learning Ecosystem
Safari
(learning
platform)
Conferences/
Foo Camps
Live Training
Books
Video
Jupyter
Notebooks
Expert
Network
Materials for reference
and learning
Immersive learning
experiences with
industry experts
Cutting edge idea forums
Digital platform for
on-demand learning
across modalities.
Books, video,
synchronous and
asynchronous
online learning
Our ecosystem matches
thousands of learning providers
with millions of customers
62. How might network enablement play out
For Uber and Lyft?
For Airbnb?
For Facebook or Google?
For Amazon?
63. Market Networks
In a market network, you’re not
connecting a simple marketplace of
buyers and sellers, but also
connecting them with intermediaries
and service providers. A Market
Network combines elements of a
professional network, an online
marketplace, and SaaS tools.
64.
65. “We wouldn’t be able to build defensibility from our supply-
side relationships purely on the basis of a Marketplace
Network Effect, because it was in the interests of the real
estate agents to syndicate their listings through every
possible channel…. So we created an XML feed standard …
This prevented brokers from having to go through the hassle
of posting them manually to every channel, and soon our
competitors had adopted the same XML standards for their
sites as well.”
And, after 2009, when the real estate market collapsed, ”to
scale [a] new monetization strategy targeting smaller
customers, we set to work creating cost-effective marketing
and lead generation products for the individual real estate
agents.”
Pete Flint
66. “Once they get some traction, platforms survive
either because:
They achieve critical mass in a market with
network effects. They are the default place to
go—this is why Craigslist, Airbnb, ebay, Etsy,
and other places with most of the inventory
thrive.
They provide a tool set ecosystem. The
product or service has certain functions that
buyer and seller need (escrow, analytics, a
CRM, etc.) that the marketplace can provide with
an economy of scale that beats everyone doing
it themselves.”
Alistair Croll
67. In 2018, we believe that technology replaces people
68. “…47 percent of jobs are “at
risk” of being automated in the
next 20 years.”
Carl Frey and Michael Osborne, Oxford University
“The Future of Employment: How Susceptible
Are Jobs to Computerisation?”
69. Will there really be nothing left for people to do?
Is there really
nothing left for
humans to do?
70.
71. Dealing with climate change
Rebuilding our infrastructure
Feeding the world
Ending disease
Resettling refugees
Caring for each other
Educating the next generation
Enjoying the fruits of shared prosperity
72. This is what technology wants
“Prosperity in human societies is best
understood as the accumulation of
solutions to human problems. We won’t
run out of work until we run out of
problems.”
Nick Hanauer
79. “In order to fully reap the benefits of a
changing economy—and sustain growth
over the long-term—businesses will need
to increase the earnings potential of the
workers who drive returns, helping the
employee who once operated a machine
learn to program it. They must improve
their capacity for internal training and
education to compete for talent in today’s
economy and fulfill their responsibilities to
their employees.”
Just-in-time learning is a 21st century competency
Larry Fink,
CEO, Blackrock
80. WeWork Acquires The Flatiron School
Like Kiva (Amazon
Robotics), this is a
network-enabling
acquisition!
84. Tim O’Reilly
@timoreilly
• O’Reilly AI Conference
• Strata: The Business of Data
• JupyterCon
• O’Reilly Open Source Summit
• Maker Faire
• Foo Camp
• …
• 40,000+ ebooks
• Tens of thousands of hours
of video training
• Live training
• Millions of customers
• A platform for knowledge
exchange
• Commercial internet
• Open source software
• Web 2.0
• Maker movement
• Government as a platform
• AI and The Next Economy
Founder & CEO, O’Reilly Media
Partner, O’Reilly AlphaTech Ventures
Board member, Code for America
Co-founder, Maker Media