Silicon Valley is dead, Long live Silicon Valley
Halfway through its third wave of creative self-destruction, Silicon Valley is delivering the biggest shift in consumer media ever. Its fourth wave will make us truly mobile just in time for its 50th anniversary in 2027.
And you are?
I got pulled into Silicon Valley’s arc around the time we were first taken to a galaxy far, far away. Started with Byte magazine, a 48KB Apple II+, demon-dialers and 300 baud modems. Have been working in Silicon Valley for 25 years. For the likes of Grove and Zuck. And it’s never been more interesting.
Silicon Valley, consumer product
To make sense of Silicon Valley’s unrivaled creative self-destruction it helps to establish its cycles of evolution:
Silicon Valley 0.1 (“alpha”, 1956–1977, no consumers): Strictly speaking, Silicon Valley started with the founding of Shockley Semiconductor (from which came Fairchild a year later and eventually Intel in 1968), but I consider this period merely a 20-year alpha since no consumers were involved.
Silicon Valley 1.0 (“personal”, 1977–1992, tens of millions of consumers): The twin arrivals of the Apple II and Atari VCS/2600 in 1977 (both of which involve Steve Wozniak and Steve Jobs in their backstory) were Silicon Valley’s launch into consumer consciousness with useful and engaging machines.
Silicon Valley 2.0 (“connected”, 1992–2007, hundreds of millions of consumers): In 1992, America Online for Windows (and the Mosaic Internet browser a year later) marked the beginning of this cycle which included the rise of the consumer Internet and with it the ascension of Amazon for shopping and Google for finding your way around.
Silicon Valley 3.0 (“mobile”, 2007–2022, billions of consumers): The iPhone’s “it’s an iPod, a phone, and an Internet communicator” introduction ushered in the cycle we are in now. Exciting as it’s been …
Mobile is under-hyped
Smartphones (and to a lesser extent tablets) aren’t just the most valuable medium in a generation (more personal than digital and the desktop Internet) or even in multiple generations (more sophisticated, global, accessible and frequently used than TV).
PREDICTION: Mobile will go down as the most valuable medium ever.
A powerful screen in everyone’s pocket all day, connected to literally everyone and everything everywhere that matters to them is indistinguishable from magic.
It is more than the sum of the best parts of all media that came before it: The depth of print … the mobility of radio … the emotion of TV … the self-determination of digital.
And its three most important services are Google (organizing billions of pieces of information), Facebook (organizing billions of people) and Amazon (organizing billions of things).
From “with us” to “on us”
If the rest of Silicon Valley 3.0 plays out similarly to 1.0 and 2.0, we have roughly 7 more years in this cycle.
PREDICTION: We will go from not just having connections with us, but having them on us. From the world not just in our pockets and palms, but resting on our wrists and noses.
Accessories that help us feel connected more constantly (wearables like the Apple Watch) or more deeply (Virtual Reality like the Oculus Rift, Samsung Gear VR or Google Cardboard, and Augmented Reality like Microsoft’s Hololens or Google investment Magic Leap).
As with all technology, these accessories will hit their strides in their third generation, so expect to feel this more constant — or more deep — sense of being connected most eloquently in 2019 and beyond.
Yes, mobile devices (and their services and accessories) are making Silicon Valley 3.0 its best product ever. But, we won’t be done until we’re …
At the threshold of Silicon Valley 4.0 (roughly 2022) people will be connected everywhere. Yet, the space between us hasn’t been fundamentally innovated upon in over a century.
We won’t be truly mobile (/ˈmōbəl/, 1. able to move or be moved freely or easily) until cars receive the full and complete benefits of computing and connecting.
It may start, as it has for two out of Silicon Valley’s three cycles (Apple II, iPhone), with a beautifully integrated system from Apple.
PREDICTION: Apple delivers fully driverless personal transportation.
In a tilt mirroring the Apple vs. everyone-else-enabled-by-Google battlefield of smartphones, Apple will go up against competitors using Google’s self-driving car platform. Players like Tesla (or Mercedes, et. al.) may take on for cars the role Samsung has played for Google in mobile phones.
Moving in implausible ways
At least three questions surface in the wake of this prediction:
- Why Apple (instead of Google, Tesla, BMW, Mercedes, etc.): While it will have to eek out a come-from-behind win (especially in manufacturing and batteries), Apple has design, consumer-grade system integration, market scale, supply chain buying power, cash reserve, brand and go-to-market advantages over all others. Although traditional car companies including Mercedes, Volkswagen Group, BMW and others are pursuing independent work on autonomous cars from offices in Silicon Valley, their resourcing (tens to low hundreds of people) is already eclipsed by that of Apple’s supposed effort (1,000+ … to begin with) as well as that of Google. And Apple and Google’s efforts don’t have to phone home to HQ in Stuttgart, Wolfsburg, Munich, Detroit or Tokyo for permission and resources.
- Why end-product (a la iPhone) instead of platform (a la CarPlay): The abject failure that has historically ensued when Apple allowed others to build crucial consumer products on its foundational technologies (see Mac clones and MOTO ROKR E1) has caused Cupertino to steer clear of this kind of reliance for nearly a decade.
- Why 2022 if Google has self-driving cars in Mountain View today: The key to autonomous transportation is getting to 100% door-to-door autonomy, including the complex environment of surface streets and neighborhoods (National Highway Traffic Safety Administration Level 4 to be official). Even Google and Tesla, the leaders in autonomous driving, are not predicting 100% driverless vehicles until 2020. Knowing how these things go in Silicon Valley, we’ll give them an extra two years.
Even with those issues addressed, there are still at least three big reasons for Apple specifically not to touch the personal transportation category:
- New class, and scale, of manufacturing: Apple has spent the last two decades building smaller and smaller. Why start stamping square feet of metal?
- Lower-than-traditional (for Apple) per-unit profit margin percentage: Even BMW only makes 10% margin at the corporate level. Rough for a company like Apple that likes things much closer to 50%.
- Need for new retail presence: A traditional “car dealership” (even without inventory, assuming a build-to-order model) would be a new set of real estate for Apple. It is, however, plausible that they simply show the car in existing retail and handle test-drives by “coming to you”.
In the end, however, the benefits will still win out:
- Enriching people’s lives: Apple won’t be able to culturally resist increasing physical connections between people by bringing the psychological, physical and actual costs of driving to zero.
- Saving people’s lives: 90% of car accidents globally are caused by human error (resulting in 1.2M annual road fatalities and over 20M injuries, with 45–60% of fatalities occurring in single-vehicle accidents most rapidly addressed by driverless cars). Announcing that Apple has built a product to genuinely combat the leading cause of death among 15–29 year-olds, and the 30% of road fatalities caused by drunk driving and 18% caused by distraction will go down as Tim Cook’s “iPhone keynote”, Jony Ive’s magnum opus and Apple’s final disruption (until they figure out teleportation in 2122).
- It’s very accretive, even to a business as large as Apple’s: Driverless transportation could become a $2.5K margin-per-unit business (a BMW-like 10% on a $30K car) for Apple with a total available market of 40M units per year globally (cars are roughly half of total global light vehicle sales, 7–8M in US alone). They will do to some combination of Lexus, BMW, Mercedes, Audi and Acura (each of whom has 1.3M to 1.8M vehicle sales per year) what they did to Blackberry, Nokia and Motorola in phones. At 2M+ units per year, they could build a $50B+ annual revenue business with $5B+ of margin contribution.
- Bonus reason: Keeping Chief Design Officer Jony Ive interested in being driven to work for another 10 years. The irony.
What the Apple Car could be
PREDICTION: Apple starts with a fully driverless electric two-door for roundtrip commutes under 150 miles ( iPhone of driverless transportation).
That would contain the initial challenge of building a breakthrough platform, make it economically accessible to premium my-first-car consumers and be one of the quicker ways to affect safety (27% of fatalities involve drivers under 25 — the same percentage as all drivers 30–50).
They can follow that with a longer-distance sedan or cross-over utility vehicle several years later (iPad-equivalent).
If Apple takes advantage of the opportunity to make the windshields of driverless cars controllably translucent (and combines that with either integrated LCDs or short-throw projectors from the dashboard), we may even come to think of their driverless cars as simply the biggest screens in their product family. Distances of road trips will be measured not in miles, but in the number of Pixar movies or episodes of HBO’s Silicon Valley Season 9 we watch.
Silicon Valley 4.0 Winners and Losers
Apple (product), Google (platform), Facebook (people’s time and location) and Uber (“ground traffic control” for the transportation-as-a-service economy as fleets of driverless vehicles plug into the system) can win big.
Lexus, BMW, Mercedes, Audi and Acura (and over time, possibly even Honda, Toyota and Ford) may lose a third or more of their collective market share as likely only one of them will become a stand-out in the enabled-by-Google ecosystem.
Just in time
This feeling of being truly mobile will become mainstream just in time for Silicon Valley’s 50th anniversary in 2027. But, don’t worry. You won’t have to drive your kids to this birthday party. Your Apple Car will do that for you.
Grateful thanks to Rob, Ellen, Jeff, Carla, Dennis, Lynn and Katrina
for improving earlier drafts