It’s the Tech, Stupid

Photo by Markus Spiske on Unsplash

Did you know that Craig Newmark destroyed journalism?

Craig the Destroyer was mentioned, as he often is, on one of those “the state of journalism today” podcasts I listened to recently. Newspaper old-timers were telling tales of the good old days, before the late 1990s fin de siècle, when Craigslist knocked out one of the pillars of their business model, classified ads, ending their days of high margins and martini lunches forever. They’ve been cursing that schlubby, beret-wearing nerd perched in his foggy second floor Sunset District walkup ever since.

Even Newmark’s 2018 donation of $20 million to the CUNY School of Journalism did little to redeem him. It was met with eye rolls since, don’t you know, journalism schools wouldn’t need rich benefactors in the first place if guys like Newmark hadn’t gone and destroyed journalism in the first place.

This is all, of course, nonsense. To believe that Newmark destroyed newspapers is to believe that an alternate history is possible, one where we are still finding dates, adopting cats, and buying used StairMasters via classified ads printed on stacks of paper delivered daily to our doorstep by a fleet of trucks.

But no alternate history is possible. If Craig had never left his cubicle at Charles Schwab to start his eponymous list, one of the many Craigslist competitors launched around 1995 in the U.S. would have sucked in the same users (Yahoo! Classifieds, anyone?) Print classified ads would have been destroyed all the same, and history would have marched merrily along.

Craig Newmark didn’t kill classified ads. Classified ads were dead the moment that web browsers and fast Internet connections became widely available, allowing an unlimited number of searchable, subscribable, multimedia classified ads to be distributed in real time with almost zero marginal costs. Print classified ads died country by country and city by city as the web became accessible all over the world. The fact that Craigslist was the early winner in that market in the U.S. was just an accident of history. Once the tech to build Craigslist became available, the outcome was inevitable. If Craig hadn’t done it, someone else would have.

Sorry, but don’t blame Craig. It Was the Tech.

If your job involves creating new technology products, this is blindingly obvious, and you may be wondering when I’ll stop whacking this poor straw man. You already know that:

• Once a technology is invented, it is never uninvented.
• Once a new technology renders a legacy business model obsolete, that business model never survives in its current form.
• If the answer to, “if this didn’t already exist, would anyone invent it?” is “no,” that thing will not survive.

But no, it’s not that obvious to many. Predicting and responding to the impact of technology on our economy, culture, and our personal lives still seems counterintuitive, causing us to waste money, time, and energy on the wrong things.

For example, after years of limping along, Toys ‘R Us finally closed all of its stores in the summer of 2018. According to the press and even some academics, it was bad management that killed Toys R’ Us. Or maybe it was private equity. Or, of course, it was that that big rich meany Jeff Bezos, who surely cackled like the Grinch as Amazon merrily ground toy stores to dust.

Or, maybe toy stores were killed by . . . you guessed it . . . Millennials!

But Toys R’ Us was killed by . . . wait for it . . . The Tech. Sure, better management could have bought Toys ‘R Us a couple of more years, but there was no scenario where Toys ‘R Us, in its current structure, was going to compete and win when its products could so easily be distributed over the Internet. A turnaround would have required tearing down and rebuilding the company as a digital-first entity, something that few legacy brick and mortar companies have achieved.

Or consider the taxi medallion system, which was obsoleted the moment that Apple launched the iPhone app store in 2008, making it possible to build and distribute mobile apps that allowed riders and drivers to find each other at the push of a button, using GPS-enabled smartphones outfitted with mapping software.

If the taxi medallion system didn’t already exist today, no one would invent it. But taxi companies and their captive regulators have battled Uber, Lyft, and their competitors all over the world, often pointing to the admittedly unsympathetic character, Travis Kalanick as the villain, the implication being, “if only this guy would cut it out, we could go back to the way it was.” But there is no going back. The smartphone is not going to be uninvented. Even if Uber, Lyft, and Didi were never started, a different set of companies would have decimated the taxi market using the same technology stack, and the result would have been the same. It’s the Tech.

Political elders grew up in the The Party Decides era, when political parties served as gatekeepers, controlling the funding necessary for candidates to pay for the TV, newspaper, and radio advertising needed to connect with voters. But candidates can now leverage social media to go “over the top” and take their message straight to the voters. The Republican Party stood by flat-footed in 2016 as Donald Trump, a candidate they did not want, used Twitter and cable television to connect with and rally voters, beating 16 more qualified candidates to win the GOP nomination. The Democrats also watched Bernie Sanders bypass the party gatekeepers, use social media to rally younger voters, and weaken Hilary Clinton, who must have been suffering flashbacks of the 2008 Obama campaign, which won by leveraging social media better than the rest of the field. It‘s the Tech.

Steven Spielberg, a top innovator back in his day, is proposing that movies distributed via streaming services like Netflix be deemed ineligible for Academy Awards. He is defending a theatrical distribution system that no one would invent today if it didn’t already exist, a system that was created before high speed Internet connections and streaming services offered thousands of choices to consumers, available 24/7. A system invented before 80-inch 4K TVs, surround-sound home theaters, noise cancellation headphones, and tablets with HD screens and enough storage to take 50 movies on a long flight. Sorry, Steven, you are just going to need to learn to compete against movies distributed over the platforms that consumers want. It’s the Tech.

Why are real estate prices and inequality soaring in a handful of vibrant, creative cities where high-growth tech companies and their employees gather to live and work? It’s the Tech.

Why did Disney give Netflix a 12-year head start in streaming services, even licensing their intellectual property to Netflix to help them grow a competing business which is now approaching the value of all of Disney combined? It’s the Tech.

Why are malls and department stores dying off? It’s the Tech.

Why are young people having less sex? It’s the Tech.

After two decades of creative destruction wreaked by the Internet, why does this still seem so counterintuitive to many? Some possible explanations are:

• We seem hardwired to seek out people and personalities as the main actors on our world, perhaps because our ancestors evolved to live in small tribes, where our fates were largely determined by our community. When we hear “smartphone” we think about Steve Jobs and Jony Ive. We don’t think about the thousands of scientific and industrial innovations that gave us fast and efficient CPUs, compact and powerful batteries, touchscreens, high speed cellular networks, accelerometers, GPS, and a powerful Taiwanese supply chain, all of which created the “stack” that made the iPhone “barely possible” by 2007. Jobs was important, but we’d have smartphones in some form today even if Jobs never came back to Apple.
• The media encourages this. Stories about personalities, conflict, and gossip get clicks. Few readers want to wade into academic treatises on disruption theory, aggregation theory, and network effects. It’s a lot more fun to read stories about Steve Jobs fighting with Eric Schmidt or how Elon Musk is losing it. This is why an article about, say, the impact of social media on the traditional media industry usually can’t help but focus on Mark Zuckerberg’s grey T-shirt or his eerie lack of blinking, as if maybe social media wouldn’t exist and legacy media would be doing just fine if only this dweeb would cut it out.
• Human nature is to ground ourselves in the familiar and treat the new with suspicion. This is why we won’t even notice a dozen two-ton cars blocking crosswalks and handicapped ramps, but we’ll be outraged by a 25-pound Lime rental scooter which has fallen over onto the sidewalk. We’ll Instagram it and demand that scooters be banned from our cities. Cars are old and familiar. Scooters are new.
• And, let’s face it, the folks in power at the top of legacy companies and governments are not exactly early adopters of technology. Although there is no reason why a person older than 50 cannot stay current with technology, too many don’t, which is why the “Series of Tubes” and “The Future is Coal” generation are often the key decision makers at the senior levels of government and industry.
• And, as the old quote says, “it’s hard to convince a person of something when his salary relies on his not understanding it.” Companies being disrupted by technology go through something like the Five Stages of Grief. Denial that it’s happening: “it’s a fad!” Anger at the disruptors: “these tech companies need to be reigned in!” Bargaining: “maybe they’ll stay off of our turf.“ Depression: “sorry, shareholders, we don’t have any good news for you.” And, eventually, Acceptance: “I’m quitting and joining Google!”

But this is not an argument for fatalism. It’s not an argument that we have no say over how new technology shapes our culture, nor is it an argument that there aren’t plenty of risks and downsides.

• There is no alternate reality where we don’t have ad-supported social networks with strong network effects, but that doesn’t mean we can’t hold companies like Facebook to a higher standard regarding user privacy and controlling abuse on their platforms.
• We’ll always have aggressive, high-growth companies in new, winner-take-most technology markets, but those companies don’t need toxic and abusive cultures to win, and we can criticize and boycott those who have them.
• The leaders in a new market may try to consolidate power and market share, but we can still reign in the worst abuses by applying our existing anti-trust laws as well as asking if those anti-trust laws need to be modified to take into account the dynamics of Internet economics.
• Technology has always causes economic disruption, but that doesn’t mean we can’t try to help those who have been displaced by building onramps for people to enter the tech industry and join the fun.

But this is precisely why it’s so important to understand how technology impacts us and why it’s impossible to make good decisions otherwise. It’s not possible to opt out and sit on the sidelines.

“It’s the Tech” is vital if you are a parent or teacher. It might help you encourage the children in your care to be more entrepreneurial or to seek careers that are less likely to be impacted by automation. You might encourage them to seek riskier opportunities in high-growth companies leveraging emerging technology vs. pushing them towards a “safe” career at a large legacy company (few of which are still “safe” anyway). It means finding opportunities for them to learn about programming, design, and machine learning since these are not “fads” that are “going to be outsourced anyway.” It means getting them access to the latest gadgets so that they can gain a visceral understanding of the devices that are going to unlock the next opportunities.

“It’s the Tech” is vital if you are in a position to revamp the nation’s anti-trust laws or vote for those who want to. New laws are needed, but legislation that is developed without understanding the interaction between technology and markets could lead to laws that, paradoxically, lead to less innovation and less new business formation, hurting the very companies they are trying to protect.

“It’s the Tech” is vital if you work for or invest in older companies that are at risk of being made irrelevant by technology. You can encourage management to accept that the tech will not be uninvented, embrace it, invest in … ahem … customer service, and to bring in new management who are more technology-literate and risk-seeking. Trying to cost cut into a leadership position is futile. There is no hunkering down and weathering the storm. You have to build for what your market will look like ten years from now, not ask how you can preserve what you had ten years ago.

“It’s the Tech” is vital if you care about economic development in your country or city. You need to understand why so much innovation and growth is concentrated in a small handful of communities in Silicon Valley, Israel, China, New York, Austin, Seattle, London, Berlin, and a few other tech hubs. Those hubs are full of a diverse set of people, many of them immigrants, whose reaction to new technology is not to dismiss or deny it, but to embrace it and ask questions like, “what can I build with this?” and “how will this change things?” Your city won’t develop if you can’t attract those people. You also will go nowhere unless you are willing to stare down the incumbent large companies in your region who want to limit their employee’s career opportunities through non-competes.

Technology creates winners and losers. It can create amazing new products and services but can also destroy established companies. It can create new jobs and economic growth in some locales but at the cost of others. It can create amazing new career opportunities but also requires constant retraining and staying current.

But sitting on the sidelines is not an option. It’s the Tech.