The Destruction of Everything but Silicon and Gucci
How tech’s abstraction will crumble all but truly unfair competitive advantages
It is the hiding away of details––whether they’re pieces of code, business processes, ulterior motives, control panels, real identities, or physical activities themselves––technology allows us to hide them away to concern ourselves with broader challenges unencumbered by the mundane or scalably solved. Increasingly, we can now focus on what really matters.
A lot of futurists will say these changes are necessary consequences of technology and the Future. At best, this is only part true. Technology is perhaps an ultimate tool for increasing abstraction — allowing for more sophisticated digital representation of the physical world than ever. Of course, it is our collective socioeconomic choices that make certain technologies notable on our journey toward some maximal abstraction. Uber and Airbnb are no more necessary consequences of technology than the New York City Subway or America’s trip to the moon. It’s easy to mistake sparkling debuts of technological progress — things that only networks like the internet or mobile could provide — with things that are actually good for us.
And even though there’s plenty to consider there — is our obsession with all things technology even good––the broader point is that any consequences of technological fascinations are small relative to those of the competitively driven march of abstraction.
Because as it becomes ever easier to spin up a business––as business verticals modularize and further break down to resemble the increasingly en-vogue microservices architecture of software engineering; so that previously apparently differentiating aspects of businesses become abstracted, modularized, non-differentiating, just expected, scaled up services available to be plugged into each of our businesses––our available options for competitive moats and barriers to entry to protect our competitive fortresses keep dwindling, leaving us with fewer tools than ever to protect the enterprise from competitive pressures.
So when anyone can build anything––plugging into business modules that provide logistics, messaging, automation, branding and beyond––stark is the question of differentiation. Why should your ride sharing app be the one that everyone uses? If what a company does is entirely non-differentiable, in the sense that anyone can rebuild its technology faster than ever, why do a company’s shareholders deserve profits versus anyone else? Classically, investors are compensated for carrying risk, but with competitor platforms easier than ever to build and a click away, why your silicon-powered website versus another?
What stops anyone from building a cheaper competitor? Does abstraction itself threaten modern existential motivations of most modern corporate entities? If today’s macro enterprise can be successively be broken apart, made automated and reassembled using interchangeable and universally adaptable modular microservice sub-enterprise parts each competing in their own domains on ever thinner margins, why should a single macro enterprise win? What about the microservice sub-enterprises that compete hopelessly on feature and price?
Abstraction will yield winners only among those who are the most abstract.
Maximal abstraction fits cleanly into two categories: On a dimension where winners offer global optima on features and price achieved mechanically through pure optimization on information and business process. The other lives where value is derived culturally through hard-won heritage, prestige and war-chests of cash. Everything creatively destroyed but Silicon and Gucci.
The future’s most successful companies, though, will be combinations of both.
You don’t want to compete on features or price. If you do, you better be the best. When you’re not competing on features or price, you compete on a hazy, glorious and tragic runway of perceived prestige and value ever generated from the zeitgeist past, present and future. You’re Chanel! You’re Gucci! You’ll struggle as that new direct to consumer lifestyle brand without a brand slush fund or a really good creative director. With consumer goods increasingly produced by the same factories and influencers ever accessible, it’s entirely conceivable capitalists could deploy generative adversarial networks to artificially produce hit after hit on any business able to be well-described by a few choices like brandmark, formulation, style, etc.,
It’s easy to make an impulse buy on a brand you saw in an Instagram ad. But this brand will not soon compete with the Gucci Loafer. Instead it will compete with an onslaught of other derivative direct to consumer brands catapulted by capital wishing to be associated to the next big thing; capital playing a game of hot potato with appearances and expectations.
Those broadly of the Silicon category are businesses that are maximally abstract so that no one but electricity companies can call them customers for business-critical processes. Large networks like Verizon, Plaid, or Amazon are strong examples. Blockchain advocates might contest Plaid and Amazon. So are owners of high-value data streams. Chip makers seem to fit. Public clouds are increasingly making their own chips to get ahead of this dynamic.
MasterCard, Ipsy, Instagram and Nasdaq are likely examples of both. They are representatives of good technology and strong heritage and branding underwritten by company values difficult to erase even by an eruption of sharp competitively-oriented capital. Values and story endure and are strongly differentiated. People remember.
If you want in on the fodder, you better be clever and have friends with a lot of money.
Where does all this leave everyone else?
Technology is disruptive. We’ve appreciated the development of technology, letting machines do for us what we used to do manually. But as artificial intelligence reaches into industries with disruption ravenous for remaining glutenous strongholds of inefficiencies, wealth transfers from what under progressive technology appear to be bloated salaries of the inefficient to the pocketbooks of clever founders financed by the ever wealthier. While historical advances in technology might have created jobs as it creatively destructed, it’s as of now unclear what jobs will be created as AI eats jobs of even the soon to be formerly white collar and beyond.
It’s clear that competition is not one click away even though competition has never had more highly accessible and powerful tools than now to deploy to compete. So why doesn’t technology’s democratization apply economically to companies themselves and the people who might make them?
Interestingly, hope may lie in the extraordinary idiosyncrasy, magnetism, and dynamism each of us intrinsically has. Our intrinsic humanity will not be abstracted. On this trip to maximal digital abstraction then, we may just find ourselves back to where we started: back in our communities, recognizing each other with curiosity and openness, and the unique gifts each of us are lucky enough to bear.