A year of tipping points: Snippets: Sunday, December 18, 2016.
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Welcome to the final issue of Snippets for 2016. We’ll be going on holiday break starting Monday, and returning in the new year. Before we go, we wanted to share some reflections on this year and its place in the future. There’s a common gloom hovering over many of us — in 2016 we certainly took some steps backward. But it’s important to not forget that all around us, the world is moving forward. Just like the old line about the stock market: “it takes the stairs up, and the elevator down.” It can be hard to recognize the progress being made every day that changes the world. And yet, when we look back twenty, forty, eighty years from now, it’ll be those steady shifts going on in the background that we recognize as truly important. So to close out the year, we wanted to highlight three areas we’ll likely look back on from our vantage point in 2046, or 2066, and recognize 2016 as being a true tipping point towards progress.
First of all, let’s talk energy. There’s a good chance we may look back and recognize 2016 as the year when renewable energy — particularly utility-scale photovoltaic solar — achieved liftoff velocity at global scale.
A jaw-dropping world record solar price was just bid in Abu Dhabi | Katie Fehrenbacher, Fortune
Michael Liebreich: a year of hectic change and off-target predictions | Bloomberg New Energy Finance
It hasn’t just been about solar, though. Wind, Electric Vehicles, Energy Storage, Behind-The-Meter, and other trends are converging towards a profound change in the way we produce and consume power. Looking back twenty years from now, the total amount of clean energy investment and installation across the world in 2016 will surely pale compared to what follows. But we may recognize a set of factors coming into alignment, becoming quite clear this year, indicating a tipping point and rearrangement of what is scarce, what is valuable, and what is cheap. I call this our “PC, meet the Internet” moment for energy.
This is a big deal, and we often don’t notice it on a day to day basis. But it’s happening. As we wrote earlier this year, when PCs came online, they changed the world forever — and we’re getting very close to that moment for our next layer of distributed energy. So many things are coming together: cheap renewable energy driven by falling costs of solar and wind, an onset of subsidized energy storage inside electric cars, the emerging Internet of Things at the edge that will glue it all together, and so much more. No one knows what’s going to happen, and we can’t wait.
Second, in medicine and health care. From up close, our health care landscape looks as complex, dysfunctional and disheartening as ever — and our recent election has added an extra dose of uncertainty with regards to the ACA and its future. But when we look back twenty years from now, we may recognize 2016 as the year of a critical shift: when we successfully began to work with machines in a new way.
The impact of artificial intelligence and deep learning has been one factor. Google’s DeepMind and IBM’s Watson Health, along with other industry hitters, have committed major resources to changing the way that decisions are made and assisted in medicine. For an industry that changes as slowly as health care, these major partnerships — particularly around sharing patient data for training — are a big deal.
How cognitive technology can revolutionize oncology | IBM Watson Health
Meanwhile, patients have finally gotten a true advocate fighting for them in the health care business landscape: consumer tech companies. Apple in particular deserves special recognition here. We aren’t used to thinking of the tech giants as consumer advocates, but that’s precisely what is starting to happen. Ten million patients have remarkably little bargaining power with our health system, but ten million iPhone users will be an entirely different story:
Aetna will subsidize Apple Watch in first US Insurer deal | Zachary Tracer & Alex Webb, Bloomberg
Aetna makes large bet on wellness with Apple Watches | Bob Herman, Modern Health Care
Apple scores GlaxoSmithKline study in key test of health apps | Caroline Chen & Alex Webb, Bloomberg
Combine the two, and what finally comes together? A technologically-empowered group of consumers interacting with technologically empowered physicians, health care professionals and networks. It’s too early to say how this shift will change the treatment of specific diseases, and what turn out to be hype versus reality. But we can definitely look optimistically around this next corner, beyond which our health care system could be radically transformed for the better.
Closer to home, we may look back to recognize 2016 as a year when Venture Capital, technology funding and risk, and the fundamentals of early stage value creation took a step into the future. This past week, The Information released the second annual version of its Future List, in collaboration with Social Capital. Concurrently, Chamath wrote an op-ed around the composition of the VC industry, how we can prioritize hard problems, and why we still find it difficult to fund big solutions:
The Sunk Cost Fallacy and the future of Silicon Valley | Chamath Palihapitiya, The Information
The Information 2016 Future List: despite more women, VCs still mostly white men
Some see encouraging signs in this slow shift towards more diversity and perspectives; others have been frustrated by its glacial pace. Nearly all agree that we should ‘solve hard problems’, but it gets murky from there — How? Who? Where? And yet, when we look from our vantage point in the future, we may well recognize right now as the time when the tech funding landscape became no longer about what happens on Sand Hill Road. How come? Among other reasons, because we may well have reached a tipping point with the public cloud, serverless, function-as-a-service (e.g. AWS Lambda and soon Lambda@Edge) and other widely available tools: many of the fixed costs of value creation are being abstracted away, leaving behind precisely knowable, variable-cost primitive building blocks that will change the way we think about early-stage risk.
Cloud trends — where we have come from and where we are headed | Adrian Cockcroft
Why the fuss about serverless? | Simon Wardley
Venture Capital and the Internet’s impact | Ben Thompson, Stratechery
As Simon Wardley powerfully put it: “The new business models around which worth-based development and the collision of finance and development will literally knock your socks off. … Beyond the initial investment in coding, I can create an almost variable cost business model and redirect investment to maximize returns in ways that most of you have never experienced. I know. I’ve been there.
These emerging practices will spread despite the inertia. The path of adoption will be a punctuated equilibrium as with all points of industrialization. This means the growth is exponential and you won’t barely notice it until it gets to a few percent of the market and then in the next few years it will take over. On average the timescale for this process is 10–15 years, so expect it to see the whole world being overtaken by serverless by 2025. These “FinDev” architectural practices will rapidly become good and then best but what their exact form will be, we don’t know yet. We’re not near the stage of reaching consensus and they still have to evolve and refine. But serverless will fundamentally change how we build business around technology and how you code. Your future looks more like this.”
Putting those two things together: when we look back, we may distinctly recognize a change in the way that the tech industry and the Venture Capital community approach the challenge of solving hard problems. And we may recognize that now is right around when the balance of power, appetite for risk, and point of view towards value creation began to run away in a new direction. It’s a very exciting time to be here.
As the year comes to a close, today is probably a good time to remember that although the tech community certainly has its differences of opinion, its disagreements and its grudges, for the most part we’re all on the same team. We all want to be on team progress. In 2017, let’s have each other’s backs and remember what we’re working for. We hope you all have a wonderful and restful holiday break, ready to take on the world’s hardest problems with a fresh start in 2017. Thank you for reading Snippets, and for all the work you do. We’ll be back in January.
All the best from the entire team at 120 Hawthorne, our portfolio companies and partners, and everyone in our extended family,
Alex & the team at Social Capital
