The past is unpredictable: December 17, 2017 Snippets
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This week’s theme: one last story about the early Internet and how there can be multiple versions of events that are both valid. Plus a new post from Arjun Sethi on competitive moats and units of time in the modern tech world.
Before we take a break for the holiday season, we’d like to wrap up this past several weeks of Snippets issues with a reminder and a story. We’ve been talking about the power and problems of the Internet: the idea of “heavy infrastructure” and “light information” (see The Original American Tech Giants, November 12th), how this has made tribalism as entertainment easier and more prevalent (Amusing Ourselves to Death on November 26th), how regulating these issues has precedent in information networks of the past (Dividing Up the Ether on December 3rd), and how we can categorize problems and solutions moving forward (The Four Quadrants of Bad Stuff Online, December 10). On several occasions on this series, we’ve asked the question: twenty or thirty years from now, with the benefit of hindsight, how will we think about the Internet of 2017? What will be obvious then that isn’t now?
Of course, from its very beginnings, the Internet has always defied easy answers and clear narratives. Since its origins in ARPANET, even the original scientists were never in agreement about what they were building, why it was important, and what they believed it would become. Walter Isaacson chronicles these misunderstandings and disagreements in his book The Innovators, painting a wonderful story of the many players involved at the beginning and how their different points of view, while seemingly “unreconcilable”, actually reflect the reality of complex projects like the early Internet: it’s possible for multiple versions of reality to be accurate at the same time, in a way. Consider one of the most pervasive origin stories of the Internet: that it was built for communications that could withstand nuclear attack on the United States. Isaacson writes:
One of the commonly accepted narratives of the Internet is that it was built to survive a nuclear attack. This enrages many of its architects, including [original ARPA designers] Bob Taylor and Larry Roberts, who insistently and repeatedly debunked this origin myth. However, like many of the innovations of the digital age, there will multiple causes and origins. Different players have different perspectives. Some who were higher in the chain of command than Taylor and Roberts, and who have more knowledge of why funding decisions were actually made, have begun to debunk the debunking.
Given that Taylor and Roberts and other key early members like Stephen Crocker would know more than anyone else what the scientists were actually thinking as they were designing the principles of packet switching and the early ARPANET, shouldn’t they have the final word? Well:
Stephen Lukasik was the deputy director of ARPA from 1967 to 1970 and then director until 1975. … [US Senators] had begun demanding that only projects directly relevant to a military mission get funding. “So in this environment,” Lukasik said, “I would have been hard pressed to plow a lot of money into the network just to improve the productivity of the researchers. That rationale would just not have been strong enough. What was strong enough was this idea that packet switching would be more survivable, more robust under damage to a network … So I can assure you, on the extent that I was signing the checks, which I was from 1967 on, I was signing them because that was the need I was convinced of.”
So how do we reconcile these two viewpoints? Which is fake news, and which is real news?
Two semiofficial histories authorized by ARPA come down on opposite sides. “It was from [Paul Baran’s RAND papers] that the false rumor started claiming that the ARPANET was somehow related to building a network resistant to nuclear war,” said the history written by the Internet Society. “This was never true of the ARPANET, only the unrelated RAND study.” On the other hand, the “Final Report” by the National Science Foundation in 1995 declared, “An outgrowth of the Department of Defense’s Advanced Research Projects Agency, the ARPANET’s packet-switching scheme was meant to provide communications in the face of nuclear attack.
So which view is correct? In this case, both are. For the academics and researchers who were actually building the network, it only had a peaceful purpose. For some of those who were overseeing and funding the project, especially in the Pentagon and Congress, it also had a military rationale. Stephen Crocker was a graduate student in the late 1960s who became integrally involved in coordinating how the ARPANET would be designed. He never considered nuclear survivability to be part of his mission. Yet when Lukasik sent around his 2011 paper, Crocker read it, smiled, and revised his thinking. “I was on top and you were on the bottom, so you really had no idea of what was going on and why we were doing it,” Lukasik told him. To which Crocker replied, with a dab of humor masking a dollop of wisdom, “I was on the bottom and you were on the top, so you had no idea of what was going on or what we were doing.”
There is apparently a joke from the old Soviet Union that goes, “The future is certain; it is only the past that is unpredictable.” Consider how lucky we are here in the land of free expression, free markets, and free association: no matter what happens with fake news on social media, with net neutrality, or with the future of the Internet as we know it, there are both a great deal of potential futures ahead of us and an even greater number of narrative explanations we will make up, on our own initiative, for why things happened and what alternate courses we could have taken. When we look back on the Internet of 2017, there will undoubtedly be some great stories, and a great many explanations for why things turned out the way they did. Do we know what they will say? Of course not. Our future and our past are both unpredictable, and that’s what keeps things interesting.
RIP AIM, December 15th 2017: the greatest tech product that ever was:
One Last Away Message | Michael Albers
So long, AIM. For years, for millions, you were the Internet. David Pierce, Wired
AIM was perfect, and now it will die | Robinson Meyer, The Atlantic
My first boyfriend’s name was boyfriend: an AIM romance | Ashley Mayer
Brilliant insight:
Machine learning for systems and systems for machine learning | Jeff Dean, Google Brain, NIPS 2017
Some Coins might work, but these might not:
Statement on Cryptocurrencies and Initial Coin Offerings | SEC Chairman Jay Clayton
Stablecoins are doomed to fail | Preston Byrne
Meshcoin | NYC Mesh, Internet Society
New challenges around the NBA:
Why the Golden State Warriors are a ‘headache’ for Las Vegas bookmakers | Doug Kezirian, ESPN
Podcast episodes for your listening enjoyment over the holidays:
The forgotten story of PLATO, with Brian Dear | The Internet History Podcast with Brian McCullough
Ray Dalio on failure, meaningful work and relationships | Masters in Business with Barry Ritholtz
Brian Cranston on TV Dads, streaming shows and creative freedom | The Bill Simmons Podcast
Milk Carton Kids | 99% Invisible
Very Quickly to the Drill: PJ and Alex chase down some very strange ad scams | Reply All
Other reading from around the Internet:
Uncle Sam’s Surprise: tax reform to impact crypto investors | Aaron Stanley, Coindesk
A glitch in the theocratic matrix | Venkatesh Rao
And just for fun:
Laboratory Layered Latte | Xue et al., Nature Communications
Both in the Social Capital office and around our family of portfolio companies, we spend a lot of time thinking about competitive advantage — and about what Warren Buffett calls moats. As Buffett has commented many times, the key to good investing “is determining the competitive advantage of any given company, and above all, the durability of that advantage. Many people think of moats as impenetrable barriers that protect the castles within — the economic engines that make businesses durably profitable. Perhaps that was once true, but today there is no such thing as an impenetrable moat. Even the greatest moats in tech today — Facebook’s social ubiquity, Amazon’s cost structure, or Apple’s incredible brand and customer loyalty — are under continuous siege, and can truthfully do little more than buy those companies time. Time for what, though?
In a must-read post, Arjun Sethi walks us through his perspective on moats and durable competitive advantage in the tech world. He focuses on a critical insight: that units of time have become the new common currency of competitive business landscapes today.
Units of time are the new currency | Arjun Sethi
As Arjun writes: “While businesses were once considered only as valuable as the dividends they paid out, the “impenetrable” moats that let companies spit off excess cash are dwindling. A moat today is simply a temporary buffer that helps a company get ahead of the next innovation cycle.”
So what does that mean? Arjun breaks it down into three crucial steps for how companies can create time, compound that time, and then buy other people’s time in order to protect and grow the utility function of their businesses:
- Reduce friction for your customers and yourself. Use the time you save to build your utility.
As examples, we hear about AWS and TensorFlow: both started out as internal competencies that Amazon and Google could offer their customers for a very low price (or for free) in order to save those customers time. Fast forward to today, and AWS has grown into a $160 billion dollar business, and TensorFlow remains years ahead of a competitive set of machine learning competitors. Had Amazon and Google kept those capacities to themselves, sure, they may derived some competitive advantage. But by exposing it to everyone, they created utilities.
2. Compound time by investing in the ecosystem and getting other companies to integrate with your product. Other companies will integrate with you to save themselves time, building on top of your platform and giving you time to invest in the next great business.
As examples here, Arjun walks us through WeChat Pay; Ethereum & ERC-20, and Swift & React.js: all examples of extending products out and into the developer community: as Arjun writes, “By investing in the ecosystem and integrating with other products, you can save time by building new functionality from scratch. Because you have a head start and you’re continuing to compound time, you receive asymmetric information that you can apply to your advantage. Because you’ve invested in other companies, you grow as they grow.”
3. Buy other people’s time to defend your utility and stay relevant. Smartly acquiring new products helps you maintain your utility.
As a final set of examples here, we can see Facebook & Instragram, along with Atlassian’s family of products, as examples of businesses that have successfully protected their utilities by acquiring adjacent businesses in order to protect and extend the time you’ve earned for your customers and for your ecosystem more broadly.
Be sure to read Arjun’s post in full, and send it along to anyone involved in any step along the way: to utilities, and beyond.
Have a great week, and we’ll see you back next year for our final Snippets issue of 2017 where we recap the second half of the year.
Alex & the team from Social Capital
