Understanding Abundance: February 5, 2017 Snippets
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What happens when friction goes away?
Practicing capitalism, at its core, means creating shareholder value by providing customers with access to something scarce. But what happens when it isn’t obvious what is scarce?
Fifty years ago, this would have been an academic question. But since then, it has become an increasingly practical one. Software has eliminated much of the friction around execution — specify the instructions for achieving some output, and software can run those instructions over and over. The Internet has eliminated much of the friction around geography and distribution — create something of value, and it can be distributed around the world in a blink. As friction in category after category (media; retail; soon transportation; so much more) slips away, we enter a different kind of world — one of abundance.
Starting this week, we’re publishing a four-part series about abundance: what it means, how it comes about, and some ways think about industry structures and competitive behaviour when friction goes away and scarcity isn’t obvious. We will introduce a few general models for thinking about abundance, how it differs from what we’re used to, and what we can still count on to be true in the future.
We’ll cover it in four parts, coming out on a weekly basis with Part 1 out this week:
Understanding Abundance, Part 1: Consumers are the Cause. It all starts with consumers. We define abundance — not in terms of supply, but instead in terms of demand. How come worlds of scarcity lead to normally-distributed outcomes, but worlds of abundance lead to bifurcated, extreme outcomes? What is the consumerization process, and how does it eliminate friction?
Understanding Abundance, Part 2: Silicon Valley’s Secret Sauce. What exactly is the innovation of the modern tech industry? How did a powerful idea led to crazy outcomes like Moore’s Law, and why it is so different from how the rest of the world thinks. The modern tech industry, built around this idea, is uniquely suited to accommodating our thirst for abundance. What lies do people tell that help us observe this is true?
At the end of part 2, we will settle on three heuristic rules of thumb for tech — A causes B; B causes C; C causes A — that drive the abundance cycle and describe industry structure & behaviour. Then we will peer into the future…
Understanding Abundance, Part 3: The Next Big Thing. First was software. Then came the Internet and mobile. What’s next? Our object-oriented world of scarcity is getting reorganized as a functional world of abundance. When friction goes down, we hire functions to address jobs-to-be-done instead of hiring objects. Who is the function operating system? What does it mean for the next ten years?
Understanding Abundance, Part 4: Planning for the Future. Many things will change over the next twenty years. But what will stay the same? How can we base our long-term thinking and planning around principles that will be true for the long run?
We hope you enjoy it and look forward to hearing your thoughts and replies on Medium!
Disruption stories:
Why Hollywood as we know it is already over | Nick Bilton, Vanity Fair
How to build the next Trello and sell it for $425 million or more | Mitt Tarasowski
Podcast episodes to listen to this week:
Stranger in paradise: an unusual story of a dead raccoon | Radiolab
What, how and why to read:
Five books you’ve never heard of that will change your life | Shane Parrish
Facts are still high cost; low virality | Eugene Wei
How to Read | Morgan Housel, Collaborative Fund
Incentives and their consequences:
Gene drives thwarted by emergence of resistant organisms | Ewen Callaway, Nature
Other reading from around the Internet:
IBM gives Watson a new challenge: your tax return | Steve Lohr, NYT
The next Disney will come from China and its name is Tencent | Jonathan Pan, Backchannel
Apple’s manufacturing plant in India is a go | Jay Somaney, Forbes
The hidden costs of Snap’s employee shares | Alfred Lee, The Information
Drinking Chai to Savannah: reflections on identity, inclusion and power in the South | Anjali Enjeti
In this week’s news and notes from the Social Capital family, we have two big product launches to share.
On Thursday, Wealthfront launched Path, their new financial planning tool that works with their popular automated investment service:
Introducing Path | Wealthfront
Path is Wealthfront’s unique approach to financial planning, linking directly with your accounts to get an up-to-date snapshot of your saving and spending so that it can help you meet your financial goals without having to bother you all the time. Dan Carroll, Wealthfront’s founder, put it this way: “Many clients don’t know what their financial goals should be, and even more don’t realize that the goals they’ve set with their current spending and saving patterns are actually unattainable. This is no fault of theirs. There are no great options to forecast your financial future outside of maybe using one of those static “retirement calculators” that make you do a lot of guesswork.”
The solution? For Wealthfront, it’s their new mobile-first, financial planning tool that gets rid of faraway in-person meetings, awkward Skype sessions, and face-to-face guilt. If you haven’t checked it out, be sure to give Path a look — whether you’re shaping up your own savings trajectory, setting up your kids for success, or want to see how else Wealthfront can help you.
Meanwhile, Slack had an announcement of its own: their long-awaited product for large businesses, Slack Enterprise Grid.
Slack Enterprise Grid is pretty much exactly what it sounds like: an organized system whereby distinct departments inside a large company can run their own dedicated Slack teams, but that’s linked to the company’s other business units in — you guessed it — a grid:
Slack CEO Stewart Butterfield on new Enterprise Grid (video) | Bloomberg
Slack launches Slack Grid, an interview with Stewart Butterfield | Ben Thompson, Stratechery
The other week in Snippets we mentioned Slack’s introduction of threaded channels as a possible trojan horse for all kinds of third party workflow interfaces — and Stewart’s interview with Ben Thompson sheds a lot more light on how that might look like, and more importantly why that makes sense for Slack as an avenue to pursue:
“One of our background theses is the number of software product categories is going to continue to proliferate forever. No matter how much software you make and try to sell, you’re going to offer an ever-diminishing percentage of the total needs of your customer. We buy source control from GitHub, because they’re the best at that, and we buy ZenDesk, and we buy NetSuite, and WorkDay, etc. What we want to do is be that connective tissue through the organization for humans-to-humans, but also for humans to connect to the applications and the applications to connect with the humans. … We’re trying to give additional surface areas to the developers to reach their customers, and over time I said messaging, identity, analytics, payment solutions and the last piece, one that is going to be most valuable to the vendors, is distribution. It’s going to be the thing that makes the most difference to them.”
The interview as a whole is well-worth reading for anyone with interest in enterprise software, how distribution is changing, and what becomes valuable when friction goes away.
Have a great week,
Alex & the team at Social Capital
