Could there be a state of Silicon Valley, a dream political unit in which innovation can be represented unhindered by the problems typical of the old industrial era? This is what Tim Draper is proposing in his plan to split California into six states. The proposal cites the reasons of oversized California compared with other states in terms of population, geography and economic power, the lack of proper political representation and poor administrative services. The movement behind this proposal already has a website for marketing and support gathering.
I assume a lot of effort went into the design of the territorial make up of the new states. The logic behind this blueprint must consider the history of California, the demographical distribution and its group interests. It is clear though that beneath this general dry presentation that the high-tech are the key influencers. What they really want is to have one state for themselves, the state of Silicon Valley.
This is fascinating. What an idea! On one hand one could think that this is madness, an exaggeration, one of those crazy ideas that are doomed to failure from the beginning. It could be interpreted as a sign of out-of-touch grandeur of companies that have achieved colossal success at a global scale: the Twitters, the Facebooks, the Apples and the Googles. It almost sounds like a prank. On the other hand maybe the people behind this proposal are onto something. Tech companies are moving much faster than Washington, they have caused a revolution that is changing the economic landscape not only in terms of novel technological products, but in terms of structure of workforce, education, social relationships.
Regulations are slow to adapt. Maybe this is a good thing and a bad thing in the same time. You don’t want to make mistakes that affect future generations because you made a quick bad decision or because you procrastinated for too long. This plan goes for speed. The California six-way split is wanting to accelerate the pace of regulatory change and create a power base for the tech class that can rival those held by the finance, energy, manufacturing and agricultural groups. The Twitters, the Facebooks, the Apples and the Googles are the new dynasties as the Morgans used to be (they still are to some degree). Or perhaps the likes of Kleiner Perkins Caulfield & Byers (Tom Draper is representing one of them) are the real dynasties pushing for this change. If somehow through a miracle this happens, other states will follow. The consequences are incalculable.
Update 3 Jan 2014: I found this map created by professor Andrew Shears who created a fantasy version of US based on past partition proposals.
Mike Nobis saw how the financial crisis led his customers to postpone orders until the last minute, forcing his 100-year-old family printing business to work faster to deliver on time.
Business invests more in software to increase efficiency and reduce the headcount
See on www.bloomberg.com
In a rapid succession in the space of two weeks, two major Australian banks raised a red warning flag signalling their deep concern of what could be their biggest existential threat. The threat comes from not from the Bank of America, or Citibank, HSBC or Bank of China, but from unexpected sources, in form of nimble technology companies from Silicon Valley.
Commonwealth Bank CEO Ian Narev expressed this view at the G100 Congress in Sydney in May this year.
The new competitors are “the Apples, the Googles, the Samsungs, the PayPals, the credit card companies, who can pick particular slivers as a result of the application of technology into financial services and compete. We need to be prepared for that.” he said.
Ian Narev alluded that regulations have to be adapted to reign in a new type of competition. The trouble with this competition is that there is no precedent. Disruptive innovators create solutions that address needs outside the boundaries of traditional models before invading the established markets threatening to displace the incumbents. What to do?
Take for instance the case of Dwolla. Founded by a 28yo young entrepreneur from Des Moines, Iowa, USA, Ben Milne, Dwolla is a 12-person startup that invented an online payment system that bypasses credit cards completely. This startup is onto something because large financial institutions are very interested in this idea. Venture capitalists are backing the company with money. Just last month Dwolla received $16.5m in funding, its biggest investment yet. It is hard to predict the impact of Dwolla and other similar innovators on the banking system in the near future if the momentum continues.
A couple of weeks ago, the ANZ chief executive Mike Smith described the technological innovation wave that is about to hit the financial industry as “terrifying”. Smith made this statement to the board based on information received following a study undertaken by the bank during a tour in California. “Much of it is being driven by small companies that are very active in payments but very well-funded, and they are moving very quickly.” It is interesting how quickly ANZ followed Commonwealth to look at what is happening in the Silicon Valley. Something must make them nervous.
Reputable banks have some of the deepest moats protecting their business from new competition, something that Warren Buffet always liked about banks. But rapid changes can ruin that assumption. The transformation will go beyond improvement of operations. It’s about service, it’s about having a different presence in the peoples’ lives, with new perceptions. If a “normal” bank is still something that brings to mind images of prestigious physical old buildings (you-come-to-us), the new banks need to become virtual, quick, creative and very social (we-come-to-you).
Will the disruptive innovation brought by super-smart technology companies become a systemic threat to the traditional banking system? Maybe not, not entirely that is. It is more likely that a wave of restructurings, consolidations, and small bankruptcies will re-shape this business. Banks that “read” the market signals will either buy some of the successful fresh innovators, or innovate themselves, or establish alliances to surf this new wave of opportunities and reap the benefits. Others that refuse to see the threat may well as disappear.
It’s not just a smart move, it is a brilliant move. Facebook brings back the glory of making software. While many large IT companies rushes to control both the software and the hardware as a way to dominate the market, Facebook is attempting to succeed by just being best at designing great software. In a way this is similar to what Microsoft has done through their partnership with Nokia, only at a grander scale. Google must be secretly brooding now. For a moment Google seemed to have it all, software and hardware together set in motion in a big wave overwhelming their long time foe, Apple. But here it is, the nightmare called Facebook is back on the front page. All that money poured into Android and Motorola hasn’t yet given any assurance that it will lead to world domination as planned.
The beauty of Facebook Home, as a concept as we don’t know how successful this is going to be, is its simplicity. Facebook created a social software layer on top of an entire ecosystem: Android operating system, hardware manufacturers, telecommunication networks and application developers. They have a phone, without having a phone. If there is someone else affected almost as much as Google is that must be Samsung. They have tried hard to build a services shop on their phone for some time, but with not much success. The media still calls the Samsung branded software applications ‘bloat ware’. And here it is, Facebook just comes along and in one swoop they capture the attention of all those eyeballs. At least what they hope they will do.
The move is brilliant, but it doesn’t guarantee success. Facebook desktop attraction started to lose some of its lustre and consumers have cooled off a bit. It will be interesting to see how the consumer will feel when Facebook is in their face all the time. Mark Zuckerberg describe Facebook Home as “highest quality experience you can have on Android“. If this is true, then the chances of broad adoption are greatly enhanced, but if not, the brand might suffer. The highest risk for Facebook is that although this move is brilliant, it may be too brilliant for their own good. Users may feel Facebook is too much into their lives. Success could irritate because by occupying the space in a dominant way it causes resentment. We have to wait and see.
It Facebook is successful, this may lead to the demise of good old phone number system. Instead of calling your friends using the telephone system, you just talk to your friends using the Facebook voice or video chat. Your Facebook ID could well be your next phone number.
In an interview given to Robert Scoble, John Gotts, the founder of Connect GOP, talks about how social media can politicians communicate with their constituencies they represent. This could be an unappealing story, one of those that you glance over while rushing to the next exciting news, if it wasn’t for the some very interesting remarks John made about how the technology can transform the political process.
First of all the magnitude of this project commands attention, because if it succeeds, it will transform the political process. Connect GOP is building a database of as many voters as possible and help their representatives use that data to get a pulse of what is going on and communicate their political messages. Here is the interesting bit: Connect GOP wants to store the experience of all campaigns and sift through the data to learn from past mistakes and successes informing the new campaigns to do better. But this is not your typical analytical tool. The system will be designed to provide the representatives with a real-time process that takes the simple political message and morphs it based on the past experience in a message communicated through multiple social media platforms and traditional forms of communication such as email. This has some massive repercussions. The big TV ad campaigns will become much less relevant. The true campaign will be almost invisible to the public eye, and become a stealth operation reaching with much better precision the same audience if not larger with targeted and personalised messages.
Secondly, John’s remark about how many intermediate jobs that exist in the current process will disappear thanks to automation and data analysis. Like office operators in the 70s and 80s, the media staff will be threatened by systems such as Connect GOP. Forget about the days where the communiques where custom crafted on each occasion in each district based on the experience of individuals and the local history. Now the big data will inform a few professionals about what are the best models to be used in various circumstances. John calls this “contextual politics”.
Another interesting thing about this is the issue of trust when it comes to supporting competitors. If you support the team A, you cannot pretend you will help team B in an absolutely neutral fashion. John talks about Votizen and National Builder and how they had an issue of trust because the suspicion that data from one party could be made available to the other side. Through extension, this raises the issue of trust large social network enterprises in the context where their leaders take political positions. As soon as this happens, their members have legitimate reasons to ask of whether their trust should be reconsidered. See my previous post When Social Networks are not Social which touches on the issue of trust in the context of Sheryl Sandberg’s Lean In campaign.
Finally, the nature of the politics seems to be in for a big change. In the past political machine has been revolving around a broad ideological framework and big personalities. The memory of a party has been passed from generation to generation in form of stories, books, speeches and long history. Now, a political party is extending this memory with large networks and cloud data in which past events, voters information, economic data, and campaigns are stored for processing with complex algorithms. This machinery will play and increased role in the future in the way political platforms are defined and in the way the representatives communicate with their constituencies. Maybe the accountability will be improved through transparency. Rogue politicians will find it more difficult to hide, but in the same time, political heroes will find it harder to make bold moves by themselves. They need data and the help of professional experts.