Category: Future

Content & distribution always beats resolution

Posted on by Steve Sammartino

This week Australian pay Tv operator Foxtel announced the launch of its IQ4 box. The key selling feature is that it enables 4K resolution of content like sports, documentaries and concerts. An interesting move considering all those around them are growing not based on ‘resolution’, but different business models. The numbers for subscription TV services are already telling this tale with Netflix already well ahead and growing, while Foxtel declines.

Number of Australian subscribers at August 2018 (and % change vs last year):

  • Netflix 9.8m (+30%)
  • Foxtel 5.4m (-3%)
  • Stan 2.0m (+40%)
  • Youtube Premium 1.0m (+40%)
  • Fetch 700k (+40%)
  • Amazon Prime Video 300k (+90%)

When was the last time ‘high resolution’ was the deciding factor to subscribe to any content platform? I can’t remember anyone ever saying;

‘You know, I’d totally sign up to Amazon Prime or Netflix if I could watch it at 4K’.

At best, resolution is a hygiene factor – hardly a reason to buy or switch when it comes to content. Are our eyes really that special?

What is clear though is that there is now a 2 speed economy when it comes to content. It needs to be either all-you-can-eat for one low price (streaming services) or a la carte (such as Apple tv). The mash-up package model is clearly broken.

The overriding point is simple – all screens are now created equal. People care less about how shiny the content looks and more about availability, simplicity and price. This is why iMax theatres are still niche at best. And sport won’t save Foxtel either, as we can expect these two things to happen:

  1. Tech firms like Amazon and Facebook to start hoovering up rights to major global sporting properties. FB already has rights to Major League baseball, La Liga Football in Spain and the World Surf League, to name a few.
  2. Sporting organizations will very soon realise they don’t even need a media partner – they can sell their own advertising and subscriptions directly for more than their broadcast rights deals generate.

While Foxtel have moved a towards streaming, it seems that they still love their historic infrastructure more than the truth of where the market is headed.

When it comes to business strategy in any realm, it pays to be agnostic about the tools and to remember what our audience are really buying.

What data and fences have in common

Posted on by Steve Sammartino

We’ve entered the age of the Data Imperialist. New world powers are taking resources before those handing them over have realised what is happening. Once again, it seems that the future is repeating the past.

Most things we value economically in the modern economy are quite far removed from real needs. We invent new asset classes that are things we don’t really need – unlike food, shelter, medicine and education. Where it gets tricky is when something which was once free, fluid and unencumbered gets claimed by a commercial interest. When it does happen though, the pattern is always the same.

  • Those it gets taken from don’t understand the ‘market value’ of what is being taken
  • It gets taken by using tools the others haven’t got.

Into this category we can put land, gold, oil and now we can add data.

Think back to when imperialists sailed to far off lands to plunder the resources from traditional owners. They put fences around things. A fence to someone who’d never seen one would seem like a very strange idea. The mere concept of anyone actually owning land unheard of in many cultures. There’s no value in a fence because no one can own the land! But of course, those who trespassed or tried to access the now fenced off resource were met with gunpowder – a tool the victims didn’t have access to, let alone grasp its power at first.

Online privacy and security are a lot like this. We’ve literally allowed the data imperialists to put a data fence around our lives. While we have known for a long time that knowledge is power, few people in the past 20 years have truly understood how much information we’re really handing over, and the many ways it can be leveraged economically. They, like the conquistadors before them, took it from us before we realised and they too did it with tools we didn’t understand.

Their favourite hack – hiding the truth in 20,000 word long legalese designed to obfuscate. Oh, and they offered us the sugar hit of emotional candy along the way so we could all ‘connect’ on-line – as if that wasn’t already possible with the old school internet. They’ve successfully stooged us out of the most important resource in the emerging economy – data. Henry Ford and his factory friends pulled the same trick on us 100+ years ago when he convinced us to trade in our artisanal skills and independence for highly paid piece labour. Privacy and security are the workplace health and safety of the digital era. The data wars are only just starting and we’ve got to fight back. But how?

Here’s a few ideas to get us started:

  1. Remember everything digital is traceable and on file, forever. There is no anonymity. Never put anything online you wouldn’t want on the front page of a newspaper.
  2. Don’t be platform lazy. Yeah, I know it’s easier to connect on social media platforms… but go direct when possible. Talk on the phone, get your own email client, text – heck, get some analogue FaceTime happening.
  3. Data is labour. We need to socialise the idea that our data should be our personal copyright. Corporations should be renting from us. We created it, we ought own it and it is an own-able resource – if we will it to be.
  4. We have to put our hands up high on what we won’t accept. Data breaches are unacceptable and we should punish platforms with serious consequences – and make sure it’s as unacceptable as pollution and unsafe work practices.
  5. We need to push our Governments to embrace blockchain technology and crypto-economics to enable valued, yet safe, use of data. We need to push them to protect us and our data when they have access to it and protect us from corporations who are data deceivers.

Data like any asset can and should be used for good – where the benefits are shared and protected by those whom create it.  And this is why Blockchain is the most important technology of the past 20 years. It makes the above things possible. And let’s never forget this – our Governments are no different to School yards. It’s a popularity contest. They do what gets them voted back in. What this means is that all we have to do is make these ideas popular.

Steve.

How to invest in technology

Posted on by Steve Sammartino

One of the most common questions I get asked is, ‘What technology or companies should I invest in? You study technology everyday and spend time large companies, so you must have an opinion’. And you guessed it – I sure do. While I’m not an investment advisor, there are some interesting things which we can be sure of when it comes to investing and technology.

The hot technology of the day will always be overpriced. We can expect that hot tech stocks, and even raw materials that go into technology will attract attention and demand that push their prices up. While this may be justified based on future expectations, it often reduces the potential return on investment. We often see this in P/E ratios. For example, the P/E ratio of the S&P500 is currently 24.37 compared to a long term average of 15, due to the big tech stocks currently making up such a big portion of it. In fact, six stocks (Google, Amazon, Facebook, Microsoft, Netflix and Apple) make up 30% of the S&P500. Sure, some stocks continue to rise like these have – but how many of them did you pick to be as big as they are now back in 2005? When it comes to stocks, I take the Warren Buffett approach and invest in Indexed Funds – that way I get all the winners and none of the cost. You can listen to a podcast I did on this topic that explains it succinctly.

Focus on the beneficiaries of the technology. The way to do this is to scrutinise social and economic structures will change due to new technology. Structures which live a layer or two outside of the technology itself, yet stand to benefit significantly from it. One particular area which is both underpriced and about to benefit from a large technology shift is certain forms of real estate. Transport historically has had an big impact on how and where we live. As we enter an era of autonomous transport, it will be easier to live further afield from major cities, and commute either virtually or in your ‘rolling lounge room’ one or two days a week to the office. While Henry Ford facilitated the birth of suburbs through affordable cars, autonomous vehicles and the work from home revolution will invent exurbs – places of great beauty within two hours of a major city. Via technology, these places will have all the benefits of a major city, but the advantage of a tranquil and desirable natural landscape. It’s possible to buy large land tracts in Geelong (1 hour from Melbourne) for a little over the median house price in the suburbs.

Right now this opportunity is wide open a few years out from when new forms of transport will change everything. It’s this type of technology investing few people ever think about.

Steve.

The Blockchain Evolution

Posted on by Steve Sammartino

New technology often goes through a hype cycle, but few get get hyped more than Blockchain. I imagine most of my readers are across it, if not, I wrote a blockchain 101 article you can read in 2 minutes flat. Now, I’ll put my hand up high, and admit right here and now that I’m a true believer. Before I tell you why, the image below is the reason I decided to write this.

I notice this image on Linkedin – it was posted by someone in an industry poised to benefit significantly from the technology. What astounded me was the absolutism of the statement. Even if a technology doesn’t emerge, it’s a far more useful life and business strategy to have an open mind to new possibilities.

There’s 3 simple reasons I think Blockchain will become a vital layer in our lives.

(1) It solves a real problem: It allows us to transmit things of value (like currency) without making a copy and removes the need for traditional intermediaries. We can finally trade with each other online using cryptography to create trust and transparency/anonymity.

(2) The technology has proven use cases: It has already been proven to ‘work‘ with crypto currencies. While it faces technology hurdles including excessive energy usage, a poor user experience and slow transaction speed – these are problems many similar technologies, like the early internet faced as well. Dial-up internet anyone?

(3) There’s a huge amount of financial and human capital going into it: The sheer investment of intellectual capacity and money flowing into the space almost guarantees that problems with it will be solved and new ways of employing the technology will be found.

In fact, that’s how it always happens. Cars today are very different from cars in 1920. The internet is a very different beast today compared to when we browsed on Netscape. And it’s always the three factors above which are required to keep a new technology from disappearing.

Blockchain isn’t Blockchain, rather, it will become something somewhat different from what we see and experience now. With the prize so big – it has potential to topple some of the worlds biggest industries, and so many people engaged in inventing the desired functionality, we can be certain it won’t go away. Historically, making a technology work smoothly is where the biggest financial wins usually come from.

 

What data doesn’t understand

Posted on by Steve Sammartino

It’s true data, and our new found ability to sift through large volumes of it, has come with many benefits: fraud detection, genomics, natural language processing to name a few. But, data doesn’t get humanity. It’s just a reflector, not the director. As a tool it has certain biasses built into it. One of which is its ability to take the wide, and make it narrow. It’s also great at finding correlation between the disparate. You know data what it isn’t good at? Detecting boredom.

We humans are weird beings and right at the point when data might tell us something is heading a certain way, we about face, and go in the exact opposite direction, often quicker than anyone expects. Probably because we love variety, nuance and something a little different.

It turns out that computers don’t actually understand – they calculate. The word computer itself used to be a job title of people who literally added things up. The large majority of algorithms we employ calculate the probability of something. That probability calculation will be based on the stack of code it feeds from. And the larger that stack, the deeper and more hidden the bias will be inside it. What this means for us, is that when we change our mind, on a whim, ‘the system’ won’t see it coming.

The stimulus we get as humans comes from the real and messy world we we live in. So much of which still sits outside of the data economy, even with all the tracking we do these days. So what does this mean for us? It means that unexpected change is inevitable, and the data wont tells us it’s coming. We need to look for it ourselves and measure it from personal human experience. Variety is one of the great human desires, and just when something is peaking in popularity, we decide to leave the building for no real reason other than the fact we are human.

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How to predict the future

Posted on by Steve Sammartino

Predicting the future seems like an impossible task, but there is a trick to it. It’s less about guessing what’s next, and more about piecing together what’s already here. A veritable mash up of tools, behaviour and incentives.  Sure, there will always be unexpected turns in events – economic externalities, social backlash and political events which we’ll never predict. But, the vast majority of the time, what is about to occur in business or an industry is there to be seen, and acted upon a long time before it happens at scale. The way I do it is by observing three things in particular.

Anthropology: This is what doesn’t change. Or that which changes very slowly – human behaviour. We are running a very old piece of software as humans – a 400,000 year old code, otherwise known as our DNA. By studying our human proclivities we can observe patterns which demonstrate what we value and how we’re likely to behave in a given set of circumstances. We need to study behaviour, everywhere we go. Paying attention pays dividends.

Technology: This is what does change. The tools we use to get things done, and they are in a constant state of flux. If the barriers to entry are lower enough to switch to a better, more efficient and enjoyable method of getting anything done – we will. The trick, is that very often the tool is available a long time before it is widely distributed. It first must be affordable and available geographically before we can embrace it. When we study what’s next in technology it’s easy to see where shifts are likely to occur because most emerging technologies follow price/ performance ratios which are very predictable. This happens both at the industrial and consumer level. Importantly, the eventual adoption of a new technology can’t be based on utility alone, it must also be socially acceptable to our species. Google Glass comes to mind as an example of something we simply didn’t like. Likewise, large corporations often find it difficult to embrace new technology for weirdly social reasons. Because new technology ignores both the financial and emotional investment a company may have made in now outdated infrastructure. Legacy firms often get disrupted because they fall in love with their tools and systems, instead of the problem they are meant to be solving for people. Read here – successful humans don’t like change.

Economics: This is what ties to the above two elements together. A simple way to define economics is the study of incentives. Wider incentives are what shapes our behaviour, and in turn influences the way money flows around people and the systems we live inside. The question we need to ask here, is will this technology facilitate the way people behave and provide a big enough incentive for them (Corporations and Consumers) to move to this new way of getting things done. If so, how will it change the way money, things and people move around.

So, when it comes to thinking about tomorrow, start by thinking about what’s already here today.

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How to future proof your kids

Posted on by Steve Sammartino

There’s lots of things we can do to future proof our kids. On the top of my list would be this: Don’t condition them to into thinking they’ll get a job when they grow up.

The reason is simple – A job is only one source of potential revenue to sustain life.

This isn’t to say that jobs are bad, just that while they are young we should be introducing the concept of economics. The first concept is that we need revenue when we grow up, and a job is just one source. Imagine asking your kids this:

What will your major revenue source be when you grow up?

Their first question will be, your guessed it – What in the heck is revenue? And this invites an important conversation that opens their minds for the rest of their life. A decent answer might be this: Well, revenue is a word that describes all of the different ways we can get money for helping people. A job is just one of those ways, but there are many more. And some are more rewarding, some easier, some harder. Here are some examples Johnny and Mary:

  • Profits from selling things, or owning a business
  • Commission which can be from selling something for someone else
  • Fees for doing projects
  • Freelancing selling your skills one task at a time
  • Rents for people using things you own – like a building
  • Dividends which is money when you own a portion of a company, Like the toy shops we go to – Did you know you can own part of that toyshop!?!
  • Royalties from letting someone use your idea, like if you drew the first picture of a cartoon character
  • Licensing which is when people pay you to use something you own in another country

The list is endless, unlike the number of jobs which are about to be replaced by AI, Automation and offshoring.

You could explain all the examples above, using just one of their toys, say Lego. Shops make profit selling it. Professional Lego builders work as freelancers. The shop the Lego is sold in is rented by the person that owns  the building. Lego pay licensing fees to Star Wars to make Darth Vader. Shareholders in the Lego company share in profits from people buying lego. You get the pattern.

This will show them many possibilities. Kids are super curious about the world, and they’ll never see money in the same way again. They’ll start to see economics and different ways they can participate. More importantly though, they’ll be thinking about systems, and how to position themselves into owning the factors of production, and not being them. If we do this, we give them a chance at being the architects of their own future, and not a bricklayer in someone else’s.

Blog readers in Melbourne – I’m inviting you as a reader to The Lessons School Forgot – Live – to celebrate the launch of my new book. 

Hope to see you there, Steve.