The Next Big Thing? (Techonomy Detroit)
Last week I was in Detroit to speak at Techonomy's one day conference there. I had never been to the city before and enjoyed meeting Mike Duggan, the mayor, Beth Niblock, CIO, and many other people working hard to turn things around. It is a fascinating window into challenges I believe we will face more broadly going forward.
Here are the video, the slides and a transcript of the talk.
(Transcription by RA Fisher Ink)
Kirkpatrick: Good job, thanks so much. You know, like I said before, in the morning, we do believe in diversity of views, and our next session is a very optimistic way of looking at how technology is changing everything. I was telling Albert Wenger backstage, you know, maybe he should call his session, âThe Internet Is the Answer,â but in any caseâhe probably would be better off not doing thatâbut heâs a venture capitalist with Union Square Ventures, which is probably the most well-known venture capital firm in New York. He has personally been an early investor in Etsy and Tumblr, and heâs got a great way of presenting a really interesting point of view, so Albert, pleaseâoh, there you are already. So, thank you so much.
Wenger: Thank you, David.
Wenger: Hi there. Thank you. This is actually my first time in Detroit. Iâve met a lot of wonderful people here, and Iâm definitely planning to be back. Whatâs the next big thing? Itâs a question I get asked a lot, as a VC, and so thought, since weâre in Detroit, it might be kind of fun to go back and say, well, what did people say about this in the past, about cars? And this is a slide, an illustration I found from 1974. In 1974, people thought well, weâre going to have these really futuristic highways and really futuristic buildings, and of course, self-driving cars.
Well, this is what it looked like when I went to the airport yesterday, in New York. So, you know, four decades later, we still mostly get this. Thereâs a strange and funny thing, thoughâitâs 2014, and we also, do, in fact, have self-driving cars. And I think itâs super-importantâand Iâm going to come back to this several timesâitâs no longer a speculation. Itâs a real thing. The Google cars have driven hundreds of thousands of miles on the highway, completely autonomously. We also have this: we have a machine thatâs beat a bunch of really smart people at a game thatâs not that easy. Like, I always yell out the answers and donât remember that itâs supposed to be a question. So we have that, and we have this: we have cheap 3-D printers that can print almost arbitrarily complex shapes without any assistance from humans.Â
So if we have all of these technologies, and theyâre actually hereâtheyâre not science fiction, theyâre science factâwhat, then, is the next big thing? Well, hereâs what I suggest is the next big thing. No, itâs not a lever with the word economy on it. Itâs the idea that our existing economy is sort of kind of like a rusty, cranky, old machine, and is somehow going to get very severely disrupted by all these new technologies which are no longer fiction but fact. And thereâs a great quote, which I love a lot, by a science fiction writer named William Gibson, and the quote is, âThe futureâs already here. Itâs just not yet evenly distributed.â And I think this is super-important here. These things, they are reality, they are here, and the only thing weâre now arguing aboutâor should be arguing about, or should be thinking aboutâis what will their impact be on the economy?Â
And in order to think through this, I want to suggest that the existing economy is actually quite simple. I know itâs incredibly complex, but at some level itâs quite simple. For the vast majority of people, the way they make a living is that they sell their labor. They sell their labor, and they receive a wage. And they then turn around a take that wage, and they do this. They go buy stuff. And that stuffâor servicesâis made by other people, who also receive a wage. And that gets us to this loop, itâs a loop where you sell your labor, you buy stuff, the stuff is being made by people who sell their labor, they buy more stuffâand itâs been an incredibly powerful loop. Itâs brought us all these fancy things that we talk about. Itâs brought us these smartphones, these amazing screens, because weâve had a system in which weâve let entrepreneurs decide what the things are that should be made, instead of top-down planning and then weâve had labor that could move around and work on the things that seemed like the most promising things.Â
But this loop is coming to an end. Iâm going to start with the labor side of things. This is Baxter, the friendly robot. Baxter is unlike previous robots. Baxter doesnât need to be programmed. You just show Baxter what to do, and Baxter learns how to do it. So we are reaching a completely new level of automation. We have, as I said before, we actually have the self-driving car. We actually have artificial intelligence that can answer customer support queries. So weâre reducing the number of people we need to do things. Weâre also globalizing. Anything thatâs information-related, you can do anywhere in the world. You bring the information there, you let people work on it, you bring the end result back. So weâre reducing the demand for labor, weâre increasing, in a way, the supply.Â
And then we have another effect, which is very, very important, which is the winner-take-all effect. If you go back to the economy before industrialization, letâs say, and you were a cobbler, you were making shoes. You were competing with a few other cobblers in your city. You werenât competing with a cobbler 100 miles away, let alone 1,000 miles away. If youâre making an app for this phone, youâre competing with anybody in the world making a similar app for this phone. And now, how many navigation apps, for instance, do you need on your phone?Â
So when you put all three of these together, weâre having these trends that are putting huge, unimaginable pressure on labor, and I think a lot of the things that weâre talking about how to stop that, I think are completely, entirely inadequate. So thatâs one side of the equation, thatâs really breaking down.Â
Letâs take a look at the other side of the equation. There, I think, we know what some of the breakdowns are, more obviously. This is the most obvious one. CO2 levels in the atmosphere are at 400 parts per million, thereâs a garbage patch in the Pacific Ocean almost the size of a continent, so we know that as places like India and China are trying to catch up with material consumptionâwe already know weâre doing too much. We canât say weâre going to get out of that job crunch by making more stuff. Thatâs a pretty bad way to try and fix this problem, when weâre having this problem, which is sort of at a global level, a species level of problem. So too much of some stuff, this is negative externalities, and not enough of other stuff.Â
This is Sal Khan, founder of Kahn Academy. In this age that we live in, where people all around the world have these devices with access to the internet, education should be free. Most content should be free. We want it to be free. We want there to be as much free content as possible, because itâs good. You never know who that person on the margins, whoâs going to learn something, who will turn out to actually figure out how to solve the entire environmental mess that weâre making. So thatâs a positive externality, and weâre not getting enough of that.Â
And finally in a reference for any fans of âHitchhikerâs Guide to the Galaxy,â the one thing weâve learned is that beyond a certain amount of consumptionâbeyond being able to clothe yourself and feed yourself and have shelter, and these days, have access to the internetâmore stuff doesnât mean more meaning or more happiness. So where weâre finding ourselves is where this loop is breaking down.Â
But there is good news. Itâs not all bad. David said I was going to give a good talk, so hereâs the good news. Thereâs a new loop thatâs coming, and that loop looks something like this. People create something, maybe in their room. They share it, maybe through a bird that tweets, letâs somebody else discover it, and then after youâve discovered it, you get to enjoy it. And Iâm using the word enjoy because, for most information goods, itâs non-rival. If Iâm listening to a Sal Kahn lecture, it has no impact on you listening to that lecture. Itâs not taking away from your ability to listen to the lecture.Â
And so we have a new loop, and itâs a very, very powerful loop. And I would posit we want as much of that loop as we can get. I went to the breakout session on farming, and one of the things I kept thinking is, all this stuff about vertical farming and new farming technologies, etcetera, we would like that to be in this loop. Seeds, the development of seedsâwe want seeds to be developed in this loop, not in an industrial loop by Monsanto. So how do we get more of this loop? What are the things that we should be building? Iâm going to give some example about what we should be building from the Union Square Ventures portfolio.Â
There is a singer named Lorde. She released her songs, her tracks, when she was 16, 17, on a platform called SoundCloud. SoundCloud is for music what YouTube is for videos. It has that loop, loop of create, share, discover, enjoy. This is a woman named Anna Todd. Youâve not heard of Anna Todd yet, probably. She wrote a novel on a platform called Wattpad. Thatâs to writing, to fiction, what SoundCloud is to music and what YouTube is to videos. She wrote a book thatâs been read by millions of people.Â
But thereâs a catch. As I was discussing this loop, I wasnât talking about anybody getting paid anywhere. And so one of the things we need to double-down on, and we need to figure out more is, how are people going to get paid in that world? And I would suggest one way they are going to get paid is through crowdfunding. Weâre just at the beginning of this, but it can be so much bigger, whether thatâs Kickstarter or Indiegogo. Itâs also companies, new companies that are focusing on specific categories. Beacon Reader, for instance, focusing on crowdfunded journalism. Or Experiement.com focusing on crowdfunded science. It feels small today, and it feels small relative to the amounts that the foundations are talking about, but if we all chip in, there are way more of us then there are foundations, and in the end it will be a distributed process of deciding what gets funded, thatâs bottom-up, what people are really interested in. So I would posit crowdfunding is essential to making that new loop work to our advantage.Â
Crowdfunding is something we already have; I also want to throw something up that we donât really have. So in these systems, in these new systems, your identity is to some degree controlled by the platform. And what I would suggest is if we really want that loop to be powerful for all of us everywhere in the world, we donât want our identity entirely controlled by a Facebook or a Twitter, or a SoundCloud or a Wattpad for that matter. So one of the things that we need to work on is decentralized identity. And fortunately, there are people working on that, including some very interesting stuff thatâs being done to use the Bitcoin technology, the Blockchain, to allow people to really take control of their own identity on the internet.Â
The other question we should be asking ourselves is, how should we regulate all this? And the entrepreneurs in the audience might go, âOh my God, no, no, no regulation. The last thing we need is regulation.â But I would say, actually, the most important thing we need is regulation, just smart regulation. Why do I say that? Well, again, letâs go back to Detroit. Detroit had stagecoach manufacturersâthis is how we all used to get around, or walk or ride the horse, but stagecoachesâand then, along came the car. Well, there were two possible regulatory responses. One is the regulatory response that says, âNo, this is very bad. This is going to put the stagecoach manufacturers out of business, and itâs also dangerous. These cars are fast, thereâs accidents. Itâs justâletâs regulate cars, cars canât go faster than stagecoaches. Or thereâs gotta be somebody with a red flag walking in front of the car, waving it, so that everybodyâs alert that a carâs coming.â And those were actual pieces of legislation, not only considered, but passed in some places.Â
So thatâs one possible regulatory response, and thatâs the one that the entrepreneurs are worried about, rightly worried about, and I think weâre seeing a lot of regulation right now thatâs trying to hang on to that loop of sell your labor, buy stuff. Itâs true, however, that cars hugely benefitted from the right kind of regulation. We would never have had this much personal transportation if we didnât agree on some rules of the road, and we wouldnât have that much personal transportation if we hadnât invested in roads, which was a public investment. So the right kind of regulation will actually give us more of this loop, so we should be thinking about whatâs the right kind of regulation.Â
And as we think about that, one of the things to keep in mind is that Detroit, in a way, has been kind of a microcosm of what can happen in this kind of shiftâin that kind of shift where you have increased automation, because weâve had robots in car manufacturing for quite some time; where you have globalization, because weâve had global competition for quite some time; where you maybe have demand shocks, like we had with the â70s and the oil crisis. So Detroit has been a microcosm of this, and what are some of the things weâve seen in Detroit? Well, this is the Packard Plant, which has looked like this for decades. And this is a street in a poor part of Detroit, where this set off a downward spiral. This, by contrast, is a house in an upscale suburb that I pulled off a real estate website just two days ago, when I was preparing this talk, this is a $2 million dollar home. So there was this pulling apart of what was happening in one part of town, versus other parts of town.Â
And weâre seeing that again today, where weâre seeing a massive increaseâeven though weâre lifting, globally weâre lifting a lot of people out of poverty, weâre also seeing simultaneously a huge divergence in how the well-off are doing versus how people who are struggling to get by are doing. And so I think as we think about regulation, we need to think about things that are more forward-thinking than trying to stabilize the existing loop. We really need to think about how do we get this other loop working? And here is an idea thatâs a slightly more radical idea. Itâs not a new idea, actuallyâMilton Friedman was one of the people that came up with this idea, which was, letâs just actually give everybody some money. And that may sort of sound crazy, and the experiments that people ran in the â70s kind of didnât work because inflation came along and whatever amount of money you would give people was, like, not enough, but it turns out weâre now living in a deflationary world mostly, and so itâs a good time to revisit this. And I actually think that Detroit would be a great place to run an experiment, and Iâm going to try and talk the foundation guys into sort of funding that.Â
But the basic idea is, if you have this loop of creating and sharing and discovering and enjoying, but nobodyâs making any money, and if you believe that crowdfunding is a mechanism to let people get some money, well, youâve got to start out with some people having some positive balance, and right now in the U.S. way too few people have any kind of positive balance to contribute to such a system. And this is one ideaâIâm not saying itâs the only ideaâbut itâs one idea for how to address this.Â
And hereâs another regulatory idea thatâs a different idea from the ones that are currently being floated, which is, if you worryâwhich I think is a legitimate worryâthat systems like Facebook might have too much powerâor if youâre a cab driver, that a company like Uber might have too much power, ultimately, in the future. And youâre worried about that because of fundamental asymmetry, which is that Facebook has everybodyâs information, but you just have your own information, your own interactions with Facebookâand a lot of the concerns that are being voiced about privacy or concerns are being voiced about is this a fair bargain, here? I think instead of trying to address those through piecemeal regulation, we could think about regulation that puts people on more even footing with the platforms. So if I could have a right to an API keyâthatâs a very technical expression, but think of it as, I have a right to be represented by a system on my behalfâthen instead of having lots of piecemeal regulation thatâs trying to say, âWell a car canât go faster than a horse-drawn carriage,â or, âYou, company, have to do this very specific thing with this piece of data,â if we empowered individuals, we would actually reinstitute the forces of the market, and then if the company said, âWell, weâre trying to do all sorts of crazy things with your data,â the individuals could say, âWell, then Iâll take my data elsewhere, because I can do it algorithmically.â Or if Iâm a driver whoâs driving a car, I can have somebody decide for me whether I should be driving for Uber or Lyft or Sidecar, or not driving at all, maybe.Â
So I think we need bigger and bolder, both entrepreneurial activity, and bigger and bolder experiments on the regulatory side, if we want to make this loop a success. And as I said before, I do think the internet matters tremendously, and that loop on the internet matters tremendously, and it can provide huge gains for all of humanity across many, many different fields, if we let it.Â
And as we think about this, itâs always good to keep in mind that weâre on a little spaceship in an otherwise pretty empty universe. Thank you.