Best of this blog 2016

It’s the holiday season and therefore time for the unavoidable ‘best of’ lists. Same deal here at the Demassed blog. In this year of virulent hacks, ransomware, digital ad fraud, and an epidemic of fake news, there were still other stories significance in the digital universe, and this post is dedicated to the Top 5 most clicked on stories on this blog in 2016.

The top two posts were on blockchain, a decentralized ledger of digital transactions that “brings security structures and incentives in line with the way we share information in the 21st century.”

One of the posts was about the vision for a new foundation of the music industry, based on direct artist to fan communication and payment, and that story can be found here.

The other blockchain post was about the great cryptocurency hack of 2016, reported to have removed between $50 million and $80 million of funds from the Ethereum blockchain. Read the full post here.

Some of the stolen funds have since been located, and despite the hack and the many unknowns associated with the blockchain it is already in use by several major banks and is forecast to be used by 15% of financial institutions in 2017.

The third most popular post of the year was a series of tweets from a talk given back in January on Marshall McLuhan in the age of social media. I wasn’t able to attend the talk but I was able to follow the discussion by way of the hashtag and captured those nuggets here.

Coming in at number four for the year was on a talk given by media and cultural theorist Douglas Rushkoff who has been thinking about and writing on the social and politic realities brought about the Internet for over 20 years. That post can be read here.

Rounding out the list, at number 5, is a post that looks at one of the most contested topics of life online, and that’s the preponderance of free, or more accurately ‘free’ content, the quotes referencing the fact that very little is ever free, it just appears to be.

What you receive for ‘free’ online is in fact traded for information about you as a consumer, and it’s a transaction all of us partake in dozens of time daily. Could the economy of free be shifting from just the way things are online to being one of a handful of possible business models? This post offers exhibits A, B, C, and D and lets you decide for yourself.

Thanks for reading and sharing the blog this year. I'm now up to 160,000 lifetime views, and even though as much as half of all Internet traffic is reported to be bot-generated, I'm still pretty happy.

The accidental industry of YouTube

2016, the year many cannot wait for the end of also had a few non-traumatic moments, such as the introduction of the term ‘YouTuber’ into the new version of the Oxford English Dictionary. And for those who don’t necessarily indulge in the delights of video by the people and for the people, a YouTuber is a person who creates video content and uploads to the video-sharing site. 

Now that YouTube itself is into its teen years we have seen YouTubers morph from hobbyists or one-off video uploaders to micro-celebrities and even stars in their own right, with tens of thousands YouTubers globally now making a living showing their wares on the site.

How did the random uploaders became hobbyists, then amateurs, and then a new type of media professional? And what is the difference between an amateur and a professional anyway? Is it intention, or is it outcome? Is it getting paid, and if so, how much? Is it the ability to attract thousands to millions of views? Or is this the future in which everyone is famous to fifteen people, a dictum issued all the way back in 2005, around the same time as the hybrid designation “pro-am” (for combination professional amateur) was explored at book length.

Whereas YouTube – and other open uploading platforms, e.g. SoundCloud, MixCloud, assorted mixtape sites – once existed in a parallel and necessarily separate universe from this thing we think of as ‘the industry’, the platforms are increasingly becoming intertwined with industry. And in ways not necessarily planned or imagined. For example, YouTube has become the new radio, with 1 in 4 music streaming hours spent on the site, which I’m pretty sure was not part of the original vision.

The same goes for the emergence of new entertainment genres, and this is isn’t an overstatement as the numbers don’t lie. Billions of views are being racked up by videos of people unboxing mattresses, of kids doing toy reviews, and in perhaps the most unanticipated category of new genre of media, YouTube videos of people reacting to other YouTube videos. (Ed. Note: Repeated use of 'wtf bro' ahead)

YouTube has also become an important second window for television, with clips from such shows as Jimmy Fallon, John Oliver, SNL, and that carpool karaoke guy (okay, James Corden, but to me he’s the carpool karaoke guy) pulling in millions of additional views by being posted and shared online. Whether or not I watch the shows (and generally I don’t) I can still play catch up by having them appear in my Facebook feed or having them pushed to me as suggested or popular videos when I open YouTube. Just as the music industry saw an unbundling of songs from albums, now television has an unbundling, from both format (the 30 or 60 minute program) and distribution channel, in this case moving from the world of the television schedule to on-demand, atomized viewing.

Piracy is as good as dead. Now What?

It’s been 17 years since Napster came onto the scene, bringing with it the combination innovation/major threat of peer-to-peer (P2P) file-sharing. What began as an outlaw activity of uploading MP3s and making them available to anyone with a desire to hear the song and a decent Internet connection ended up providing a beatdown to the music industry that lasted well over a decade, with the carnage only settling down recently. And even now the music industry is, in many ways, still up for grabs.

You may have seen the headlines proclaiming that 2016 was the first year in which streaming revenues were the largest revenue source for music, eclipsing digital downloads for the first time, and taking a big lead over physical sales of all other physical formats combined. The pie below shows the respective shares for the U.S. market. To put things into additional context it's worth considering that the global music industry peaked in 1999 with revenues of about $30 billion, which, by 2005 had shrunk to $20 billion, and now hover just under $15 billion. 

Source:
http://www.riaa.com/wp-content/uploads/2016/03/RIAA-2015-Year-End-shipments-memo.pdf

It doesn’t take Nostradamus to see that the blue piece of the pie is only going to get bigger, while the red and green slices shrink. (The diet yellow slice, marked “synch”, refers to music synchronization, which are the revenues that come from licensing fees when songs are used in commercials, movies, TV shows, videogames, etc. I have no view on whether or not this chunk will grow though I understand it’s a valuable source of income for musicians both well-known and up and coming).

What we can extrapolate from these developments in the music industry is that piracy is more or less dead. Which is not to say that it doesn’t exist. Of course it does. But it’s dead in the sense that it is considered to be public enemy #1 of the industry. When pretty much any music you want to hear is available on demand -- whether via legit sources or unsanctioned ones -- the location of value shifts irrevocably, whether we like it or not. Where did it go? To the new intermediaries,  in this case the platforms that enable us to hear anything we want to, whenever we want to.

So what happens now? This discussion got underway at a Music Tech Meetup I attended at the end of the summer, at which the featured speakers were Steven Ehrlick and Noah Schwartz, both from Ryerson University’s Music Den, a music and tech incubator that brings creators together with technologists, in the hope of building apps, systems, or platforms, that identify, and hopefully propose a solution to, addressable problems in a new environment of possibility. Ehrlick and Schwartz shared their thinking around the experience of being a musician in the 21^st century, the reality of which, in their view, is that you have to a digital media specialist in addition to being a performer and/or writer. 

But what does that mean?  We so often hear people with titles such as Chief Digital Officer tell the troops at organizations that were not ‘born digital’ that everyone’s thinking needs to be re-jigged.  Phrases such as ‘from now on the company will think like a digital company”, or “starting today we’re a digital first organization”. Erhlich & Schwartz see it this way: There are two kinds of companies: Tech companies that get into music and music companies that get into tech.

An example of the former:

Bandcamp: A music discovery platform that, as of Fall 2016, has paid close to $200 million directly to artists since its inception.

Examples of the latter:

MusicNet (b. 2001, d. 2005)  and PressPlay (b. 2001, d. 2003), services started by the music labels that tried to replicate the analog industry in the digital world. 

Why did they do that? Because that’s the business they knew well. Contrast with what Steve Jobs did with iTunes: unbundled the album, established a price point of 99 cents that was low enough to move people from Limewire, Kazaa, Gnutella, and created an ecosystem of beautiful hardware and easy to use software which for many became a way of life, not just music or gadgets, and resulted in Apple becoming (if only intermittently) the world’s most valuable company.

The enterpreneurial trick is this: Ask yourself "what is the problem you're trying to solve?" Apparently the investment community, particularly in Silicon Valley, wants to hear things expressed as verbs, not nouns. It’s about what people will do with what you’re making, not what it is.  Think Twitter, Snapchat, even Pinterest – hard to rationalize if you’re only describing what it is; easier to rationalize as a vision for a new way in which people communicate and connect.

Erhlich and Schwartz suggested that a company allows you to solve musicians’ problems e.g. where to play, where to stay, how to do your digital distribution. And you can start small and do so on a small budget and scale up, moving from local to global, with the costs of working globally being a fraction of what they were in the world of physical things and physical places.

They point to this example: DistroKid, where for twenty dollars per year musicians get the ability to do unlimited uploads to digital services such as iTunes and Spotify (and no, it’s not free to get your music onto those sites.)

As we approach two decades since peer-to-peer technologies effectively detonated the music industry,  some pieces are falling into place while others are still trying to find a way for the peg to fit the slot (Heck, Spotify, with its 100 million users of which about 40 million are premium users is still not profitable in 2016). But it's not all bad news, which is the rallying cry of this blog if there is one. I am reminded of the words of Clay Shirky when asked how the rapidly declining revenues of the newspaper industry might be stemmed. His response: What will work? Nothing. But everything might. 

Where Credit Is Due: Max Levchin and Banking For A New World

HVF is his motto. And the name of the umbrella company that arches over his many undertakings. He is Max Levchin, one of the founders of PayPal, and therefore member in good standing of the PayPal mafia, with personal investments in over 100 startups, the most recent of which are a fintech company and a women’s reproductive health company. 

The HVF part stands for hard valuable fun, which is how Levchin decides which projects to take on. The hard part refers to something that is challenging, something that is a problem to be solved. If it was easy, anyone would do it. The valuable may be something on a global scale, such as a shortage of clean drinking water or it may be something of a more everyday nature, such as simplifying banking. And the fun, that’s where personal obsessions and passions come into the picture. If you love what you’re doing, it’s fun. It may not be Tommy Lee’s idea of fun, but we’ll leave the drumming on a roller coaster to him and the real HVF to others.

Levchin’s latest project is Affirm, which seeks to solve the problem of banking in a world which has changed. Whereas people used to get into professions in their mid 20s and stay in them until the arrival of the gold watch several decades later. As he put it during a recent conference keynote interview: “banking doesn’t have to be an industry that helps you shoot yourself in the foot”, referring to the fact that the banks’ objectives – of charging as many fees to customers as possible – and individuals’ objectives – of paying as few fees as possible while hopefully being able to squirrel away a few dollars here and there and earn a bit of interest – are generally at cross-purposes with each other. 

Max Levchin, interviewed by Kara Swisher in Boston, October 15, 2016

Does it have to be this way? Levchin doesn’t think so. “It’s possible not to charge 5 to 7% overhead, as most banks do, and it’s possible not to have 100 disparate software systems, which is what you find in a typical bank”, Levchin told the crowd. 

“I think the bank of the future is more like an app that works in real time, linking your decisions and behaviors to your financial goals and overall fiscal health”. In other words, if you say you’re saving up for a vacation, or a car, or a pricey jacket, then maybe visiting Starbucks twice a day isn’t in your best interest, and the app could help with reminders that nudge you in a more productive direction. And when it comes to determining creditworthiness, the Fico score has been the accepted standard since 1989. 

Lenders are in the business of risk assessment....i.e. are you a reasonably good candidate for credit? What recourse does the bank have if you default on your loan or mortgage, or if you overextend your credit? This doesn't sound at all unreasonable but, as Levchin is quick to point out, the Fico score system does not reflect today’s world of fairly frequent job hopping, of startups and creative endeavours funded on credit cards, of flexible work and the gig economy, or of rising student debt loads. The Fico system effectively penalizes people that don’t fit into neat little boxes of creditworthiness assessment, and that’s where Levchin sees the opportunity. 

After all, according to a recent McKinsey study, as many as 162 million people, representing 20 to 30% of the working age population, are said to participate in the economy of flexible work. This does not, by definition, make them irresponsible or poor candidates for loans; it just makes them people who don’t fall into the existing buckets of the Fico measurement system.

And this is where digital, networked systems -- whether they are deployed for fairly mundane functions such as dating or providing alternate accommodation options or for more serious enterprises such matching organ donors with those in need or identifying scientific, technical, or socio-political problems and providing monetary incentives for their solution -- are fascinating to both observe and participate in, manifesting new ways of operating that in no way resemble the rationales of the previous era.

For more thinking on this topic, here's Max Levchin speaking at SXSW 2016 about what he sees as the unstoppable trends in our midst.

Discoverability: Audiences in a time of endless choice

One way to think about today's media landscape is as the 'attention olympics'.

It's not always the best or even the first that 'wins', but the players that are able to grab the most attention. I recently saw this line: "On the Internet the reptilian brain gets served first", and while it's not true across the board, there is certainly some truth in the statement.

That which is refreshing about the Internet is also that which is threatening to some. The authentic and the contraband flow throw the same pipes, which means the traditional big players often find themselves vying with the smaller ones online. Competition now comes from all corners. Competition for screen space, and competition for viewers', listeners', and readers' attention.

Search and Search Engine Optimization (SEO) used to be the primary ways things rose to the surface online. Then came curation and aggregation. Social added another dimension to an already complex model of production and distribution.

So how do audiences navigate through the maze? 

The term being used in some circles to refer to the challenges inherent in a saturated media environment is Discoverability. A report I worked on released earlier this week offers some perspectives. 

Click here to read the full report, entitled "Discoverability: Toward A Common Frame Of Reference, Part 2 The Audience Journey".

When "you get what you pay for" no longer applies

Ah, the Internet. It brings us hotel reviews, deals on shoes, too many pictures of people's kids and renovations, and so much more...hence the 2 word catch-all Because Internet as a glib attempt to explain away the oddities of the vast network's offerings, and the often strange behaviours we all contribute to the mix.

The many splendored thing that is the Internet has rewritten the rules of many businesses, or, more accurately, those rules are in the process of being rewritten.

The conventional economic thinking of people operating in self interest, and therefore not working for free has been upended by the likes of Wikipedia and The Huffington Post.

The laws of supply and demand have similarly been suspended. Generally it works like this: demand goes down, supply co-operates with gravity and also goes down. Not always so on the Internet, with, for example, the output of the creative industries such as music, writing, and photography, being prime examples.  Fewer people pay, more people produce. What would Adam "Wealth of Nations" Smith have to say about this?  We'll never know.  

Conventional wisdom says we get what we pay for.  But on the Internet we also get what we don't pay for, a topic explored further in the Up Next Podcast on which I was recently a guest.  

Or perhaps as an old friend from my campus radio days put it:

Better complaining through technology

People just want to get stuff done. And with as few hurdles as possible. Sometimes intermediaries can assist in the process – that’s what the concept of a value chain is all about, i.e. the sequence of steps between creators and consumers, between organizations and citizens, that exist because they refine and improve products and services along way. That's the idea, anyway. Think of the journey a coffee bean harvested in Ethiopia takes to become the half caff tall skim latte at your neighbourhood Starbucks and you’ll have the beginnings of a mental model of a value chain. In such a case there are undeniable value adds along the way, though whether or not the end product is 'worth' the $4 you pay for it is a debate best left to branding experts. Or these everyday citizens. But I digress. 

This blog has focused on the changing faces and shapes of intermediaries in the creative industries, but today we’re going to look at an area known as civic tech, a way for interested individuals and community groups to enter the value chain of government and governance, using the self-organizing tools and techniques of peer-to-peer networking, crowdfunding, and co-creation.

I first learned of the field while living in Boston, by way of the MIT Center for Civic Media , and thanks to the civic tech involvement of a friend in Toronto ended up at an event hosted by the local Civic Tech group.

What I learned at this event is that while many of us spend our evenings with, I don’t know, laundry, yoga, or Netflix, there’s a group of laptop-toting individuals out there who get together each week to put their coding and design skills to work to address such civic issues as affordable housing, resource sharing, and getting out the vote. And they do it all on a volunteer basis. If you want to see the wheels of disintermediation in motion, this is a great place to start.

One of the projects discussed at last week’s Civic Tech meetup was based on SeeClickFix,  a website and app that lets anyone report civic concerns – whether they’re abandoned mattresses, potholes, or even roadkill -- and also offers tools through with third party developers can build on top of the site's core functionality. 

Civic complaints made easier at www.seeclickfix.com 

If you don’t believe me, just go to the home page at www.seeclickfix.com and enter your city’s name and see what’s going on around you. Some municipalities have some pretty brisk blotters going on while others have just a handful of ancient complaints. 

Street light bird nest issue recently resolved in NYC, taken from SeeClickFix.com

But the larger point is that anyone can post, thereby opening a ticket, and a combination of community members and civic officials comment and then follow up. As posts build up so does a picture of the neighbourhood, from the ground up. This is a key feature of the majority of civic tech projects: the collective corralling of community intelligence that also creates an asset for better governance and improved communication.

Note that also built into the system is a points mechanism, whereby frequent civic watchers can collect points for their interactions, becoming a digital Jane Jacobs at the 10,000 point level.

Organizing Without Organizations (and the story of the world’s biggest cash heist)

It’s an organization without a boss. No org chart, no hierarchy, no workflow plan. This may at first sound like utopian post-hippie talk, i.e. that if everyone just brings their best intentions, and their favourite casserole, that we the people can do anything. Barriers to entry be damned, business as usual be damned, best practices and all the rest be damned too. This may sound like a whole lot of antiestablishment nonsense except that we now have examples to point to such as Wikipedia, a free-to-use, high quality, written by no one in particular encyclopedia that is organized, vetted, and updated by the crowd.  Previous attempts to do the same – produce an online encyclopedia, with a combination of experts and the public had been attempted but with extremely limited success. How limited? In its first year a scant 21 articles went online, compared with Wikipedia’s 18,000 in its first year.

Design by committee, rather than bosses, VPs, and armies of the able, was the philosophy behind Nupedia, but apparently they did not go far enough. It wasn’t until the whole system was thrown to the wind and decentralization became the lay of the land that Wikipedia started to flourish, and now it is a daily destination for most of the world’s 3 billion Internet users.

The fact that with a few tweaks something like a wiki-based encyclopedia could go from a stalled, somewhat idealistic effort to a world-changing repository of knowledge may be reason for us all to have faith in other decentralized technologies.

The blockchain is one that comes to mind, and one about which I learned more at a recent Meetup. Blockchain, perhaps best known as the technology backbone of BitCoin, was looked at in an earlier blog post, as a potential solution to many of the music industry’s legacy system problems that send dollars to layers of the business that aren’t necessarily needed in today’s digitally connected marketplaces.  

The blockchain is also behind something called the DAO, which stands for decentralized autonomous organization.

Click to enlarge

The objective of the DAO, a single app running on the blockchain, is to eliminate the need for organizational decision making apparatuses, such as formal managerial positions and hierarchical structures. And note: Decentralization does not mean an absence of control, but, rather, no single person or entity is in control. It sounds kind of crazy until you think of, say, Wikipedia.

In the words of one of the Meetup speakers, Jeff Coleman of Ledger Labs, the blockchain enables “super secure, super awesome decentralized organizations that can give you more security for less work than any other system out there." 

Ledger Labs’ Jeff Coleman schools the crowd on the great DAO hack of 2016    

Coleman then walked the Meetup crowd of 100+  through the architecture of the DAO, explaining how, when a funding window in the DAO was opened on April 30^th, 2016, over 10,000 people poured in about $100 million in funds, making it the largest crowdfunding endeavour in history. The idea was that it that this would be a relatively low risk investment where you could invest and withdraw funds at will.

All good. Really really good in fact, until the hack. 

Coleman called the hack, in which $60 million was drained from the DAO, “the largest cash heist in the history of the world”.  (As you can see lots of firsts and biggests here.) The problem, it was explained, came down to issues with the smart contracts, pieces of computer code that represent contract-like agreements between other pieces of code built on the blockchain. (I’m not a lawyer so for an actual lawyer’s perspective on smart contracts, click here.)

The short version of the story is that despite two years of due diligence, including bug bounties -- essentially crowdsourced security -- it was assumed the system was good to go. Who performed the due diligence? Not the DAO, pointed out Coleman, but the underlying platform, Ethereum.

How the Ethereum platform works
Source: https://www.ethereum.org

Coleman continued: "Thanks to this careful due diligence, Ethereum, the platform, remains uncompromised. But the DAO opted for just a few short weeks of public viewability and no serious testing, audits, or bounties, and that's why it was successfully attacked."

In other words, this wasn't a blockchain problem, but a negligence problem. If there's a problem with a single website you don't blame or impugn the entire Internet. Same thing here.

And the icing on the cake, in Coleman’s view: “It’s exceedingly likely that the attackers didn’t plan on actually getting the $60 million.” In fact, the cash is still yet to be released to the attacker, and Coleman thinks it may never be.

The moral(s) of this story? That’s hard to say, as this is a story that is only beginning to be written, and is one that changes dramatically from week to week. Not only do technologies move at unfathomable speeds and take on increasingly complex functions, but they also bring with them enormous flows of capital, and along with those flows trust invested in systems that are built and operated outside of the usual standards and structures that have formed the basis of our economy for decades.

Related Post:
Will the blockchain free music from being free?

Do Borders Matter In A Digital World?

My original plan for this brief blog post was to point readers to an article I recently wrote for the CMF Trends Blog. Simply that. Then something arose the other day that added another dimension to the discussion. The topic for the piece I wrote is the fate of Canadian content -- and the related subsidy and quota systems for its creation -- in a time of Netflix, YouTube, streaming, torrenting, etc., and the full article can be found here. Meanwhile, in Europe, a similar debate has emerged.

More on that in a bit. But first, some Canadian content for you.

For readers outside of Canada the concept of CanCon, the catchy abbreviation for Canadian content, may be not only foreign but also a bit hard to get one's head around. The idea is this: That there is a mandated minimum on the broadcast schedules of radio and television entities across the country for music and television programs created by Canadians. This is part of Canada's Broadcasting Act, supported and enforced by governmental cultural institutions as well as industry partners such as radio broadcasters and cable and satellite companies.

Allow me to provide you with the most unintentionally successful example of Canadian content, created by Rick Moranis and Dave Thomas when they were informed that SCTV, the television show on which they appeared, was 2 minutes short on its CanCon requirements. Upon hearing this was the case, Moranis and Thomas are said to have jokingly responded with: "What...you want 2 guys sitting on beer cases, frying back bacon, and talking about donut shops? Will that do it?"

And so, a phenomenon was born, that led to catchphrases, a best-selling album, and a cult classic movie.

Most CanCon does not enjoy anywhere near this level of success, of course, fuelling ongoing debates about the usefulness and relevance of the governmental mandate in today's landscape of the all-you-can-eat offerings of Netflix and Spotify; not to mention the podcasters and YouTubers able to create content on a shoestring, with a reach limited only by the number of people that like what they're doing and are willing to publicize it via digital word-of-mouth. Competition now comes not only from the usual places, but from the most unusual places as well.

I thought of this conundrum as largely a matter of Canadian cultural politics until I saw this article, in which a department of the European Union "...proposes that video streaming services operating in Europe -- including Netflix, Amazon Prime, and HBO -- be forced to dedicate at least 20% of their local content offerings to European product, and to invest in some European productions....part of a larger effort to create a borderless digital marketplace stretching from Ireland to Greece..."

I'm not sure what a Euro version of Bob & Doug might look like...perhaps smartly attired, baguette-breaking Gitanes smokers, discussing the finer points of post-structuralism?

In the meantime, for those unwilling to wait for sweeping cultural reform or the end of geo-blocking, there's always VPNs.

Decentralization, Douglas Rushkoff, and the Digital Economy

This blog has spent the last 3+ years and 150,000 or so words chronicling the demassification of media enabled by digitally networked individuals and systems. Simply put, we’ve gone from a few people telling a lot of people what they can watch or read to a veritable free-for-all in which the cost of getting into the ring is almost nil and we end up with unthinkable things like 500 hours of video being uploaded to YouTube every minute. (Note: Statistic as of early 2016, almost certainly more by the time you read this)

Decentralization is a wonderful thing as it means democratization. The trouble with decentralization, though, is it’s hard to find a place to start. In the context of music, e.g., we’ve gone from the Top 40 format of radio to the 40 million (probably more by now) of Spotify.  If you know exactly what you’re looking for, it’s great. But if you don’t, it’s less great. This truism is what’s led value on the Internet to shift from creators to aggregators. There just aren’t enough hours in the day to help us navigate the choppy waters of freely flowing content on our own.

And this is a big part of why today’s Internet looks nothing like the fledgling Internet of the early 1990s. Back then it was a combination of a technologically-enabled future that didn’t yet have a roadmap and a post-hippie playground where the cybertopian ideals of a decentralized society frolicked alongside the plans for world domination being hatched in locales such as Redmond, WA and Silicon Valley. 

And it turns out that what’s happened in between then and now isn’t that much of a new thing. Douglas Rushkoff, author of numerous books on digital culture and media in the connected era, and one of my favourite thinkers in the field, breaks the issues down in his new book, Throwing Rocks At The Google Bus: How Growth Became The Enemy of Prosperity. 

The title of the book comes from the Google Bus protests of 2014. These private shuttle buses were seen as odious symbols of the digital economy, transporting tech workers from their urban San Francisco homes to the suburban campuses of the big tech companies. So central to the Silicon Valley economy were/are these caravans that the closer the apartment is to the Google bus stop, the higher the rent. According to one report, proximity to the Google stop puts the premium on a 1 bedroom apartment in San Francisco at about $4000/month. 

What, asks Rushkoff, does value creation look like now? What should it look like? And how did we go from the moneyless, collectively constructed, everyone was welcome Internet to the Internet we have today? This is not about neo-Marxism, but about, as Rushkoff likes to point out, a company such as Twitter, built on 140 character tweets, making $500 million per quarter and still being considered a massive failure by Wall Street.

In the book, and at the event at which I heard Rushkoff speak, he embarks on a journey, one in search of the origin of the model of the digital economy. Where did this ‘operating system’ come from? He traces things back to the bazaar of the late middle ages, post Crusades, when a peer-to-peer economy was the order of the day. People used ‘market money’, temporary objects that had value for a day, i.e. my bundle of spice for your chicken, your piece of fabric for my jar of oil. Over time, this is how the peasants became the bourgeois. 

And nothing is more threatening to the aristocratic upper classes than peasants on the rise. Therefore, explains Rushkoff, the elites came up with mechanisms such as centralized currency, issued by monarchs, to replace the market money of the peer-to-peer economy. Then came monopolies, which made purchasing from those other than the sanctioned entities illegal. Cities became weaker, nations became stronger.

Not all that dissimilar to the Internet of today in which individual websites, publishers, and creators have, to varying degrees, become beholden to platforms and aggregators. Like they say in Las Vegas, the house always wins.

The great promises of the Internet were the removal of the intermediary and lowered operating costs, so sellers could go direct to buyers, writers to readers, musicians to fans, etc. These activities were, and still are, enabled by the Internet, but what came next was not just an abundance of creative production, but an overabundance. And what came along with that was a public generally unwilling to pay for content. You want free? You got it. But not so fast. You’ll be paying with your data instead of dollars. Not that that’s necessarily a bad thing, but it’s definitely a real thing. (I’m always surprised when people are surprised, but that’s a whole ‘nother story).

But are these digital businesses viable business models? For some, they certainly are. Facebook, e.g, with its 1.65 billion global users and $20 billion in annual revenue has an annual revenue per user (ARPU) of $12.12 according to my calculations (yes, I do such spreadsheets for fun) and is highly profitable, whereas LinkedIn is making about $2/year off of you (with the company worth about half of what it was back in 2013), Google across all of its properties that you use pulls in about $50 in advertising revenue from you annually and runs a very profitable operation, and Twitter is at $6.45 of annual revenue per user, but unable to make bank. Why? Because as a public company, funded by venture capital dollars, the name of the game is growth, and theirs seems to have plateaued.

Click to enlarge

It’s exactly situations such as Twitter’s, with $2 billion of annual revenue and hundreds of millions of users, being considered a colossal failure that rankle Rushkoff. “I’m not anti-business, I’m pro business” he reminded the audience at the Toronto talk. “It’s just that if you can’t scale up indefinitely it’s somehow bad or wrong. Ongoing growth should be a happy outcome of business, not a defining element.”

For more, spend some time with Douglas Rushkoff here, at a talk given recently at the 92^nd St. Y in NYC.

Related Posts on Internet Economics:

• On the music industry and the blockchain
• Signals of the end of the online 'freeconomy'? 
• How we ended up back in the walled gardens of the Internet

Politics for fun & profit: The Donald Trump Story

This blog has nothing to do with politics, yet I wanted to share a 1-2-3 sequence here that I've been thinking about for some time with readers.

So here we go.

1. Ross Perot's 1992 campaign was remarkable for the way he spent his own money running for office in the United States

2. Ron Paul's 2008 campaign was remarkable for the ways he raised money running for office in the United States

3. Donald Trump's 2016 campaign is remarkable for the ways a presidential bid makes him money

***********************

Ross Perot: 1992 infomercial. Yes, he bought television time slots to show us his bar charts

Ron Paul: The 2007 & 2008 money bombs go off

Donald Trump 2015-2016: Billions in free coverage

Yes, Mr. Trump, who inherited a money bomb of his own in the 70s (and on that pile of artillery is said to have achieved a non-noteworthy return more or less equal to that of the S&P), makes money through brand awareness. And more creates more. He sells his name to things like flashy real estate developments and in return usually receives a flat fee plus a percentage of annual revenues.

With a personal brand that he estimates at being worth in the billions, and a campaign that is said to have received close to $2 billion in free media coverage (so far), I think it's safe to say that Mr. Trump is the first presidential candidate to actually increase his net worth by running for office.