Technology predictions

For those of us in the prediction business, it’s sometimes useful to go back and read past predictions to try to discern patterns in what they got right and wrong.

Back in the early 90s, a lot of people thought the Internet was overhyped. Here’s one example from Newsweek:

Do our computer pundits lack all common sense? The truth in no online database will replace your daily newspaper, no CD-ROM can take the place of a competent teacher and no computer network will change the way government works…. What the Internet hucksters won’t tell you is tht the Internet is one big ocean of unedited data, without any pretense of completeness. Lacking editors, reviewers or critics, the Internet has become a wasteland of unfiltered data.

Today, it’s easy to find people expressing similar skepticism about emerging technologies like the Internet of things, robotics, 3D printing, Bitcoin, etc.

What the skeptics overlook is that platforms that are open to third-party developers have the following characteristic: it’s hard to think of important use cases before they are built, and hard to find examples where important use cases weren’t developed after they were built.

Just look at the founding years of top websites. Google: 1998. Wikipedia: 2001. YouTube: 2005. Twitter: 2006. No wonder it was so hard to imagine these services early on. It took years to imagine them even after the Internet had gone mainstream.

What the smartest people do on the weekend is what everyone else will do during the week in ten years

Many breakthrough technologies were hatched by hobbyists in garages and dorm rooms. Prominent examples include the PC, the web, blogs, and most open source software.

The fact that flip-flop wearing hobbyists spawn large industries is commonly viewed as an amusing eccentricity of the technology industry. But there is a reason why hobbies are so important.

Business people vote with their dollars, and are mostly trying to create near-term financial returns. Engineers vote with their time, and are mostly trying to invent interesting new things. Hobbies are what the smartest people spend their time on when they aren’t constrained by near-term financial goals.

Today, the tech hobbies with momentum include: math-based currencies like Bitcoin, new software development tools like NoSQL databases, the internet of things, 3D printing, touch-free human/computer interfaces, and “artisanal” hardware like the kind you find on Kickstarter.

It’s a good bet these present-day hobbies will seed future industries. What the smartest people do on the weekends is what everyone else will do during the week in ten years.

“PCs are going to be like trucks”

Steve Jobs in 2010:

When we were an agrarian nation, all cars were trucks because that’s what you needed on the farms. Cars became more popular as cities rose, and things like power steering and automatic transmission became popular.

PCs are going to be like trucks. They are still going to be around…they are going to be one out of x people.

This transformation is going to make some people uneasy…because the PC has taken us a long ways. It’s brilliant. We like to talk about the post-PC era, but when it really starts to happen, it’s uncomfortable.

We are just scratching the surface on the kinds of apps for the iPad…I think there are lots of kinds of content that can be created on the iPad.

When I am going to write that 35-page analyst report, I am going to want my Bluetooth keyboard. That’s 1 percent of the time. The software will get more powerful. I think your vision would have to be pretty short to think these can’t grow into machines that can do more things, like editing video, graphic arts, productivity. You can imagine all of these content creation possibilities on these kind of things. Time takes care of lots of these things.

This year, about five times as many smartphones will be shipped versus PCs, and tablets will surpass PCs for the first time. According to Jobs, the right way to look at this isn’t that mobile devices are creating a new market. It’s that mobile devices are relegating PCs to special-purpose, mostly industrial devices.

The credentials trap

I talk a lot to people who are deciding between startups and established companies. They’re usually early in their careers and have been exclusively affiliated with well-known schools and companies. As a result, they’re accustomed to praise from family and friends. Going to a startup is scary, as Jessica Livingstone, cofounder of Y Combinator, describes:

Everyone you encounter will have doubts about what you’re doing—investors, potential employees, reporters, your family and friends. What you don’t realize until you start a startup is how much external validation you’ve gotten for the conservative choices you’ve made in the past. You go to college and everyone says, “Great!” Then you graduate get a job at Google and everyone says, “Great!”

But optimizing for external validation is a dangerous trap. You’re fighting over a fixed pie against well-credentialed peers. The most likely outcome is a middle management job where you’ll have little impact and never seriously attempt to realize your ambitions. Peter Thiel’s personal experience illustrates this well:

By graduation, students at Stanford Law and other elite law schools have been racking up credentials and awards for well over a dozen years. The pinnacle of post law school credentialism is landing a Supreme Court clerkship. After graduating from SLS in ’92 and clerking for a year on the 11th Circuit, Peter Thiel was one of the small handful of clerks who made it to the interview stage with two of the Justices. That capstone credential was within reach. Peter was so close to winning that last competition. There was a sense that, if only he’d get the nod, he’d be set for life. But he didn’t.

Years later, after Peter built and sold PayPal, he reconnected with an old friend from SLS. The first thing the friend said was, “So, aren’t you glad you didn’t get that Supreme Court clerkship?” It was a funny question. At the time, it seemed much better to be chosen than not chosen. But there are many reasons to doubt whether winning that last competition would have been so good after all. Probably it would have meant a future of more insane competition. And no PayPal. The pithy, wry version of this is the line about Rhodes Scholars: they all had a great future in their past.

Great institutions can prepare you for great things. Credentials can open doors. But don’t let them become an end in themselves.

The computing deployment phase

Technological revolutions happen in two main phases: the installation phase and the deployment phase. Here’s a chart (from this excellent book by Carlota Perez via Fred Wilson) showing the four previous technological revolutions and the first part of the current one:

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Each revolution begins with a financial bubble that propels the (irrationally) rapid “installation” of the new technology.  Then there’s a crash, followed by a recovery and then a long period of productive growth as the new technology is “deployed” throughout other industries as well as society more broadly. Eventually the revolution runs its course and a new technological revolution begins.

In the transition from installation to deployment, the bulk of the entrepreneurial activity moves “up the stack”. For example, in the installation phase of the automobile revolution, the action was in building cars. In the deployment phase, the action shifted to the app layer: the highway system, shipping, suburbanization, big box retail, etc.

This pattern is repeating itself in the computing/internet revolution. Most of the successful startups in the 90s built core infrastructure (e.g. optical switching) whereas most of the successful startups since then built applications on top of that infrastructure (e.g. search). The next phase should see startups higher in the stack. According to historical patterns, these would be ones that require deeper cultural change or deeper integration into existing industries.

Some questions to consider:

- What industries are the best candidates for the next phase of deployment? The likely candidates are the information-intensive mega-industries that have been only superficially affected by the internet thus far: education, healthcare, and finance. Note that deployment doesn’t just mean creating, say, a healthcare or education app. It means refactoring an industry into its “optimal structure” – what the industry would look like if rebuilt from scratch using the new technology.

- How long will this deployment period last? Most people – at least in the tech industry – think it’s just getting started. From the inside, it looks like one big revolution with lots of smaller, internal revolutions (PC, internet, mobile, etc). Each smaller revolution extends the duration and impact of the core revolution.

- Where will this innovation take place? The historical pattern suggests it will become more geographically diffuse over time. Detroit was the main beneficiary of the first part of the automobile revolution. Lots of other places benefited from the second part. This is the main reason to be bullish on ”application layer” cities like New York and LA. It is also suggests that entrepreneurs will increasingly have multi-disciplinary expertise.