Episode 29: Special—2016 Review and 2017 Predictions
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Welcome to episode twenty nine of acquired the podcast where we talk about technology acquisitions and ipos. Bd, David rose, cal, and we are your hosts. This is a very different episode for us than usual.

We decided to do a year in review and and probably more importantly than that, um talk about what lies ahead in twenty seventeen. So um David, I was thinking, um you know we've talked a lot about lot of tech themes in in a very sort of ramp lag and unstructured way over the course of the show. And we went back and actually pulled out what were the tech themes that we identified from from each episode. And um and we've kind of uh basically have a little tally going of which ones were we thought we're the most important and and we're going to a talk about those and then get into the themes that we think you're gonna be a pretty, pretty dominant two thousand seventeen or at least .

makes some free wheeling predictions. Yeah no, you get what you pay for here. So no guarantee will be right. But yeah couple notes. Uh, so Better matter recording this on december thirty three at the tail end of two thousand sixteen. That will barring some editing heroics, uh IT will probably be uh up for you guys, uh alty in to twenty seventeen.

But but as we came to the end of the year, we thought especially this being our first full year of doing acquired, we wanted to look back and um and run some run some data on our own content and see what the the biggest themes of our show then so um then in our chatting just before we started, we recorded twenty three regular episodes. Why I guess that include specials, but twenty three full episodes in twenty sixteen. This is our twenty fourth and IT was really fun to go through and and pull out the a lot of a lot .

of repeats. yeah.

So with that, should we should we announce the acquired twenty sixteen days of the year?

We should. And a frequent listers, the show, i'm sure, can, uh, can guess what this going to be, or at least who the originator of the time.

Shocked shock.

yeah. So discussed in six different episodes is aggregation theory by benn thomson, austerity chary. This this, of course, talks about building superior user experiences as the winning strategy in an infinitely accessible zero cost distribution world, A K A, the internet. And this was discussed on a company Snapchat, jet, android, skype and marvel. And so I think um for us it's such A A IT IT says a lot about the power of the theory that once you see that you can't unc and once you realized that h this is this is a very dominant factor in making these companies successful. You know every company we analyzed were like, oh I I see what .

they yeah obviously a big hat tip as we always do on this show that to ban uh tomson and um all of his work. But I think it's interesting how much we've talked about IT and also reading benzer throughout the year.

He he first published the post on aggregation theory last year in two thousand fifty um but how much he keeps coming up in his work too and and how he keeps refining um this concepts uh and and adding not what but the core of IT I think you know that insight that in this world where um where distribution costs are, are the cost of distribution is zero. And in digital marketplaces, your accessible market is the entire world. That IT is really the superior customer experiences that are going to beat everything else because you can have sort of perfect competition amongst the whole world. Um and and so the best will rise the top. Um and it's it's totally informed, you know my work and in and i'm sure five years to you know in the companies that we work with um when a meetings startups trying to decide which to which to invest in, in which you know I think might be successful and won't be a very been hugely influential not just on this show but in in my everyday work too .

yeah absolutely move gone to things that were discussed uh, four times throughout the year. And I think listeners what we're going to do here for the structure the show is um move through this fairly quickly um to can just just established a baseline of where we come from and then really spend the book on on twenty seventeen themes and and also we have sort of an extended carve out section to kind of talk about the best things that we've buy or red or listen to our paid attention to this year. So um that said, going back to the the twenty sixteen themes um that ever so dominant network effects um in in virgin amErica episode paypal linked in in adobe and you know this one like for me he was a was such a dominant theme that I I gave us talk um at a product conference called industry earlier this year and I had like two ideas for talks going and I was work on both of them and um David I was recording I forget at which episode IT was but it's only done on me that like oh my god my this talk cast to be about network effects and I think IT IT was actually pretty interesting because there was A A conference for uh like product managers and and people that uh some amount of product management in their role and IT was really interesting to take sort of adventure lens um to a product audience and talk about building um building network effects and violin dependencies on the rest of your user base uh into the core product and rather than thinking you about IT as as kind of an .

after thought 也 is that is that is your talk on youtube。

It's not yet it's not they're they're going to start releasing the talks, I think pretty soon here um but we'll definitely let the acquired audience know when when they can check that out.

Yeah as I got to got the privilege of seen ben slides and um hearing hearing a first draft the talk and IT IT was great. So we'll be sure to share that with you guys. And and you know this one I think was one of things I learned doing the show this year um and thought about is how rare like true strong form network effects are and talking about IT on these episodes and we would spend a lot of time on and when we created that, ephod um talking about how you know that is one of the very few um really, really strong form network effects out there. And and it's striking to me that all of the companies we covered, you know some have vary degrees of them but only a few facebook snapshot linked in um have have the strong form effects.

Yeah it's really interesting thinking about the uh strength of the sort of like relationship between the nodes of the network and how that can be super variable like you can you can have a uh product that has network effects that that are just not core to the product itself and that ends up not not scaling and becoming as as powerful of of a sort of force of your business as the incredibly strong ones.

So a couple examples thinking of I use my fitness pal um what i'm tracking, what I and there's sort of two components to IT there. There's utility to actually provide me the ability and a track, you know how much a beach micrometres an a meeting, you know how many calories about eating today ah what should I be getting more of the actual catalogue of food that has all the data associated with that? And then you know I can make friends on that and that's kind of important.

I mean, it's interesting for sort of encouragement and our accountability or anything like that. But um an apple like that is so much more utility than IT is network and then you have up a sort of a cross over like you look at instagram at first. Um and there is incredibly utility to the fact that you could put filters on photos and sure you could share IT out to the small nest.

K that was instagram. Um but ultimately, there was a powerful utility, their regardless of network. Now that was an amazing product that actually did grow into incredibly powerful network effects.

yes. And then you get to things on the other side of the spectrum that have no utility in our peer network effects like the telephone. I mean, if you have a communication network, the only purpose of this is to talk to other people on the networks, on the network. And when you think about how entrench that technology became and how long that the telephone has been the effect of means of communication, it's a it's pretty clear that like the the the more core your network effect is to the product itself, the more power and and I get staying power that that technology has yeah.

it's interesting to the maybe a Better distinction between IT because I was as I was just going to the list again. I mean, network effects from play a large role in many these companies we've talked about, but there is the the the strong form single platform network effects that the facebook has, the linked in has the sap jet has and then there's the two sided network effect that multiple aces have, of which we spend a lot of a lot of time on this show between amazon and um sky. Well, the skype the skype is also a strong form single platform network effect.

Um but youtube where you have supply and demand getting matched um and and and that a that can also be a strong network effect. But it's so much harder to get going because you have to bring both these sides together. Uh, where's the the single platform? Strong form effect where it's literally been you being on facebook makes facebook more valuable to me.

Where is you buying stuff from amazon only indirectly make amazon more valuable to me, right? There are so so few companies that can achieve the scale in a single platform. And then once you do just that, the defensive ability is pretty much I unbroken .

able yeah funny yes I saw I was reading a thing um is reflections of obama is presidency and he was talking about um actually I think was I think this quote was from one of his a his aims but talking about how important the telephone was to uh the the obama administration and how amazing IT was that that's the way that he speaks to other world leaders and yeah how that's pretty much unchanged over the last I don't know how are many decades, but we have all this this new technology and you know he was notoriously a blackberries addict.

Um but uh you know the phone is a is ubiquitous. It's you know especially for a landlines, pretty high quality, secure. Um it's you know it's one of the that's .

that's the classic case, right of two world leaders. The value of the telephone is solely in the fact that other world leaders are available be at the telephone.

Yeah, yeah, exactly .

right. Let's move on. Our next team that we also discuss four times this year was what I like to call start small, uh, but is focusing at the outset on solving a specific problem for a specific customer base, not trying to be everything to everyone is at the start of phase.

And uh you could also think about this is as targeting niche markets and then growing from there. And we talk about this on the virgin amErica episode uh with alaska obviously targeting um the seattle market uh and virgin target the california market. We talked to Better on satcher with snapshot really tAiling the products. Uh after some wandering in the woods for a while um to high schoolers in orange county. Ah and with truly and and also with amazon, you know amazon was just books until long after the IPO and and and several those companies for amazon, obviously veen and potentially snapp ed to have gone on to become huge companies that do lots of things that have many different products and target uh diverse user bases. But they all started with that core solving a very specific problem for a very specific audience yeah and relating .

this to network effects like like we just mentioned um what not in this list but easily could be as facebook and you think about the the issue the issue of the cold start problem, like if they launched facebook to the world, IT would have been no fun because let's even say there's ten people in every city on IT. I mean that the years not in a only one, maybe one person, and by launching university by university and focusing on just harvard for us, you take advantage of those those preexisting networks to make sure that there there is density on your customer base.

Yeah when you can provide, you can you can do the program, things that don't scale to get those notes on on the small nitny ork and then grow from there. And actually, I think in our well, uh let let jumped to the third theme that we discuss four times this year.

And I think that three, these kind of form maternity that you know if you are working with started up starting and started up are working in technology generally, you could do far worse than to keep these three things in mind. Um and the third one is, is growth culture. Um and what we mean by that is, is the discipline of growth within startups and technology and and IT really started with paypal and that was the first.

So where we discussed of um using real data from the marketplace and from usage of your product to iterate what you're doing and to iterate your product towards the signal of how people are using that data. So we talked about them on on paypal snapp chat next and the amazon IPO. Um but I think the interplay of these three things, you know one you know keeping in the power of network effects.

But the problem with that is that it's they're very hard to achieve because need a lot of scale. And the companies that have achieve them have used defensively. So how do you attack that? You you started small with a very specific mitch you know that's underserved uh and try by whatever solutions are in the marketplace today, target them and then and then you you know use the discipline of growth uh to um to be honest with yourself about what's working, what people using and um you take a one step at time and i'll tell you .

uh in looking at at growth culture and thinking about the way paypal l did IT when they released um you know a product that that wasn't really resonating and then they found in where people are using this product and they turned out, oh wow, like an incredible amount of a transactions are actually happening over um because ebay sales .

yeah or are you look at like right .

right and you look at like twitch and they realized, you know that's a general purpose thing but wow, people are really using the singer and gaming so let's focus on that. We've totally discovered that with with p sl and major al labs companies where is so important to like get in market with something and and just be like a player in that space to have something to talk to partners and customers to and and ways to get actual data back from the way that people are using your thing and and IT is funny how companies see their narrow or or you know move to in a jacket market and and so important to get in the space, have a product and market. Be able to learn and then you'll find what the real opportunity is from there because it's always you know that there's a very degrees of how similarities to your original idea that ends up working, but um you know it's never exactly of that and you need customer data to know we .

didn't plan at this. But uh um you as we've been talking about these teams, I almost see this like this this kind of trinity of of the the teams that we talked about four times throughout the year being how you you a sort of the playbook of when you're actually lutely building and running and start up what you work on and then the metathesis aggregation theory on top of that because the output of if you do these three things as you'll create a superior or customer experience, that really is the goal of starting small, focusing, solving a specific problem Better than anyone else for a specific customer and then growing from there and and h and the network affects learning on top of that, of making the product even Better and providing defensively those together. And you get aggregation theory.

you can do a lot worse than using these as as your checklist when starting or pitching or refining an idea. You know as like am I going to be able to create a successful company, or at least convince other people that my company could be successful? The sure feels like a decent, a decent place to start.

Yeah, unfortunately, uh, nobody has yet invented a magic button to transat theory into practice in the technology world. But that's what makes IT fun.

Yeah yes yeah. Are you moving on to things we've discussed uh, three times? Uh, the fly wheel is is a big one with lucille marvel and the and the amazon IPO episode. And you know I think I look at a fly wheel as a sort of a very specific type of network effect where um any any increase in one piece of your business ads momentum and grows and additional part of your business, amazon and and disney of course, being classic examples of this disney with um you know movies that feed into theme parks, that feed into T V shows, that feed into merchandise. And then amazon with uh the ability to create A A A Better experience through lower cost, building more customer trust, riding more traffic and then their ability to continue and grow and scale from there.

So and you know amazon is definitely a two sided uh network effect um or yes now with A W S all in the different businesses that amazon has multiple ded. But uh uh you know for them the fly wheel is about adding to one side of the network effect and that pursing the other side. Um know disney and and the companies theyve required in their fly wheel.

I don't know how much it's about a network effect, but it's IT allots makes me think more of like economies of scale and sort of old world businesses. But I I guess you could argue to the extent that um to the extent that people come that the consumers come to see content， that the more consumers they have coming to see disney content, the more they can channel those consumers into other disney content. And then so you you could think about IT as kind of a content consumer, uh, network effect. Yeah, but it's not not strong.

I don't think yeah yeah, it's a good point. And it's funny in thinking about the best way to define fly whelks or are potentially if you're uh, in an existing business to to see fly wheel opportunities in the business. Um I think a good way to define IT might be what a does your existing asset of you know business line customer um capability is all those things allow you to do that.

A is an unfair vantage that people are starting from a cold start wouldn't be able to do. So sort of criteria one. And then criteria two is, does the existence of that new thing that you do feedback and grow your your original business? Yeah yeah.

Disney, somebody trying to create A H cricket ure like a toy business, delton have disney IP so they can fall on their face. And so criterial won is like, boy, you can really boot strap and merchandise business. And then criterion to is, of course, more people are going na go to want to see, want to go see the movies and and visit the parks .

if they have the toys yeah this makes me think about A B N B what they're doing now with launching experiences uh and blending both of the lodging and experiences in the trip. You know lots of people have tried to solve the kind of destination services and travel for a long time.

But airbnb as a complete unfair advantage in that they have travellers who are coming in using their site to book lodging um and are especially travellers who are often time to looking for experiences at the destinations they're going to um and so they can see that into the experiences product. And then as that product matson, potentially someday people will be coming to arb specifically for specifically for experiences, then they can fund those people into book lodging. So we can see you could paint what they're trying to do now and in a fly wheel light yeah good point right next one.

Ah we also discuss three times this year was as this idea that as a particular technology generation matures. So um and we saw this with with the PC generation ah with the mobile generation um and and potentially with with future um technology generations to come. Maybe we will talk about this in twenty seventeen 春天。 But the the basis of competition moves up the stack throughout the generation and and can starts at the hardware level and then moves up to the Operating system level and then to the application layer level and then eventually, like we're seeing now in in mobile and on the web into the service later level, which is cross cross application. Um so we talked about this in the accompany my episode and the android episode where I think you can see that most clearly um and in the push pop press episode .

which became facebook against articles yeah I really like this one and and we talked about a IT was like not exactly the same but in in that episode about rightly in google dogs um yeah we are talking about uh you know as um as productivity move toward the cloud um from desktop software like who there's a low end disruption thing that happened where where google decided that they were going to create.

You know not as good tools for the professional, but uh, you know very good for people that wanted to do sort of light way editing in their browser. And then that we got a total arms race of a ww. They're actually there is a services and cloud based productivity market here. And you you don't necessarily discover those things without somebody um building an an inferior product further up the stack. First.

you which is a great transition to our last our last three point theme uh or three times theme uh for twenty sixteen, which is business model based disruption, which we talked about on the rightly and google to accept the d and on the way episode and on the android episode.

But um you know any time ah if you're an incumbent in an area and somebody pops up that can offer the same product as you and make money uh by via different business model, you should be very, very worried. yes. And this is classic claim n Christians in here .

and very much falls in the same sort of fear as the jeff basis. Quote your margin is my opportunity and ah in this method is more like your business model is my opportunity. Because if if you're able to leverage something like how rightly was able, i'm sorry, how waves was able to to crowd source of the data suddenly it's like, hey, i've got this huge asset that costs you money for free and now I get to decide what to do with that.

Yeah um we'll see this all the way. Amazon is uh, one of the best in the world at this and actually this is part of one of my car vets coming up um not amazon video. My car dad is not an amazon video, but you see that happening there.

I mean um netflix is a great grey company and valued very highly right now. But amazon video has improved so much throughout twenty sixteen and it's free with prime um and you have to pay a box of month or whatever is for netlist. Now it's a different model.

IT is IT is IT is all right. Well, we've got some things that are are discussed you twice and in once throughout the across the area. Bet um we're going to put those in the show notes. So if you if you're curious about um other tech themes that um where prevAilin and twenty sixteen at least through through our lands, uh those will be in the show notes and we're going to move on to talk about um some themes that we think are gonna a be key in twenty seventeen. So uh, David is off one year.

Yeah I will in i'm laughing and i'm sure long time this is the show will be laughing as well. But the first one I wanted to talk about is I think aggregation theory is going to continue to be critically important and one of if the clearest lens through which to view opportunities and chAllenges and disruption that have pending um not only in in tech going into twenty seventeen, but but I think in the world broadly to in society uh benton son has had um some great post really great posts in the the back half the year here um talking about uh how you can apply that lends the aggregation theory lands to looking at uh politics uh and I was that the U S E.

Presidential election in two thousand sixteen um but the media as well um and I I to me personally I I actually see that becoming more important than twenty seventeen um and thinking about sort of beyond just the traditional I T sector of tech, consumer technology and enterprise software technology. Um but what what does that look like when agree when the dynamics, the aggregation theory and the um the both opportunities and and implications of internet dynamics get trained on all industries? Um you know we're seeing IT with driving right now, which um if i'm not getting my facts wrong, what is entirely possible that I could be I believe driving jobs are either the number one or certainly top five yeah category of jobs in the U S. And it's .

like two three million jobs are directly related to the logistics industry. So I kind of trucking and tracking .

and and then you had you know I don't know how many uber drivers there are. If you add up uber and lift and taxi drivers, that's another huge amount of people um and all the same, you're going to have a superior a superior customer experience through self driving um know technology that's going to come on board in the next few years. Um I think everybody uh in some former fashion is going to have to come to groups with the implications of what this means.

Yeah yeah that's it's pretty interesting. Um the same way is nicely into one of mine and I think that um I was gonna k about three things that I think will happen in twenty seventeen than three things that I think will begin to happen but are really you know twenty and twenty nine twenty things but this totally gets into uh one of mine, which is autonomous and vehicles start to make people more serious about universal basic income.

And as I mean this discussion with a friend recently, where let's start with this hypothetical world, that is we can basically produce in a very sighed way um our basic means of living for free. We create technology that is efficient enough that you know let's say that we can have firms that have all autonomous equipment that are powered by solar rays of you know renewable free energy um and can deliver uh all these ingredients to to to people basically free of charge. So we have clean water, clean food entirely for free and and maybe it's even possible that the transportation is there too.

So then there's things like know shelter, uh other other basic things that you need to live that that aren't free. But where we're going to start trending toward this world, where um we could provide those things for everyone. Um but the thing that will happen much sooner than that is that um will be able to provide these things with very little jobs. And and so if you look at like the industrial revolution, the argument that everyone always makes as well, you know technology eliminates jobs, but that also creates new jobs. And I think in this era uh of autonomous um in autonomous vehicles, autonomists machines uh and in leveraging machine learning, the difference is that you don't create as as many jobs as you eliminate and that might be OK in the extreme long run where we do have uh society of structure in place that you know we take care of everyone that um doesn't have a job because like nobody needs to work. Glad to imagine a world where everybody gets to live without working and uh then we need some you know some ways to distribute that that welfare to people.

But what we we also need something for our people .

to do yeah boy, that's that's all right of you know figuring out what to do in IT with your time in an era we don't work. But I think there's a media impressing problem, which is um companies will get extremely wealthy by having really fat profit margins on um being able to achieve great value for you know tons and tons of people through aggregation. Um yes, and those people .

will be completely served.

But I will be you know the same Price that we've been paying for things except that lots of people don't have jobs. And there is going to kind of scary valley where we eliminate the jobs long before we have any sort of like support redistribution system.

Yeah there's um well a couple thought. I mean I think one of the um I I think what we're talking about is A A consequence of aggregation here where you know if you believe IT a the we are entering a world across all industries now where a prior customer experience becomes a winner take all business, you know that means there is a winner and lots of losers and um you know as opposed to where you have equal librarian in other industries now, such as the auto industry where there are you know ten, twenty or the airline industry. Uh ten, twenty firms uh that are all employing lots of people um and maybe they they're not as profitable as firms as they want to take all business um but they are uh at least providing jobs um uh so so this is definitely you know who as far as far as I know nobody has solved uh what this means, you know how to deal with this on a societal level um but but what you are saying after that reminds me of um there was a great I believed this was inquired I am going to find this article leaked out in the shower notes when ripe before the election obama give a few interviews um where he talked a lot about tech and sort of used on what he saw as the biggest chAllenges for the world and for amErica going forward now and called on the tech industry to respond them um and and the the first one was was inequality and uh as peace they had at six you well known figures from the tech industry sort of respond that each of these things the chAllenges that obama called out and I believe yes IT was timorese 嗯 the counter of a Riley media um answered the inequality topic and and he said exactly what you're time about silicon valley often forgets that um IT takes consumer surplus and people with jobs who have disposable income to then spend money money on silicon silicon valley products and technology um so you're always kind of eating your own tail in in the economy um and to the extent that we put more people out of jobs as an industry。 Then there is going to be far less consumption of our own products as an industry.

Yeah kind of funny thinking about a this is if not as much funny as .

a hunting yeah um IT it's uh it's ironic but um but not a not in a happy way yeah so .

I guess like you know, technology is an interesting sort that has to be um responsibly wheeled IT like you we've talked about this in the past that um the purpose of technology is to make things easier so that IT requires less effort from people and when you um run that to IT is extreme, it's that you need less people to do the jobs that you know that that create the value for people um for you know the consumers of those things.

I think this is one of the P M S that we talked about um the first that we have the technology is a ever um you know IT doesn't mean technology is like not like it's a scale ber rate. It's not like it's you know a sd good like to magnify what is going on uh whether that's you know good or evil or or indifferent and just magnifies the consequences.

Yeah so in in having this ability to uh um no create incredible uh automation and an incredible value without human input, I don't think we've necessarily figured out what a societal structure is. In a world or technology is so powerful and I think a lot of the the things that we uh take for granted in a society that is a democratic republic and uh has a capitalist economy um function pretty well in A A world or aggregation theory and automation is not so powerful. But I think we could be forced to do some serious rethinking um in the coming decade as as these new harsh realities come to light and think about like boy um if if we just pure capitalism may not actually work anymore or I think i'm i'm venturing in a dangerous territory there.

But well we're going have to call my wife getting under the show as a guest expert for this as a um she's A P H D and a in the humanities and things a lot about this but I think channeling her SHE would say we have been in a late capitalist world uh for a long time. I I at least in the end the world war two um and this is kind of the homework k of lake capitalism uh which is that you have uh rapidly increasing wealth inequality um and then the um the theory is that IT ends in a in a communist or socialist revolution uh will see not predicting that that will necessarily happen but that direction you like IT like europe that that um um that political economies there I have been moving towards over the last twenty years or so. But it's also a world where innovation is encouraged as much as IT is in a purely capitalist society.

Yeah um maybe I I think then you started diving into what are human motives besides you know if you look at like the reason a Daniel pink astana research on what makes people happy in their jobs, it's not really money.

Its autonomy, mastery and purpose above once you hit a certain dollar amount of of sustaining yourself and if you think about you know that on on one hand and you you look at sort of like the things that motivate people in general, you know money, a power, uh love. There's a lot of like very core um human things that we often like wrap up with how much money someone makes and people often define themselves by by their job. And their value in the world is so tired to that. And I think we might start seeing IT may be not twenty seventeen and may not for for a while, but once we get to a kind of a post scarcely societies, a place where we start to finding ourselves and and and and doing things by difference measurements and actually.

i'm gd. You brought that up because i'm catching myself sort of falling into a trap that I think a lot of people and a lot of economists have for a long time been uh reading a bunch of economic ously and uh realizing that you know classical and traditional macro economics, uh is kind of like video, right like and and not effective video like it's really deeply, lad. And some of the one of the assumptions that is really flawed and IT is that every individual is a irrational actor um b has perfect information and c is motivated by by money and wealth um and that's been all of the three of those things have been proven to .

be just not true are you are you reading .

called them in right now? I not yet started reading the undoing project, but it's on my list. Um but no i've been listed i've been reading um i've been reading uh Tyler cowen uh blog in marginal revolution and a lot of the links and worked but he worked that he links to impose there and he's start of one of the the poster children for the new breed of of economists they reject a lot .

of these classical .

assumptions. Cool to check that out. Yeah well so we move on to um so one that I wanted to bring up on a um sort of looking more on the bright side note of all of this that we talking about on the on the facebook IPO.

I'm hopeful that twenty seventeen sees we started to see the beginning of the end of this stay private longer and and start up private technology companies delaying their indefinitely. Um you IT sure looks like we're gonna see a snapping IPO in the first half, maybe in the first quarter of twenty seventeen. Um and i'm really a really excited and hopeful to see what that does for the market.

Um you lots of questions to answer both about the company and and what valuation um the end of getting both at pricing and how the stock ter is afterwards. But I hope that you know I am encouraged by um by their uh courage word of twenty seventy of twenty sixteen. So in doing this yeah thank you, feel shiller. Um so I hope we see more companies um that are building long term sustainable businesses um depicted ge to go public.

Yeah and it's it's not clear to me if it's like like courage, like they're taking some big risk necessarily that um being private wouldn't make them risk or or of that like they're doing IT out of some sense of like it's probably like just overwhelmingly the right thing for them to do. So they are doing IT. But regardless of motivation IT sure seems like it's Better for everyone to have companies IPO ing. You know ada before the five year mark and after you know somewhere between like three and six years rather than waiting up to ten because I just we talked about this on the facebook and episode. But like IT lets the american public get in on the growth and wealth that is created from um late stage american innovation .

and and I think IT also you know I think this is something that um don't get me wrong. Wall street has its own set of issues and the short term focus on for term earnings results uh can be a bad thing for companies of all types um but I think going public IT forces a level of accountability and um and being forced to see the real picture reflection of your business um that I think in the long term will be good for a companies. So we think we talked about on the facebook, do you know episode IT was I really think not being there the time but but doing all the research and talking through the story, I think facebook going public forced the company to recognize how big a problem they had in mobile into um and to move uh at work speed to fix IT.

Yeah that's a great point.

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right? I've got another couple that that go together. Yes, so do the first one is the commoditization of basic machine learning. I think you know there's I am let me just create disclaim where that says I am not a machine learning practitioner or a data scientist nor the way a formal education on the topic. Um I am a curious person in tech and so i've been doing as much reading as I possibly can and talk to us some people that are that are A A lot smarter than I am in these things and try to understand what does the landscape look like and what's become really apparent is that a lot of these things are fifty to seventy year old technologies, or I guess are really like math papers, that only now are are coming to fruition and and actually being applied because, number one, we have the hard way to do so. Uh not only with just cheap C P U and G P S, but with actual like google creating tensor processing units that that are more effective at doing the sort of math quickly and efficiently that you need to do for fur machine .

learning because you have access to a elastically scalable cloud.

You know you .

don't have to build tons of data centers. You can use us three, yes.

store all your data yep. And ah yeah so variety of factors uh, contributing to this. There are tens or hundreds of defined machine learning methodologies. And I think something that that is pretty interesting is like there's about there's less than five that are actually used right now, buy a lot of people and have actually had a lot of research on them, a lot of like time and practice.

Um and you know it's it's interesting that like relative to a decade ago when there was still this Green you know a lot of Green face of like this is an emerging field. It's been researched for a while but not commercialized. Um we don't know which things work best. Now there is like a fairly understood scope and scale and understand of what they can be used for, for the the you know few basic types or a few most used types and what we've seen as the platform zone of those.

So if if you have machine learning task to do your company that are not like wildly different than something somebody else is doing or don't require any sort of like new research or actual mathematicians to be um you know hammering autometer logy that's that's not um well understood yet. These are often available from um from google, from amazon, from microsoft as a as cloud services. That that are built on TensorFlow or at google or any of the other um platforms at these other companies. And so what you see is like companies that might be like thirty forty eight people don't really need to build out A A data science of machine learning practice in the company. They just need to find a way to create really clean data and then feeding into the sort of flight off the shelf systems that that the the big companies are created.

Yeah and that makes me really excited as an investor because it's going to enable so many more companies, uh, in so many more industries to take advantage of these tools. And and I think it's going to you I think this will be one of the enabling factors that further pushes aggregation theory out into the world. You know beyond the traditional borders of the court, quote, tech industry that we that we talked about earlier.

Yeah and that that brings up the second point that I I have is know the reason that uh, these larger companies are incentivize to make these things available is that the value once you had a certain kind of scale and an understanding and saturation of these things, the value isn't the elegant m themselves. The value is all about the data. And so these companies with uh with large sets of data, google, facebook, microsoft is on a um can solve problems that start up just can't and there's a total fly weel effective.

You know once they once they have like just incredible critical masses of data and and have the um you know the machine learning algorithms kind of uh and practices built in house to really be competent at at turning that data into you know new products and new services, they are just able to to be the best at things that startups have no chance at. This is a category of of a machine learning problems that, like you're saying, David, are a very exciting as an invested in new startups because they can use these off the elves shelf tools. But there is a whole other category of things that that you know the the big tech companies with lots of data can do that. No one else can.

Yeah, I think i'm going to agree with you with a cava on this one. Uh and more to come. We know on my friend in in twenty seventeen on this idea. But um but my view, at least right now on this question is I think the key to the data is its data and about your customers and your domain and people who could be your customers um and the interaction between those customers and what you are product is.

So yes, I agree that if you have multiple companies doing the same thing, the company that has the most data and and the the most robust and uh rich data is going to be able to create the the most superior costing experiencing when via irrigation peria, which we're talking about that notice. But to extend, you're doing something slightly differently, I don't think IT IT pipit very well, you know. So um that gives me some hope for opportunities for start up.

And maybe like I think there's this category of things I see you uh I think there's definitely in a category things are on personalization where uh all all those pointed red like spot on, right anything that requires a lots of information about you to uh to bootstrap from, for example, like showing you the photos of your best memories of the last five years when you were in motion.

You some like queries like that, but like, uh, google has the most photos of cats. So anything that relies on a very accurate cat recognizers like you're not onna beat google at that. And so I I think about like these companies have the largest data sets of like a lot of things.

And so I think you're write that like outside of the domain of things that these companies capture, like you know you can imagine like flow meters on pluming, like none of those big to companies have the data on flow meters on pluming. But anything that's like photo related or conversation related or um you know data sets that people create in interactions with themselves in the world um is really like locked up there. And I think there's probably interesting opportunities to try and go fine data sets elsewhere and figure out what value can be created from those that that those companies don't have.

I think that's right. But but I I guess I guess the perspective I come out IT from is if you think about all the um activities in our economy and in our lives, like there is a infinite spectrum of of products and services that can be built that are very different and and I guess the excited I come out of from is that you think about google, you know and the things you are saying um you know understanding cats.

And I do think machine vision is going to be perhaps the biggest category of machine learning um value creation in the coming years um but like you know what about company I work with? There were investors in in magna, the company called booster fuels and they deliver gas to your car um and you wouldn't think that, that would be driven by a machine learning, but actually turns out that you that the route the trucks take to deliver gas is is usually important. And the more efficient you get that uh the Better your business your products will be in, the Better business will be um you know google can't do that. So I just think there is or at least they .

don't have an unfair advantage in doing that.

They don't have an unfair advantage doing that. Yes, even uber doesn't have an unfair vange in doing that. So I think there's a big sea out, fair, efficient.

cool. Yes, I see there.

All right. Uh, last one that I had more, more fun one to for me a week to end on is um I think twenty seventeen is a i'm going back to the mitch uh a sort of H A team we didn't talk about in the preamble le um that is really what the native experiences quite quote, look like in new mediums. Um and I think twenty seventeen could be a really interesting year for V R um and in the whole vrar industry.

And I think will get a lot more signal this year on whether um V R and a is going to be a mainstream industry anytime soon or a large niti industry or none of the above. And I am hopeful that by this time next year will have a lot more information on net front. And to the extent that either becomes mainstream or a large snitch industry, um i'm really excited to see what native code code experiences look like in in the V R.

world. Yeah and me too because it's funny. It's like you remember the first Steve jobs demo the iphone when he pulls up the new york times and he there is no such a mobile optimize site yet need double taps to zoom in on all the articles and you look at like a desktop rendered version of the times.

You like.

what's the equivalent there? Like what's the one of the native V, R experiences that are are right now? Like we're so excited like oh my god, we're playing the a similar video game of VR .

yeah when and a lot of the games you're seeing in V R right now are those, you know oh man, this game that we've always know in love would be so cool if we could do IT in the r ter. whatever. But what is the and I think this is just where the creativity of entrepreneurs is going to come out.

It'll be things that you and I haven't imagined yet um and uh ah having done a lot of V R experiences myself and I don't imagine a lot of our listeners either haven't done many or haven't done any. Um it's very much a bleeding edge nat technology right now, but you can see so much potential in the immersive ess of the experience. You know it's it's like the anti mobile a lot.

Yeah, yeah, yeah. I mean, it's right now, it's largely tethered experience that you don't you certainly kept them around much outside of a very .

controlled environment. The best of you, our experiences right now, um we still have lots of problems with them. But where you I supposed on a mobile phone where you're getting sixteen thousand notifications every minute and jumping between context all the time, you know you really do start to forget that you're in a simulation and just get totally immersed in what you do yeah well.

David, I would argue i'm frequently completely immersed in my phone and not paying at .

times around yourself. It's all the question of what context you are thinking about.

Well, hey, i've got i've got one more and it's more of a question. I'm curious what you think because IT for help political, we could get on the show, we pret we stay pretty far away from even though we sort of discuss society issues. And I was going to think through we've been in this era of rising abundance of both information and physical products ah over the last several decades.

And I was trying to figure out, like do is IT possible that we start moving to an era of scarcity of physical products where um in in years past, you know it's it's um um it's been incredibly expensive to manufacturer overseas and you know that's the reason why we can get an iphone for six hundred dollars when it's this incredible magical device. And uh with the combination of uh a rising middle school in china, you know uh additional countries where a lot of this very inexpensive manufacturing is getting done, a becoming more of A A A deep developed nation. And then also, it's hard to predict what's gona happen, but all indications lead toward um we may have a little bit more restrictions and terrorists on trade um to encourage things to be built in amErica under the trump administration. Curious, even if that doesn't come to fruition, do you think that, that we start to shift back toward an area where goods are more expensive than we have have less physical goods?

Yeah I don't know. I I hadn't quite caught about in that. Um it's really hard to imagine that just from a consumer perspective um which doesn't me wonder if IT happened, what would the political reaction be I mean, let's let's say, uh can let's assume that um if more barriers to trade get enacted that a consequence of that is that Price of physical goods goes up significantly unless people are able to afford them like how would people vote in reaction to that? I don't know, I don't know.

Yeah if, uh, if you can buy your big screen, uh, anymore yeah I don't I don't know. It's a at the same time, like we also live in this moment where um you know one of the books are on this year was one of the top selling books in twenty sixteen was that uh the light change in magic of tiding up the japanese art of declaring uh about removing physical things that there there is too much. Many people have too many physical things in their life, and you need to remove them. So if Prices go up, will IT. I know, and I I can't tell .

if there's a cultural. I'm trying to decide if I live too much in a bubble but IT sure seems like there's a trend toward ownerless things just just to um you know try and be more minimalist and um especially with the the shift tard um more people being in an urban environments and having smaller spaces that we may just start to see this from a cultural desire perspective .

too yeah I mean, no question. I think one thing that seems very clear to me that you mentioned is urbanization. Um regardless of what happens to the globalization and trade um I think urban ization is going to continue to be a very, very powerful force throughout the rest of this decade and likely into the next uh you know so many um for for a whole variety of reasons. So many people in this country and around the world are are migrating to cities in the you know the net migration to cities that I think is happening um is gna force a lot of this change now um the um uh the the big mansions in the suburbs, you know, aren't what a lot of people aspire to anymore.

嗯， to great point.

let us, let alone the fancy cars that you drive to get back comfort.

Yeah no kidding with that. Do you want to move on to to car bets?

yeah. So for car belts, for the episodes, it's the end of the year. We thought that we would each do uh a car about across um a whole bunch of basically all the categories that we talked about here about the year.

So we have books, articles, podcast, uh, music, uh, T V and movies and apps. Should we start with h we started books. Yeah, let's do IT.

I've got one that I am rereading now and I don't think i've done IT as a car out before um but it's one of these books that I play should read every year and um you know i'm just reading for the second time now, but it's called on writing well IT is A A kind of a spirit al supplement to the A E B Whites the elements, elements of style and if IT is really great, very enjoyable to read book that harps on the importance of writing in plain english uh using one word when you can instead of two or three or ten um eliminating kind of colloquial phrases that are um you know not adding anything to the piece and and really declaring you're writing and having a clarity of thought and one of the things I want to get Better at in twenty seventeen is is just being a Better writer and writing with with more clarity and purpose and nb more pithy and it's just a phenomenal uh phenomenal guide to doing .

exactly that. I had that recommended to me several times over the years. I've never read IT um and I I gotto get that and read IT very few things ah that we can invest in. It'll um do more for our our communication and learning to be a Better rider, something I definite definitely need to keep working on.

Okay for my book um for the car about I actually broken into two I did nonfiction and fiction. So for non fiction um the creative habit by a toilet thark watch was a book that actually got a long time ago and had been meaning to read, had started uh never finished and I finally picked IT back up again and finished IT this year um really great. Uh toilet is a um american chooses PH and the answer um and just has uh it's a really creative work itself but a lot of a great advice for how to think creatively and structure your life uh if you are someone from an entrepreneur to an executive to an actual artist who needs to think creatively in your work.

And my fiction for the year is actually a whole uh multiple series of books but I finally read uh the entire uh asic asm of can in um not not all the books that hero but the robot series, the empire series and the foundation series, which are all separate series but later in his life he wrote other books to fill in the gaps and tie them all together. Really fun and a great a great read as we head into this world, as we've been talking about on this episode, artificial intelligence and robotics potentially coming along with that. Um a lot of um a lot of his work has been an inspiration to actual innovators in the inventions. Um there are the years so highly, highly recommended all of the series that .

he's written awesome. And actually that that kind of leads into my my article yet it's religion for the non religious, which is a way why column and yeah.

so good.

Yeah really, really great. Like talks about you. Level one thinking, which is more like instinctual. Level to the thinking, which is more empathetic. Level three thinking which is like thinking about the whole universe as we know IT and being just floored by our place in IT and then level four thinking which is we even know what we don't know and it's kind of a an interesting like way to tie um everything together from why am I acting so silly right now all the way to what .

are the bounds of the no universe yeah city great blog whip web. Uh my article is a piece in new times that came out a few weeks ago um about the alleged um uh activities by russian hackers in hacking the dnc uh and the R N C and then there use of that information uh to try and influence the outcome of the U S. elections. This is a really great long reporting peace. Uh and they started deliberately make the analogy in the beginning of the piece between water gate and the hacking of the dnc, the physical hacking of the dnc headquarters for information during water gate to um to the digital hacking now but what I thought I was super cool is they make the argument in the piece that if rush a did in fact do this that this is actually moving beyond S B N H into you know a trying to influence outcomes of elections in another country is A A world like act um and he made me think a lot regard this as of what you think about this particular situation about a disruption uh and evolving technology as regards to war too you know um um if this is um this might be the way that at least one of the ways that war is conducted now, as opposed to you know tanks and planes and bar um super interesting to think about disruption of uh at that level two um and also relevant to what we're talking about earlier in this show wow ah totally .

sized IT together you speaking of being all over the place. My podcast recommendation is the episode of the as reclined show with Patrick losson, the cofounder and CEO stripe and fascinating at a lot of levels IT truly is all over the place in a lot of the um the best ways that you would hope super intellectual on on technology, politics, philosophy and uh highly recommend checking IT .

out that is so footy because the exciting show was my podcast as well. Fortunately, I had two episodes recommend one was that that show with Patrick lison which is a great great efficient. The other one I think is the one that that um as we're did immediately following that episode, either immediately or two episodes, ter with tony hazy coats um completely different ah type of person in in different world h coaches another in a journalist but also very very episode and work listening to I agree.

music music so we've been writing this really high brow and electronic train something to bring him back down and declare twenty sixteen in the year of Justin bieber as his album of mega hits technically came out november of twenty sixteen but boy that they have staying power and stayed snappy and hot and released first singles all year. So I unapologetically go Justin bieber.

that's great. I'm also unapologetically gona go back to, I think I mentioned this an episode or two ago, Jenny, I went to A T. V. Next concert this year and I was so good. I've been a huge leafy ood mac fan for a long, long time and but in two thousand sixteen I have discovered Steve nexis solo career, two even beyond, you know, edge of seventeen and the the famous hits SHE SHE really is an amazing artist and both her her own solo albums and her collaborations, especially with competing and the heartbreak ers, also prints uh I didn't know until I went to her show that prince played the guitar on her hit stand back then they had really close relationship um my that's my music for for .

twenty sixteen and Watson uh so my T V or movie is a west world. The H B. O show I mentioned as my car about a few episodes ago but that was the the piece of entertainment of twenty sixteen for me is so thought provoking, worth watching twice, worth listening to podcast about, worth talking your friends about and and reading the subway and diving in IT is J. J. ms. And JoNathan nolan at their .

absolutely the best. So i'm going to bring you down even further here. I haven't haven't gotten into any of the heady grade television that's being produce these days, but my video content of the year was rogo one so good if you haven't seen IT yet.

I know it's got somewhat mixed views, but I thought I was just fantastic. But and I saw together on opening tonight on on the opening night, IT was a blast. I've seen that uh, once more since then. Then I would totally go see .

again the forces with me and .

I am at the forest .

David move .

gone to APP my appear as when I just started using, which is reach. Now the car sharing program by bmw IT behaves very similar to car to go if if you use that. But um you get a car that's that's not A A smart car so you can um you know take take four, five passengers uh it's enjoyable dry and go on highways costs about the same amount and it's a really great um renting and and drop off experience.

interesting. I tried to reach now when they personal ed in seattle earlier in the year and I stopped using IT because I remembered the Price is being way more expensive than than hard to go. Have they have they gone Better? I think that the same .

right now there are waving sign up fees, which is like thirty nine books. I think they'll play start at some point, but it's forty yeah forty seven of nine and I think that's pretty comparable. Remember when I stop using hard to go like three four years ago, I was thirty three cents a mile and I think has gone up since then.

So um interesting. Yeah great. And conceptive for the same Price as a smart car you can drive. A bmw yeah yeah I take .

the bmw and I think, sorry, not a mile per minute. And I think it's actually kind of part of their their plan for eventually building a self driving fleet. I think .

they're data data learning. Yeah um my APP uh also plays until a bunch teams we're talking about on the show and there out the year and a company uh is amazon music. I uh discovered red this in twenty sixteen and as perhaps evidence by my music car without and Steve next, i'm not I don't spend a lot of time staying up on new music. And the amazon prime music is free with prime and is pretty great, uh especially for free. Um so talking about business model disruption, um the amazon if you are not already a spotify or um pandora or other paid music or or apple music um subscriber and it's not something that's like so important you to have a absolute for catalog prety with amazon prime, the music that is .

pretty good yeah i'd be curious of listeners if you are a music lover and have tried out amazon amazon mp three, I would love to to get your review. If you want Richard to us in the slack, go to acquire dot FM. You can see the the slack where the conversations happening. And yeah I would love to hear about IT from from music lovers .

yeah I also have a request to for uh anyone out there on going back to books. I love reading size I and but i'm super curious I haven't read a lot of current scientist fiction and I would love to hear um read and and learn about what people are imagining about the future today and especially women scientific authors which I have read embarrassingly little um so if you have any good recommendations for current side, especially by women.

others hit me I M we want .

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acquired well listeners. We hope you had a great twenty sixteen and a ringing in the the the twenty seventeen with, you know, however you choose to ring IT in play a week or so in right now. But we hope you have a great year if you been listening in the show for a long time or even if your brand new and enjoy the episode um we would love a view on itunes and share IT with your friends and and colleagues or anyone that you think would be interested on on twitter or just email or word mouth so thank you so much for being a listener and have a great year.

Have twenty tee soon.

Easy you, easy you, easy you who got the true.