Most web tools that are re-shaping commerce are doing one thing, handing over control to the users from the producers. They are democratizing the factors of production so that anyone with access and ideas can now play. They do this through cutting out two things that existed and thrived in the industrial era: middle men and gate keepers. The power of collaboration has been touted as a revolution consistently since the the word web 2.0 exited the mouth of Tim O’Reilly. I think it is entirely justified. This is particularly the case with the latest disruptor to emerge – crowd funding. The reason that funding our projects from the crowd changes everything, is because it doesn’t really change anything.
All things have always been funded by the crowd, we just didn’t know it before.
To bring this idea to life let’s consider a couple of examples:
Debt funding via banks is a form of crowd funding: They take our deposits, assess and carry the risk of ‘sub-letting’ our deposits on margin. Essentially banks make money from crowd funding projects and managing the organisation of it.
Capital raising via VC firms is a form of crowd funding: They take large portions of their venture money from Superannuation or 401K funds which has been allocated to ‘high risk’ investments. This is typically between 1-5% of the total asset allocation. Again, our money is being allocated in our behalf from which transaction profit margin is made.
The point is that pretty much every type of investment that involved aggregated money, has always been the money of the ‘audience’ hidden within a structured system. A system which we are now re-structuring with deomcratised tools so that we can organise our capital amongst ourselves. So that we can access each others funds without permission from financiers. So that we can decide what is worth funding. So that we can make the margin available on float capital. And this is just the start of the inevitable changes to the financial system.
The very truth about crowd funding is that before it arrived in its current ‘web organised’ form – we got locked out of the system that our money funded. And it feels like crowd funding of micro projects is just the begging of something much bigger and more important. The question for aspiring entrepreneurs is how can we disrupt the finance industry further with newly connected commercial eco systems?
After the blog post from yesterday I happened upon a Cool Hunting interview with young comedy powerhouse Aziz Ansari. His approach has also been one of going direct to fans and paying attention to the changes in the digital landscape. His interview below has some cool insights, and a few laughs to boot. Oh, by the way, the Youtube channel from Cool Hunting is worth following as well.
What other entrepreneurial examples of web first & direct are you guys seeing?
The biggest flip the technology age has done on the industrial era is the open API. For the uninitiated, an open API (Application Program Interface) is a word used to describe sets of technologies that enable websites to interact with each other. It is also a system where web companies ‘open up’ their platform for external non affiliated software developers to create applications on. Facebook most famously did this with their ‘Facebook Platform‘.
While this sounds like some kind of nerd nirvana, it is actually a counter intuitive move that forms a large part of the marketing genius of social web 2.0 applications. And that is outsourcing the R&D to total strangers. That is, entrepreneurs who have new and interesting ways to mash up their content. It is quite revolutionary in fact. Corporations from the pre-web industrial era would rarely let people use their logo, let alone open up part of the factory for hackers to come in and try and build something interesting. But this is exactly what is happening, the most amazing stuff is usually coming from external organisations and the entire ecosystem is the beneficiary.
- Existing web companies get their new product development for free
- Entrepreneurs get a shot at being acquired by the firms whose API they focus on
The open API idea has to be one of the major reasons why technology companies are eating the world. The only question remaining is why don’t old world industrial companies open up their doors to some new, fresh and external innovation?
At first we got confused about how to make money out of the internet. We thought we should be able to demand payment. Silly us, we forgot about the first lesson in economics – that pesky demand and supply. Supply doesn’t automatically equal demand – especially financial demand. On the internet things work in reverse. First value must be created, then it is extracted. It’s the opposite to the previous industrial world of buying and selling.
Now it’s proving, then earning.
Journalism is dead. No, newspapers are dying. Writing has never been more omnipresent or important.
The music industry is dead. No, more artists are making more music. It’s just not in a record store.
TV is dead. No, TV is different. ‘t now has 6 billion channels with www. addresses rather than 200 numbers to choose from.
Advertising is dead. No, we no longer “tell then sell”. We now collaborate and create before hand. The 4th P is now the 1st.
Print production is dead. No, we print on our desktop. We print millions more pages than ever.
Book stores are dead. No, stories and reading continue to grow via the screen and home delivered books.
Retail is dead. No, it’s growing rapidly. In different places, in different ways, all digitally augmented.
The point is that anything that is culturally or economically important will never die. Humans will find new ways to keep them alive, or more truthfully make them more alive by knocking down the previous barriers to entry held in place but the profitable incumbents. They loved their systems because it made them rich from keeping us out.
My question to all entrepreneurs is this; how are we making the most of the change old dying systems are presenting us?
In many ways Gamification is an evolution of the long lived Loyalty Scheme. But so much better, and the evidence exists even at the simplest level – the words themselves.
Loyalty Scheme: Firstly the word loyalty seems very one way. It was / is as if the company expects us to be loyal to them. And although one might argue that loyalty is a two way street, the second word of the phrase is the giveaway – ‘Scheme’. Yep, sounds like some kind of a trick to me. A scheme to make us believe we are getting a good deal, when in truth we are just a number on some kind of cost / benefit analysis spreadsheet. Intuitively, schemes feel like there is a winner and a loser.
Gamificiation: Games are fun. We spend most of our childhood playing them and find as many excuses as possible to play them as adults. ‘Who wants to come to the football this Friday night?’ A game needs at least two willing parties or organisations to play. Sometimes we can collaborate and form teams and clubs and divisions and theme songs and have awards nights and weekend getaways. We can celebrate wins together and lament the losses, either way we like to return to the game and try and win, or even better our own score, although it’s collaborative, it’s also personal. The game is the ‘thing’, not the result of it. Games contrive all of the important human emotions that make our hearts beat.
Play is human. Great games even turn into industries.
Yep, it feels to me that gamification facilitated via Moore’s law is here to stay.
People got confused about how to make money out of the internet. They thought we should be able to demand payment. They forgot about demand and supply. Supply doesn’t automatically equal demand – especially financial demand. First value must be created, then it is extracted. It’s the opposite to the previous industrial world, in which we used to buy first and re-sell. There’s been an economic shift worth noting. Now it’s proving, then earning.
With great wealth comes great responsibility. The key word I’d use to describe this is ‘legacy’. When entrepreneurs become successful financially, then I think it makes sense to leave a legacy which creates pride beyond money. Often this comes in the form of the business that has been built. A footprint of good stuff the business created – which is the source of the original monetary rewards. Great entrepreneurs go beyond their business and create value for society.
What successful people do after they are financially rewarded is more important than what they did in order to arrive.
So let’s consider the tale of two billionaires. One from Australia and one from the USA. Granted the USA version is much wealthier, but when we are talking billions, I think it matters not.
Billionaire 1 from the USA: Bill Gates. No introduction needed. Gates has made The Giving Pledge to donate over half of his wealth to charity. He has given more than $28 billion to charity and focuses the majority of his efforts fighting poverty and disease in 3rd world countries.
Billionaire 2 from Australia: Gerry Harvey. Retailing magnate known for having strong opinions and doing his own voice overs for his radio and TV advertising. Sure his industry is changing (Just like Microsoft is under siege from web based software platforms) but rather than being happy he’s a billionaire and doing some good, he’s investing his wealth and energy into lobbying the government to change GST tax law thwart his competitive threats.
Despite the fact the GST is not the reason people are taking their shopping on line, Gerry has really lacked the decorum and perspective that should accompany a billionaire. Sure, Bill has had his fair share of questionable tactics in business, but he has never cried poor. In some ways, it makes me embarrassed to be Australian when our business stalwarts are showing such a lack of leadership in society.
I’d be happy to hear your thoughts, but I can’t help but think that it comes down to responsible leadership and legacy. If I’m ever fortunate enough to make one….(a fortune that is)… please remind me of this blog post.