Thought Starters: post carbon futures, social class and Brazil

Thought Starters provides me with a chance to review and highlight some of the more important or interesting research and opinions that I’ve read over the last week or so. This edition looks at venture capital, Uber’s valuation, mobile commerce, innovations in the telecom and the energy sector, social class and Brazil among other things.

Benedict Evans has written a valuable overview of the venture capital sector, pointing to the importance of winning big rather than winning often, with failure a necessary part of the equation for investors if they really want to get ahead:

There are no 10x deals

Uber has been one of the darlings of the startup sector with its position further strengthened by the sale of its Chinese subsidiary which was proving a drain on its finances. Steve LeVine has looked to pour some cold water on Uber’s current valuation suggesting that the brand is not necessarily the sure thing that some investors would have you believe:

With Uber, you have a singular brand with a credible story. The question is whether that brand and that credibility, plus the other assets on Uber’s balance sheet, add up to $62.5 billion. Here is a business under siege by rivals big and Lilliputian, in the midst of a cannibalistic pricing race to the bottom, bleeding cash and losing money while battling well-heeled, technologically savvy incumbents displaying every intention of owning the space themselves.

Ofcom released its annual Communications Market report, providing a whole host of benchmark statistics for the UK across television, online video, radio, telecoms and the internet. Well worth bookmarking:

Household take-up of digital communications/ AV devices: 2006-2016

Mobile commerce is definitely on the rise as we spend more and more time glued to our smartphone screens. What’s interesting is that for all the talk of the opportunities of mobile apps, browser based purchasing dominates with a lead that’s growing according to Andy Favell:

Access Method for Mobile Shoppers

Federic Filloux looks at how the traditional media players have been sidelined by the news aggregators (primarily Facebook and Google) and newer media outlets more attuned to the rapid fire news cycles of the current age:

For the news industry, this huge economic gap carries two likely consequences: internet giants and digital native news outlets will have tremendous financial firepower to do whatever it takes in terms of marketing or their ability to go further into the general information segment (cf. Snapchat); and the network effect will apply even further when advertising dollars keep drying up for what will be increasingly seen as niche media.

More broadly, except for the old, educated and affluent segment of the population, the vast majority will be informed by a rapid-fire of superficial and shallow contents spat by the social firehose. Expect more Brexit hurricanes and Trump floods in the future.

Self driving cars are reshape our relationship with the automobile but it’s not just the driver who will be impacted by these changes as Robin Chase explores:

We’re at a fork on that roadmap. One direction leads to a productive new century where cities are more sustainable, livable, equitable, and just.

But if we take the wrong turn, we’re at a dead end. Cities are already complex and chaotic places in which to live and work. If we allow the introduction of automated vehicles to be guided by existing regulations we’ll end up with more congestion, millions of unemployed drivers, and a huge deficit in how we fund our transportation infrastructure. We will also miss an opportunity to fix transportation’s hereto intractable reliance on liquid fossil fuels (and their associated pollution).

There’s no disputing the fact that mobile is reshaping the world we live in with data via hardwired, mobile and wifi networks fueling the growth in an ever expanding range of devices (smartphones, sports trackers etc) and services (mobile messaging Shazam etc). Our current infrastructure isn’t really built for these growing demandsJeff Hecht looks at what providers are doing to future proof our telecoms infrastructure:

Bottleneck Engineering

The energy sector is facing growing calls to switch away from fossil fuel based energy given the growing threat from climate change. Renewable energy has traditionally been handicapped by intermittent supply and the costs of energy storage whilst nuclear is costly and has a rather mixed safety record. Tim Harford points to the potentially valuable role of price signals in getting the energy market to travel in the right direction:

Overall, there is little prospect of running out of fossil fuels, and it seems unlikely that alternative energy sources will outcompete them. And yet we must make the shift, or risk catastrophic climate change. Our reserves of fossil fuels may be no constraint but the atmosphere’s capacity to safely absorb carbon dioxide is.

There is some space for optimism. Renewable energy sources are no longer impossibly costly. Nor is nuclear power, even though the costs have moved in the wrong direction. We cannot wait for the market to make the switch unaided — but the gap is no longer so wide that sensible policy cannot bridge it. The centrepiece of such a policy would be to raise the price of carbon dioxide emissions, using internationally co-ordinated taxes or their equivalent. Such a tax would make renewable energy sources more attractive — as well as encouraging energy efficient technologies and behaviour. Market forces can do the rest. Low carbon energy is not free — but it is worth paying for.

Ambrose Evans-Pritchard points to innovations in energy storage as giving more than a helping hand,  changing what is economically viable and potentially making Hinkley Point look like something of a white elephant:

This transforms the calculus of energy policy. The question for the British government as it designs a strategy fit for the 21st Century – and wrestles with an exorbitant commitment to Hinkley Point – is no longer whether this form of back-up power will ever be commercially viable, but whether the inflection point arrives in the early-2020s or in the late 2020s.

Simon Hattenstone  has taken a critical at meritocracy in the UK in light of Theresa May’s recent cabinet appointments which are less dominated by Etonians than her predecessor David Cameron. This raises the question will we see real change or more of the same?

Lee Elliot Major of the Sutton Trust, talks of an academic arms race. “Every time opportunities widen for those from less privileged backgrounds, the middle classes find some way of defining merit to their advantage again. Never underestimate the skills and the tenacity of the middle classes to reinforce their privileged position in society. So there was a university expansion, but if you look at the more prestigious universities, there’s still a stark gap in terms of those from more advantaged backgrounds versus those from disadvantaged backgrounds. And increasingly you’re seeing post-graduate degrees.”

The rise of Donald Trump has prompted much soul searching among political commentators in the US pointing to it as a symptom of the growing social inequality. Research from Gallup provides a more nuanced analysis as Max Ehrenfreund and Jeff Guo report:

According to this new analysis, those who view Trump favorably have not been disproportionately affected by foreign trade or immigration, compared with people with unfavorable views of the Republican presidential nominee. The results suggest that his supporters, on average, do not have lower incomes than other Americans, nor are they more likely to be unemployed.

Yet while Trump’s supporters might be comparatively well off themselves, they come from places where their neighbors endure other forms of hardship. In their communities, white residents are dying younger, and it is harder for young people who grow up poor to get ahead.

Alec MacGillis looks more broadly at the growth of a white underclass in the US which has  provided a fertile ground for Trump’s more xenophobic view of the world:

So why are white Americans in downwardly mobile areas feeling a despair that appears to be driving stark increases in substance abuse and suicide? In my own reporting in Vance’s home ground of southwestern Ohio and ancestral territory of eastern Kentucky, I have encountered racial anxiety and antagonism, for sure. But far more striking is the general aura of decline that hangs over towns in which medical-supply stores and pawn shops dominate decrepit main streets, and Victorians stand crumbling, unoccupied. Talk with those still sticking it out, the body-shop worker and the dollar-store clerk and the unemployed miner, and the fatalism is clear: Things were much better in an earlier time, and no future awaits in places that have been left behind by polished people in gleaming cities. The most painful comparison is not with supposedly ascendant minorities—it’s with the fortunes of one’s own parents or, by now, grandparents. The demoralizing effect of decay enveloping the place you live cannot be underestimated. And the bitterness—the “primal scorn”—that Donald Trump has tapped into among white Americans in struggling areas is aimed not just at those of foreign extraction. It is directed toward fellow countrymen who have become foreigners of a different sort, looking down on the natives, if they bother to look at all.

Reflecting the current race between Hillary Clinton and Donald Trump, The Economist suggests that politics will increasingly be about open versus closed models rather than the traditional battles between left and right:

Left, right, left, right

The Rio Olympics has put Brazil in the spotlight during a tumultuous period in its political history. Franklin Foer has a valuable piece that provides a valuable background to recent events:

But the public’s understandable despair isn’t wholly shared by the experts I spoke with. Stepping back, they saw unlikely causes for hope. Impeachment revealed the worst about Brazilian democracy—and the worst wasn’t so terrible. There’s no talk of returning to dictatorship, no real fear of a Hugo Chávez–like figure clouding the sky. Impeachment was a poor showing of democracy, but it was still democracy. Even with all the budgetary turmoil, Bolsa Família remains firmly ensconced. Austerity will whack the poor, yet Lula’s evolution of Brazilian social democracy won’t reverse course. Most important, the Petrobras scandal is so spectacular that its grasp on the popular imagination doesn’t seem to be slipping. Indeed, Temer’s impeachment gambit has yet to slow the Moro investigation. Brazil has a once-in-a-generation chance to untether its politics from its debilitating state of codependence with the big firms. Hosting the Olympics was never going to bring Brazil the national greatness Lula advertised. Freeing its democracy and economy from the plague of corruption could.

Saudi Arabia feels for many of us like a different world given the way that religion shapes everyone’s lives. Studio D’s research into the lives of young Saudi’s provides a valuable window of how people adjust and if that whets your appetite, it’s also worth reading Jessi Hempel’s coverage of the research process:
For Saudi female youth the smartphone is the great liberator
The featured image is a Gue mural photographed by Angelo Jaroszuk Bogasz at the Altrove Street Art Festival in Catanzaro, Italy and published in StreetArtNews.

Thought Starters: TV, messaging, innovation and tension in Israel among other things…

Thought Starters provides me with a chance to review the research and opinions that I’ve read over the last week or so. This edition looks at the evolving worlds of mobile messaging and television, the increasing pace of innovation and profiles of network effects, intergenerational equity, Israel, Denmark and Brazil among other things.

Tomaž Štolfa reports on the evolution of the messaging formats, from IRC through to the movement to richer model we have today which goes well beyond acting as a means of basic peer to peer communication:

Each message has the potential to be a mini application. It might be just an application that displays text, a photo, or alternatively presents an interface for something more complex in the constrained environment of a message cell. There is an unlimited set of opportunities to create bite size applications like a photo carousel, media players, mini games, inventory items, in-messaging payments, and many others.

Snapchat has emerged as one of the break out winners in the mobile messaging space although monetisation has definitely trailed far behind user growth. Mark Suster argues that Snapchat’s reach, immediacy, authenticity, engagement, geography, brand recall and monetisation point to it being a channel you’ll see a whole lot more of in months and years to come.

Matthew Ball and Tal Shachar do some crystal ball gazing for the television and online video sector and positing three different business models (scale feed; social feed; and identity feeds) that are likely to provide significant business models in the future:

The end of traditional television has begun. That much is clear. And even if authentication is figured out, TV Everywhere isn’t the answer. The future of video will look, behave, be valued and interacted with very differently than it has in the past. It won’t just be a digital adaption of linear, and it won’t just be more Netflixes.

CB Insights’ Corporate Innovation Trends provides a window into why there’s so much incessant talk about disruption. Various technologies and business strategies are making it much easier to launch a startup:

Cost to launch a tech startup

At the other end of the scale, companies are finding their moment in the spotlight shrinking with firms on average spending less time in the S&P 500 Index:

Average company lifespan on S&P 500 Index

Before you put all your life savings behind a high growth startup, it’s worth repeating that 92% of tech startups fail. There’s no secret ingredient for successful startups but a recent presentation from Andreessen Horowitz focuses on the role of network effects, contrasting it with economies of scale and virality which it is sometimes confused with:

Network effects versus Virality versus Economies of scale

Ross Baird and Lenny Mendonca call for business models that address the financial and geographical concentrations of wealth typically associated with the startup economy:

We need to figure out how to make the system work for everyone in the face of technological changes. We need policymakers to incentivize regional and industry diversity in our innovation, and entrepreneurs to focus on the larger, thornier questions related to building businesses that share the wealth better among those who create them — not design a system to spread the crumbs a little better.

Doc Searls and David Weinberger  who are among the authors of the Cluetrain Manifesto, have pulled together some new “clues” in their call for a more collaborative open internet:

Sure, apps offer a nice experience. But the Web is about links that constantly reach out, connecting us without end. For lives and ideas, completion is death. Choose life.

The globalisation of the world economy can be clearly seen in a recently released report from McKinsey with growth in interregional data. Among the causes and effects are that startups are finding it easier to tap global markets whilst consumers are increasingly looking to interact with communities of interest rather than proximity:

Global flow of data and communication
Morgane Santos gives a spirited called for Designer Daves to take a less conformist approach to digital design in what should be a still evolving medium:

Certainly, design should follow some basic paradigms to make whatever we’re designing easy to use. All scissors look fundamentally the same because that’s what works.

But digital design—whether it’s for desktop, mobile, VR, games, whatever—is still relatively young. We simply do not know what the best solutions are. At best, we’ve reached a local maximum. And so long as we reward predictable designs, we will never move past this local maximum.

Much of the attention on income inequality has focused on the growing share earned by the very wealthy. Research in The Guardian on the other hand has pointed to the disproportionate share of disposable income held by older age cohorts with younger audiences having to fight increasingly hard to get a foot up on the economic ladder:
Pensioners have seen significantly higher disposable income growth than young people in almost every wealthy country over the last few decades
 The Israeli-Palestinian conflict has always presented something of a conundrum with sympathy for the plight of the Palestinians tempered by concerns for the more moderate Jews looking for a peaceful resolution. Recently released research from the Pew Research Center sheds some light on the Jewish and Arabic populations and points to the growing political divide between the two. Unfortunately a peaceful resolution looks increasingly far off:
Israel's diverse religious landscape
Whilst we’re on the subject of the Middle East, The Economist looks at which countries are (or aren’t) being generous in their welcome towards Syrian refugees:
Syrian refugees by country
 One country that hasn’t welcomed them with open arms is Denmark. Hugh Eakin looks at the increasingly hostile attitude among many Danes and the Danish political system to the plight of refugees which unfortunately is becoming increasingly reflective of many other European countries:
In January, more than 60,000 refugees arrived in Europe, a thirty-five-fold increase from the same month last year; but in Denmark, according to Politiken, the number of asylum-seekers has steadily declined since the start of the year, with only 1,400 seeking to enter the country. In limiting the kind of social turmoil now playing out in Germany, Sweden, and France, the Danes may yet come through the current crisis a more stable, united, and open society than any of their neighbors. But they may also have shown that this openness extends no farther than the Danish frontier.
Many international news reports from Brazil seem to point to a country that has had enough of corruption in the ruling PT party. Glenn Greenwald, Andrew Fishman and David Miranda give a more balanced account, not denying accounts of corruption but also pointing to a ruling elite who would like to see the democratically elected government out of power:
Corruption among Brazil’s political class — including the top levels of the PT — is real and substantial. But Brazil’s plutocrats, their media, and the upper and middle classes are glaringly exploiting this corruption scandal to achieve what they have failed for years to accomplish democratically: the removal of PT from power.
The featured image is an Add Fuel mural from the Memoire Urbane Festival in Gaeta, Italy and published in StreetArtNews.