Economies of Scale As a Service

foxconn

Credit where it’s definitely due: this post was inspired by a Twitter conversation with Box CEO Aaron Levie.

Don’t look now, but something remarkable is happening.

Instagram had twelve employees when it was purchased for $700 million; all of its actual computing power was outsourced to Amazon Web Services. Mighty ARM has only 2300 employees, but there are more than 35 billion ARM-based chips out there. They do no manufacturing; instead they license their designs to companies like Apple, who in turn contract withcompanies like TSMC for the actual fabrication. Nest Labs and Ubiquiti are both 200-employee hardware companies worth circa $1 billion…who subcontract their actual manufacturing out to China.

Warren Buffett has long advocated investing in businesses with “moats” around their business model. Often that moat is an economy of scale; the notion that a hundred widgets cost a dollar each but a million widgets only a dime apiece.

Obviously that doesn’t apply to software, or music, or other virtual goods. What’s less obvious is that as time goes by, and technology and interconnectivity advance, it applies less and less to the physical world as well. Industrial capacities that not long ago were available only to gargantuan corporations are today open to anyone and everyone. Amazon, Microsoft, Google, and the OpenStack providers compete to rent economies of scale for web services. Foxconn et al essentially do the same for electronics. So what happens when this trend expands into other sectors? What happens when there are Foxconns for furniture, or cars, or houses, or retail stores? And a Dronenet for transporting physical goods?

What happens is that moats dry up, and are bridged, and previously impregnable incumbents start looking very vulnerable to disruption indeed.

But wait. This is all too small. Let’s think bigger yet.

Compare and contrast Intel with ARM. The former is, historically, a vertically integrated design-and-manufacturing monolith which owns and controls everything they do, whereas the latter concentrates on being the best at the one thing they do. I have enormous respect for Intel but it seems clear that the world is trending towards ARM’s more decoupled model, wherein their designs (like TSMC’s manufacturing capacity) are made available to any and all customers.

The logical conclusion of that trend, however, is far more transformative than a mere reduction in optimal corporate size and scope: it’s this–

I might paraphrase that as “property isn’t theft; property is an inefficient distribution of resources.” It signifies a dichotomy between two very different modes of thinking–one where you own things, and one where you just use them, and share them when they’re not in use. This is old news in the tech world, which has been dispersing monolithic dedicated channels into hordes of flexibly routed packets for decades…

Fibers always come in pairs. This practice seems obvious to a telephony person, who is in the business of setting up symmetrical two-way circuits, but makes no particular sense to a hacker tourist who tends to think in terms of one-way packet transmission. The split between these two ways of thinking runs very deep and accounts for much tumult in the telecom world.

— Neal Stephenson, Mother Earth Mother Board, 1994

…but it’s enormously foreign and disruptive, verging on revolutionary, to most everyone else. (Indeed, a whole lot of people have probably just mistaken it for communism. It’s not.)

We’re getting pretty abstract here. Let me pick a particular example: this column by Casey B. Mulligan in the New York Times this week, which concludes that “driverless cars … will increase the number of vehicles on the road.”

It’s a fairly smart piece that suffers from what I call “unidimensional extrapolation,” and so misses effects like the trend I refer to above. Widespread use of driverless cars will inevitably lead to a sharp rise in ownerless cars. A major reason for owning a car is that you don’t need to go get one when you need one. Which sounds like a tautology today, but won’t when shared driverless cars will be able to zoom to your house on five minute’s notice when you need to go to the mall for an hour.

Ultimately, I’m confident that driverless cars will lead to much lower car ownership in urban areas; instead, large numbers of people will have fractional ownership of sizable pools of driverless vehicles, à la Berkshire Hathaway’s NetJets, and just summon them when they need them. This will codify and formalize the running cost of using a car…and since you won’t pay for them when you’re not using them, it in turn will lead to fewer cars on the road.

That’s just one example. More generally, I think it’s hard to deny that both industries (AWS, Foxconn, etc) and individuals (from AirBNB to Zipcar) are increasingly moving towards collective usage of large pools of widely accessible shared resources. Economies of scale as a service, as Aaron put it. So far the effects are limited to specific sectors and domains — but it’s only a matter of time before this wave of change reaches, and profoundly disturbs, entire industries hitherto untouched by its force.

JON EVANS

Kool Clipz Review

One of my favorite social media platforms is twitter. I’ve connected with so many people from all over the world. The technology is pretty amazing because it provides entrepreneurs the ability to get their products or services in front of people quicker, and go around the traditional layers of media that are out dated and slow.

That’s how I met David Clark, inventor of Kool Clipz. He reached out on twitter and shared his entrepreneurial story. This “bobby pin” on steroids works just like he advertises. My wife talked me into running a leg of the upcoming Akron Marathon, so this was perfect timing. David shipped me some Kool Clipz to try out and in about :15 seconds realized the niche his product was filling. It clips and holds your headphone wires providing a “wireless” feeling. My headphones weren’t flapping all over the place… It really works.

Kool Clipz is located in Iowa, and their product are “Made in America” Give them a try and let me know what you think!

@avalanchemike 

Chairlift Gets Another Page 1 Ranking

Our Chairlift Digital Marketing Services has a proven blueprint when it comes to page rankings. Our latest proof is producing a “Welcome/Introduction” Video for the law firm Pavick & Pavick L.P.A. targeting personal injury legal services in Akron, Ohio.

After the final edits were complete, we keyword researched their local competition, and optimized their video.

In 6 days we have them on page 1 and position 1 for the search phrasepersonal injury, akron ohio
-Out of 159,000 results, we positioned our client #1

Chairlift’s Runout Network has also pushed almost 2,000 viewers to their movie as well… Below is the video.

Before You Download That App, What You Need to Know About Security and Privacy

An entrepreneur’s smartphone and tablet are stuffed with sensitive information, from customer lists to business strategy notes. Loss or theft isn’t the only way it can fall into the wrong hands. Cyberthieves and unprincipled or ignorant companies could use apps to take data without your even realizing it.

Mobile apps — whether for business or entertainment — can upload your contact lists and access your location and email, though in almost all cases you must give them permission to do so. They may also store personal and other sensitive information, and sell it or share it, without your knowledge.

Your phone is “highly personal and facilitates a huge level of data collection,” says Sarah Downey, a privacy analyst at Abine Inc., a Boston-based privacy software firm. You owe it to yourself, your business and your clients — especially if your company promises them confidentiality — to keep your devices free of malicious apps and to put privacy protections in place.

Here are five tips to consider before downloading a new app on your device:

1. Shop wisely. 

Despite the media hype, malware on mobile devices is not yet a significant problem. Although malware incidents are on the rise, the majority involve apps acquired from random, untrustworthy websites. Most have targeted the Symbian operating system and, more recently, Android. You can reduce your risk of downloading an outright malicious app to almost zero by acquiring apps only from your operating system maker’s app store.

Related: Three Tips for Keeping Business Data Safe on Personal Mobile Devices 

Google scrutinizes the security of apps sold through Google Play (formerly the Android Market), takes user complaints and removes apps that violate its policies. Apple also vets apps before allowing them to grace its App Store which, experts say, has never distributed a malicious app. Microsoft does the same in its Windows Phone 7 marketplace.

2. Be cautious. 
Before downloading an app from a company you’ve never heard of, do a quick web search to make sure it’s legitimate and reputable. People love to complain online, and their grumbles could protect you from a bad actor — or a sloppy newcomer that ignores user privacy.

3. Be socially discerning. 
Don’t use your personal Facebook or Twitter account to sign in to a business app. “You want to keep a separation between church and state,” says Pam Dixon, executive director of World Privacy Forum, a San Diego-based advocacy group. “We don’t know all the dangers yet … You need to make sure client data is not getting sucked in [to social networks]. It could be a real competitive issue down the road.”

4. Demand privacy. 
Don’t buy an app it if requires permission to access data or take other actions you find intrusive or unnecessary. Few apps need your contacts list or physical location. Even fewer need to access your emails, send text messages or listen in via your microphone.

App developers often seek more permissions than they need in case they might want them for a new feature down the road, Downey says. Many apps don’t have privacy polices (though more will soon), and they often fail to disclose or are vague about how they’ll use your data.

Related: Nine Tools for Building Your Own Mobile App

Also, check privacy policies, the documents that give you legal recourse if data are misused. You can use your computer to visit the app store, find the app and click through to the developer’s site to look for the policy. If necessary, email the app maker for more information. Does your note-taking app store a copy of your scribblings on its own servers? Does your project planner transmit your client list?

If you’re not comfortable after your due diligence, don’t install the app and let the maker know why. Mobile privacy is new territory that’s beginning to get public, corporate and government attention.

5. Check your existing apps. 
It isn’t quick, easy or fun, but it is helpful to review the privacy policies and permissions given to apps you already own.

Android users can review permissions for individual apps by going to the Settings screen and choosing Device and then Apps. Both Android and iPhone let you adjust or totally turn off their GPS location features within settings. With iPhone, you can see which apps access location and turn each one on or off. Apple plans to provide a similar tool for adjusting permissions to access contacts lists in a future operating system update.

Related: Three Ways to Make Your App Stand Out (Video)

Independent resources for understanding app privacy and security are limited. WhatApp.org has some useful expert reviews but covers a very small number of apps. Common Sense Mediareviews games and other apps popular with kids.

Concerned users may want to consider security software to defend against mobile malware, including spyware apps like FlexiSPY, which are most often planted by jealous lovers but presumably could be installed by corporate spies.

Lookout Inc., a mobile security software maker, offers Privacy Advisor as part of its premium security software package for Android phones and tablets ($3 a month or $30 a year). Privacy Advisor provides a list of which of your apps can access private data, along with reports that explain the risks and capabilities of each app.

 is a freelance journalist who has covered technology for more than 10 years. She writes regularly on electronic security and privacy for The New York Times and its Gadgetwise and Bits blogs. She has also written extensively about small business for The Wall Street Journal and was previously a technology reporter at Dow Jones Newswires.

 

Can Twitter Make Local Pay?

The crazy kids at Twitter have been busy turning a revolution into a business. Led by ex-Googler (and ex-improv comedian) Dick Costolo, the five-year-old company bagged $260 million in revenues last year on the way towards justifying their $8 billion secondary market valuation. Costolo has deftly nudged the Twitter team towards subtle forms of monetization centered on sponsored tweets and sponsored trends that allow corporate marketers to place their message front and center. This is part of the now nearly decade-old shift towards what Web guru John Battelle has long called conversational marketing.
In the next few months, Twitter plans on rolling out tools to help local merchants also buy tweets. To date, Twitter has primarily targeted larger businesses with bigger marketing budgets ranging from several thousand a month well up into the hundreds of thousands. McDonalds and GM have played the game, albeit with serious investments in monitoring social media and responding to comments in the stream relating to their sponsored tweets and trends. For their part, many local merchants that are already Twitter savvy are doing it for free, tweeting deals and messages to their followers and responding to comments. So the obvious question is, will they pay for what they are getting for free? And how can Twitter add additional value for local merchants bombarded by marketing tools claiming to solve their problems?
I know a number of local merchants who are aggressive users of Twitter. Their answer to me has been, thus far, it depends. And what they recognize is this: For Twitter to prove real value and garner the additional revenue for sponsored deals from Mom-and-Pop shops, it needs to move from becoming a vehicle for communication to a vehicle for discovery. At present, savvy merchants use Twitter to communicate with existing followers. These are usually people who have had physical contact or actually used the good or service on offer. (They also can use Twitter as a customer service channel, but that largely relates to bigger companies with more complex services – phone companies and the like). And it works beautifully for local merchants who man the channel and regularly Tweet useful things.
But what happens when these merchants try to use Twitter to spark interest from people they never met before and have no real connection with? Twitter apparently plans to address this by directing the sponsored Tweets at people who are more likely to be interested in this local trend or Tweet. How granular they can go is of critical importance. I am a fan of brick-oven pizza. But I won’t travel more than a few miles out of my way to get it. How likely am I to find a brick-oven pizza deal or a Tweet related to this topic within my geofence will determine the value of this advertising medium to me.
Temporal aspects of the sponsored Tweets will also be essential. Just as display ads served incessantly condition Web surfers not to look, ever present Tweets that are not temporally relevant (a pizza Tweet served at 10 pm on a Sunday night) will encourage the development of “Twitter blinders”. On the subject of time, one thing that the local merchants do not have is time. So Twitter’s core value proposition that merchants pay only for actions — retweets, follows and clicks — will seem less alluring to small shops pressed for time and less willing to experiment.
That said, if Twitter makes it easy or clear enough to buy, then they can tap easily into the fast growing cadre of small businesses that are already buying ads online via self-service — a group that can only grow. Costolo, too, has shown deference to the medium, weaving ad offerings artfully into the Twitter ecosystem in ways that seem natural.
With a ton of money in the bank, too, Twitter is in the game for the long-haul. Nearly a decade after Google went self-service with ads, only now are we starting to see serious penetration at the local level of the self-service business model. And, like Twitter, Google could easily have poisoned the search engine well by pouring on too many ads and turning off searchers. So Costolo is entirely justified in his go-slow approach. In the local business, expect a slow-burn from the Twitter kids as they learn more about Mom-and-Pop and make sure not to offend the faithful. And, frankly, that’s just fine.

By: Alex Salkever 



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