Blind Men and the Elephant. 

12/10/2017

How the Internet Works

"The biggest money is in the smallest sales." A key reason proposed for the success of Amazon, Ebay and Netflix. An update on the 80/20 Pareto to the "98% principle," advanced by Chris Anderson, in his book:"The Long Tail." 

The opportunity cost of stocking a digital product* is negligible in comparison with tangible goods. Markets shatter into niches and choice becomes almost unlimited. *A digital product is one where creating multiple exact copies is either cheap or free. 

 In "The Long Tail," Anderson uses the metaphor of a waning tide uncovering new ground which was previously unseen or too costly to reach.

Clayton M Christiansen states that a key institutional failing of big companies is that they cannot chase the "unprofitable niche"... that sometimes it is right to prospect lower performing, lower performance segments - "to aggressively pursue small, rather than substantial markets." The Innovator's Dilemma (1997)

"...He also talked about something that was to land on me with a thud six years later. The principle of originality. So what! I thought at the time; Who cares?" Steve Martin (2007)

Companies that compete on a distinctive set of ideas reject other ideas ...a big a part of (ING Direct's - web based bank) strategy is avoiding opportunities that are "off target." ...promoting the interest of the little guy. We are about main street, not Wall St." Low overhead, low cost, low margin business model. Mavericks at Work (2007).

The internet is a world (read virtuality -  worlds can be constructed in ways we cannot yet imagine) of abundance, not scarcity. It removes the opportunity cost of starting business; the physical space, infrastructural cost, fit out, deposits, real estate and staff investment. 

"Virtuality is far bigger than Reality" - Don and Erwin Schrödinger

The usage side of the internet is not primarily investment capital, it is intellectual capital. It creates new tribes, groups and collectives.  The early internet was replete with this type of collaborative ideal and software.  GeoCities (1994) began the creation of virtual communities long before Facebook - in fact GeoCities Japan still exists today. So explain Facebook? I can't! Philosophically Facebook is the anti-internet and should have been outmoded in 2008. A stationary object in a sea of change.

The internet has no 24 hour cycle. Time is not finite, it may even be expanding. Consider that "YouTube users upload 300 hours of video every minute. It would currently take 60000 years to watch every video" (Courtesy of YouTube.com).

"It took thirty-eight years before 50 million people gained access to radios. It took television thirteen years to earn an audience that size. It took Instagram a year and a half." Gary Vaynerchuk (2013).

Massive, rewards niches. Knowledge on demand, but access oriented. Collaborative, expansive, non linear, inverts the laws of rational economics and evolving fast - yes. 

"The internet killed the Porn industry" ... no it didn't it took scarcity value out of the mix. Porn is still going strong, today with HD video and VR, I checked. These days you're just not paying 60 dollars for a CD or 20 for a magazine - its free (ad supported) and caters to your particular fetish, in your own home.

"It killed book stores." Partially true. It made the cost of carrying and shipping a publication far cheaper. It took out the geographical constraints. Amazon's price differential, Paypal and effective local postal options (depending on your country) combine to undercut the local store owner. 

The physical book store hits the law of diminishing returns quite early - on the internet plane the point of inefficiency is reduced by automation, virtualization and homogenisis to almost nil. 

"IT killed community." In one sense yes, it puts people behind screens. Whether a social contract exists and whether it can be expanded to a global level is for you to decide. The concepts of citizenry, polis and mob are culturally constructed from 2000 year old Mediterranean models. 

The internet does remove the geographical constraint and structural communication barriers, increasing the viability of dialogue or multilogue. Instead of physical walls, clubs, castes and cliques, it has created virtual ones. "We might say the body is trapped, but the mind is free (...or is it?)"

"We live in a world where there is more and more information, and less and less meaning...Everywhere socialization is measured by the exposure to media messages.  Whoever is underexposed to the media is desocialized or virtually asocial. (1981). The internet fits snugly into the postmodern philosophy espoused by Derrida, Barthez, Foucault, and Buadrilliard.

"What progress we are making. In the Middle Ages they would have burned me. Now they are content with burning my books. "
― Sigmund Freud

One of the key features of "our" INTERNET is how many people consciously work to keep the public network open, inclusive and accessible. I address this point now, as it is questionable whether the current collective internet will remain intact. The danger of Nation state malware like Stuxnet, NSA snooping, copyright and network security concerns, creates obvious ongoing issues for global collaboration.

Ok, Interlude - time for the boring hardware bits... (Skip five paragraphs)

The INTERNET is the shared virtual space occupied by networked
computers. Initially the system was built for military networks over telephone and secure cable connections, under the authority of DARPA. Initial networks were built using shared computers in US college campuses, where the value of shared information stored on multiple smaller computers instead of single large "mainframe" computers fit the usage strategy. 


The boom in personal computing in the second phase of the process (70s/80s) meant that private owners could use home telephone cables to communicate small packets of data over a telephone connection. Till today telephone companies are the single biggest owners of INTERNET hardware.
Xerox built one of the first network connected computers but did not see the value in the concept early enough to capitalize on it financially. They wanted to focus on networked printers, not computers.


In terms of software ... Sir Tim Berners Lee developed the WWW (world wide web) protocol which we use today to transfer packet data over wired and unwired connections. Steve Jobs is credited with building one of the first "windows" ("borrowed"from Xerox - complained when Gates took his idea) based computer systems that allowed ordinary users to use visual icons, instead of lists of commands (or code), to "point and click"

Another key concept is the use of free internet browsers; initially windows "explorer," "netscape navigator" and more recently google chrome, allows us to search indexed directories of web sites or pages based on an IP (INTERNET protocol) addresses for each computer in the network.

The principle of differentiated complexity  - this principle states that evolution is defined by an accumulation of niche tools, emergent uses for those tools and a widening scope of development (for the successful) within any environment (even a virtual one).  

This principle shares the contradictory but convergent quality in engineering, that the more evolved a process or design, usually the smaller becomes the various pieces. In the internet domain this is reflected in Moore's Law, a doubling of data transmission capacity every few years.

So the internet is a vast, evolving, cavernous space where we can create identity, communicate in real time around the world, build business, trade, make payments, develop new collaborative models, processes and tools, even manipulate elements of the real world - Yes.

"The real question is not whether machines think but whether men do. The mystery which surrounds a thinking machine already surrounds a thinking man.|"

Bf Skinner (1969)

"Man has become a god by means of artificial limbs, so to speak, quite magnificent when equipped with all his accessory organs; but they do not grow on him and they still give him trouble at times... "


References 

Born Standing Up: A Comic's Life (2008) Steve Martin 

Civilization and Its Discontents (2010) Sigmund Freud 

Contingencies of Reinforcement: A Theoretical Analysis (1969) B F Skinner

Fumbling the Future: How Xerox Invented, Then Ignored, the First Personal Computer (1999) Douglas K. Smith, Robert C. Alexander

Influence: The Psychology of Persuasion (1984) Cialdini

Jab, Jab, Jab, Right Hook: How to Tell Your Story in a Noisy World  (2013) Gary Vaynerchuk,

Mavericks at Work (2007) William C. Taylor, Polly G. LaBarre

Predictably Irrational: The Hidden Forces That Shape Our Decisions (2008) Dan Ariely

Pre-suasion, Simon & Schuster (2016) Cialdini

Simulation and Simulacra (1981) Baudriliard

Steve Jobs (2011) Walter Isaacson

System of objects (1996) Baudriliard

The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich  (2009) Timothy Ferriss

The $100 Startup: Reinvent the Way You Make a Living, Do What You Love, and Create a New Future (2012)  Chris Guillebeau

The Age of Access: The New Culture of Hypercapitalism, Where all of Life is a Paid-For Experience (2001) Jeremy Rifkin

The Innovator's Dilemma  (2016) Clayton M. Christensen

The Long Tail: Why the Future of Business is Selling Less of More (2008) Chris Anderson

Thinking Fast and Slow (2011) Daniel Kahneman

The Biggest Money is in Small Wins https://www.mediafactory.org.au/alexandra-roach/2013/10/08/the-biggest-money-is-in-the-smallest-sales-and-kevin-kelly/ (2013)

The Power of Small Wins (2011) https://hbr.org/2011/05/the-power-of-small-wins

Blind Men and the Elephant https://en.wikipedia.org/wiki/Blind_men_and_an_elephant 2017)

"How Xerox invented the Information Age..." https://www.cracked.com/article_18807_how-xerox-invented-information-age-and-gave-it-away.html (2010)