I'm talking about the sale of Instagram, the top-selling iPhone app with 12 employees that just sold Monday for $1,000,000,000 to Facebook in a deal personally nurtured and finalized by Mark Zuckerberg himself. Over the company's 18-month gestation they'd already gotten venture capital injections of $7MM and subsequently $50MM but now they've cashed out. Facebook is even spinning them off into the first independent company owned by Facebook instead of integrating them into the social network like they've done with previous acquisitions Facebook has made over the past few years. The computer millionaire is far from a new thing. Bill Gates made Microsoft into the juggernaut it is by throwing absurd chunks of money at every little company, software developer, competitor, and even somebody who just might be a competitor down the line (recently Microsoft has been shelling out millions to buy various patents from AOL including Netscape, Microsoft's onetime web rival; MS claims a lot of the purchases have been more to prevent competitors from buying the patents, which could not only give MS' rivals a competitive edge but also allow them to possibly sue MS for copyright infringement). But the web and software BILLIONAIRE, the hottest new trend in silicon value, is a drastic and monumental development in the world of American commerce and further proves that all great American gold rushes begin and end in the San Francisco bay area.
Yet to speak to my point Monday about the great magnet, about all things flowing together with some sort of illogical logic, in Tuesday's Wall Street Journal the article about the sale of Instagram landed on the same page as the obituary for Jack Tramiel.
After 30 YEARS of toil, experimentation and evolution, as well as for a period becoming THE name in home computing (long before Microsoft's user-friendly software began a revolution and around the time that Mark Zuckerberg was weaseling his way out of his mother's womb), Tramiel left the company because it was doing $1B a year in business and in spite of the fact that he'd essentially begun the PC craze, survived the holocaust, and, as he said "made more millionaires than anybody else", Tramiel could see he wasn't the person to run such a big company. He went on to run Atari, America's first gaming console, and rolled out the predecessors of our current portable game consoles, namely Lynx (even if his decisions eventually lead to Atari's demise) before retiring. It took 30 years and basically perfecting the price/need point of the personal computer before this man's company hit $1 billion in sales. And now a company with NO ANNUAL SALES and a year and a half existence is sold for $1 billion.
I'm not trying to ask whether that makes sense. Facebook was founded and still, to a certain extent, enjoys popularity because of the ease of sharing pictures. Instagram is an asset in this mission to dominate the picture-sharing world but could possibly be a threat if left to its own. Also, with a valuation most likely to near $100 billion dollars Facebook can make some big purchases without sweating whether they bring back immediate returns - or any returns at all. The point I'm trying to make is about the paradigm shift in business and revenue but specifically how America, once the land of mining gold, then the land of trade routes, and finally the land of mining and refining oil is entering a new creation of instant of wealth by mining - what - possibility? The interweb?
Tramiel started off importing physical products. Then he hired men to improve on these products based on his vision. Then he vertically integrated his products, buying chip suppliers to create a computer the world had just begun seeing as possibly a device everybody could own and benefit from. He was the first person to make technology and, thereby connectivity, accessible. And after all that he probably never saw such a payday.
There's a theory called Moore's law about how computing power will double every 2 years - though some people think it's closer to 18 months while others think it'll slow to every 3 years in 2013. It's based on the physical specs of shrinking transistor size but it seems to define everything today. When I was a kid we had an IBM compatible, dos, with flat, disgustingly pixellated games with slow response times. I remember my favorite, Tankfire (or maybe Nightfire?), in which you literally typed in the angle of your tank's canon - you couldn't move it up and down but had to put in approximate vectors - and then shot it at your opponent's tank. This could take half an hour if they kept moving.
2 years ago, while on a train during snowmageddon from DC to NY my wife and I met a recent mother whose husband bought an iPad 2 on the day their son was born since that was the day it came out. The novelty, she said, was the fact that for him the iPad is his zero point. Just imagine what they'll have when that kid is 30? There'll be computers that tap into our brains and senses directly, apps that allow us to communicate telepathically with our friends, maybe even in the same room, why not? We have cars that drive themselves and drones patrolling the streets and companies with no revenue and 18 months of existence pulling in 10 figures.
Not to say this is the standard. Online gamer Zynga had an IPO of $10 with a high of $14.55 and I last saw it trading at $11.41. Groupon came out at $20 a share, rose to $31.14, and now, about 5 months later is trading @ $13.85 and dropping due to misreporting of revenues on GroupOn's part. MySpace was purchased for $580M or so by NewsCorp just as Facebook was poised to decimate it. Now Facebook is being valued by some estimates at $100 billion and MySpace sold for $35M and is being turned into "the future of entertainment" by none other than former boybander-cum-popstar-cum-moviestar-cum-businessman Justin Timberlake.
So herein lies the rub. Tramiel had a physical product and while he had to have his finger on the pulse of consumer needs, he had 30 years to develop that sense and could make a physical product that, no matter what, could at least be sold for parts. But today's wealth is created online with virtual companies, a true wild wild west gold rush and just the same you could spend years building up a small gold sluicing operation with nothing to show for it or you could just be camping on a creekbed when you notice flecks and next thing you know you've discovered Gold Canyon which would eventually lead to the discovery of the Comstock Lode.
It's a fast-changing world. Moore's Law applies to the rapid development of physical computing power but we're dealing with something more complex than that. It's the amplification of computing power added to the rapid development of interpersonal culture as abetted by that computing power, a perfect storm of mechanical innovation and cultural renaissance that is combining to speed up not only how fast we compute but how fast we can share ideas and art and in turn speeding up evolution of art and culture. Like the recent South Park episode where they talk about Meme-ing and how Tebowing is already such old news. What the ramifications have for future society is unknown. Generation shifts are happening in half a generation, speeding up incrementally. Wealth is therefore being shifted and created at a rate reminiscent of the first dot.com bubble but while that was based on a relatively old idea of consumerism, this is based on the new concept of connectivity, on selling advertising based on all the hundreds of millions of eyes that are viewing the top websites at any given moment.
The new straw is the web connecting all of us. And as people figure out new ways to weave this together, gold is appearing at absurd rates. In a fraction of the time it took to shoot an autochrome about a century ago, my wife can take a picture, stylize it to be old-timey or black and white or any of a couple filters, then share it with her friends all over the country, hell all over the world.
In the end, it makes one wonder where the next innovations will lead. The last few generations since the 60's have been increasingly self-centered so it's no wonder that the greatest usages of technology and creations of wealth have been about making the sharing of one's personal life easier. And the upside is we may be able to go from impressionism to cubism in a few years because of the wide reach and accessibility of influence so who knows where art will be in a decade. But how much navel-gazing can we base an economy on?
For now, let's all just sit back and applaud the great electronic gold rush in the 10's. Whether it'll have the ability to sustain or not is inconsequential. All that matters is - the fact that I really need to come up with some fucking apps. To hell with blogging. How about something that allows you to insert genitals into any picture - imagine, virtual t-bag or vagina-mouth made easy?
- Ryan
No comments:
Post a Comment