WTF?: What's the Future and Why It's Up to Us

by Tim O'Reilly

We saw that radically new industries don’t start when creative entrepreneurs meet venture capitalists. They start with people who are infatuated with seemingly impossible futures. Those who change the world are people who are chasing a very different kind of unicorn, far more important than the Silicon Valley billion-dollar valuation (though some of them will achieve that too). It is the breakthrough, once remarkable, that becomes so ubiquitous that eventually it is taken for granted.

So what makes a real unicorn of this amazing kind? 1. It seems unbelievable at first. 2. It changes the way the world works. 3. It results in an ecosystem of new services, jobs, business models, and industries.

In Who Do You Want Your Customers to Become? Michael Schrage writes: Successful innovators don’t ask customers and clients to do something different; they ask them to become someone different. . . . Successful innovators ask users to embrace—or at least tolerate—new values, new skills, new behaviors, new vocabulary, new ideas, new expectations, and new aspirations. They transform their customers.

This is utterly profound

And that gets me to the third characteristic of true unicorns: They create value. Not just financial value, but real-world value for society.

We face a similar set of paradoxes today. The magical technologies of today—and choices we’ve already made, decades ago, about what we value as a society—are leading us down a path with complex contingencies, unseen dangers, and decisions that we don’t even know we are making.

Top US CEOs now earn 373x the income of the average worker, up from 42x in 1980.

Recently published research by Stanford economist Raj Chetty shows that for children born in 1940, the chance that they’d earn more than their parents was 92%; for children born in 1990, that chance has fallen to 50%.

Much like a physical landscape, a fitness landscape has peaks and valleys. The challenge is that you can only get from one peak—a so-called local maximum—to another by going back down. In evolutionary biology, a local maximum may mean that you become one of the long-lived stable species, unchanged for millions of years, or it may mean that you become extinct because you’re unable to respond to changed conditions.

We accepted the idea that what was good for financial markets was good for everyone and structured our economy to drive stock prices ever higher, convincing ourselves that “the market” of stocks, bonds, and derivatives was the same as Adam Smith’s market of real goods and services exchanged by ordinary people. We hollowed out the real economy, putting people out of work and capping their wages in service to corporate profits that went to a smaller and smaller slice of society.

One of my favorite quotes is from Edwin Schlossberg: “The skill of writing is to create a context in which other people can think.”

It is almost always the case that if you want to see the future, you have to look not at the technologies offered by the mainstream but by the innovators out at the fringes.

The lesson is clear: Treat curiosity and wonder as a guide to the future. That sense of wonder may just mean that those crazy enthusiasts are seeing something that you don’t . . . yet.

Larry also quoted to me a variation of Stewart Brand’s classic observation, saying, “Information doesn’t want to be free. Information wants to be valuable.”

This question has recurred, ever more broadly, throughout my career: How can a business create more value for society than it captures for itself?

This is a key lesson in how to see the future: bring people together who are already living in it. Science fiction writer William Gibson famously observed, “The future is already here. It’s just not evenly distributed yet.” The early developers of Linux and the Internet were already living in a future that was on its way to the wider world. Bringing them together was the first step in redrawing the map.

Your map should be an aid to seeing, not a replacement for it.

Language can also lead us astray. Korzybski was fond of showing people how words shaped their experience of the world. In one famous anecdote, he shared a tin of biscuits wrapped in brown paper with his class. As everyone munched on the biscuits, some taking seconds, he tore off the paper, showing that he’d passed out dog biscuits. Several students ran out of the class to throw up. Korzybski’s lesson: “I have just demonstrated that people don’t just eat food, but also words, and that the taste of the former is often outdone by the taste of the latter.”

When faced with the unknown, a certain cultivated receptivity, an opening to that unknown, leads to better maps than simply trying to overlay prior maps on that which is new.

This is my next lesson. If the future is here, but just not evenly distributed yet, find seeds of that future, study them, and ask yourself how things will be different when they are the new normal. What happens if this trend keeps going?

Ed Krol, the author, didn’t yet know much about the web, so Mike Loukides, his editor at O’Reilly, wrote the chapter and we added it to the book just before its publication in October 1992. Ed’s book, The Whole Internet User’s Guide & Catalog, went on to sell over a million copies and be named by the New York Public Library as one of the most significant books of the twentieth century.

MAKING STRATEGIC CHOICES You can tell if a business model map is good if it helps a company to make sound strategic choices. That is, it frames the problem in such a way that a company can make conscious choices about what’s important, rather than discovering too late that it broke a key part of what had made it successful.

Saul pointed out how replacing materials with information could play out with autonomous cars. Most cars doubled in weight from 1960 to 2010. We made them safer by adding crumple zones and airbags and all sorts of clever features useful in accidents. We did not make spectacular gains in fuel economy even though engines became more efficient, because most cars got fatter—larger and heavier. “What would happen,” he asked, “if we made cars so smart, and so automated, that they never hit each other? This is biology’s approach to safety. Jump out of the way or avoid the collision altogether. If we did so, we could lighten our cars up again, significantly so, which would have positive benefits on making it easier to electrify them. We could easily reduce the energy consumed in the transportation sector by two-thirds or more.”

“Replacing materials with information” is a more powerful formulation than “replacing ownership with access.”

To make the future economy better than the present, find new ways to augment workers, giving them new skills and access to new opportunities. As we automate something that humans used to do, how can we augment them so that they can do something newly valuable?

Steve Jobs, who was a master at throwing that door wide open, said, “When you grow up you tend to get told that the world is the way it is. . . . Life can be much broader once you discover one simple fact: Everything around you that you call life was made up by people that were no smarter than you. And you can change it, you can influence it. . . . Once you learn that, you’ll never be the same again.”

When you draw a new map successfully enough, you change the perception not only of the future but of the past. That thing that seemed unthinkable becomes the fabric of the everyday, and it’s hard to remember that it once was only one of many possibilities.

HUGE

In 2007 Logan Green and John Zimmer had founded a peer-to-peer service called Zimride, which was focused on matching drivers and passengers for long intercity rides. In 2012, Sunil’s work inspired them to launch a new service, called Lyft,

An app such as Uber knows when the ride begins and when it ends, calculates the cost in real time, and charges the stored credit card as soon as the ride is over. This innovation has still not entirely been grasped by others who could put it to use. In 2014, more than five years after the launch of Uber, the Apple Pay announcement demonstrated that even leading-edge companies were still stuck in the old model.

Truly disruptive new services don’t just digitize the familiar. They do away with it.

Uber knows what I owe based on GPS. And it charges me automatically. I “pay” simply by reaching my destination and getting out of the car. That is the future of payment, not “hold[ing] your iPhone near the contactless reader with your finger on Touch ID.”

Keep waiting for the missing pieces of the puzzle to arrive. Even if you aren’t the one to push that boundary, once someone does it successfully, there’s a huge opportunity for a fast follower. Be ready!

Twilio launched in 2008, providing program-callable cloud-based communications. This is the capability that lets you reach your driver by text or phone to adjust your location or to perform last-minute coordination, without providing a phone number that could be used to reach either party directly at a later time. This is an important tool for protecting the privacy of both driver and passenger.

Understanding that what used to be hard is now free and easy due to the work of others is essential to the leapfrogging progress of technology.

Real breakthroughs come when an entrepreneur doesn’t just use new technology to duplicate what went before or to fine-tune the way the world works now, but to reimagine how it ought to work.

Ronald Coase’s theory of twentieth-century business organization, which explores the question of when it makes sense to hire employees rather than simply contracting the work out to an individual or small company with specialized expertise. Coase’s answer is that it makes sense to put people into one business organization because of the transaction costs of finding, vetting, bargaining with, and supervising the work of external suppliers. But the Internet has changed that math, as Kilpi observes. “If the (transaction) costs of exchanging value in the society at large go down drastically as is happening today,” he writes, “the form and logic of economic and organizational entities necessarily need to change! The core firm should now be small and agile, with a large network.” He adds: “Apps can do now what managers used to do.”

Years ago, Clay Shirky described the move from “filter, then publish” to “publish, then filter” as one of the key advantages brought by the Internet to publishing, but the lesson applies to almost every Internet marketplace.

According to the Taxicab, Limousine & Paratransit Association (TLPA), the US taxi industry consists of approximately 6,300 companies operating 171,000 taxicabs and other vehicles. More than 80% of these are small companies operating anywhere between 1 and 50 taxis. Only 6% of these companies have more than 100 taxicabs.

I have been told that at current growth rates, Flex, Amazon’s network of on-demand delivery drivers, might well be larger than Lyft by 2018. Interestingly, Flex uses a model in which drivers sign up in advance for two, four, or six-hour shifts for a predetermined hourly rate. Amazon takes the risk of not having enough delivery volume to keep them busy. While drivers may earn slightly less than the most successful Uber or Lyft drivers, the greater predictability has made Flex highly desirable to drivers.

Science fiction writer Kim Stanley Robinson captures this moment perfectly in his novel Green Mars, when one of the original settlers of Mars has a shock of insight: “He realized then that history is a wave that moves through time slightly faster than we do.” If we are honest with ourselves, each of us has many such moments, when we realize that the world has moved on and we are stuck in the past.

The primary platform service provided by Airbnb, though, is not to build a pretty web page showing off a property, to schedule rentals, or to take payments. Anyone with a modicum of web experience can do all those things in an afternoon. The essential job of an Internet service like Airbnb is to build what Alvin E. Roth, the economist whose work on labor marketplaces earned him the Nobel Prize, calls a “thick marketplace,” a critical mass of consumers and producers, readers and writers, or buyers and sellers.

Permissionless networks, like open source software projects or the World Wide Web, often grow faster and more organically than those that require approval, and the web soon left MSN and AOL far behind. The web grew to hundreds of millions of websites, hosting trillions of web pages.

Networks often turn out to be two-sided marketplaces, in which one party pays for access to the other, trading money for attention. If you are unable to develop the matching side of the market, in the form of a network of advertisers, you are in trouble. This is why, for example, YouTube was sold to Google despite beating Google’s own video product in attracting viewers, and why Instagram and WhatsApp were sold to Facebook. It is why Twitter is still struggling. Ultimately, network businesses need to develop both sides of the market.

More than 63 million Americans (roughly half of all households) are now enrolled in Amazon Prime, the company’s free shipping service. Amazon has more than 200 million active credit card accounts; 55% of online shoppers now begin their search at Amazon, and 46% of all online shopping happens on the platform.

Simple, decentralized systems work better at generating new possibilities than centralized, complex systems because they are able to evolve more quickly. Each decentralized component within the overall framework of simple rules is able to seek out its own fitness function. Those components that work better reproduce and spread; those that don’t die off.

In 1973, Bob Kahn and Vint Cerf realized that the right way to solve the interoperability problem was to take the intelligence out of the network and to make the network endpoints responsible for reassembling the packets and requesting retransmission if any packets had been lost. Seemingly paradoxically, they had figured out that the best way to make the network more reliable was to have it do less. Over the next five years, with the help of many others, they developed two protocols, TCP (Transmission Control Protocol) and IP (Internet Protocol), generally spoken of together as TCP/IP, which effectively bridged the differences between underlying networks.

And there was this naive, glorious statement by Jon Postel in RFC 761: “TCP implementation should follow a general principle of robustness. Be conservative in what you do. Be liberal in what you accept from others.”

There’s a key lesson here for networks that wish to reach maximum scale. Open source software projects like Linux and open systems like the Internet and the World Wide Web work not because there’s a central board of approval giving permission for each new addition but because the original designers of the system laid down clear rules for cooperation and interoperability.

One slide highlighted my vision for what made the bazaar of open source development, or a permissionless network like the Internet, so powerful: • An architecture of participation means that your users help to extend your platform. • Low barriers to experimentation mean that the system is “hacker friendly” for maximum innovation. • Interoperability means that one component or service can be swapped out if a better one comes along. • “Lock-in” comes because others depend on the benefit from your services, not because you’re completely in control.

The long Internet boom of the past decade can be traced back to Amazon’s strategic decision to rebuild its own infrastructure and then open that infrastructure to the world.

Any project at Amazon is designed via a “working backwards” process. That is, the company, famous for its focus on the customer, starts with a press release that describes what the finished product does and why. (If it’s an internal-only service or product, the “customer” might be another internal team.) Then they write a “Frequently Asked Questions” document. They create mock-ups and other ways of defining the customer experience. They go so far as to write an actual user manual, describing how to use the product. Only then is the actual product green-lighted. Development is still iterative, informed by additional data from actual users as the product is built and tested, but the promise of the final product is where everything starts.

BRILLIANT