Startups Don’t Need to Make Financial Sense

Startups Don’t Need to Make Financial Sense

I’m sure some investors will be rolling their eyes just about now. And with good cause. Yes, companies are supposed to make financial sense, and there is an apparent reason for that.

Entrepreneurs start companies with the goal of generating value for society. The larger the value, the more their customers are ready to pay for it. The more painful the problem the company solves, the more money they’ll be able to charge. The more universal is the issue, the bigger their market is.

That’s the theory at least.

Money isn’t only a ‘reward’ for bringing about value. That payoff allows the company to sustain their operations. In other words, it makes the value generation sustainable.

If we look at System Theory, it’s what we call a reinforcing feedback loop. The more value a company generates, the more money it gets to do more. If the company stops reinvesting, the money it makes will eventually decline. 

Tools for Systems Thinkers

However, on some occasions, the entrepreneurs can’t deliver value without initial capital. This initial capital or seed is what in System Theory we call Stocks. Investors are usually the ones providing the starting stock (money) of the system.

Basic Reinforcing loop. The Aleph Report (thealeph.com)

Their goal is to provide the kindle to start the system going. Once it’s grown, investors can take a big cut on the enlarged money stock earned by the company if everything went well. And that’s a big If. And that’s why it’s called Venture Capital investment and not safe-and-easy-as-bonds.

Basic startup investment (VC) system model. The Aleph Report (thealeph.com)

The thing about feedback loops is that they’re rarely immediate. It takes time for a company to create value. This is what System Theory dubs feedback loop Delay. In the case of companies, this delay can range from near-immediate to decades.

There is an increasing movement in the industry called Deep Technology. One of the main characteristics of Deep Technology is their long delays of this feedback loop.

The longer the delay, the more money the company will require to survive before depleting their capital, also known as going bankrupt or system collapse.

Finance vs. Innovation

Most investors want this delay to be as small as possible. The quicker the company can show they can generate value, the higher their worth is. VCs measure this “valuation” both as the amount of current profit the company perceives from the market, and the potential profit of the next iteration (future potential).

To maximize this valuation, they pour their money to accelerate the iteration. On the one hand, investors want to increase the speed at which the company can deliver value (reducing the delay of the loop). On the other, they want to sustain the company as long as possible until the market starts reacting.

Here is the catch though. While companies can increase their value and the speed they deliver it, the delay of the returning loop is beyond their control. The market will react at their own time.

Feedback loop delay in the model. The Aleph Report (thealeph.com)

What’s obvious is that if the market takes a long time to react, the company will run out of capital and die, plunging their investors with them.

The question though is if that’s bad for the system or just for some of the actors. From a financial perspective, primarily, from the company’s investors, it’s terrible. They’ll lose their money.

But is it bad for the system at large?

One of the aspects that make System Thinking so compelling is the fact that all systems are connected. So while, on one side the system at large exposes a particular behavior, on another subsystem you might bear testimony to something completely different (i.e., Chaos theory).

Let’s forget financial sustainability for a second (a subsystem). If we focus on the impact of certain startups on the broader system, then a new picture emerges.

Startups, spurred by their investors, push the boundaries of innovation and try to provide ever-increasing value to the market. The effects of such innovations affect the end consumers and their latent behaviors.

For most failed startups, this effect is trivial and negligible. But a few do capture the market’s imagination. And while the market’s reaction, from an economic perspective, might be timid, they do react in other ways. One of these ways is by reinforcing an emerging behavior. A behavior that will stay in place independently of the startup that reinforced it. 

New loop gets established for increase need of the product. The Aleph Report (thealeph.com)

Disruption at Work

An excellent example of this is WeWork. Many keep focusing on the risky and fragile financial position of the organization. And while they’re right to be wary of it, they’re missing the broader trend.

WeWork is tapping into a new emerging behavior. One, few are seeing, much less exploiting. And while it’s probable that WeWork crashes and burns, the subsequent crater will change the market landscape forever.

WeWork’s value is strengthening this new behavior. The demand for Co-Living, Co-Working, Co-Everything, will remain in place, independently of WeWork. And this is the real power of Disruption; it doesn’t go away.

Worst than that, all incumbents laughing at the predictable fall of WeWork, are not picking up the new trend. Most will fail to see it, even after WeWork’s potential disappearance and will implode as a result.

Another beautiful example is the recent drama with Vice Media. It’s easy to highlight the gross negligence of their lack of business model. Nonetheless, their continuous innovations in media formats are shaping and shifting the market. It’s irrelevant they aren’t the ones benefiting from them. Someone will and when that happens, they’ll disrupt the market. 

Closing words

Sometimes we mistake financial soundness for innovation. Both concepts are connected, but as I’ve shown, they work at different speeds. Delays in the feedback loops that govern the system will make them play, sometimes in tandem, sometimes independently.

Particular caution should be observed when the technology employed by such companies is disruptive. The mere nature of disruption prompts the system to run at different speeds and this will have an impact on the competition landscape subsystem too. Some incumbents will collapse, some entrants will thrive. 

Entrants competing against the incumbent competitors model. The Aleph Report (thealeph.com)
Need feedback look taken over by a new entrant model. The Aleph Report (thealeph.com)

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Do you remember 3D Printing?

Do you remember 3D Printing?

Do you remember the fever around 3D printing? Evangelists heralded a brave new world spearheaded by 3D printing technology. Makers, hobbyists, and strangled researchers took on to the innovation and started hacking it to suit their needs.

Everyone deemed the technology as disruptive. However, we rarely hear about it anymore. Has it disappeared? Do manufacturers use it? Was it a fad or the real deal?

3D printing technology is the perfect poster boy for disruption. Much praised by visionaries, much forgotten after the fact. But the technology is still around, and incumbents are already feeling its disruptive power.

It sets a great example of how to think about technology. 3D printing technology was first catered to an underserved market, hobbyists, and makers. The high-end market, equipped with power-tools, sniffed at the low quality and restrictions of the technology. Makers though, incapable of coughing 350.000 dollars for a casting machine, embraced the innovation. The hallmark of disruption is always similar. Underserved market and underperforming technology with plenty of potentials to improve.

While incumbent manufacturers discarded 3D printing as a playful tool, innovation in new materials and printing techniques was propelling the disruption.

The beginnings are always harsh, and while visionaries can imagine new scenarios, reality takes time to catch up. The first use of the technology was around rapid prototyping and consumer “toys.” Speed and quality were huge impediments.

But things have changed drastically. Sculpteo’s 2018 State of 3D printing report paints a very different picture.

3D Printing in 2018

There has been a significant change in the industry, the arrival of metal. For many industries, plastics didn’t cut it. With improved technology, metal 3D printers are becoming the de facto for many companies.

State of 3D Printing 2018 – Sculpteo

The quality of the printers and the new materials are increasing, not only the amount companies are spending on 3D printing, but the range of things they’re applying it to.

State of 3D Printing 2018 – Sculpteo
State of 3D Printing 2018 – Sculpteo

One of the most significant changes is that tools produced with 3D printers aren’t just prototypes. They’re increasingly integrated into production.

The use in live production is changing the rules because it’s enabling innovation of the final product. The thing about 3D printing isn’t that they’re cheap; It’s that they can achieve the production of complex parts that are hard or even impossible to obtain with traditional manufacturing methods.

State of 3D Printing 2018 – Sculpteo

Generative design

The new technologies are giving rise to a field called generative design. According to Autodesk:

“Generative design mimics nature’s evolutionary approach to design. Designers or engineers input design goals into generative design software, along with parameters such as materials, manufacturing methods, and cost constraints. Unlike topology optimization, the software explores all the possible permutations of a solution, quickly generating design alternatives. It tests and learns from each iteration what works and what doesn’t.”

This is a blend between the fields of Biomimicry and Genetic AlgorithmsDeep Learning models are capable of exploring novel and creative solutions to manufacturing problems. These algorithms have been known for a while. However, they’ve remained on a theoretical plane due to restrictions on manufacturing methods. 3D printing and new materials are changing this. We refuse to acknowledge the creativity of Artificial Intelligent systems, but we keep on using it to our benefit.

Autodesk Generative Design – YouTube

The exciting thing about this new field is its implications. We can now produce stronger, lighter and more efficient parts. Here is the catch though. Very few incumbents will be able to take advantage of this technology. Most will employ the novel approach to improve their current products. They’ll approach it as a sustained innovation.

Incumbents will have a hard time creating novel products from the ground up using these innovations. The new entrants, 3D Printing-first companies, will be the ones to take advantage of generative design technology. 

State of 3D Printing 2018 – Sculpteo

I’m very intrigued to see what they come up with. In contrast to incumbents, startups will use these innovations to deliver radically new products to the market.

Industries benefiting from 3D printing disruption

Which industries are benefiting the most from this? There are three big groups, but they won’t be the only ones.

Aerospace industry

The arrival of metal and ceramic 3D printers is transforming the aerospace industry. From lighter designs which save fuel and increase range, to cheaper production of critical components.

One of the most captivating uses of 3D printing has been SpaceX’s new rocket booster design. Not only it has cut production time, but it has allowed new functionalities impossible before at a fragment of the usual cost.

Photo by SpaceX on Unsplash

The speed and cost reduction of satellite parts is one of the driving forces behind the Low Orbit Micro-satellite constellation revolution. Production of micro-satellites at scale will enable us to create a genuine global communication’s system. Those that control the communication channels influence the world.

Health & Medical industry

Another obvious winner is the medical field. The development of several bio-inks is bringing incredible developments. I would argue that when it comes to biological applications, we’re still in a very early stage.

There are impressive advances, ranging from biological scaffolding for organ growth to full steam-cells printed corneas. Eventually, the field will allow for ad hoc organ printing but still requires more time to mature.

Nonetheless, some applications, like bacteria-based ink tattoos are jumping to the consumer side. Organic ink will allow us to print logic gates on our bodies. These tattoos act as live, real-time detectors of diseases, chemical changes or health problems.

3D Printing of Living Responsive Materials and Devices – YouTube

Another application that might have far-reaching consequences is the printing of tissue to experiment drugs on. Regulatory approval for drugs is a lengthy process. The printing of target tissue or a part of an organ will serve as a much more realistic testing ground for specific compounds. This still ignores interactions with other cells or chemicals but will be a big step towards a much more robust testing ground.

Automotive industry

The closest industry to benefit from 3D printing advances is the automotive one. Not only is AI already disrupting it, but such disruption has an immediate impact on most strata of society. We live in an auto-driven society, and as such, any change in the nature and quality of transportation will have dramatic consequences.

Three trends are colliding in the industry. On one side we have the rise of the environmental conscience and the need to move away from fossil fuels. This change is being led by the electrical vehicle (EV) and is irreversible. EVs require fewer parts than their combustion counterparts. New 3D Printing companies will begin to supply next-generation parts for EVs.

On the other side, the use of Artificial Intelligence to deliver true autonomous driving capabilities requires a whole new array of sensors, parts, and unique designs. The fact that there is no driver will remove the need for steering wheels, and the cockpit will be redesigned. 3D Printing will be essential for the new redesign of the car structure.

Waymo Firefly prototype

Finally, the use of autonomous vehicles will precipitate the massive adoption of ride-sharing instead of ride owning. The trend is already there, but AI systems will accelerate the dismissal of car ownership. Shared car fleets will be standard. Fleet managers though will encounter a new problem. Cars aren’t designed to sustain such continuous use of the resource. Car parts will erode at a quick pace, and car maintenance will become a significant cost for operators. New modular car architectures that reduce the cost of support are needed. These new architectures will require novel building approaches. 3D Printing technology will deliver on this, making such companies the new players of the automotive industry.

EDIT Self-Driving Car by Open Motors – YouTube

Future trends in 3D Printing

The 3D Printing technology is on the verge of showing its true disruptive potential. It’s gone from being a hobbyist tool to becoming indispensable to keep up with the competition and the innovation theatre at large.

State of 3D Printing 2018 – Sculpteo
State of 3D Printing 2018 – Sculpteo

The next stage for the industry is the advancement of autonomous 3D Printing manufacturing. Right now, many processes require of humans. There are some experiments, though, to push the limits and achieve autonomous manufacturing capabilities.

System can 3-D print an entire building – YouTube

Another big step yet to be achieved is the necessary autonomous assembly of 3D printed parts. There is an increasing number of printers that are capable of printing different materials and textures. Still, such all-in-one printers deliver subpar quality. If I had to guess, I would say that 3D System’s modular factory approach will be the future.

Automated, scalable metal additive factory solution – YouTube

The combination of specific modular printers with autonomous robots will deliver on the assembly part.

The last hurdle is the increase of speed in the production of parts. Several trends are being explored here. The first one is the use of generative design mentioned before. Such models allow for fewer elements as complex topologies can substitute several assembled parts. Another one is the improvement of the extruders and techniques used to print. One of the most impressive ones is the Rapid Liquid Printing developed by MIT. It’s still very experimental, but it will allow to break the additive layering hurdle and speed up the process orders of magnitude.

Steelcase MIT Rapid Liquid Printing in Furniture – YouTube

Final words

As I said at the beginning of this article, 3D Printing technology is a disruptive innovation. It will, not only change manufacturing but the kind of products we can create with it. It will unlock new design capabilities that will disrupt whole industries like the automotive one.

Most incumbents are either using 3D Printing to improve their time to market or ignoring it all together. As with other disruptive technologies like Blockchain, they’re missing the point. The real revolution isn’t about making your process more efficient. It’s about enabling new business models around entirely novel products that are only doable through 3D Printing cutting edge technology.

Incumbents will be late to realize this. They’ll insist in employing their traditional business model, upfront purchase. 3D Printing technology, though, enables massive customization and the move towards a pay per use or pay per impact business models.

Are you making something physical? You should be thinking of designing the whole process for 3D Printing.

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Your current AI approach is broken

Your current AI approach is broken

Some weeks ago a friend asked me how to automate and achieve scale for his mental health startup. It’s not been the first time someone has asked me this. Scale and automation are, under the technology creed, synonyms for Artificial Intelligence.

I was hesitant to answer. I told him that I am a believer on AI, but that you couldn’t apply AI as it stands today to mental health problems.

Most AI methods are based on function optimization. In layman’s terms, the algorithm looks for the best (optimal) solution to a given goal. The problem with this is that such goal rarely contains information about its moral worth.

“A system that is optimizing a function of n variables, where the objective depends on a subset of size k < n, will often set the remaining unconstrained variables to extreme values; if one of those unconstrained variables is actually something we care about, the solution found may be highly undesirable.”

Stuart J. Russell. Of Myths and moonshine. The Myth of AI. Edge. 2014

In other words,

“Building an agent to do something which (in humans) correlates with the desired behavior does not necessarily result in a system that acts like a human.”

Nate Soares. The Value Learning Problem. Machine Intelligence Research Institute. 2016

And this is the key to the disturbing stage of technological evolution we are experiencing. As I’ve pointed out before, I believe we’re living a major moral crisis. One of the consequences is that we’re blindly applying mathematical formulas that don’t factor in human moral values. The goal is to automate a problem and do it fast an efficiently. The issue is that the human mind can’t be reduced to a set of equations (yet).

Human psychology is incredibly complex. We’re governed by dynamic systems that defy most rational explanations. During the last few decades, we’ve witnessed the failure of the Keynesian doctrine in economics. Heralded by behavioral scientists like Dan Ariely, more voices are demanding better models. Models that account for human irrationality.

However, we’re, once more, making the same mistake. We’re applying sophisticated algorithms that overly simplify the reality they deal with. One could argue that most AI systems are employed to non-human, repetitive, tedious tasks. And they’re right. Still, many of those AI systems are making decisions that do affect humans and their mental models.

An excellent example of this is Filter Bubbles and Echo Chambers produced by algorithmic news feeds. As much as it pains us, Deep Learning techniques obviate any moral judgment of the outcome. The surprising thing is that this effect, nicknamed the “Sorcerer’s Apprentice” problem by Norman Wiener, has been known since 1960. Systems that follow instructions but misinterpret the developer’s intent.

But maybe the most striking thing about the current AI wave is the lack of awareness of the problem. The recent demo of Google Duplex is a perfect example of this. Natasha Lomas wrote a brilliant piece on the issue.

“Yet despite all the thoughtful ethical guidance and research that’s already been produced, and is out there for the reading, here we are again being shown the same tired tech industry playbook applauding engineering capabilities in a shiny bubble, stripped of human context and societal consideration, and dangled in front of an uncritical audience to see how loud they’ll cheer.”

Natasha Lomas – Duplex shows Google failing at ethical and creative AI design

It’s discouraging to watch history repeated. In 1962, Rachel L. Carson published one of the most impactful books in science, Silent Spring. In it she criticised the indiscriminate use of chemicals (DTTs) and the poisonous effects of these in the ecosystem, humans included.

“Technology, she feared, was moving on a faster trajectory than mankind’s sense of moral responsibility.”

Linda Lear’s introduction to Silent Spring by Rachel L. Carson. 2002

At the time, the US Chemistry industry, one of the largest beneficiaries of the Cold War, operated at large. Science and chemists were considered the top of the food chain. No one questioned their knowledge. No one questioned their products. What Carson uncovered, documented and publicised was the other truth; lethal ignorance, greed, and Capitalism.

“Carson questioned the moral right of government to leave its citizens unprotected from substances they could neither physically avoid nor publicly question.”

Linda Lear’s introduction to Silent Spring by Rachel L. Carson. 2002

I can’t but draw parallels with our current situation. I question the moral right of Google or Facebook to leave their users unprotected. But this isn’t a problem with the prominent technology corporations, but with most AI-powered solutions. Not even with such solutions, but with the lack of awareness of the developers and designers.

All this said I’m bullish on AI. I’ve been a defendant and ardent believer of the field. This is why I’m so vocal about the current misdirection.

Yes, we need autonomous agents. We need to apply AI, but we need to incorporate moral values into the equation. This in itself is a considerable challenge. It’s becoming one of the newest research lines in AI, but most advances are, so far, theoretical. New companies deploying new systems should be aware of the problems. They should try to apply new AI models and build moral safeguards.

“The systems will need some method for learning and adopting prosocial preferences, in light of the fact that we cannot expect arbitrary rational actors to exhibit prosocial behavior in the face of large power disparities.”

Nate Soares. The Value Learning Problem. Machine Intelligence Research Institute

As I told my friend, yes, you need to scale your mental health approach. But you can’t do what everyone else is doing. Stakes are too high to play moral depravity with our minds.

“Man has lost the capacity to foresee and to forestall. He will end by destroying the earth.”

Albert Schweitzer

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Are Podcasts the next ad frontier?

Are Podcasts the next ad frontier?

Last week, Pocket Casts got acquired by a collective group that includes NPR, WNYC Studios (makers of RadioLab), WBEZ Chicago (makers of Serial), and This American Life. It’s yet another move in a space that’s been heating up for a while now

Podcasting has been around for ages, but it hasn’t been until recently that it’s making a comeback. For years, it was hard, not only to find good content but to subscribe to it. On top of that, the only place you could listen to podcasts was on your computer.

Apple, smartphones and bandwidth improvements changed that. The simplicity of subscribing to a show on iTunes and listen to it on the Apple Podcast app made it a breeze. It opens the gates for mainstream adoption of podcasts.

The Podcast Consumer 2018 Report by Edison Research

Two significant milestones propelled the awareness of podcasts. The first one was the addition of official support for podcasts on iTunes in June 2005. The second milestone was the release of the iPhone on June 2007.

Nonetheless, awareness remained constant during a decade. In late 2014, Sarah Koenig and Julie Snyder released an experimental podcast called ‘Serial‘. The podcast went viral, smashed all podcasting records and went on to win the 2015 Peabody Award. As of June of 2017, it had become the most downloaded podcast ever with 175 million downloads. By mid-2015 David Carr named ‘Serial’ the First Breakout Hit.

Source: Google Trends

Despite Serial’s success, podcast consumption remained low compared to other siblings like video or social media. Audio remains a much-loved but not-mainstream medium. 

Source: The Podcast Consumer 2018 Report by Edison Research – Elaborated TheAleph.com
Source: The Podcast Consumer 2018 Report by Edison Research – Elaborated by TheAleph.com

One of the major problems around podcasting has always been monetization. One the one hand, audiences have been small compared to other content sources. On the other, there’s always been a difficulty with measuring the exact engagement of the audience. You can measure how many downloads but not the precise behavior of listeners. And that’s a problem for attracting money.

Some podcasters turned to their fans for monetization. They joined Patreon and transformed their audience into patrons that kept the lights running. However, not every podcast could pull that feat. Some creators believed brands should sponsor the content, instead of fans. Still, having no metrics was a significant stop-block.

All this changed in 2017. In June Apple announced in-depth analytics for podcast creators. Podcast creators finally had a way to learn what performed and what didn’t on Apple platform’s (roughly 60% of the market). Even better, they could share these metrics with advertisers to help monetize it.

Since then, the space is undergoing drastic changes. Data is already showing what many podcast creators have been claiming for years, that their audiences are hyper-engaged. They might not command Facebook-size audiences, but they sure have very targetted and bespoken listeners.

“On average, according to Midroll’s data, podcast listeners are making it through about 90 percent of a given episode, and relatively few are skipping through ads.”
[…]
“Those numbers tend to be steady regardless of the length of the show—and according to Panoply, the few listeners who do skip ads continue to remain engaged with the episode, rather than dropping off at the first sign of an interruption.”

Podcast Listeners Really are The Holy Grail Advertisers Hoped they’d be.

As the Wired article mentions, this is the advertising Holy Grail. This has become even more important with Facebook’s recent problems. Not only ads are becoming politically charge on those platforms, but companies that advertise there are also feeling the heat. Also, many advertisers are looking for ways to break out of the advertising duopoly held by Google and Facebook.

It’s not surprising though that brands are looking at podcasts as a new frontier for their advertising dollars. One not controlled by Google or Facebook, but new players. Podcast advertising grew a 228% between 2015 and 2016. That’s not even taking into account 2017 which, as I mentioned, was a stellar year for the industry.

IAB Podcast Ad Revenue Study 2017
IAB Podcast Ad Revenue Study 2017

The impact of voice interfaces

Looming at a distance, voice interfaces like Amazon Alexa or Google’s Home Now, are heralding the audio renaissance. Many expect the increasingly ubiquitous smart speakers to change the dynamics.

The Podcast Consumer 2018 Report by Edison Research

As I’ve written before, I believe conversational interfaces will change how we consume many things. I’ve felt the change happening at home. How voice interfaces are pushing me to seek more integrated appliances. That said, I also reckon it still needs more time. It’s not surprising then how few users listen to podcasts with their smart speakers.

The Podcast Consumer 2018 Report by Edison Research
The Podcast Consumer 2018 Report by Edison Research

“David Markowitz from ListenUp thinks Interactive audio is still very much in the experimental phase. “I don’t think we’ll see broad adoption until we get more comfortable having lengthy interactions with smart speakers. That is going to happen – we are just not there yet.”

Global Audiobook Trends and Statistics for 2018

I have to agree with Markowitz. I’ve tried several podcast skills in Alexa, and it’s still not there. Some experiments are exciting and we’ll see more engagement but still needs more time.

Audiobooks to the rescue

I have no doubts that smart speakers will drive podcast consumption even higher. I would expect the newer generations to be used to consume audio as naturally as our parents did radio.

Another trend that will accelerate both smart speakers and podcasts, in general, are audiobooks. Audible (and Amazon’s) success in these past years is opening an entirely new media segment.

People that would never read a book are, surprisingly, willing to listen to one. There is no correlation between the quality of the book and its audio counterpart.

“One of the things that’s most interesting to me here is the fact that it used to be that the success of an audiobook was correlated with the success of the print book. That is no longer true. The number of audiobooks that perform well independent of its print and eBook circulation is increasing. The format itself is creating new ways of discovering content that is becoming increasingly independent of the underlying print and eBook success.”

Global Audiobook Trends and Statistics for 2018

It’s remarkable how some writers are even willing to create audio narratives to accompany their writings. In a way, it reminds of a comeback to ‘Serial’. Podcasts and audiobooks will begin to fuse and mingle. Some podcasts will remain radio shows, others will become new narrative portals and will drive audio consumption.

”Margaret Atwood, author of The Handmaid’s Tale, recently worked with Audible to write and record a spoken-word coda to the novel, and comedian David Spade is developing an audio-only memoir. “We’re really trying to break the boundaries,” Blum says, “and go to writers and creators and artists to think outside the traditional boundaries of what is a book.”

Amazon Turbocharged Audible’s Domination of Audiobooks

Aggregators on the horizon?

It’s not surprising that NPR et al. bought Pocket Casts. There is an impending need to create the ultimate podcast platform. The key here is the word platform, or more specifically, aggregator. As Ben Thompson argued recently, when the market is already modularized, it’s ripe for the rise of an aggregator.

I wonder who will that be. Apple still holds a massive grip on the podcast industry, but they’re slowly losing it. Both regarding client market share and on the follower side. New podcast distribution networks like Midroll, Art19 or Megaphone (Panoply) are carving a space not touched by Apple. 

Elaborated by TheAleph.com

At the same time, Amazon and Google are pushing hard on the audiobook and smart speakers front. Will they control the space by owning the relationship with the end user like Apple had with the iPhone? They have an advantage, one they aren’t exploiting so far.

It’s a fascinating time to dwell in this space. I expect more content producers and creative people to adventure into the audio world during the next few years. 

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Get ready to share the walkway with robots

Get ready to share the walkway with robots

I am a big fan of logistics. Moving things from here to there is the dream of any engineer. We can track my enthusiasm to my time spent playing SimCity and The Incredible Machine games. I will throw in some Lemmings in the mix too.

Despite my keen interest in the field, we must confess it’s perceived as a dull industry. And no wonder. Run by old school boys driving trucks and loading freights. Grease, dirt, heavy cargo and men in flannel shirts come to mind.

Lemmings by DMA Design

However, the logistic dream from the 60s has nothing to do with logistics in 2018. The convergence of e-commerce, mobile and artificial intelligence is sending shockwaves across the industry.

While international logistics are essential, their complexity pales to the challenges of last-mile delivery. And to be honest, the current last-mile companies suck big time. I’m tired of getting my food cold. I’ve tried them in many different cities and countries, and it’s a hit and miss. I mention food delivery, but the same goes for package delivery.

Many companies, stirred by the looming Amazon empire, are pushing into the field. To do last-mile right, you need massive capillarity and low response times. On top of building predictive systems for improved routing, which is worth noting, not everyone is doing; there is the simple need of adding more couriers. Here is the kickback, they have to be cheap. All hail to the sharing economy.

Overworked and underpaid riders roam the world cities delivering your overpriced pizza. And local governments aren’t liking it. There are now several instances where judges are slamming the breaks on last-mile companies on employee exploitation charges.

The rise of the robots

Not only last-mile delivery requires speed and capillarity, but low marginal costs. The problem is that humans are slow, expensive and above all, they despise this kind of work. People aren’t cogs, but we insist on using them as machinery.

Enter the robot utopia. What if we could substitute these tasks with robots, or more precisely, autonomous delivery vehicles. Devices that can travel by air or ground, without human intervention, delivering contents virtually anywhere within record time.

That’s the dream a set of companies has been pursuing during these past five years. The problem? The over-sold robotic promise of better-than-humans. The result is a backslash of under-performing companies with lame devices that produce mix-bag results.

To avoid undesired flashy PR, many of these companies have been in stealth mode for a while and have only unearthed their products recently.

To walk or to fly?

There are two big approaches in the field, air delivery with drones or ground distribution with small autonomous delivery rover-like vehicles. Which is better is up for debate.

Autonomous Air Delivery Vehicles

What better way to do last-mile delivery than via high-precision air delivery? It’s fast, allowing straightforward delivery routes and road traffic avoidance.

Within this group, we find companies like Flirtey, Matternet, Zipline or the omnipresent Amazon. These systems work, and they’re impressive to watch.

The Matternet Station – YouTube

Despite how remarkable they are, the aerial approach is riddled with problems. While it’s faster than ground approximations, technical specifications are complicated, both in-flight and on delivery. The major hurdle though isn’t technical but regulatory. Not only flight regulations are strict, but craft safety and air traffic control are critical.

The problem is so big that there are several startups like AirMap or Google’s Project Wing working on Drone Traffic Control products.

Swiss U-space demonstrator run-through powered by AirMap

Drone delivery has a place and use, that said, I don’t believe it will be massive. The reason is simple, e-commerce package traffic (or food for that matter) is too big for last-mile air delivery. The scale needed to support an even small percentage of that traffic would collapse any city’s airspace.

“But tools have not yet been developed to predict how weather will affect small drones flying around obstacles such as buildings or hills at such low altitude, Gitlin said.”

Air traffic control for drones is coming. Here’s how it could work

Taking Amazon Prime as an example, we’re talking about five billion packages shipped in a year; 416 million a month. If you factor in the seasonality of shipping, you have north of 900+ million deliveries at any given December. That’s only Amazon. Factor in new players like Walmart and the impending growth of urban areas. Air delivery requirements (collision avoidance, weather patterns, and safety space to name a few) will make it very hard to scale beyond a certain threshold.

Source: WorldPopulationHistory
Source: United Nations Population 2005 report

As I mentioned before, Drone Delivery is instrumental but the cornerstone industries won’t be ecommerce or food delivery per se. Companies will continue to pursue it, but it won’t amount to much at first. The real disruption will come from shippings where speed is critical as in life-threatening, for example, medical deliveries. From blood samples to vaccines to organs.

Drones will gain traction outside mega cities too. Agrotech is already making use of drones, and I’m sure they’ll expand their usage of delivery services too. Industrial operations will also employ air delivery for spare parts, maintenance operations and even safe product transportation (i.e., Diamond delivery through hostile territories).

Autonomous Ground Delivery Vehicles

The other big group is ground-delivery autonomous vehicles. Within this side, we have startups like Starship, Marble, Teleretail, Dispatch or Robbie.

Ground robots sacrifice speed for easier regulation and less technical complexity. These devices look like small Mars rovers and are designed to roam the walkways at human speeds. They are fully autonomous, even though they do have human backup operators in case of emergency. They range from small carts to small burrito-like stands with wheels.

Marble’s delivery robot rolls through SF – YouTube

Approval for this kind of vehicles has been straightforward. There are already five US states that allow them on their walkways as well as 40 European cities with small-scale pilots.

These robots are simpler to deploy, and that’s the reason why they’re already operational in some locations. As with drones, the concern is around how to scale their number. For now, regulation limits their speed (6 km/h) and weight (18kg – 36kg unloaded) to human standards to prevent dangerous collisions. These restrictions severely cap their performance. Some of these vehicles can reach speeds of up to 50km/h and achieve bigger sizes. Faster and bigger rovers would enable a much more prominent payload in less time, improving the last-mile performance goal.

Many in the industry think these are initial conditions and as humans become used to the vehicles, they’ll gradually tolerate higher limits.

While accidents will occur, it’s not fair to compare bikes or motorbikes with autonomous delivery vehicles. If done right, LIDAR technology should provide better sensors than anything human. This should enable brake and slowdown of the rovers in the presence of humans, making it safe to operate at higher speeds without incidents.

Starship Campus Delivery Service with Robots – YouTube

Another concern is walkway traffic. If last-mile companies start deploying these vehicles en masse, it could cause severe problems for pedestrians.

“If there really were hundreds of little robots,” Ehrenfeucht said, “they would stop functioning as sidewalks and start functioning more as bike lanes. They would stop being spaces that are available for playing games or sitting down.”

Ehrenfeucht pointed out that 130 years ago, streets were not yet divided into lanes for traffic, parked cars, pedestrians and bikes, and that the introduction of robots to the streetscape might require a reimagining of the available space, possibly with a designated lane for robots.

Renia Ehrenfeucht, University of New Mexico professor. Co-author of Sidewalks: Conflict and Negotiation over Public Space

I have to agree with Ehrenfeucht’s vision. I think that the advent of autonomous vehicles will reduce private car ownership and traffic. Hence we will be able to devote new lanes to autonomous ground vehicles. It will take years though. In the meanwhile, we’ll probably share the walkway with these little rovers.

It’s worth mentioning some other approaches like Nuro’s one. Cofounded by two former Googlers, they’re taking a radical approach. They’ve created an autonomous delivery vehicle, like Waymo’s, from the ground up. Jiajun “JZ” Zhu was one of the first employees at Waymo, so no surprise here. They’ve raised a monstrous 92 million dollar round for the company to put these babies on the road soon.

Nuro Vehicle at Proving Grounds – YouTube

While I think the approach has merits, especially the heightened specialization of autonomous vehicles, they have a long way to go. Being a specialized vehicle, they’ll probably have less regulatory hurdles than Waymo, but they need to prove that a street-parked approach works better than a walkway one. That said, I’m sure they’ll inspire a new crop of vehicles designed for one use and one use only. It’s the modularization of the point of integration. The problem is, they might be too early for the modularization phase. Right now, vertical integration will win the game.

Disruptive effects of autonomous delivery vehicles

One of the most interesting effects is the clear disruptive nature of these vehicles. Most companies are aiming for e-commerce or food and grocery deliveries. That’s, in my opinion, the wrong disruptive approach.

There is entrenched competition in that space. There are myriad logistic companies that are pushing incremental innovations in last-mile deliveries. For autonomous delivery to survive, they need to focus on underserved or non-existent market footholds.

Starship Technologies is a fascinating case. They’ve gone from regular package delivery trials to focus on university and corporate campus deliveries. The move is genius. They’re serving a non-existent market, which welcomes the capacity to deliver goods (let it be food or packages) between buildings. Because there are no competitors, the users have no expectations. This works for Starship, who can develop their technology without performance comparisons. In such scenario, limiting regulations won’t matter much, as having rovers is already a welcome addition.

Intuit Marine Way Building by WRNS Studio and Clive Wilkinson Architects

The critical part here is that autonomous delivery vehicle technology is a disruptive one. The pace of innovation is dramatic. Improvements in sensors, batteries, space allocation and route prediction will make to the market in no time.

“Mr. Blown’s trial showed consumers were open to this new service, but it also revealed some limitations of the robots: they were confined to a three-mile area that the machines had to map out beforehand.
[…]
“At the moment one of our couriers can deliver 50 parcels in one go. With one robot delivering a package in about half an hour, you would need a lot of robots.”

Delivery robots hit the streets, but some cities opt out

The Hermes case is a beautiful example of why this technology will disrupt the logistics industry. So far, limitations on autonomy, mapping and data necessity, speed and cargo caps, will make them underperform. Assuming that this will be the case in a couple of years is a mistake. One that will wipe many couriers. Disruptive technology advances will make it progress way faster than many can predict. Once these technologies make it out of their niches (upscale march), they’ll start competing with traditional couriers, and they’ll win.

Market opportunities

The space is wide open for a plethora of supporting services. 3D Sensing mapping companies will become increasingly important. New delivery companies don’t want to re-map an area but leverage preexistent LIDAR-generated 3D maps. There are several startups already working this approach, most only for roads, but the competition is still wide open for walkways and aerial maps.

Aerial LIDAR capture

Another space that will need some services are geofencing services for municipalities. Cities need a way to register autonomous delivery vehicles, to track them and to create no-fly-no-drive exclusion areas. The most advanced company in this space is AirMap, which does this for the drone industry. Nothing like it exists for ground delivery fleets. That piece will be pivotal to the mainstream adoption of autonomous delivery rovers.

AirMap Capture

Due to the autonomous nature of this vehicles, they’ll need to achieve a certain number of autonomous driven miles before they’re allowed to operate. Simulation software, like the one employed by Waymo, will be critical. Scenarios are different from autonomous cars. Walkways are very heterogeneous and pedestrians too. There will be a need to engineer synthetic scenarios permutations. These alternative scenarios will allow for better testing of the autonomous brain.

Many of these companies though, need to rethink their customers. Going for the sexy e-commerce pie might be a big mistake at this stage. New delivery methods allow them to serve inexistent demand. Becoming adept in these areas will allow them to expand horizontally and attack incumbents from a much more robust position.

It is an exciting new space, whose time is coming faster than many might think. Regulations are in place. Testing pilots are maturing, and scale is being achieved. I wouldn’t be surprised to see some of these vehicles roaming our streets in two to three years. It’s a brave new world, one where humans might be pushed aside if we aren’t careful.

Run, run, the robots are here!

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Is WeWork the real deal?

Is WeWork the real deal?

The way our generation is living is changing. It stands to reason that our needs as individuals are also shifting. However, we resist acknowledging that change is affecting more than just our news consumption habits.

One of those spaces that we refuse to recognize is the transformation of work. The most significant testimony of this shift is the rise of coworking spaces. And within that movement, one brand outshines the rest, WeWork. With a 4.5 billion dollars war chest and a 20 billion dollar valuation, it’s becoming hard to ignore.

Number of coworking spaces worldwide from 2005 to 2018 – Statista

For many, though, WeWork remains a mistake, or a fluke and coworking is just another millennial fad. Detractors are quick to point out that WeWork is an over-glorified Regus. A reseller of office space catered to the hipster echelons of tech society. This speed of judgment is preventing us from understanding why WeWork matters.

The company started as a coworking space but limiting its scope to that is myopic. Many journalists and professionals, though, are quick to dismiss WeWork’s innovative approach.

“WeWork’s coworking spaces give entrepreneurs space to work, and come equipped with amenities like free beer, stocked fridges, and Foosball tables.”

How WeWork became the most valuable startup in New York City

Let’s start with the obvious. WeWork isn’t only about space. If it were, then it wouldn’t have become one of the fastest growing coworking spaces in the world. The devil lies in the details.

Yes, the organization sells space, but not just any space. It acts as a broker between landlords that need to fill their space and companies that are looking for affordable office rents.

Most coworking companies pick any affordable space that allows them to offer cheap rent. This isn’t the case with WeWork. There is a careful study around where and what to rent. This alignment with the space providers allows them to negotiate what others can’t. 

Restricting WeWork’s value to real estate though is still too narrow. The company has been focusing on building community since day one. It’s not about the office; it’s about the sense of belonging. The attention to their tenant’s culture is one of the linchpins of WeWork’s success.

For all the talk about the importance of corporate culture, few organizations achieve healthy ones. In true cargo cult fashion, most companies try to mimic the fancy designs they see elsewhere. Plastering the office with motivational quotes, dropping bean bags or adding ping pong tables won’t do the trick.

WeWork’s attention to community and the fostering of an outstanding culture is unique. As sound designers, they’ve taken a human-centric approach and built their offerings around them.

An excellent example of this is their floor design and architecture. Every corner, every room, every desk is accounted for. They analyze from foot traffic to room occupancy. Nothing is random. They know that building a comfortable environment is critical for culture.

They get things wrong too. This isn’t an ode to the wonders of WeWork either. Growth, especially the one WeWork is undergoing, tends to derail specific details in favor of scale. But overall, their global footprint, design, and attention to certain important aspects of the decentralized office are winning the day.

Maybe one of the most undervalued aspects of the company is this affinity with the rise of the decentralized office. They listen, analyze and react to the new needs emerging from it. They understand the way work is changing, and they’re offering their own Amazon Web Services for the new workers.

It’s tempting to talk about entrepreneurs and startup employees as the new workers. It’s was equally attractive to think that only young people would use and want an iPhone. RIM learned their lesson. Many realtors, coworking owners, and companies are learning their lesson too.

New workers are everywhere. They’re not circumscribed to entrepreneurs. Remote, decentralized professionals are cropping everywhere. Technology is making “working at the local office” a thing of the past. Global competition is forcing companies to slim down their core employees and relay on vertical independent workers. These professionals work globally, require mobility and non-binding contracts. WeWork understands this better than anyone and is happy to oblige.

Owning the value chain

But the most impressive aspect of the company isn’t the coworking; it’s culture, or it’s their understanding of the future of work. The most remarkable point is the vertical integration of their value chain. WeWork isn’t a coworking company; it’s a data startup.

The Aleph Report

The company deploys an extensive IoT network in its buildings. Not only they track foot traffic or room occupancy, but they also analyze how people use their workspaces when they come and go, etc.

Construction Tech

Their data team then crunches these numbers to inform the lower end of their value chain. They’re capable of scouting and vetting their locations semi-automatically. Not only that, they are capable of locking it in and put it into production at tremendous speeds.

“Notably, the company can add space so quickly due to its construction chops and operational efficiency. After a location has been scouted and vetted, and a lease or co-management agreement is in place, the company can accept tenants in as few as 4 months, and on average does so within 9 months.”

WeWork’s $20 Billion Dream

The same information is pushed to their office design process, so they know exactly what to build and how. The construction is greatly enhanced by the use of data, 3D scanning of the space and the use of Building Information Models (BIM). The organization has invested heavily in this space, acquiring two startups to speed up the automation of this first phases.

While apparently this might not be important, their operational improvements regarding speed, stock, and redesigns, allows them to lower their cost of operation and increase their competitiveness beyond many other players. Its end-to-end data approach is unique and rarely seen in the Real Estate industry. They’re applying a startup mentality to the space, not a Real Estate one, hence their valuation.

Upstream integration

But their value chain integration doesn’t only apply to the lower part of the chain, but the upper too. The company is pushing hard beyond the coworking space. One of their early moves was to set up their service platform, WeWork Store. It’s their App Store version for the WeWork family. More locations, more customers. The more substantial their customer base, the better deals and offerings they can give at their store. The better deals they offer, the more customers they attract. Thus building a powerful virtuous cycle that speaks of their aggregation power.

The store was the first natural step. Let’s equip our residents with better tools to do their job. What else does someone need to be happy at work? Easy, personal growth. WeWork is investing heavily in education for their members. They recently bought FlatIron School, a world-class coding academy, and partnered up with 2U, an online education platform. Want to change careers? The company will give you the tools to do it from your office space. Are you under a crushing debt from school? Don’t worry, WeWork has your back with their partnership with SoFi.

The message is clear. Come to WeWork, work with us, and we can help you grow and develop your career path. Aligned with that is their offering of startup accelerator-like services under WeLabs.

There are four things someone needs to be happy at work. A great space (check), access to useful tools (check), education (check) and inspiration from others (check).

The company is doubling down on their vision of what work should look like. They’re providing all the elements that Millennials value from their job.

Amazon Web Service style horizontal integration

WeWork though operates with plenty of risks. Their business model isn’t disruptive, as it’s the same play as Regus. They make money on the arbitrage between what they pay the landlords and what they charge their tenants (2x).

The company has been hard at work to mitigate their risk. One of their best plays has been what they call ‘Power By We.’ It’s their real-estate as a service offering for corporates. Now that they’ve automated most of the value chain, they can offer these same benefits to other landlords. Corporations save on rents thanks to the operational excellence and know-how from WeWork. The company makes money but diminishes their risk as they don’t own or operate these white-labeled spaces.

In other words, they’ve built a horizontal integration mimicking Amazon Web Services (AWS). They can know leverage their initial investment and scale infinitely, keeping their costs down while diminishing their risk.

WeWork isn’t a coworking; they are the data service company for the Real Estate at large.

Future integrations

However, their vision is to provide the ultimate experience for Millennials. I opened this article stating that the way our generation lives is changing dramatically. Work is but one aspect of this shift. A much larger one is that that encompasses our living. We don’t buy houses, we rent. We don’t stay in the same location, we move. We don’t have local friends; we have international ones.

One of the consequences of this transformation is that typical rentals don’t fit the Millennial mindset anymore.

Enter the co-living movement. What if we applied the same culture, community and space designs to living quarters instead of office space? That’s what WeWork has been trying to do with their co-living brand WeLive.

They aren’t the first ones by any stretch. They weren’t the first ones to do coworking either. Nonetheless, their know-how of this ‘co-generation’ might give them an edge on this next wave.

So far they haven’t been doing well with WeLive. Time will say if they end up owning this space too. What’s clear is that they’re experimenting in many ways around the concept.

“The companies’ new joint building in Brooklyn, Dock 72, is a 675,000 square foot Class-A building. WeWork will occupy 222,000 sq ft, while 35,000 sq ft of the building will be devoted to amenities designed by WeWork, including a 13,000 sq ft food hall, a 15,000 sq ft wellness center, lounges, conference rooms, and a rooftop conference center and event facility, among other amenities.”
[…]
“The building also will have its own app to assist in building security, conference center booking, food deliveries, and transportation updates.”

WeWork’s $20 Billion Dream

Last words

It’s easy to dismiss WeWork as the coworking company. But as we’ve seen, the company is pursuing an aggressive and ambitious strategy. They’re taking many risks, but they’re also pioneering some strategic end-to-end advantages that can give them the edge.

The most impressive aspect of WeWork is their bet on the future of the Millennial generation. They might be too early for co-living, but I do not doubt that we will see an explosion of it in the next few years.

Everyone should start watching this space up close as it will redefine many of the things we take for granted. Workspaces are one of them. Logistics is another. But residential space, transportation, ownership, dating or education are others. Radiating from a communal gathering space, myriad altered behaviors will develop and with them, new opportunities for new companies with different business models.

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Facebook’s Immaturity And Its Consequences

Facebook’s Immaturity And Its Consequences

It hasn’t been a good year for Facebook. We can all agree on that. I’ve been very vocal about this online. I like Facebook, but their culture and management get on my nerves. For a while now, I’ve been trying to understand why.

I’ve been an entrepreneur for 15 years. When I got into technology, it was because I believed technology could fix many problems. Technology turns labor-intensive processes into easy ones. It produces efficiencies that enable economies of scale. Scale that can be leveraged to help and serve more people.

With age and experience, I’ve evolved my perceptions. Technology is incredible, but infusing it with quasi-mythological powers is a gross misconception. The world isn’t as clean and straightforward as technology wants it to be. While advancement is welcome, we spend most of our time wrestling in the mud of humanity.

As my experience grew, I began to fix my attention, not to the technology per se, but to what that enabled or achieved. I realized that while new products or services are great, they’re shrouded in context. Human context. Isolating the impact of such innovations from the people that are touched by them is a dangerous and costly mistake.

The reach and impact of our current innovations have grown dramatically in the last five years. We’ve gone from a company that served five million users, to world-dominating empires.

This growth has implications. There is a cost that we all have to pay. And it’s precisely this cost that most are ignoring and brushing away. We want global reach and recognition but no responsibility. We want an Augustus treatment but shrug away the burden of disruption. In the climb to Olympus, we are willing to sacrifice everything. Machiavelli would be proud of us.

The problem though is that we don’t live in isolation. Consequences have the nasty habit of catching up with you. And this is precisely what’s happening to Facebook.

When I look at them, I see the reflection of the technocratic elites. And it makes me cringe. I see young people clinging to the brand as a way to find their own identity. I behold talented people offering their happiness and mental wellbeing to the altars of the tech gods. Their reward, a sit at the table, a place away from the homelessness.

Technology is creating a difference in classes. You are either a tech insider, or you’re not. If you’re a member of our club, you get exclusive benefits like access to better networks, more knowledge, and better salaries. If you’re not in technology, we don’t care. You should learn how to code. You should get yourself a nanodegree online. You should be using car sharing platforms instead of using the broken public transport system.

The one thing this narrative doesn’t highlight is the fact that only a particular elite has access to this. In the process of bettering the world, we’re creating moats that are, single-handedly, making the world the roughest place to many strata of society.

And it’s this myopia, this lack of awareness and responsibility, this egoism of tech buddies first, everyone else later, that makes me ashamed of Facebook.

Their problem isn’t one of technology. It’s one of culture. They don’t want to do evil. They’ve just built an overly simplistic model of the world according to their algorithms. And they trust it and they believe in it, and they don’t question it, and they lived chained by it.

And it’s reckoning time.

“Facebook’s CEO’s constant apologies aren’t a promise to do better. They’re a symptom of a profound crisis of accountability.”

Why Zuckerberg’s 14-Year Apology Tour Hasn’t Fixed Facebook

A look at this past week’s news is enough to feel the brewing storm. Every part of the Facebook system is being questioned. Does Facebook scan your messenger without your consent? Can Zuckerberg erase content from your inbox without you knowing or even agreeing? Facebook is playing doctor with your data and isn’t asking your permission?

The current narrative spun by the social network’s culture is “trust us, we know better.” The truth is, facts have shown, they don’t. The truth is, no one does.

“I actually am not sure we shouldn’t be regulated.”

Mark Zuckerberg CNN Interview Highlights

Facebook’s privacy concerns have ramifications

This global backlash is having real repercussions for all businesses. People are starting to distrust and prosecute any breach of trust from any tech operator. With the GDPR around the corner, it’s critical for all organizations to understand the wind of change.

Any application that is planning to use user-data beyond the explicit scope needs to reassess how they do it. It doesn’t matter users clicked on the elusive Terms Of Service. If your customers don’t understand what their data is being used for, there will be thunder.

Facebook’s privacy woes are becoming beacons in the sky for users to realize what’s going on behind the curtain of Oz. More users will begin to distrust and demand tighter levels of control. Any company that is ignoring this issue will be burnt at the stake.

Product developers should update their priorities and bump privacy and data control to the top. It’s not that the GDPR will punish you, it’s that the mobs will incinerate your business.

Final words

I am not into the #DeleteFacebook movement. I believe it delivers tremendous value. But there is also a hidden side to it. It’s a double-edged sword; one most people insist that doesn’t exist. I think many people in the industry need to mature their worldviews beyond their fancy bro-clubs. The world is vast and complex. Everything we put into play has consequences. Ripples that are being magnified by our technological advancement.

Ignoring our responsibility towards society is, in my eyes, betraying the reason why we work in the industry. We shouldn’t sacrifice our weekends and holiday for better salaries. We shouldn’t forgo our friendships for the sake of bro-recognition and selfie glory. We do this to help others. The moment we believe in our deity and on the absoluteness of our reason, we’ve unquestionably lost the way.

More walking, more reflecting, more traveling, more reading. More empathy, more ethics and above all, more humanity

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Star Wars: The rise of the SpaceX mini-constellation

Star Wars: The rise of the SpaceX mini-constellation

On Thursday, the FCC green-lighted SpaceX's ambitious plan to launch their minisatellite broadband network. This comes right after SpaceX's successful test of two test satellites in February.

In 2015, Elon Musk announced the creation of project StarLink. The goal is to build a satellite broadband network that offers fiber-like access from anywhere in the world.

To achieve this, they plan to launch 4425 minisatellites and build the largest Low Earth Orbit (LEO) constellation to date. Just to put this into perspective, according to the Index of Objects Launched into Outer Space in 2017 there where 4635 satellites in orbit around Earth. That's an increase of 8.91% compared to 2016. SpaceX intends to double that total in less than six years. 

Musk isn't chasing a crazy dream though. There are existing satellite providers like Iridium or Intelsat. However, both networks rely on old and bulky technology. Some, like Intelsat, orbit in high altitude geostationary orbit (~36.000 km). It gives them much larger coverture of the planet's surface but adds massive latency problems. These networks are suitable for non-critical connections, but not for low-latency ones. On the other hand, systems like Iridium went for Low Earth Orbits. The massive costs of launching and building the satellites, though, restricted how many they could put in orbit (66). A smaller network reduced their coverage and translated into low bandwidth and speeds

SpaceX FCC fillings

New manufacturing processes are enabling the construction of much smaller and cheaper satellites. Cheaper satellites are more accessible to put into orbit and populate the LEO and VLEO (Very Low Earth Orbit) with a large mesh of next-generation satellites. This mesh can deliver under 50ms latency performance.

SpaceX isn't the only one racing towards that objective. There are at least four other organizations in the game, OneWeb, Boeing, Leosat and the Chinese-sponsored Hongyan.

OneWeb, which has investment from Softbank and Richard Branson, got FCC approval in June of last year, but still has to launch any satellites. 

NSR: China's LEO Constellations Ambitions

Why is everyone trying to build a satellite constellation?

What interests me, isn't the news per se, but the strategic reasons for it. There has always been an interest in dominating space communications. However, SpaceX's speed and structural advantages are putting pressure on the industry.

Musk's approach to space domination is a perfect example of vertical integration. I mentioned before that when entering a nascent market, the best strategy is always one of verticalization. Owning the whole stack gives the entrant significant advantages.

SpaceX is doing just that. They're integrating the whole stack, from rocket launcher (Falcon 9) to satellite constellation. They're developing all technologies in-house, giving them a speed and cost edge.

Meanwhile, their closest competitors, OneWeb are following a horizontal integration strategy. They're working with different partners, including Airbus, to deliver on several elements of the system. While it's not a bad strategy when competition is fierce, it first requires some traction. Going for a horizontal approach when there is still no market, is not a wise move.

But why fight for satellite broadband? SpaceX is looking for a lucrative market to finance their end goal of Mars colonization. Building space communication capabilities is a must for them. In the process though, they can also outsmart all terrestrial and space broadband operators and make a massive profit.

According to the company, their goal is to deliver global broadband access to those users that have either no infrastructure or lack affordable prices

Source: World Economic Forum
Source: World Bank

While these reasons seem very altruistic, the truth is that the strategic value of owning a global communication network is massive. 

Who wins with a global satellite broadband network?

There are some distinct strategic scenarios. The most straightforward one is competing with the current terrestrial operators.

Being able to compete, not only on speed but on latency and network coverage, is massive. I have no doubt FCC Chairman Ajit Pai is looking for increase innovation in that space.

The FCC is currently examining additional applications for the operation of NGSO FSS constellations, most of which include large numbers of satellites,” the agency said. “With today’s action, the Commission facilitates greater broadband offerings and competition in the United States.”

FCC Grants OneWeb US Access for Broadband Satellite Constellation

An essential advantage of a LEO satellite network, apart from global coverage, is long-distance latency. Communication between the satellites and ground stations is done via radio. However, SpaceX's proposed satellite to satellite communication is done via optic links. This enables the creation of a high-speed low-latency space mesh network. This mesh can span 7846 km between nodes, allowing for a drastic reduction of the number of routers data has to go through. In other words, terrestrial long-distance connections (Europe to Singapore for example), might go through 10 routers and take 200 ms. Space long-distance connections will go through three routers (minisatellites) in under 50 ms.

The gain is more than considerable and it's the chief competitive advantage Musk is after. Such an infrastructure would enable SpaceX to route part of the Internet's long-distance traffic through their network.

“The goal will be to have the majority of long-distance Internet traffic go over this network and about 10% of local consumer and business traffic. So that's, still probably 90% of people's local access will still come from fiber but we'll do about 10% business to consumer direct and more than half of the long-distance traffic.”

Elon Musk, SpaceX speech 2015

Beyond competing with Internet providers, it could enable strategic low-latency network for crucial businesses. Google, which is one of the leading investors behind SpaceX, is one that comes to mind. They already run their dedicated terrestrial fiber optics network. Having access to a space network would entrench their competitive position and enable them to have a massive advantage. Imagine the creation of a Space Content Delivery Network. Imagine the leverage YouTube might acquire with such infrastructure.

That's if terrestrial operators don't innovate and improve their networks. Musk isn't discarding this option, and he acknowledges that the risk is real.

“One of the mistakes that Teledesic made was not assuming that terrestrial networks would get much better over time. So we need to make sure that the system we design is good, even taking into account significant improvements in the terrestrial systems, but I do think there's an important difference between what we're doing and say Teledesic."

Elon Musk, SpaceX speech 2015

The China menace

Here are where things get interesting. As I stated before, there are several players in the field. One of them is China government's Hongyan 300 minisatellite constellation.

While they're still behind SpaceX, both regarding deployment and satellite fleet size, they have a powerful ally, the Chinese government. China's goal isn't financial return, but world domination. This is well aligned with their "One Belt One Road” (OBOR) initiative, and they'll invest until they win.

"In fact, it can be argued that gaining positive ROI is not the end goal of China’s space program but primarily the projection and increase of its power and influence across the globe. The side effect of this is to potentially undermine the value proposition of Western players that go by traditional market rules and strategies, specifically in the Eurasian, African and Latin American regions as well as other low-income countries that cannot afford high-speed connections."

China's LEO Constellation Ambitions

On top of being a state-sponsored operation, they also have a technology advantage. China has the only Quantum Communication satellite in existence. The development of Quantum communications can be a deal breaker for SpaceX. Quantum technology could deliver instantaneous transmissions between thousands of kilometers.

The technology is still experimental, but the rate of advancement is drastic. It wouldn't surprise me to see functional Quantum transmissions happening in the next five years. Let's remember that five years is still short term. Most Mini satellite constellations will take 6 – 7 years to fully deploy.

This is one of the reasons why the current US bans against Chinese technology companies can have a tremendous impact on US competitiveness.

Worth noting that China isn't the only one investing in Quantum. South Korea is also investing in this space and recently acquired ID Quantique (IDQ), one of the most advanced companies in the field.

Potential disrupted industries

Broadband satellite networks won't only disrupt telecommunication providers. It will affect many sectors. One that will be hit the most is the logistics industry.

Access to global tracking capabilities will supercharge cargo tracking. It will bring a new dimension to all IoT projects build around that space. From ship container tracking to aircraft location and maritime commercial lanes control. This space is already seeing increased activity from China and their "One Belt One Road” (OBOR) initiative. Investment in real-time high-bandwidth logistic applications built on top of the satellite mesh will be a no-brainer.

Within the IoT space, Industrial IoT (IIoT or Industry 4.0) could also benefit from these networks. Mining rigs, remote factories, energy producers, farming operations, oil & gas explorations, etc. Access to high-speed global coverage Internet will catalyze the adoption of IoT in the industry domain.

Another obvious winner would be autonomous fleet operators. The field is growing exponentially and is if anything, data heavy. As this space evolves and fleet managers start deploying vehicles and robots to distant locations, the need for enhanced data-heavy links will increase.

CBInsights CVC Report 2017
CBInsights CVC Report 2017

In this regard, SpaceX holds a strategic position. The fact that SpaceX has access to Tesla and SolarCity technology is a significant advantage. It allows for tremendous vertical integration of the stack.

Tesla vehicles will come with satellite antennas for global data links. Such move will create an initial foothold for StarLink's service. At the same time, it gives Tesla a significant advantage in their industry. If that wasn't enough, Tesla's solar roofs (SolarCity tech), could also be outfitted with StarLink receptors. These autonomous units could power many remote areas, expanding both Tesla's and SpaceX's business.

Another industry that could see disruption are networking equipment makers. New satellite entrants might displace companies like Qualcomm, Broadcom, Intel, Huawei or Cisco. Broadcom already tried to sue SpaceX for poaching some of their top experts. I wouldn't be surprised to see the rise of a new crop of disruptive satellite equipment companies like KymetaMynaric or Isotropic Systems.

Many other fields would be affected by this. An interesting one is Education. Global Internet access at affordable prices (big hypothesis), would enable increased education in developing countries. Better education leads to better living standards. But this change could also upset the rule of many authoritarian regimes. The geopolitical implications of the long-term can't be ignored. 

Censorship and antitrust

The impact of such networks will be drastic and can generate major issues at a political and regulatory level. On the one hand, it can enable citizens to bypass state censorships. Governments have control of their physical boundaries, but not of the sky. Individuals might install ground antennas and link to the global satellite network and bypass any local monopoly. This though has prominent political implications.

"Then there's the – whether it's legal to have a ground link. Obviously, any given country can say it's illegal to have a ground link. From our standpoint, we could conceivably continue to broadcast, and they'd have a choice of either shooting our satellites down.. or not. China can do that. So we probably shouldn't broadcast there. If they get upset with us, they can blow our satellites up. I mean, I'm hopeful that we can structure agreements with various countries to allow communication with their citizens, but it is on a country by country basis."

Elon Musk, SpaceX speech 2015

Another risk is that of monopoly or oligopolies. With two or three viable competitors in this space, one has to wonder who or how would it be regulated. So far FCC is on top of it in the US, but with a global reach, there is no protection in other regions like Africa or South America. 

Deep Tech opportunities

Despite all these things, the field is opening massive opportunities. There are, still many problems to be solved that startups and investors can dig into.

Ground links

The whole ground link connection can generate many opportunities. SpaceX has mentioned that they're working on a phased array antenna, but there are other ways to create that link. From Kymeta's holographic technology to Mynaric's laser tracking tech.

I also wonder who will be capable of making technology that allows for drastic miniaturization. This could enable the incorporation of ground links within smartphones. So far this is considered impossible, but it's an exciting space for research.

Other companies are heading towards a more prosaic path. That's the case of Infostellar, which is creating the first Airbnb for ground antennas.

Manufacturing

Innovative manufacturing processes are also vital to the industry. New materials and new ways of building both, satellites and rockets are critical. 3D printing and assembling will be pivotal in the space and it's no surprise to see important investments happening.

“People in the space industry have a tough time manufacturing things. They're pretty good at designing them in the first place, but they don't actually know how to make them in volume."

Elon Musk, SpaceX speech 2015

Launching platforms

Another apparent field is how to place those satellites into orbit. SpaceX achieved a major step with the Falcon 9. As of 2016, SpaceX was pricing 2719 dollars per kilogram of LEO satellite. Musk's goal is to hit the 1100 dollars per kilogram soon. 

Falcon 9 Launch outcomes. Source: Wikipedia.
Falcon 9 Booster landings. Source: Wikipedia.

Meanwhile, many others are trying to lower the cost of launching objects to space. Some are focusing on micro or nanosatellites payloads (i.e., PLD Space), others are researching new solid fuels and others like SpinLaunch are attempting utterly unique launching methods like spinning catapults. 

Launch systems by country. Source: Wikipedia

Satellite to Satellite communication

As the LEO and VLEO mesh start growing and traffic starts flowing through their backbone, satellite to satellite communications will become critical. So far, most systems used radio links for ground and satellite to satellite communication. SpaceX though has said theirs will employ optic links for space.

Mynaric is already on the verge of commercializing their sat to sat laser communicators, and I wouldn't be surprised to see others jump in.

Mynaric laser technology

One interesting option is Quantum communication between the satellites. The technology is still a little far away, but I expect it to become the next generation tech used in space communications.

Satellite defense

A field that will become very attractive is satellite defense technology. Just like with drones, satellites will need disabling and protection. With LEO and VLEO becoming a crowded space and political, commercial and regulatory issues at stake, being able to disrupt and protect satellites will become critical.

New technologies for Satellite to Satellite (S2S) disruption, Satellite to Ground (S2G) disruption, full satellite disabling and debris protection will emerge in coming years, if not earlier. 

From crazy to doable

I must confess that I find this space of Frontier Tech fascinating. We've gone from crazy research that was only accessible to a government-funded organization like NASA, to commercial companies and VCs funding startups in the field.

These startups require advance research, but it's suddenly becoming fundable and realistic to launch a project in this space. I expect more companies to get involved in the industry, either by building satellite-powered applications or propelling their satellite technology.

For once, this is real Deep Technology that has the potential to change billions of lives and deliver those retarded animojis even to the poles. 

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Corporate Venture Capital Is Doing It Wrong

Corporate Venture Capital Is Doing It Wrong

It's no secret that corporations are struggling to keep up with the innovation pace of the market. They've been trying different approaches for the past decade, some more successful than others. Corporate Venture Capital (CVC) is becoming one of the usuals. According to CBInsights 2017 report, CVC activity is growing rapidly. 

CBInsights CVC Report 2017
CBInsights CVC Report 2017

Most of this activity is being driven by new funds being open. An interesting fact is that the region that's pushing the growth isn't the US or Europe, but Asia

CBInsights CVC Report 2017

And while the share of CVC deals is still small compared to their VC counterparts, the average deal size is considerably higher for CVC than VCs.

CBInsights CVC Report 2017
CBInsights CVC Report 2017

The word that comes to mind when I read these charts is panic. Corporations are panicking and pushing hard on their innovation efforts. 

The striking thing is that while CVC activity is increasing, it's still an outlier when it comes to corporate investment. Most organizations are ramping up their investments, but they are funneling it through their corporate structures. 

CBInsights CVC Report 2017

The increased activity and frenzy is good news for startups. With a fairly slowed IPO market, Corporate acquisitions are the next desirable thing. The fact that many organizations are investing in their venture branches will increase liquidity and accelerate potential acquisitions

CBInsights Tech IPO Report 2018
CBInsights Tech IPO Report 2018

And why do I bring all this? Because my experience during these past few years is that Corporate Venture Capital and corporate innovation strategies are failing miserably. Yes, there are brilliant examples of CVC like Intel Capital or Qualcomm Ventures. But for every good example, hundreds are falling short.

I am a believer of the CVC model as one side of the Open Innovation approach. However, I think the implementations of most CVC are utterly flawed. 

Open Innovation and the Bose case

A fascinating and illustrative example of how much need there is for innovation strategies is Bose, the high-end speaker maker.

The Bose Corporation is a fascinating company. Founded in 1964 by Amar Bose, it became one of the leading speakers and headphones company in the world. With estimated revenues of 3.8 billion dollars in 2017, it's considered one of the most innovative companies in the US. The fact that it's still a privately held company and a secretive one at that has always been a source of fascination.

Nonetheless, the last five years haven't been easy for the company. Their market decline, accelerated by new entrants like Beats/Apple, is showing significant problems with their innovation process.

"I think we can all agree that the pace of change is greater than it's ever been," Maresca says, "and it requires all companies to be faster and more agile."

Bob Maresca – Former Bose CEO (2013 – 2017)

The surprising fact is that Bose is a corporation that has innovation in their DNA. The company's motto "better products through research" says it all. How is it possible that they've been outmaneuvered by a bunch of hipster rappers?

This beautiful example shows how closed innovation paradigms are failing at a rapid rate. Dr. Bose's edge when he started the company resided on the company's research capabilities. Dr. Bose, an M.I.T professor for more than 46 years, had access to top research and talent.

At the time, finding sound research and talented individuals beyond corporations was impossible. Most of the investigation was funded by large corporations like Intel, Xerox, HP, Bell Labs or GE. Dr. Bose, being born to the boon of Corporate Labs, created an organization that closely mimicked the work of such labs. And they won. They won big.

Nevertheless, the confluence of a series of factors ignited the decline of Corporate labs. Increased academic research funding, changes in patent law and increased workforce mobility began eroding the closed innovation model. With increased mobility, employees would leave to other organizations and take their knowledge with them. With time, the US academic system started producing as much research as Corporate labs democratizing the access to innovative ideas.

Before, competing with Bose required a fully-fledged corporate research lab. The democratization of knowledge, increased mobility and the rise of Venture Capital, enabled competition by new entrants. New players were capable of competing, not only on innovations but also on costs. Meanwhile, Bose Corporation has been stuck with massive R&D costs that drag their price competitiveness.

Internet and the rise of mobile have drastically altered this market. Audio consumption has shifted from the home to portable devices. Wireless, miniaturization, battery life and vertical product integration have become keys to the market.

And guess who the king of mobile entertainment devices is? Yes, Apple. The same Apple that bought Beats in 2014. The same Apple that released the AirPods and HomePod and has taken the Wireless Headphone market by storm.

"It's all about entertainment now, the firms creating their new ads say. That's not something the engineering mind understands, Maresca says."

Bose's new beat

The consequences of all this are that the market is forcing Bose Corporation to find ways to innovate faster and cheaper. 20-year research isn't acceptable anymore. 

Bose is reacting. They've been scouting, investing and acquiring startups in the audio technology, wearables, health and wellness spaces.

They recently announced the creation of a 50 million dollar fund to push their new Augmented Reality platform centered around their new AR-audio glasses. They'll use that money to invest in companies that develop applications for their platform. It reminds me of the fbFund, with a big exception, Bose's AR glasses isn't Facebook. 

Building the right Disruptive Innovation strategy

And this is the problem with most Corporate Venture Capital funds. The theory is sound. Invest in external innovation, mix it with our internal resources and come out with disruptive products. Execution though is way harder.

For starters, most CVC only invest in products or services that enable or improve their core offerings. There are two reasons for this. On the one hand, it makes strategic sense to invest in sustaining innovation. If the organization can get a slight edge and surpass their competitors, they can rip hansom profits. The problem with this though is the speed of innovation. A decade ago a sustained innovation would give the organization a five or six years lead. Nowadays competitors will erode that lead in one and a half years tops.

Bose developed their first commercial Noise Canceling Headphones prototype in 1986. While Sennheiser, the German company, produced their own Noise Canceling Headphones two years later, Bose has maintained their lead in the space for a decade. Fast forward to 2018, and you have a comprehensive set of options ranging from Bose's top line to Sony, Sennheiser or Audio-Technica.

Therefore, while sustaining innovations can help maintain an innovation lead, their impact is becoming increasingly reduced.

The second reason why organizations focus on improving their core is that of their corporate culture. Innovating beyond the corporate narrative is tough. Individuals will see new innovative options, but will always tend to apply the existing business models to these new ideas. It happened to Xerox PARC, HP, Microsoft, IBM and many others. It's happening with Blockchain technology and Augmented Reality too.

Building disruptive innovation requires agility, open innovation, autonomy and alternative business models. Most CVC look for sustained innovation. They perceive the viability of the projects through their existing business model lens. Worst of all, most of these CVC aren't entirely independent of the organization. The receiving political pressures to innovate and fast. If the investments don't have a meaningful and immediate impact on the revenue line, they'll be ditched.

Bose Corporation is doing many things right. They're an innovative company at heart. They've recognized the need to move faster. To open their innovation to the outside employing startup acquisition and investment. They're investing beyond their core and trying new things. They're testing the market through customer-centric approaches like crowdfunding projects.

Their newest Augmented Reality (AR) platform is a bold move. They're betting on a disruptive technology which gives them a higher chance to disrupt the market. They're also betting on a change of model. They're moving away from a transaction-based model to a platform one. 

What Bose is getting wrong about Augmented Reality

That said, I think they're also making some strategic mistakes. Bose Ventures should be an independent organization and not a department within the organization. Ensuring autonomy is the best way for disruptive innovation to thrive.

Their new bet, AR glasses as a platform can only work if there are two preexisting elements. On one side you need a community to drive the growth of the platform. Bose has, historically, been a transaction-based company. There is no community or ecosystem behind Bose. Kickstarting one around AR will be tough. The second element is the need for vertical integration.

As a rule of thumb, when a market is nascent, the best strategy is always one of vertical integration. Clients want one size fits all solution. They want the technology to work. To achieve this, it requires tight integration of the platform and the experiences. That is only delivered through ferrous control of the ecosystem.

Bose has no such vertical integration of the space, nor the ecosystem. Bose should learn a page from Apple's playbook instead of Google. The former always approaches a horizontal integration. One that is paying off (now), with Android, but has failed with Google Glasses or their AR approach through Tango.

Apple, which always takes a vertical path, is leading the AR market with their tight integration between hardware (iPhone X TrueDepth), software (iOS + ARKit) and community (App Store).

Final words on Corporate Innovation

Open Innovation isn't optional for most industries. That said, theory is easier than practice. While Corporate Venture funds are on the rise, there is a lack of an accompanying strategy.

Creating a fund isn't just raising money. It's about focusing on the right goals, on the right metrics, and on the appropriate strategy. Most CVCs are investing but follow what seems to be murky strategies and misplaced incentives.

Bose Corporation is doing a great job, but despite their best efforts, they're still trying to enforce their corporate narrative on their innovation efforts: sell a physical product and profit.

"Exactly," Maresca says. "Because we had that direct marketing engine for so many years, we didn't need celebrities.”

Bose's new beat

Escaping the corporate narratives of valid business models is essential. To accomplish this, it's not enough to shift the revenue model, but also about building the right strategy that sustains the new model. It implies new cost structures, different organizational structures, and innovative marketing approaches. This is rarely achieved within a department in the organization, but with independent innovation units

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Can Artificial Intelligence take over our creative jobs?

"How many of you believe that Artificial Intelligence (AI) will automate most jobs in 10 years?"

Around 90% of the room raised their hands.

"How many of you believe AI will replace YOUR job in 10 years?"

Around 15% of the room raised their hands.

This is a typical response. We all understand the theory, but it rarely applies to us. Artificial Intelligence keeps getting trashed-talked in many industries. Few appreciate how fast it's developing and how rapid its iterations are.

One area that seems to feel immune to automation is creativity. The consensus is that AIs will substitute repetitive, highly specialized tasks. Those that require holistic thinking or high degrees of creativity will be spared. I beg to differ. 

The Future Of Employment: How Susceptible Are Jobs To Computerisation?

"Our model predicts that the second wave of computerization will mainly depend on overcoming the engineering bottlenecks related to creative and social intelligence."

The Future Of Employment: How Susceptible Are Jobs To Computerisation?

AI systems are improving at an incredible pace. We already have Deep Learning systems that are capable of doing music improvisationartistic image styling or creative new images

Leon Gatys shares a neural algorithm of artistic style – YouTube

So far though, such technologies are lacking internal coherence. Yes, an AI can compose an improvised musical piece. The piece though doesn't have a purposeful intention or connection. The same happens for images. An extreme example of this would be the art of writing. Not only does it involves creativity, but it requires social intelligence, planning and plot consistency too

Automating the creative process

Can creativity be automated? The creativity process usually follows three well-known steps. The learning & research stage, the development of structure or form and the creative freedom or breaking of the form.

The automation of creativity is following a similar path than in humans.

Information gathering

Before we can even start creating we need to learn and gather information. The help of a teacher or mentor is critical at this stage. They can help students focus on what and how to study. They create a template or roadmap for the students to follow.

That's precisely what the first generation of automated tools is already doing. Human operators design written templates that the machine then uses to create written reports. From automated reporting of The Washington Post's Heliograf to computerized financial statements written by Quill. These systems though, require human editors to create these templates. Their outputs are scalable and informative, but it would be a stretch to call them creative.

"Instead of targeting a big audience with a small number of labor-intensive human-written stories, Heliograf can target many small audiences with a huge number of automated stories about niche or local topics. There may not be a wide audience for stories about the race for the Iowa 4th, but there is some audience, and, with local news outlets floundering, the Post can tap it. “It’s the Bezos concept of the Everything Store,” says Shailesh Prakash, CIO, and VP of digital product development at the Post.

What New-Writing Bots Mean For The Future Of Journalism

The danger though lies in discarding these early approaches and the potential to improve. They're obviously pretty limiting but are the foundation for more comprehensive automated efforts. Ignoring them as failed creative attempts is not to understand how disruption works.

Creative repetition

The second stage of the creative process is the personalized copy. You copy and repeat what others have done and add, progressively, your flavour to it. On this stage, you can already perceive a sense of purpose. There is a goal, an intention to the creation. It can be informative or mere emotional expression, but it's driven by something.

A whole set of AI tools are trying to mimic this stage. Given a topic or a subtopic, AI agents research and write thousands of variations on the given theme. It's impressive to see the machine produce all that content. Nonetheless, these algorithms rely on the existence of available written material on the topic. Writings that exist because a human wrote them. Again, simple automation, rewriting, summarizing, but no creating. 

While most AI systems lack a sense of purpose or a reason for their creative traits, we should meditate carefully on our creative impulses.

Humans create, not for the sake of creating, but because of need. This need can be driven by our egos or for other reasons like self-expression, identity fixation or personal therapy. My point though is that it's driven by a desire.

I wonder if some of the quirks we observe in AI systems aren't the machine's creative ways of dealing with their own needs. Google's translation system produced its interlingua language to deal with translations. Why do we discard that as non-creative? 

Zero-Shot Translation with Google’s Multilingual Neural Machine Translation System

Not long ago, Facebook AI agents developed their language to communicate with one another. The goal was to achieve a negotiation between two agents. The researchers forgot to incentivize the use of the human word and what the AI came out with was its language. They decided to shut it down. Why is it that the only creativity that is valid is the one we humans can understand?

Facebook: Deal or no deal? Training AI bots to negotiate

Abstract linking

The third and final stage of the creative process is the abstract linking. Once you've mastered the form, you break it. Free of form, the artistic purpose links and connects distant objects, concepts, feelings. People measure creative prowess in terms of originality, intention, and coherence.

AI is still not at this level, but current advances are proving akin to magic. While these systems aren't capable of plot coherence, they're achieving remarkable creativity.

In 2015, Andrej Karpathy released a seminal article where he demonstrated the use of Deep Learning to generate texts, character by character. His paper and code created a before and after in generative text AIs. 

The Unreasonable Effectiveness of Recurrent Neural Networks – Training I
The Unreasonable Effectiveness of Recurrent Neural Networks – Training II

A year later, researchers from the Google Brain project showcased an AI that was capable of building coherent threads between two distant phrasesSentence gradients in a nutshell.

Generating Sentences from a Continuous Space

Building on these two, Robin Sloan, a writer and enthusiast programmer decided to use this technology to aid his writing. He made, among other things, an impressive text editor helper that inspires his writing.

Robin Sloan's Writing With The Machine – Example I
Robin Sloan's Writing With The Machine – Example II

Like Robin, other creatives are finding an increasing fascination with the use of AI systems to enhance their creativity. Ross Goodwin's use of AI to create poetry around an image is mind-blowing. 

Adventures in Narrated Reality – Narrated caption – word.camera

Goodwin even took it as far as letting the AI generate a script that was then filmed under the name of Sunspring.

Sunspring | A Sci-Fi Short Film Starring Thomas Middleditch – YouTube

Another intriguing and powerful development is Johnson's work in generating descriptive image paragraphs. A recent paper shows how can AIs can extract meaning from an image an write down what they see. 

A Hierarchical Approach for Generating Descriptive Image Paragraphs

Future of AI creativity

While it might be true that creative AIs lack coherence, I have no doubts that we'll see new systems that start building coherence into their models.

The combination of sentence gradients, deep learning networks and the rise of generational adversarial networks paints an exciting future.

I can see how an adversarial network can drive a plot idea while the convolutional network builds the different chapters. Even simpler than that, we could mix human-made plot and character templates with the automated text generation of current models.

I believe Artificial Intelligence can be creative and develop new innovative formats. Many artists lash back against the mere notion of having machines creating anything.

"But while algorithms can be useful tools in the artistic process, Wilson said he didn't necessarily think robots will ever be able to create art more meaningful than humans because humans have one thing that no robot ever will: the experience of living a human life."

Can an algorithm make science fiction better?

For me, creativity, like many other human aspects, isn't unique to us. Machines will, driven by their own needs, become creative in their own way.

The question though is, what does this mean for companies? Is this something that only writers care about?

The topic is an interesting one because many organizations are betting on a future where their jobs won't be taken by the machines. Most of those "protected" positions are so because they entail a certain degree of creativity and holistic approach.

The more I observe how Deep Tech is evolving, the less convinced I am that creativity will be a safeguard for jobs.

On the other hand, I think that AIs can significantly enhance the creative process. We are already doing that. Machines are the heart of video games, CGI effects in movies, Frank Gehry's Guggenheim, etc.

In many ways, companies using AI enhanced creativity processes will win the day. A good example is Reuters Tracer, their in-house tool to detect, validate and corroborate real-time news. Their capacity to write part of the story in real time is giving them a decisive edge.

Machines will become creative. They will be able to write, compose and paint as good as humans. You can debate it their art is soulless or not, but they'll produce stunning pieces. Most of this creations will be consumed by humans and will give a serious scalable competitive edge to any company that employs such methods. 

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