The close relationship between Hoffman and the White House isn’t just about his being a major political donor. He and others like him have something more powerful than money to offer: a way for officials to connect with the largest possible audiences. In the nineteenth century, the bosses of political machines served this role; in the twentieth, it was media barons, especially in broadcasting and newspapers; in the twenty-first, it is people who have created vast online social networks.
.. Everything about Reid Hoffman—his business, his political activities, his philanthropy, and his social life—is based on a premise about how the economic world will work from now on. In the decades immediately after the Second World War, people thought about the economy in terms of corporations, government agencies, labor unions, and so on; middle-class Americans often aspired to a life spent at a big organization that offered job security, health care, and a pension. Beginning in the mid-nineteen-seventies, this social order fell apart, as economic life became much more uncertain and more favorable to Wall Street than to Main Street. The idea that companies should be run primarily to keep their stock price as high as possible came to the fore, the goal of lifetime employment faded, and bright people who wanted business careers were more attracted to finance than to industry. It was at this time that the growth of middle-class incomes began to slow, and inequality began to increase.
.. Mike Maples, Jr., estimates that of the roughly thirty thousand tech startups a year, only ten will wind up representing ninety-seven per cent of the total value of all of them, and one will represent as much value as all the others combined.
A rigorous study of twenty years’ worth of Silicon Valley startups by two economists—Robert Hall, of Stanford, and Susan Woodward, of Sand Hill Econometrics—found that almost three-quarters of company founders who get venture funding (a category that represents only a small minority of those who try to get venture funding) wind up making nothing. Venture capital is overwhelmingly oriented toward speed, big ideas, and the quest for the obsessive, super-smart, rule-breaking entrepreneur-hero.
.. it helped establish a number of lasting principles. One is extreme adaptability. PayPal began as a security system for the PalmPilot. It evolved into a system for processing transactions on eBay
.. when the passage of the Patriot Act severely damaged PayPal’s second line of business—handling cash transactions for gamblers—Hoffman helped arrange a quick sale of PayPal to eBay.
.. In 2006, LinkedIn decided to make all profiles partly public, so that when you type someone’s name into a Google search, that person’s LinkedIn profile is one of the top results.
.. These dreams may never be fully realized. But what if they are? Hoffman and LinkedIn represent the distilled essence of Silicon Valley’s vision of the economic future. People will switch jobs every two or three years; indeed, the challenge is to prevent them from switching more often.
.. It’s assumed that what everybody really wants is to quit and create a startup ..
.. “I’m trying to get politicians to understand that solving this problem is about facilitation of a network, as opposed to”—sarcastically—“the New Deal.”
.. Thus far, among the Presidential candidates, he has had private meetings with Hillary Clinton and Jeb Bush, but has not made up his mind whom to support for President.
.. “I have an algorithm,” Hoffman said. “If it’s a good place, order the special. If it’s a bad place, order what they can’t screw up.” They ordered the special.
.. Could you imagine a system that decided it would be better to eliminate human beings? You could make an argument. You’re screwing up the climate, you’re killing off other species.”
.. There will be some people who think whatever’s right is to let the next step in evolution play out. That’s a scary thought.”
How Smart, Connected Products Are Transforming Competition
Smart, connected products dramatically expand opportunities for product differentiation, moving competition away from price alone. Knowing how customers actually use the products enhances a company’s ability to segment customers, customize products, set prices to better capture value, and extend value-added services. Smart, connected products also allow companies to develop much closer customer relationships. Through capturing rich historical and product-usage data, buyers’ costs of switching to a new supplier increase. In addition, smart, connected products allow firms to reduce their dependency on distribution or service partners, or even disintermediate them, thereby capturing more profit. All of this serves to mitigate or reduce buyers’ bargaining power.
.. Smart, connected products also create opportunities to broaden the value proposition beyond products per se, to include valuable data and enhanced service offerings. Babolat, for example, has produced tennis rackets and related equipment for 140 years. With its new Babolat Play Pure Drive system, which puts sensors and connectivity in the racket handle, the company now offers a service to help players improve their game through the tracking and analysis of ball speed, spin, and impact location, delivered through a smartphone application.
.. John Deere and AGCO, for example, are beginning to connect not only farm machinery but irrigation systems and soil and nutrient sources with information on weather, crop prices, and commodity futures to optimize overall farm performance. Smart homes, which involve numerous product systems including lighting, HVAC, entertainment, and security, are another example. Companies whose products and designs have the greatest impact on total system performance will be in the best position to drive this process and capture disproportionate value.
.. Companies that fail to adapt may find their traditional products becoming commoditized or may themselves be relegated to the role of OEM supplier, with system integrators in control
.. Whereas operational effectiveness is about doing things well, strategic positioning is about doing things differently. A company must choose how it will deliver unique value to the set of customers it chooses to serve. Strategy requires making trade-offs: deciding not only what to do but what not to do.
.. Expertise in systems engineering and in agile software development is essential to integrate a product’s hardware, electronics, software, operating system, and connectivity components—expertise that is not well developed in many manufacturing companies.
.. If either Philips Healthcare or GE Healthcare were the dominant manufacturer of medical imaging equipment, for example, it could drive a closed approach in which it could sell medical imaging management systems that included only its own or partners’ equipment to hospitals. However, neither company has the clout to restrict hospitals’ choice of other manufacturers’ equipment, so both companies’ imaging system platforms interface with other manufacturers’ machines.
.. For example, while software skills are not well developed in most manufacturing companies, Jeff Immelt recently said that “every industrial company will become a software company.”
.. For example, most companies should strive to maintain solid internal capabilities in areas such as device design, the user interface, systems engineering, data analytics, and rapid product application development.
.. Manufacturers have traditionally focused on producing a physical good and capturing value by transferring ownership of the good to the customer through a sales transaction.
.. Whirlpool, for example, currently has a healthy business selling spare parts and service contracts—a model that can dull incentives to make products more reliable, more durable, and easier to fix. If, instead, Whirlpool moved to a product-as-a-service model, in which it maintained ownership of the product and the customer simply paid for the use of the machine, the economic incentives would be turned upside down.
.. Product sharing, a variation of the product-as-a-service model, focuses on more efficient utilization of products that are used intermittently.
.. Smart, connected products not only transform existing products but often broaden industry boundaries. Products that have been separate and distinct can become parts of optimized systems of related products, or components of systems of systems. Shifting boundaries mean that companies that have been industry leaders for decades may find themselves playing more of a supporting role in a broader landscape.
“Inside product” optimization involves integrating individual product designs so that products work better together. “Outside product” optimization takes place through the algorithms that connect products and other information, where products themselves are modular. Inside product optimization creates the strongest rationale for expanding into related products and offering a proprietary platform. Outside product optimization favors an open platform, and the platform may be offered by a company that does not produce products at all.
.. Smart, connected products are changing how value is created for customers, how companies compete, and the boundaries of competition itself.
Why the U.S. Can’t Punish North Korea
He explained that part of why it’s difficult to sanction and further isolate North Korea is that Pyongyang “isn’t integrated with the rest of the world.” That has made the country difficult to sanction or punish in the past as well. As Snyder reminds us, this isn’t the first time we’ve had trouble with North Korea.
A Rare Peek Into The Massive Scale of AWS
The Amazon online retail business may be a $70 billion behemoth, but it does not throw off a lot of cash. Amazon founder and CEO Jeff Bezos is not interested in profits as much as he is about transforming the world around him, but the cloud computing business is one of the most capital intensive businesses there are in the world. Thanks to its near monopoly in online search, Google can spend tens of billions of dollars on datacenters and not bat an eyelash. Microsoft, thanks to its near monopoly on desktop software and its dominant position in datacenter software, also has very deep pockets and can spend as much.
.. So, the answer is that AWS probably has somewhere between 2.8 million and 5.6 million servers across its infrastructure. I realize those are some pretty big error bars, but this is the data we have to work with.
.. “Networking is a red alert situation for us right now,” explained Hamilton. “The cost of networking is escalating relative to the cost of all other equipment. It is Anti-Moore. All of our gear is going down in cost, and we are dropping prices, and networking is going the wrong way. That is a super-big problem, and I like to look out a few years, and I am seeing that the size of the networking problem is getting worse constantly. At the same time that networking is going Anti-Moore, the ratio of networking to compute is going up.”
.. The first thing that Amazon learned from its custom network gear is what it learned about servers and storage a long time ago: If you build it yourself with minimalist attitudes and only with the features you need, it is a lot cheaper.
.. But the surprising thing, even to Hamilton, was that network availability went up, not down. And that is because AWS switches and routers only had features that AWS needed in its network.
.. And so when it first tested out its homegrown networking, it did so on a 3 megawatt datacenter with 8,000 servers that cost something on the order of $40 million to build. This is not something even the largest network equipment providers can do, but AWS could, and did, literally rent the capacity from itself for a couple of hundred thousand dollars to test at this vast scale for a couple of months. (Yet another example of scale and how to leverage it.) Today all of the AWS network is using this custom network stack. Equally important to owning the stack and testing it thoroughly, Amazon continuously develops the code and puts it into production. “Even if it doesn’t start out better, it keeps getting better.”
.. The AZs are usually under 1 millisecond apart in terms of latency and are always less than 2 milliseconds apart; this speed is what allows for synchronous data replication, since committing data to a solid state drive takes – wait for it – between 1 and 2 milliseconds.