The Age of Convergence

I am Dan Ramsden. I have been in media, technology, finance, markets, business building and strategy for over twenty years. And I have some other interests. The title of this tumblog is the title of the book I wrote.

Mar 27

The acquisition spree in context

As the information network branches into transportation and wearables and health and entertainment and home devices and fiber to the home, the social network seeks to become an information network, too.

But there isn’t any blueprint, only possibilities, as many predecessors have failed to recognize. And even with the recognition, there is the gamble, which is to say, the business value. There is the asset, the core that must be guarded, and the option, or the upside. The two interconnect and one doesn’t exist without the other.

The balance of the two, the relative importance, varies with the circumstance, the market, and the era. Volatility feeds option value and erodes the asset. A deflationary economics does the same. It isn’t a matter of taste, but of survival.

… All of these big tech companies are looking for the next thing to make sure they don’t miss it. And they will pay… for a call option on the next thing. It isn’t clear if the next thing is virtual reality, the internet of things, drones, machine learning, or something else. Larry doesn’t know. Zuck doesn’t know. I don’t know. But the race is on to figure it out. Trillions of dollars of collective market capitalizations are on the line. So a couple billion here or there is chump change…

- @fredwilson, The Search For The Next Platform

And anyway, the opportunity cost of expired options at the expense of building robust assets isn’t high.

Fred’s comments made me wonder: so are smartest minds of our time as clueless about the future as the rest of us? [Or] is it that both Google and Facebook realize that there is only so much they can do with web-based advertising and ensuing revenue stream? If you ask me, that is the real story here…

- @om, Billion Dollar Dart Throwing

The currency of choice also bears noting, because this points to a risk-appetite and financial strategy of its own. When equity is cheap and cash is dear - as doubly happens in a strange bull market characterized by deflationary business fundamentals - strategic option portfolios come to resemble venture capital formation.

His stock currency has given him plenty to play with. It’s the way the Valley has come to think about startup valuations. Consumer Internet success is binary. It’s a home run or a disappointment. As long as there is a liquidation preference to protect you on the way down…

- @sarahcuda, Even Facebook’s biggest fans should be thrilled its stock traded down today

For additional background on converging segments and financial asset classes, on the breakdown of value between the business core and its optionality, on the emergence of a new economics fueled by a new economy, and on the interconnectedness of all these things by way of context…

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… a collection of essays about a new technology environment and its new fundamentals.

For paperback or eBook edition, click here.


Feb 23

Broader signals from the isolated case

The argument was simple. At one polar end there is the technology, which requires continuous reinvention and upgrade. It is said that technology companies are in the business of innovation. At the other extreme there is the network, which is robust because it has effect, because there are switching costs for its users, who preserve the value of its base with their interconnected presence. At one end there is a high degree of option value, at the other there is a greater element of stability.

The argument is no longer simple. When the world’s largest social network makes it a point to acquire the up-comers, at ever increasing prices, at first for merely 1% of its market capitalization but soon enough 10%, this is a signal from the other side that times have changed. It is a signal that the effect is not what it once was and that the network needs to be defended and preserved and reinvented, much like a technology.

When one large social network buys a smaller one (partly as defensive tactic), the transaction is a symbol. When the price is high, the message isn’t subtle. When the payment is in stock, there is a statement in that as well, because buyers with multiple and ample resources will use the least expensive to transact. And when the successful up-comer quickly sells to the deeper pocket with the greater resources, there is in that too a sort of comment, possibly about necessity.

It has been argued in this space that in an information economy marked by deflationary trends and rapid innovation, there are convergences underway that are diminishing distinctions between previously disparate sector categories. It has also been argued that option value is the order of the day in this environment of technical volatility.

All these themes are represented in the referenced transaction, which additionally hints at a new convergence, previously less pronounced: the blend of network and technology, whereby the former assumes the volatile insecurities of the latter.

Further reading…

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… a collection of essays about a new information economy and its new fundamentals.

For paperback or eBook edition, click here.


Nov 29

A thesis & its elements

In an economy increasingly shaped by information processing and flows, in which innovation, technical efficiency and entrepreneurship play a central role, new macro and micro fundamentals are taking root that should be understood and interpreted holistically.

In this economy, information technology is not merely a tool but increasingly the core business - in fields as varied and dominant as finance and commerce, markets and marketing, hardware and software, healthcare, entertainment, and even heavy industry. These sectors and others will increasingly overlap, pulled by a shared language of mechanized knowledge and the processing of bits.

The evolution is from an age of hyper-specialization to an era of synthesis and combination. In this, elements that were previously apart and self-contained are beginning to blend and become one. We see this already in areas of design and logistics, content and distribution, networks and applications; while definitions and categories are tracking the change with their own combinations in finance and funding structures, the variety of markets and marketplaces, and in the notion of consumer and vendor.

In this evolving environment, aspects of inflation and deflation, productivity and growth, supply and demand, employment, operating and financial leverage, enterprise value and optionality, all take new forms, meanings and stature.

We’re not there yet, but we’re moving fast.

Further reading…

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… a collection of essays about a new information economy and its new fundamentals.

For paperback or eBook edition, click here.


Nov 21

New options rooted in new markets driven by new economics

In a disinflationary environment…

… mirroring deflationary trends in technology, software and information processing…

… and large-scale transformations and volatility…

… optionality remains an attractive value proposition…

… as overall market expectations diminish…

… and the difference between public and private capital flows erodes.

Further reading…

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For paperback or eBook edition, click.

For regular updates, 'like' or follow.


Nov 20

Nov 18

New symptoms rooted in new causes

New macro economic perspectives are gaining mainstream acceptance, testing previously accepted norms and models and reflecting new economic patterns…

… in deflation and its monetary mirrors…

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… and in bubbles and their economic virtues.

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But what still lags in popular discussion is the micro economic world that coincides with these new patterns, and the reconciliation of micro with macro elements.

Exploding technology capacity

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Mechanization and ubiquity of information

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The shape of networks and volatility of communication modes

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In a new economy shaped by new fundamentals, the symptoms of macro economic trends are rooted in new micro economic causes.

Further reading…

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For paperback or eBook edition, click.

For regular updates, 'like' or follow.


Nov 16

The franchise, the network & other lessons from media

As traditional industries - from finance to commerce to healthcare and education and household appliances and “things” and even manufacture now too - adopt information technology to the point where it, for many, is not a mere tool but the very core of the enterprise, as this occurs it will be increasingly necessary to study the nature of information and its processing, analysis, safekeeping, distribution, and so on… all of which have been at the core of the media sector all along.

To a large extent traditional industries will be media businesses as the information economy continues to take root. To this extent, the lessons of media as a sector will be important to understand. Among these is the value of the franchise and the special significance of networks, which can exist in a variety of forms.

And, as has been argued in this space before, the medium is the new star.

Further reading…

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For paperback or eBook edition, click.

For regular updates, 'like' or follow.


Nov 15
“I don’t even know why I would want to be on a label in a few years, because I don’t think it’s going to work by labels and by distribution systems in the same way. The absolute transformation of everything that we ever thought about music will take place within 10 years, and nothing is going to be able to stop it. I see absolutely no point in pretending that it’s not going to happen. I’m fully confident that copyright, for instance, will no longer exist in 10 years, and authorship and intellectual property is in for such a bashing. Music itself is going to become like running water or electricity. So it’s like, just take advantage of these last few years because none of this is ever going to happen again. You’d better be prepared for doing a lot of touring because that’s really the only unique situation that’s going to be left. It’s terribly exciting. But on the other hand it doesn’t matter if you think it’s exciting or not; it’s what’s going to happen.”

David Bowie in 2002

David Bowie’s 2002 predictions about the future of music were pretty close - The Next Web

(via fred-wilson)

Not only music, but really all content. Books aren’t far behind, journalism was there before music, video moving in that direction… and the medium itself is the new star.

(via fred-wilson)


Nov 14

Maturation of insight before maturation of value

As the initial novelty of past disruptions subsides and as these become the new norm, analysis is also maturing and the levels of investigation are deepening.

In the financial expanse from pure optionality at one end to hard asset at the other, this might signal a relative movement of perception that same way, from possibility to actuality, from blue-sky to the ground, from volatility to settlement.

And with perception so also market flows and investment… but it is still early.

Here are some examples from the hottest trends and most fervent discussion topics… (click through on images for links to sources):

1) Mobile media… What actually is it? Why does it matter? Where is the audience? How are they reached?

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2) Mobile devices… Who uses them? How are they used? What is the segmentation and the economics?

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3) Social networks… What is a network? To whom is it valuable? How is it defensible? Why is it unique?

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4) Social commerce… What is useful for marketers? And what isn’t? How valuable is it? And when?

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Related reading…

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For paperback or eBook edition, click.

For regular updates, 'like' or follow.


Nov 13

Results as complex as markets

The use of proceeds may not have been as immediately intended…

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But the environment has opened windows and led to opportunities (and liquidity) for newcomers…

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And incumbents sooner or later do catch on.

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In a market economy, capital flows to its most efficient use… even if this doesn’t take the quickest, most direct, and architected path.

QE, from this vantage point, has been a boon to entrepreneurial disruption.


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