Supported by Greenhaven Road Capital, finding value off the beaten path.
Brian McCullough spoke at Google and podcasted with Chris Dixon about his book How the Internet Happened. McCullough said he wrote the book because “I feel like anybody would want to know who did this” and “It just sort of bothered me that no one had done a book about the internet going mainstream and I just got tired of no one writing that book.”
These glitches in the Matrix where something confuses us, enlightens us, or bothers us are where a lot of products begin. It’s the catalyst for products like RX Bars, Panera Bread, and Spotify’s Discovery Weekly. “So like any other startup I’ve done, I was like, ‘Well someone’s gonna do that so why not me?'”
McCullough found some interesting things at the library, like Al Gore’s contribution. During interviews, he also noticed some media manipulation. “To a person, all the Mosaic/Netscape engineers made the point that this sort of work hard, sleep under your desk, startup culture was from the media. These were corn-fed Midwesterners.”
The media distorts things all the time. Ed Catmull noted the caricature of Steve Jobs. Annie Leibovitz wrote about the manipulation of scenes for war zone photos. Andre Agassi never planned on saying image is everything.
But maps distort things. So do stories. Memories too. Nothing is a perfect replication.
As countermeasures, we can adopt Tyler Cowen’s approach and avoid the philosophy of once-and-for-allism and heed this advice from Jason Bateman:
“Baked into the cake is the assumption that the people reading this are reading this for fun. You kinda know that with those magazines there’s more than a grain of salt, more like a kernel of truth to it, but its super hyperbolic to get the magazine sold or the click-bait on the computer.”
Netscape’s browser was the first major software to be distributed digitally. McAfee and Brynjolfsson and Smith and Telang researched why this shift was important. McCullough reminds us, “Before Netscape, you would still put software in boxes, shrink wrap it, and put it on a shelf.” I remember getting Warcraft in a box and thinking, that’s a lot of space for one disc and a manual.
Netscape was also the first internet company in the sense they acted like – A/B testing – an internet company. Andrew Ng said, “What defines the internet company is whether or not you have an architect at your organization to leverage internet capabilities to do the things that the internet allows you do really well.”
Part of the reason Netscape did this was out of fear. “The research was a surprising reminder to me how much everything in the 90s was in relation to what Microsoft might do.” Read anything about technology in the 90s and Microsoft comes up. Tim Wu compared Microsoft to Kronos, eating the young. Jerry Kaplan wrote “If we so much as threatened to sue, it would rain lawyers on our office like the plagues of Egypt.” “Googlers told me that when AdWords finally took off they didn’t tell anybody until they were far enough along so that Gates can’t catch us,” noted McCullough.
Gates’s mistake was in thinking TV was the portal and broadband was the means. “The thing that Gates missed was that the internet was good enough.” McCullough told Dixon, “The lesson of the early internet is that sometimes just good enough technology is good enough.”
This was true for Twitter and the fail whale. Instagram too. Kevin Systrom said, “To be clear, there is no reason we should have succeeded. The server was down every other hour and people just kind of forgave us. They came back and they would share their photos. At the time mobile networks weren’t that great either, so people would blame their connection and not us – which was great.”
McCullough’s talk and book include many other companies; Facebook, AOL, Yahoo, and Amazon among others. eBay too, which did three things.
- “Taught normal people to trust faceless strangers across the country online.”
- Created “masses that are self-organizing,” and introduced a rating system.
- “They were the first company who succeeded with the business model of the platform, of whatever the users are doing.”
McCullough says that newspapers were interested in buying eBay but they had no inventory. Chris Dixon noted that what the publishers thought was a bug was actually a feature. Related was Alex Rampell’s Tivo problem.
At one point, 7% of all eBay listings were for Beanie Babies, and Zac Bissonnette wrote about the toy’s importance, “In order to lure people out of their comfort zone and into the idea of e-commerce—and, even scarier, peer-to-peer e-commerce—eBay needed to offer consumers something that was easy to ship, couldn’t be found anywhere else, and elicited passion among the people who were looking for it.”
More recently Michael Munger summarized the economics, noting that platforms reduce the transaction costs. He said, “The best proposition is where transaction costs are high but reducible and excess capacity is high.” Before eBay people used newsletters and local shows to trade toys.
McCullough also addresses the idea of a killer app. “I think the reason mobile didn’t take off for so many years was because there wasn’t anything for normal people to do with it. The iPhone comes out in 2007 and six months later Facebook opens registration to everybody.” The ‘opening’ was something Steve Jobs nearly got wrong.
Ben Horowitz addressed this idea too, “When asked ‘What’s the killer app?’ No one ever gets it right.” Horowitz didn’t give an answer but he did offer an approach. “If you think about the smartphone it was much worse than the PC. It had a tiny screen, it was far less powerful, etc, etc. But it had a couple of properties that weren’t in a PC. It had a GPS and it had a camera, so you could now build things like Lyft and Instagram.”
McCullough supposed, “Maybe you had to have Facebook to go mainstream for the iPhone to go mainstream and vice-versa.” There had to be ‘an app for that.’
We study history, said Michael Ovitz “Because past is prologue.” It also helps said McCullough, “how much can you learn by looking back at dumb ideas that will always be dumb ideas (inversion) or dumb ideas that were only dumb ideas at that time (timing matters).”
This a trope that this time is different. That’s true on some levels but not others. What never changes is an exchange, an X for Y. That’s the essential economic question. What always changes is the means, reasons, and explanations.
Thanks for reading.