Perhaps you too remember that crayon-factory segment from Sesame Street. The one where they show dramatic shots of hot orange wax getting poured into vats and molds and eventually labeled and boxed up into neat packages of the rainbow, while Skrillex-junior music played in the background. This was my favorite segment on Sesame Street, evidenced mostly by the fact that it’s really the only one I remember. Not to worry if you have no recollection, I found it for you on YouTube.
Some people freak out when they see movie sets, or space stations, or fire trucks, but for me it has always been factories. I spent some time 2005-2008 wandering in and out of factories in Shenzhen, Dongguan and Chaozhou and what was most surprising was how much is still made by hand. It is not all robots, even remotely.
And modern supply chains were built around that very premise – that hands were needed, and the best way to compete and scale was to find the cheaper hands. But some very interesting rumblings on the periphery of mainstream production (specifically in electronics) indicates not that the need for hands is going away, but that the entire system is evolving in a much more fundamental way.
The latest buzz-phrase-of-late seems to be “hardware is the new software” – and from what I can tell, the significance rests in the idea that the formerly painful process of making software has become a mostly democratized affair that has created many billion dollar companies along the way. The same will soon happen in hardware. And “soon” is used very loosely here. Could be 2, 12, 20, years down the road (ok probably not 2), but it seems near-inevitable that the shift will create many new and interesting companies along the way.
I titled this post “APIs for Manufaucturing” because that’s what I hope will happen; in many ways the changes are already underway. The dream is that manufacturing will eventually be democratized through a series of APIs. They will make it easy for aspirational producers to access expensive production devices that they would not be able to get access to on their own. Because sadly manufacturing is still extremely difficult and out of reach for all but the most tenacious producers. Open-source hardware and consumer-friendly 3D printing is slowly changing that, but getting any sort of scale remains quite difficult.
A great read from yesterday is Ben Kaufman’s blog post on Quirky’s recent $68m fundraise. Perhaps the most insightful observation for me was from this reaction piece: “After several trips to China, Kaufman realized that he actually needed to master a list of “50 or 60″ disciplines to make his product a reality”. It is these 50 or 60 disciplines that will one by one become companies in the still-nascent MaaS market (manufacturing-as-a-service, a term not-yet widespread but still used). Perhaps that’s why this is such an exciting time in hardware – the changes are materializing but are nowhere close to realized.
But when you start to poke around, it becomes clear that the changes happening in the market are actually much more profound, and are mirroring a lot of what has happened with software startups since the late 1990s. Changes in creation, prototyping, production and distribution is making it more and more possible to thrive as a 4-person hardware startup and new ones seem to be launching every day.
I can’t overstate how exciting this is – consumers will get access to devices that more exactly fit their needs and producers will no longer need million-dollar retail distribution deals to survive.
Here’s an overview of some of these changes:
Our relationship with our devices has evolved.
More and more, our devices are becoming extensions of ourselves. They are the first thing we see in the morning and the last thing we see at night. In the same way that clothing can be a tool of self-expression, so can your speakers or your headphones or your docking station or your watch. Specialization and niche products are becoming the norm.
Buying decisions are less influenced by specs and features and more driven by design and experience.
Apple up, Dell down. Need I say more?
Financing is shifting.
Pre-sales happening through Kickstarter/Indiegogo and new development models from companies like Quirky are making it easier for hardware companies to get started. Costs are coming way down and transparency around production is growing as knowledge-sharing becomes even more ubiquitious. Producers can connect directly with their users right away, making the getting-started costs much less prohibitive.
Consumerization of 3D printing.
The growth of consumer and prosumer 3D printing will help to cut costs even further and will contribute to a more iterative prototype process, increasing the overall quality of these new electronics.
Growth of the maker community.
The communites that have grown around Makerbot, Shapeways, Tindie, Kickstarter, and other hardware niches is exceptional. While the indie hardware community is not new, there has been a spike in sites and tools that make hardware hacking easier than ever.
The gaping hole, at least for me, is at the very last part of the process: retail. The biggest players are the same – Best Buy, Wal-Mart, Amazon. Given all the above changes, surely this segment would have to shift – the experience of finding and buying new personal technology needs to adapt as well. Joe, Aaron and I couldn’t stop talking about this – we’re all gadget-obsessed web nerds, so we decided to just start building instead. Excited to share it soon, but for now, hope you enjoy our snake-tastic landing page and launch contest.
Just because we have all spent years buying electronics based on specs we didn’t care about, features we never used, and Black Friday blowouts doesn’t mean it is going to be that way forever.
Ironically enough, some of the growth in hardware has been facilitated by advances in web and social software. Putting aside the heartbreak of 2001, the late 1990s were (from what I hear) some of the most exciting years in web software development. Endless possibilities and intoxicating optimism, and the best is still yet to come.
I’ve been thinking about hopeful Craigslist-crushing startups this weekend as a result of all the Padmapperdrama over the past few days. Padmapper is my #1 site for apartment hunting and I really sincerely hope that Craig and Jim will at least consider coming to some sort of agreement that is beneficial to both. Even if they don’t come to an agreement, I am optimistic about Padmapper’s future because Eric is super talented and will figure it out.
This post isn’t about Padmapper though, it’s about all the startups you don’t read about that have struggled over the past however-many years because of this Craigslist-can-be-killed attitude that is pervasive in startupland. While I don’t doubt that perhaps the right person will come along someday, I also think that the formula for killing Craigslist will require so much beyond software alone (sorry nerdos) and will be a piecemeal game.
While a handful of companies like AirBNB and TaskRabbit have made some progress in their particular areas of focus, Craigslist is still incredibly dominant in the following 4 areas: selling used items, apartment search, roommate search, and jobs (other than the IRL task-focused jobs that TaskRabbit has cornered). Coincidentally these are also all the areas where craigslist makes their money.
Why do so many startups focused in the above four areas generally flounder? Here is my hypothesis: startups are failing most on the seller-side because of their inability to provide qualified buyers. Everyone has their own theory on 2-sided marketplaces and mine is as follows: if you provide a seller with a pool of qualified buyers, and a transaction happens, they will continue to sell through you. Otherwise, they will go elsewhere.
Over the past few years, I have done every one of those 4 things listed above as a seller. I have listed apartments, a roommate ad (that led me to one of the most awesome roommates ever), found several interns, and sold countless items – electronics, furniture, etc.
As a lover of startups, I will often list items on multiple platforms just to see if anyone is making a dent. C-list *ALWAYS* wins on pretty much all criteria: volume of responses, best price, best candidates, people who mostly reliably show up and always pay cash. Now look, I am not saying that Craigslist is free of sketchballs and criminals. That would be naive. What I am saying is that, from a seller’s perspective, I will take spammers, flakes, and weirdos any day of the week so long as you are bringing me legitimate buyers/options.
Nothing is worse than crickets. NOTHING.
If you are trying to compete with Craigslist in any of the above listed categories, you have to make life amazing for the seller. If that means driving a truck around “buying” couches and bookshelves and iphones for a year, consider it the cost of user acquisition.
I think we need to collectively get over the knee-jerk “problems” with craigslist:
1. that a new UI is the answer (it’s not…though maps on apartment listings would be <3 <3 <3)
2. that making the listing process “seamless” will make users switch (it won’t…the listing process is already seamless)
3. that sellers want better tools (this is party true. but what sellers really want is buyers, and they are not willing to sacrifice buyers for better tools)
4. that you can be competitive through software alone – you need SERIOUS community-building skills, potentially paid acquisition ($$$) and maybe even a logistics mastermind
I love startups and genuinely would love (and use!) a better solution.
But to be honest I kinda just want to sell my stuff and be done with it.
There’s an incredibly large and tragically unsexy opportunity hidden in all the excitement around consumer-facing “collaborative consumption”: the massive opportunity it presents for enterprise-scale logistics-driven industries like shipping, big box retail, energy and agriculture.
The same principles that apply to “Hey I have a snowblower, extra bedroom, car, desk in my office, or Chanel bag that I don’t use all the time and can rent in off-hours” apply equally well to the four industries listed above. Technology will allow farmers to connect directly with consumers to sell food and allow anyone with a car to become a one-person Fedex in the same way that AirBNB has made everyone a hotelier.
I like to think about it as distributed economies of scale. Previously, achieving economies of scale meant crippling up-front investment: warehouses, hubs, trucks, storefronts, employees, etc. Selling one frying pan costs a lot, but every additional pan sold costs you less.
We all took economics.
Yet the rise of web and mobile technologies has created an opportunity to eliminate so many of the costly steps before the actual sale happens. Up-front investment required is smaller and the economic benefits received from achieving scale come much more quickly because the risk/costs are shared amongst the entire network instead of taking on the entire burden yourself.
At some point someone made the assumption that consumers shouldn’t have to share the burden and are willing to pay more for that. I am not so sure that is true anymore.
While naysayers will point out that the theory won’t hold up for physical goods in the same way it has digitally, I am optimistic. Yes, the belief in such a system requires a rosy outlook on human nature – that the members of any given network won’t ruin the system for everyone. But just as Fedex trains its drivers not to steal packages, I think these emerging P2P systems will first learn some hard lessons and then construct incentive systems that punish bad behavior to the point where it just isn’t worth it. There will always be outliers, just like there are within the existing system.
In some ways the early successes of model suggest that we are at the very, very beginning of an emerging peer-to-peer world. Music to files to bedrooms to, soon, ALL THE THINGS. With properly constructed software, a suburban block can be Target, Costco, UPS, Exxon, and Whole Foods. Whether this will actually lead to more jobs or more efficient consumption or a better world is TBD.
I have been thinking about a succinct way to express this thought for a few weeks — that time and attention are valuable in a way that is just as measurable as real estate or oil or currency.
Saw Jonathan Harris talk at the Eyeo Festival this afternoon and he said it perhaps most eloquently: “human attention is a finite resource.” While it’s fairly obvious, I wonder why so many people have trouble applying this supposed truism.
For example, the fact that Facebook’s stock is imploding indicates to me that we dont value attention in the same way that we value commodities, when in fact they are quite similar – both are very limited and in extremely high demand.
The real problem here is pricing. The inability to determine the value of something does not mean the thing itself has no value. That is a dangerous fallacy. It simply means that there is no comprehensive system in place. Too many people understand that oil is valuable, and as a result a system developed to track the value.
How long will it be before such a system is developed around human attention? Will it be something in the future that we can buy, sell, trade and collect?
Tech publications have been writing posts based on interesting Quora threads for a while – it’s great, cheap content that can be repurposed enough to be fashioned into an original story, and there’s usually a primary source involved.
But only recently has it become apparent (to me, at least) that Quora has in some ways inverted parts of the journalistic process and concocted a new kind of reporting entirely. It’s news that is different from the “social news” of years past and complements the existing status quo rather than disrupt it.
Let me be clear – I do not at all think that Quora will displace journalists/bloggers/your-term-of-choice. Instead, the site has carved out a sort of long-tail, peer-to-peer journalism that can satisfy niche audiences in an economical and scalable way that traditional journalism cannot.
Most journalists have a beat or audience that they cover, and it is their job to pick and choose stories that this audience will appreciate at scale. There is an unspoken but very real pressure to drive pageviews to these stories, as the pageviews provide revenue which is then used to pay the journalist.
By taking revenue out of the equation, the niche interests/stories now have a convenient home. It doesn’t matter if a question gets 10,000 pageviews or 10. Additionally, the most excellent thing Quora has done is create a community with the expectation that in order to consume, you must contribute.
For example, I am interested in the evolution of Javascript and the opinions of technical thought leaders about emerging trends (Meteor, Node, etc.). Not exactly a click-worthy topic for most people, but extremely easy to find several relevant answers on Quora. They have created perhaps the best soapbox on the web for piecing together interesting, thoughtful, and well-sourced stories around ultra-niche topics. Perhaps it is due to the Q+A format – instead of a journalist asking the questions, it’s the readers, so it’s already baked-in that the answer will be of interest to the reader.
As the site grows outside of technology (and I am pretty bullish that it will), I think we’ll see this peer-to-peer journalism evolve into an interesting and commendable force within the world of news as we know it.
“More important than anything else is the look on people’s faces when you cross paths with them in the street, or in the store, or in the grocery line. You can always tell that you were—maybe still are, maybe always will be—a part of their family. Movies have this thing where it’s an event. You get dressed up, you go to dinner, and you go to the movies. You’re outside of your element. But with television, people are watching you in bed, at their kitchen table eating. You’re in their house.”
–Matt LeBlanc
Vanity Fair has this great longread “With Friends Like These” about the history of the Thursday night Juggernaut Friends. The pilot is nearly 20 years old, which is bananas. It’s a great read though, and more than anything shows the value of creating an open, creativity-encouraged environment and the difficulty and balance required in any sort of ensemble-affair.
Back in December, Christina Cacioppo wrote this great post called “Cherry is fascinating and grocery stores belong on second floors” and I read it and thought “Christina is brilliant and sees the future, but I still don’t get Cherry.” But in the five months that have passed since she first posted about it, I have come around.
Cherry *IS* fascinating.
For those unfamiliar, Cherry is a come-to-you car wash mobile app. The app marks your location and you send in a request. $30 later and your car is washed for you, tip included.
While what the business does is pretty cool (for all you car lovers), I think what it represents is actually more interesting. To me, Cherry has become the poster child for the Service Layer of the web. This “service-layer” exists above the application layer, and powers the person-to-person economy that has been growing slowly and is about to explode. How do I know it is going to explode? Just watch the money — Fiverr (announced last week), TaskRabbit, Zaarly, and Uber have all raised eight-figure venture rounds in the past 12 months. To me it’s a bit reminiscent of the mid-2000s social-networking boom, when everyone seemed to know that one was going to explode but it was unclear exactly which one.
While Cherry might not become the largest of these service-layer businesses, it is my favorite because of its elegance and simplicity. It does one thing in a large market really, really well (car wash market is $6b according to quick Google search).
What’s interesting is that I am not sure a business like this would have worked even as recently as 2009. Smart phones are getting faster and easier to use and as a result, these service-oriented businesses will have a much easier time getting to critical mass.
Additionally, the underplayed aspect of all these businesses is that the require pretty significant behavior change. It took *years* for ebay and craigslist to really take off because there was such an understanding gap about how the platforms could be used. Some of the more generalist platforms like TaskRabbit and Zaarly might run into this problem, but Cherry will likely not because it is so specific.
Although these service businesses will be harder to scale because of the very arduous and potentially messy offline component, that is exactly why they present huge opportunities.
Ultimately, there are incredible inefficiencies in the offline distribution of human capital. That is something we learned the first time around with the massive growth of web businesses, and something that we are going to learn all over again with mobile.
Now, if only they would come to Brooklyn and wash my car.
please enjoy this photo of a sudsy kuwait-based lambo (via googs).
Media pricing: a topic that never gets old and never has any right answers. As we continue to see more and more pricing models tested (micro purchases, digital subscriptions, firewalls, all-access streaming, etc.) I wanted to take a moment to think about magazines.
The conclusion that I reached yesterday is that, despite the fact that a magazine is a magazine, I now believe that a stand-alone magazine and a magazine subscription are actually two different products with a different set of substitutes, creating a different mental model and perception of price around the exact same product.
Let me explain. Yesterday I went to a bodega and spent $26 on magazines to read without a second thought. While some of the mags I bought offer subscriptions for like $10/year, I wouldn’t consider subscribing. Am I going to buy more than two $6 magazines in a year? For sure, so economically it’s better for me to subscribe rather than binge buy.
But buying a bunch of magazines to sit and read on a Saturday is an activity, and the substitutes are expensive. Going out to brunch/dinner, seeing a movie, going to a museum, etc. All the obvious substitutes are in the above-$20 range.
Subscribing, though, isn’t really an activity as much as it is a media choice. The substitues there are significantly less expensive and sometimes even free. If you are making the choice to align with a specific publication, why wouldn’t you just read their website instead? There’s also the non-trivial guilt that comes with not keeping up with your issues, especially with weekly publications.
As a leisure product, the willingness to pay is much higher, even for the same product. As much as this is a cop-out, I don’t think we are ever going to find the best and most-optimized way to price media because the product itself is so malleable that we must be content to keep trying.
Great marketplace businesses always have the appearance of
thriving marketplaces before they ever achieve true liquidity. There are a ton of hacks you can use to get there, and they are some of the most interesting stories in all of startuplandia. Going to put an epic collection together to post here soon. Email me if you have any to add.
