“Technological progress has merely provided us with more efficient means for going backwards.” – Aldous Huxley
In a very small way it’s deliciously ironic that a small army of SocialBots are spreading the a message of “safeguarding humanity.” But, the reality of unmasking fake profiles and their deceptively cloaked messages is where we lose the irony. It’s also the why we’re adding the Lifeboat Foundation to our bullshitters list.
This microbe in the pathogenic ecosystem of fake, proves Tweet in and re-Tweet out to be a serial SocialBot abuser. Seeing a Tweet where SocialBots are serving as promotional agents for a computational intelligence symposium is too irresistible not to highlight. In this case the first 25 re-Tweets and 25 Likes were all boosted by different Bots.
In this next example, we verified 25 of the first 25 re-tweets are courtesy fake profiles. However, four real profiles got into the act by adding their likes to the first 25.
Elon Musk getting Bot propelled advice seems like a moment worth pondering.
It’s seeing consistent patterns of fake behavior that warrants attention. Looking at this collection of Lifeboat Foundation network maps we can verify that only 12 real profiles are responsible for these 100 re-Tweets. This isn’t an anomaly, it’s chronic behavior.
Being a willing participant or not, the Lifeboat Foundation is an active agent in the ecosystem of fake. Like that person in a packed elevator who coughs without covering their mouth, they’re spreading a sickness any unwilling bystanders want nothing part of.
By cutting corners and using fake profiles to share their technocratic-Utopian prophecies, it’s seems only fair to ponder what other chicanery could be going on.
Next week, we’ll reveal a verified Twitter user’s affinity for SocialBots.
Mentionmapp Investigates: See if your social reputation is at risk. Contact: john [at] mentionmapp [dot] com for a Bot investigation and network analytics risk assessment. As Used By –
2,000 words or less. Entries must follow this year’s prompt: What will it mean to be human in the age of machine learning and artificial intelligence? What will this mean to you in terms of human creativity, identity, love, communication, and community? Given that current AI-based algorithms are a big part of today’s fake news problem, your essay might also address human solutions to this pressing issue.
Note… Despite not being eligible, exploring this years theme wasn’t a deterrent to submitting this on 12/16/16
Cupid scored her a 70. There were numerous 80’s and 90’s gazing back. My first thoughts were something like, “do I reply to her;” “is a 70 worth my time and a coffee?” Then I started pondering what it meant to be the data, in a science experiment. Was I willing to believe that an algorithm could optimize love? Can the most human of emotions be distilled into a mathematical formula? Paint me a skeptic. More than our quest for love, artificially intelligent machines are crawling through almost every crevice of our lives. Like Cupids unseen arrow, there are equations calculating our work, our interests, our health, and public policy. The news that guides our thoughts, in addition to influencing our decisions is smitten by these calculations too.
Being human in the age of machine learning and artificial intelligence connects to a world of mysteries and secrets. Some of what’s happening we know, some of it we don’t know. We can muse about the Moai statues of Easter Island, the Antikythera Mechanism, Oak Island’s Money Pit, or the disappearance of DB Cooper. However, there’s a vast difference between unraveling mysteries like these and then navigating the treacherous currents of a secret world.
Governments hide their secrets behind the mask of democracy. The Pentagon Papers, Watergate, WikiLeaks, and Edward Snowden have all pulled back a veil. The distance between the levers of power and the citizens best interests is an ever widening expanse. In theory accountability is at the heart of democracy. However, transcending theory into reality is much like transparency being a foundational quality of the powerful, they’re rarely synonymous.
Corporate secrets occupy another universe altogether. Coca-Cola, Colonel Sanders, WD-40, and Google have an iconic like status because of their secrets. Like the flaws in democracy, the marketplace is equally skewed to favoring the few, the rich, and the most powerful. It’s homo economicus dictating the script. The marketplace full of stories that keep consumers fixated and in awe of the corporate Moonshots. We’re not supposed to comprehend them, we’re only supposed to accept every feat of technological prowess as progress. Secrets are the currency of competitive advantage. What’s valuable to the marketplace has nothing to do with keeping in step with individual values or best interests. However, it’s worth considering the impact that corporate secrets can have. In this case they can be measured by the magnitude of difference between not knowing why Coca-Cola tastes the way it does, and not knowing why we each see different search results. I can live with the mystery of one, but I’m concerned about the secrets of the other.
Beyond asking for accountability from corporations and our governments, we have to hold ourselves accountable. Because, accountability is at the core of coming to terms with what it means to be human in the age of machine learning and artificial intelligence. Humanness, and humanity itself will be defined by the relationship we choose to have with technology. It needs to more than just owning and using a device.
Having a conversation about artificial intelligence and machine learning should always reflect on Norbert Wiener’s work and words, as he suggested “any useful logic must concern itself with Ideas with a fringe of vagueness and a Truth that is a matter of degree.” There’s no disputing how deeply enmeshed these technologies are in our lives. Just because they are no longer the stuff of science fiction, it’s no reason to stop questioning why they exist and the influence they are exerting on society.
Think about two points on a line. We can label point A as good, and point B as bad, and everything in between them is the mess. No matter how far we stretch that line, the mess is still there. With machine learning and artificial intelligence we know there is the good and the bad. But, we have to see how our humanity is getting tangled up in the mess. More importantly we have take action and start untangling the mess.
If someone’s on a spending bender with your stolen credit card, we can probably agree the technology behind improved fraud detection is good. On the other hand, we know that machines are chewing on data like zip codes, and someone’s education, then spitting out inequitable credit terms or product pricing. That’s either bad modeling or even worse, it’s predatory and malicious behaviour. If someone is socially disadvantaged, it’s likely that today’s artificially intelligent machines will ensure they remain that way. Machines might be blind and without human care, but that doesn’t mean there’s no bias at work.
Sports fans are happy when their team is Moneyballin’ it’s way to more wins. But, winning this way is about people choosing to model, process, decipher, and implement openly available data. It’s only the won/lose column that suffers when outcomes don’t measure up. However, it’s unconscionable when someone’s unwittingly placed on a no-fly list and having their civil liberties trampled over because the government is Moneyballin’ the apparatus of state surveillance. We all suffer when data is being collected surreptitiously, modelled in secrecy, and processed in a way that’s casting a spectre of guilt over us all. This is stripping away our humanity.
Oncologists using Watson to make significant strides in cancer research and treatment is humane. There’s nothing nefarious about companies optimizing delivery routes and helping reduce the amount of carbon polluting our atmosphere. These are good examples of how valuable this technology is. But, we’re denying our humanness if we simply accept technology that is persistent, pervasive and pernicious in the name of wishing to optimize our way out the chaos and uncertainty that makes life an existential challenge. What’s worse, this attempt to free ourselves from life’s messy quandaries is eroding our freedom of thought.
Artificially intelligent machines are neither accountable nor infallible. They process, they calculate, they do what they are programmed to do. Machines are incapable of exercising intellectual honesty. F. Scott Fitzgerald wrote“the test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function.” If those who train the machine aren’t up to performing Fitzgerald like mental contortions themselves, then it’s unlikely such ambiguity can be coded into the secrets of any algorithmic.
To be human in the age of machine learning it’s fair to ask, who is teaching the machines to learn? What qualifications do these teachers have? What do these teachers know about the human experience and condition? Are these teachers prepared to be accountable for the models they create, and the choices of data being fed into them? When significant decisions are being made from machine outputs that can have dire consequences in people’s lives, then demanding more accountability can’t be an act of heresy or treason.
Human learning is largely a social activity. Curiosity is also at the heart of learning. Proclaiming that machines are learning is deflecting from the idea that someone is training them. As machines don’t muse over important human questions such as the meaning life, our attention should be directed at the fact that they are simply tools. We can learn to think critically. We can also learn to be skeptical. These two distinctly human qualities can be our fulcrum for separating fact from fiction, because it’s abundantly clear that some of the tools delivering our news are deeply flawed.
There’s no Walter Cronkite bot because a machine doesn’t care about earning our trust, or communicating with the credibility like he did. A bot can’t reveal the humanness of a tragic moment that comes with announcing the death of President Kennedy. Describing Neil Armstrong’s first step on the Moon wasn’t something mechanical, it was seminal event. Re-visit Cronkite’s 1968 commentary on the Vietnam war, a recognize a bot can’t communicate with the depth or the gravity like he delivered. Instead, today we get Facebook censoring one of that war’s most important images because a machine sees it as child pornography.
In the race to optimize eyeballs and clicks for cash, what we’re getting in return is the erosion of authority. Losing touch with any authorial credibility is making news meaningless. Reducing news and information to a clickbait commodity means facts have absolutely no sublime value. Investigating the facts, and holding our leaders and institutions accountable becomes little more than a ridiculous act. The algorithms driving our news are machines of bias optimization. News feeds are an expansive chasm of polarity. With opinion masquerading as knowledge, and dogma being construed as truth, humanity is at risk.
Machines are voraciously consuming our data, and we’re getting less value in return. The push to optimize and personalize our news is turning world wide web into something more like miniature world. What we see, what we think, and the language by which we define our very existence is dissolving around us. By giving our language over algorithms, these non-human agents are pushing us towards to the precipice of an Oceania like abyss. From his novel 1984, Orwell writes, “the whole aim of Newspeak is to narrow the range of thought? In the end we shall make thought-crime literally impossible, because there will be no words in which to express it.”
My deep concern is that the mechanization of our language and streams of free flowing Newspeak will be the dissolution of dissent. We will be facing a collective social failure if we lose our ability to question and hold accountable those running the most powerful and important institutions. I approach each day with curiosity and great hope that we have the technologists, designers, and engineers who care about putting humanity first. Putting humanity into the heart of their machines will make it possible to imagine a more equitable world, and one where we can flourish in a richer web of human knowledge.
If we think about desire, erotic love, attraction and affection, then Cupid is the mythical embodiment of what’s messy about being human. Cupid’s arrow is symbolic of our tools. Addressing the question of what it means to be human in the age of machine learning and artificial intelligence is about trusting ourselves to be human, getting over our flaws, getting comfortable with the unknown, and hosing ourselves off when it gets messy. I said screw the algorithm and trusted myself. Happy I did, because choosing to date a 70 has become a meaningful relationship. With matters of the heart it’s always good reminding ourselves that machines don’t dance.
“In order to make progress, one must leave the door to the unknown ajar.” — Richard Feynman
This is a prelude to the 2017 “crisscrossing America tour.” Being invited to attend MisInfoCon promises to be a personally epic road trip. This event is happening February 24–26, at MIT Media Lab, and The Nieman Foundation for Journalism and will be both a summit & creative studio on misinformation.
I’m sure by studying enough hieroglyphs we’d see traces of misinformation emerge from the ancient past. While misinformation isn’t new, in today’s media landscape it’s impact matters and participating in this conversation now is important to us. We also find ourselves in the position to take action. Being asked to demo Mentionmapp’s prototype for identifying Twitter bots makes this trip special. I’m also eager to take in all the feedback and insight possible from everyone attending MisInfoCon.
We’re interested in seeing the network effect these non-human agents are having on Twitter, and how they’re capable of spreading misinformation and disinformation at an exponential pace. The BotMapp is a tool to better identify and investigate the impact these weapons of mass amplification are having. The prototype is not yet publicly available, however we have this short video to spark your imagination.
Attending MisInfoCon is a big deal on it’s own. I’m crisscrossing America to experience and connect with people like I’ve never done before. Traveling through the heartland rather than flying over it will keep me firmly grounded. Leaving February 21st, it’ll be 3 days by train to Boston, MA, and then 4 days of busing my way home arriving in Vancouver, BC March 3rd. I’m curious to observe, note and talk with the people whose paths I cross to better appreciate how they’re engaging with information in all shapes and forms.
Misinformation the disconnector of knowledge. There’s an epistemic crisis unfolding, because we have opinion masquerading as knowledge, and dogma dressing up as truth.
Somewhere between hyperbolic hysteria and thoughtful testimony there’s the potential to witness and understand how information becomes knowledge.
On one hand, there’s the story I’m imagining that could be written, and on the other there’s the story that emerges out of the actual experience. “America Informed. People getting to Know” will be written; just like the code for Mentionmapp and the BotMapp will continue to be written. It’s all about connecting how we’re informed and how we come to know.
“The first principle is that you must not fool yourself and you are the easiest person to fool.”– Richard P. Feynman
I’m grateful to acknowledge this trip is happening because of the generosity of Jay Brown, Amy Rae, Nick Waddell (Cantech Letter), Ginette Law & Frank Hangler (Plot+Scatter).
The siren like technocratic-utopians are becoming tough to tune out. Stories of the future play like an endless loop of The Jetsons. There’s the image of coolness and convenience, but it’s really all about control and winning. If technology owns us, the technologists win.
For the many it’ll be living in a cave and rubbing a couple good sticks together, while the few will live like the Jetsons. Refusing a tomorrow that’s bound in isolationism and dystopianism, there has to be an act of mass humanism. Being more human starts with being skeptical of what they’re selling us, and not taking every new product release as an epiphany.
We’re curious, we believe in what’s possible, and we’re confident in human potential finding solutions to human problems. In the spirit of optimistic humanism we’re focusing on two key words that are the core of our conversations. Genuineness and stewardship.
Genuineness is defined as: “free from pretense, affectation, or hypocrisy; sincere: a genuine person.”
Wrapped in a guise of connectedness and convenience the web of personalization is technology that’s effectively erasing genuineness. For instance the unwitting communication with chatbots is disingenuous. The lack of transparency and choice of interactions (cold lines of code versus flesh and flowing blood) is a technical erosion of humanity. With more ways to talk more with people than ever before we should be interacting with more genuine humanness, not less.
Stewardship is defined as: “the careful and responsible management of something entrusted to one’s care:stewardshipof natural resources.”
The last wave of industrialists operated like a plague of locusts. They collectively laid waste to our waters, our soils, and the air we breathe to assure their 1% status. The stewardship of our natural resources is a huge concern, but it’s degradation has gone hand in hand with a decline in the value of intellectual stewardship.
Neil Postman wrote in 1985, “Americans no longer talk to each other, they entertain each other. They do not exchange ideas, they exchange images. They do not argue with propositions; they argue with good looks, celebrities and commercials.” ― Amusing Ourselves to Death: Public Discourse in the Age of Show Business
The only difference between Postman’s yesterday and our today, is the global scale of amusement.
Intellectual stewardship isn’t about being pretentious. Because, if looking out the window of curiosity and keeping a door open for doubt are slammed shut, we’re screwed. There’s nothing noble or cool about the imposition of stupidity.
Being connected to unprecedented amounts of information should be translating into a richness of individual knowledge. The opportunity to raise the collective intellect is massive. There little reason that we can’t have more genuine people exchanging real ideas. Choosing fractionally less amusement and embracing marginally more curiosity, could be like standing on the plains watching the wild horses run instead of believing in a mythical world of Unicorns.
What we see, and how we choose to see it contributes to shaping our world view. Growing weary of faux news, swamp tales, weaponized opinion, and polarizing dogma, we went searching for some different narratives. We see Twitter as a place capable of bringing us food for thought, bringing us together and showing us a world of awe. We hope you enjoy sampling these connections and the conversations related to food, the city, exploring the world, and nature.
Food stories matter more than what’s filling Instagram feeds, plates, and the bellies of those who can both afford and access the bountiful.
We admire Caleb Harper @calebgrowsfood, because he’s not just thinking about the future of food, he’s leading a team that is doing something about it.
City stories are reshaping our future. They’re also much more than landmarks, architecture, and infrastructure. It’s peopled narrative.
We consider ourselves fortunate to call Vancouver, BC home and appreciate the workSFU Public Square @SFUPublicSquare is doing. They’re like the connective tissue of meaningful and diverse dialogue between the citizens and the city.
World stories live at our fingertips and move through the social ether at light speed. We can see more of the world than ever, and forget as fast as we click the next piece of bait.
Paul Salopeck’s journey, the Out of Eden Walk is chronicling our world with today’s technology while moving at a human pace. His narrative rhythm is befitting of the ancient footsteps he’s retracing.
The four characteristics of humanism are curiosity, a free mind, belief in good taste, and belief in the human race. E. M. Forster
We love to set it and forget it; what’s not to like about life on easy street and rolling in easy money; there’s nothing like the open road, the wind rushing through your hair and being on cruise control; we love our easy to program devices; easy just slides off the tongue, and tops our tool-kit of four letter words.
It’s like the realization of Moore’s Law has delivered us to the Cult of Easy’s altar. If we contrast Forster’s sense of humanism with the key four characteristics of a computer; with their speed, accuracy, versatility and storage capacity, it only makes sense that these tools will be our saviour. They’ll save us from work, save us undue effort, save us from thinking, and maybe even save us from ourselves.
As communication professionals, we need to see the Cult of Easy for what it is. On one hand, it’s a massive noise generator, and on the other, it glorifies the tools for managing all of that noise. The Cult’s impact is like an ergot fungus blight infecting a healthy field of wheat. It’s causing hallucinations and distorting realities. The machines, the tools of today like the bots and algorithms are no replacement for our brains. We need to look beyond easy and recognize that no software application can supplant our own curiosity and creativity.
We’re creating, curating, consuming, and confronting a daily tsunami of information. It’s daunting. From all of this information, the data exhaust is being described in terms of exabytes and zetabytes. According to this study, we’re producing the data equivalent of 530,000,000 millions of songs every day. But looking beyond the big numbers, I think it’s more important to consider what’s relevant to you, your organization, your audience, or your stakeholders. Of course defining what’s relevant, and then discovering it, and then connecting who’s an authority is still complex. Who’s kidding who, it’s hard.
I don’t pine for the good old days of analog, newspaper ink coating my fingertips or watching a DVD. The fact our machines can, and are trained to see patterns both fascinates and concerns me (by redefining repetitive business tasks = good. Being mechanisms of state surveillance = bad). But, I also don’t believe machines can question revealed patterns. Each of us sees patterns differently. Granted that just because we see differently than machines, and can ask different questions we’re not assured of discovering what’s relevant or meaningful. We’ll always have to navigate our own personal bundles of bias. At least I can question my bias or that of other people’s. Good luck questioning the bias that’s coded into an algorithm you could be banking your company, or your client’s success upon. We sense, we question, we create, whereas machines simply process.
The thrashing machine separates the wheat from the chaff, but it’s the baker who puts the life into what lights up your taste buds. I’m all for computing horsepower trying to help us separate signals from noise. Grinding the life out of information and data is like turning it into ‘Wonder Bread.’ By grinding it too finely we’ll lose its textures. What anomalies or outliers will we miss? Instead, appreciating a taste sensation like ancient grains with their texture and complexity coming to life, important knowledge and information or compelling narratives are distilled into blandness. Likes, views, pins, shares and every other vanity metric don’t tell a relevant or fulfilling story. It’s hard to take meaningful action when the machines give us a report of irrelevance and the blandness of another pie chart or spreadsheet.
Sifting through the noise, managing complex communication environments and platforms are hard work. I also wonder if there’s a tendency to over-complicate business processes or claim to adopt new technologies simply to look like we’re keeping up with the “times.” I’m skeptical about many businesses or organizations needing tools of National Security Organization intelligence and sophistication. If all of this computing horsepower is not discovering would be terrorists, then keeping us in tune with relevant information and conversations is a doubtful proposition as well. Defining, deciding, discovering, and verifying what information matters, why it matters, and how to act on it are still very human things to do.
We’re the curious ones, we innovate, we create, all of which connects us to potential moments of serendipity. As Frans Johansson writes in the Harvard Business Review, “diverse perspectives drive innovation. “ He concludes “serendipity is what sets us apart — since that is the only way we can discover an approach that is not obvious or logical.”
I appreciate Johansson relating the serendipitous story of how “nine months into Google’s existence, Sergei Brin and Larry Page realized they needed to choose between their company and their Ph.D. work at Stanford. They decided to pursue their doctorates and offered their search engine to Yahoo for $1 million. Yahoo declined” Now imagine if Yahoo had bought Google.
We need to think about what we’re asking of our machines versus ourselves. We can, and should care about the questions we’re asking of our information or data; what’s it telling you and why. We can be intellectually honest, machines can’t. Machines aren’t serendipity generators. We can put care into what’s created. The value and magic in what we craft and how we communicate have nothing to do with the tools; it’s all in that moment where imagination meets performance.
A year later, it’s interesting revisiting the question and the answers. It started out as a conversation about the team behind designing Slack. MetaLab Founder & CEO Andrew Wilkinson shared a little background on his company’s portfolio. “Since 2007 we’ve helped some of the world’s coolest companies build products and services that are attractive, thoughtful, and enjoyable to use. We’ve worked with clients including Apple, Google, Disney, Walmart, and more,” he said.
I was concerned that the conversation was a ploy to promote MetaLab. However, Wilkinson went on a tear when the topic turned to business. “There’s too much money out there, too many people with too much money. In one way we benefit, because they come to us because they want a new product designed or existing product redesigned.”
“We haven’t had a problem adjusting our price model upward, in alignment with the demand,” Wilkinson added. “The real problem is talent. Every single mobile developer in the world can essentially become a rock star overnight. It’s a challenge for us to hire really great iOS or Android developers. It’s next to impossible.
“I think it’s going to be interesting to see over the next year or two; because frankly I believe there is a complete valuation bubble and this is starting to feel like 1999 all over again. I’m a little nervous to be honest.”
I thought to myself that Wilkinson was only 15 years old in 1999; tech bubbles were surely not the type of stuff I was thinking about at that age. But Wilkinson did qualify that gut feeling with research, “reading back to that time and looking at what the press was saying. How people were talking about the bull market. How people were thinking about internet businesses.”
“Mostly what I’m seeing,” Wilkinson continued, “is say 4–5 years ago an early stage tech founder might come to me looking for a product designed or an iPhone app developed. I’ve been able to quadruple prices over the past couple of years, and we’re still doing it. While it’s great for business, I can’t imagine it’s sustainable long term.
“I’d say that’s because people are raising money at higher and higher valuations, and they’re shoveling buckets of money into these businesses and are set-up like moon shots, so that you raise at a $40 million valuation, you have to have a $140 million dollar exit to be successful. There’s all these people with insane expectations and delusions of grandeur, in spite of some amazing companies out there. But even some of these amazing companies raising at multi-billion dollar valuations, and I just don’t believe that there can be (something like) 40 new billion companies this year. That just seems absurd to me. So I’m getting nervous for a variety of reasons.”
Wilkinson’s confession of unease got me curious. It was time to ask if anyone else was getting nervous or saw the current technology landscape in a similar light. Here’s what some other investors think.
We’re not in a tech bubble even though private company valuations are going up. The reality is that venture financing is still below the crazy amounts in 2000 that went into companies that didn’t have solid business fundamentals. Companies are waiting much longer to go public and when they do, they have real revenue streams and paths to the #1 spot in their category opposed to those in the 2000 peak. Many early stage seed companies will never make it to Series A and the losers there will be private investors not the mass public market.
We definitely feel like we are in a frothy market. We’re encouraging all of our company to look at financing now if it’s a need they have in near future. It’s better to raise money now and sit on cash than to be stuck in a bear market and need it.
One interesting perspective we have been talking about internally is how tech companies that are over $40M+ in rev and growing north of 50% are not thinking about earnings/profitability, they are successfully raising dollar in the private market and therefore opting out of the public market because the public market will not give them a similar market cap without earnings growth.
The public market has no appetite for rev growth if it forgoes earnings — they reward earnings growth only as shown by Amazon. And so we have many companies who “could” IPO but have decided not to because the private markets are more favourable. That said, there is no liquidity in the private market so they are taking valuation in lieu of liquidity other than maybe getting a secondary for the executives.
Any company going public with these valuations will most likely struggle to keep their multiples/market cap where they are in private sector because quite frankly the public market isn’t as frothy as the private market. I guess by that analysis either we are in a bubble or we’re at a point in time where either the public markets need to adapt to what tech companies are serving up or perhaps more people will start investing in the private markets (AngelList). This could be a calling for change.
The companies are real companies with real revenue — which makes me stray from agreeing or stating that it’s a bubble, but I can agree that the private markets are giving higher valuations than the public markets. I think that is a fact. My questions is, are we in a bubble or do we need a shift to take in the public markets to make room for technologies companies that have high margins and lower capital costs?
I think there is no evidence that we are in a bubble — this chart [above] is one of the best one I have seen recently on this topic.
So while we are at or close to the top of the cycle it doesn’t mean that the cycle will turn tomorrow — it might still run for a few years…
While valuations might be relatively high right now, we are also seeing some of the best entrepreneurs and opportunities ever — so we continue to invest in outstanding founders that have the passion and ambition to disrupt big industries and build large, stand-alone companies.
To start, I would first say this is a very different environment than what we experienced in the 90s. For one many of today’s companies are actually making significant revenue. For example, you might balk at Uber’s valuation but at one point they were doubling revenue every 6 months (while already at scale). That’s a big leap from some of the vaporware of the first dot-com boom.
However, I invest primarily at the very early stage and to see some companies with little traction command $10M+ valuations is concerning. I imagine many of them are going to find themselves in a hard spot when it comes to raising their Series A.
Valuation is an estimate of intrinsic value based on expected cash flows.
Price is the result of supply and demand.
Price is observable, valuation isn’t; private markets are more esoteric because the typical cash flow fundamentals needed to estimate intrinsic value are not publicly available.
Hence, we tend to observe pricing events, not necessarily valuation events for private tech companies.
Significant dislocations of price from value are the core tests of a ‘bubble’.
Ok, bubbles are driven by pricing, what drives pricing?
Key is to look at supply and demand of venture capital, ie fund flows: fundraising and fund investments.
If there is a lot of excess capital sloshing around, heady pricing events tend to become more common.
This has largely been validated by Paul Gompers, noting correlation between fund flows and peaks in valuation cycles.
Looking at NVCA data, 2000 marked the peak with $100B committed into VC funds, followed by 1999 with a little less than $60B. in 2014, VC firms raised ~ $30B, near historical averages.
Investments by VCs were the highest since 2000, at $48B, but still only 50% of the peak levels in 2000.
Outside of gross fund flows, I also follow capital overhang something that Pitchbook does a great job of. Basically, this is total dry powder divided by average investment in a year; currently in the U.S. this stands just below 2 years. In other words, if VC funds raised no more capital, and continued to invest at the same rate they could fund activity for almost two more years. This compares to levels of 3–4 years as recent as 2005–2007.
Generally speaking, activity is robust but nowhere near relative levels seen in the 1999–2000 period. I don’t think we are looking ‘bubblicious’.
Ok, so there is no bubble?
Well, there are a couple of anecdotal things that I look at that have increasing trends and, if they continue to accelerate, will require me to reconsider my position.
First, 1st time VC fundraising activity. This is important, as it represents at the margin new entrants to the market. This rate climbed by about 60% last year and represented almost 40% of all fund closed, though only 12% of capital raised.
Second, age of company at IPO. This drops as we get to peaks in the cycle — pets.com and other marginal Internet businesses capitalizing on the IPO market in the 1990s are evidence of this. However, IPOs are now much older and mature — more than 2x the median age of the 1990s, where companies were going public who were less than 5 years old. This is largely due the robust late stage market.
Third, you really need to look at age of unicorns, not IPOs. Looking specifically at the U.S., IPO activity has been replaced by $1B private company financings. In 2014, over 40 companies eclipsed the $1B valuation first the first time. YTD 2015, on pace to a similar level. Prior to 2013, typical average was less than 10. Yes, there has been a significant increase in unicorns in 2014–2015. However, the age of these unicorns hasn’t changed, and in fact they have gotten slightly older: median and average age from 2013–2015 is around 7 years, while in prior years the median and average has been 5 years.
The data around unicorns indicates a significant increase in total fund investments in the $1B club. This is something to watch as it is this cycle’s IPO.
What about Canada?
The Canadian market is on the other end of the spectrum.
Fundraising by Canadian VCs has been down since 2012, though partly due to slower than expected deployment of VCAP.
Canadian firms raised $1.2B, down 30%, in 2014 according to ThomsonReuters, a level equal to the U.S. in 1980 (this is why I am bullish on Canadian Tech & VC but a topic for a longer discussion).
While the amount of investing by VCs has increased to $2.4B in 2014, up 21%, it pales in comparison to the U.S. increase of 61%.
Capital overhang is likely less than a year across Canada; the situation is critically worse in BC. Basically, in aggregate, the Canadian VC market lives paycheck to paycheck — raising money that is consumed that year.
I always appreciate a good quote, and thought it fair to give Wilkinson the last word. “Mark Twain said, history doesn’t repeat itself, but it rhymes. I’m hearing a lot of rhyming right now,” he said.
“Even things like looking at the Super Bowl, for instance. This last year had more new companies advertising that ever before, the majority of which were venture-backed startups, many of which aren’t profitable. You start thinking back to pets.com. I’m also seeing really, really low margin food delivery businesses… the Uberfication of food delivery. Crunch the numbers on some of their businesses, and it’s f**cking insane. Negative margin! It’s like a million dollars isn’t a lot of money anymore, and that’s f**cking crazy.”
Wilkinson’s observations are valid, from the likes of Galileo, to James Watt, to Alan Turing, those doing things deemed “crazy” have seen history write stories of genius. Out of today’s craziness, I have little doubt we’ll look back one day and be writing those stories anew.
“Dear John,” (a note to self and to friends) there’s been things bugging me about Facebook for a while. Being painted with their target is making my skin crawl.
I’ve always known the deal; use this free platform to connect and communicate with friends and family. In return Facebook machines learn things about me. At first I liked the connectivity, in some cases the re-connectivity. It’s their pervasiveness that’s now too much. Like being lit-up with red-dot laser beams, there’s no fighting it. Hands up in surrender, or face down dead aren’t options.
I know every free platform is like making a deal with the digital Satan, (read Jaron Lanier or Eli Pariser ) I’m good with Google, because at least I get s**t done using their stuff.
Sure, Apple’s got me fenced in too. But, I can make a phone call and I like texting. I can use my laptop or tablet explore other parts of the internet that’s not being linked through Facebook.
I like Twitter a lot. The fact it’s not Facebook is a bonus, and I’m happy building our business (Mentionmapp) on their platform. Twitter is more open; the choice of having a non-algorithmic feed rocks; having brevity as a constraint is appealing; plus it’s a media feed and the type of channel surfing I like.
Medium’s appealing. I’m writing here in large part out of respect for Ev Williams 20 years in publishing. It seems like his team cares about the writing, publishing, and reading experience.
Back to Facebook. Too often I’ve been scrolling, and wondering where are my friends and family; using it recently feels like the experience is a galaxy away from why I started. In spite of the time spent and personal social capital invested, I’m done. I’m done because today, it’s like the Death Star of platforms, not creating value, only extracting it. Facebook’s not improving our public discourse, they’re manipulating it.
I find reading this unnerving, “He (Zuckerberg) stood in front of a diagram outlining an audacious 10-year expansion plan, which included several features to help keep people inside Facebook’s world instead of following links out.”
Employees asking (reputedly) how to help stop Donald Trump, has me doing a forehead slap. He’s link bait, not a statesman. A lot about Campaign 2016 is sad. But what’s sadder, is the idea of Facebook employees wanting to stop his potential Presidency from inside a corporate cubicle, instead of the voting booth.
No news flash. Corporate and media interests have always been engaged in the nefarious games of political influence, and interference. It’s the warp speed whirring algorithmic machine that’s changing the game. People write the code, yet were not having much conversation about the human bias being coded into the machine?
There’s an organizational hubris that resonates with Facebook. One day, it’ll be that hubris precipitating their “Rosebud moment.”
A last Facebook entry… (inner voice saying “never say never”) that I’m also guessing won’t be seen in many feeds. The heavy algorithmic hand will probably turn it into pixel vapour.
Yet, I’m holding out a little hope that some of my Facebook friends are reading this. I hope you’ll to follow me here; email me when you’ve got something to share; text me if you’re in a jam; or give me shout on Twitter @grayspective or @mentionmapp.
There’s other machines learning about me. Yet, none of them don’t know me. The machines are shrinking my world. Platform fatigue, a concern about the descending plague of bots, and this personalizing web are stories for another day. Digital dehumanizing.
No Facebook in five days, at least they’re emailing reminders of what I’m missing. Pervasiveness. Invasiveness. Change those settings.
With or without Facebook, there’s always missed moments. I’ve outgrown FOMO. Fear is a four letter word I’ve purged along with easy, and busy. Life’s not easy; busy is an excuse; and fear is self manifesting. What will I miss about Facebooking? Nothing. I don’t miss, what I don’t have. I’m getting on with the business of being.
It’s interesting reflecting back a year on conversations about technology. This conversation with Adrian Cockcroft, the former Netflix chief architect of cloud services, founder of eBay Research Labs, and current leading technical fellow at Battery Ventures was a highlight. Talking about the cloud of yesterday, today, and tomorrow proved enjoyable and insightful. The idea for cloud computing was a buzzy idea in the late ‘90’s. I remember the enthusiasm for ASP’s (Application Service Providers) and the early days of Salesforce.com. But cloud adoption and innovation felt like it was moving at a glacial speed until seemingly this past 5 years.
“15 years ago the people got the right ideas,” Cockcroft said. “We were talking about web services, remote access to applications, even the Internet of Things. Sun Microsystems at the time famously got way too ahead of itself too often — ‘this is where the world’s going to be’; but it’s not there yet. Sun had all of the right ideas, but couldn’t figure out how to take it to market.”
Cockcroft was working on the cloud with Sun at that time, and shared that “the problem was that they were selling to CIO’s at the enterprise and most didn’t want the cloud. The trick that Amazon found was that they had a personal relationship with people with a credit card. That was the way through.”
“When AWS got going it was a credit card personal sign-up model, where you could get something done personally without having to go through all of this procurement processes and talk with sales reps, and have your CIO involved,” Cockcroft continued. “That’s why startups did it, and that’s why it sort of came in as this stealth IT thing in large corporations that didn’t know they were doing it. That was one of the big missing ingredients. The rest of it was mostly just the technology maturing. The rise of open source helped as well. It was a collection of things coming together to make cloud work right.”
Kodak missed digital, EMI Records missed digital, Blockbuster dismissed NetFlix, and RIM dismissed Apple; I asked Cockcroft with the combination of digital media, hardware, and the cloud, who’s next to have their lunch handed to them?
Cockcroft said he sees government IT moving in a positive direction, noting, “there’s actually some amazing stuff happening in digital services where they’re taking the ideas out of the web-scale startup world and applying it. They’re doing programs for a few percent of what they’d previously cost with the massive multi-billion dollar projects to create a website that doesn’t look very interesting of usable. Government is going through this transition to an Agile & DevOps methodology, and getting away for it’s huge overblown waterfall, systems integrator project mentality. The UK has been driving that for a few year, and the US government is started doing it recently.”
It’s the big verticals of education and finance where disruption is not keeping pace. Cockcroft pointed out that “it used to be the most advanced thinking in the world happened in the universities, and now they’re behind. The most advanced thinking is happening outside. If you go to university you’re mostly learning old stuff. They’ve become trapped in this business model which is actually holding them back. They’re a commercial entity trying to make money. So they spend more money on their sports team than their research. You’re seeing the likes of Coursera nibbling away at the edges, but it’s still early.
“The other big area, is seeing how different bits of companies have been disrupted at different times. We’re starting to get SaaS applications built for the finance silo, for the CFO. We’re seeing the whole ERP space getting disaggregated and moved out to cloud vendors. If you look at where companies spend their money it’s slowly being picked off.”
Cockcroft highlighted that some of the biggest banks in the world are really getting into cloud in a way that two or three years ago they weren’t, realizing that if they don’t, they’re going to get left behind. In contrast, the pharma and hospital markets are huge, but are trending as late adopters of these technologies; Cockcroft thinks they will get there eventually.
“There’s kind of a herd instinct. As one company kind of breaks from the herd and is successful, the other will try to catch up,” he said. “You’re seeing a little of that happening in finance right now where a few players are aggressively adopting much more modern development techniques, and becoming extremely agile and running things on AWS or options. I’m seeing some in finance questioning themselves as to why they’re building data centres when they actually have nothing to do with the business of banking.”
Cockcroft said that it’s about focusing on building applications and deploying technology, but having to own all of the infrastructure. “They’re starting to realize owning data centres isn’t a business differentiator. Running a data centre slightly better doesn’t make a bank better. It turns out today that the best data centre you can build is an AWS account. You can do more with it, it’s more reliable, more scalable, and you can start it up in seconds,” he said.
Cockcroft’s forecast for the future of the cloud is very clear. He concluded that “unless you’re maybe Facebook or Apple, most internal corporate data centres are just a mess of spaghetti, brokenness, and snowflake individually built machines with no uniformity. That’s the way they really are. It’s why the world’s top ten banks, for instance, have annual IT budgets of several billion dollars. Regularizing that into a cloud environment turns out to be a way forward.”
Images courtesy Ben Nelms.
Originally published at betakit.com on July 17, 2015.
A debt of gratitude is owed to the BC Innovation Council (particularly Director of Communications Lindsay Chan). In preparing for the feature story about the recentTechnology Forum, I thought it a “moonshot” asking for the opportunity to interview their keynote speaker, Commander Chris Hadfield. They delivered.
Of course, I’m also grateful to Commander Hadfield and his team for making the time for us to have the conversation. Articulate, eloquent, and informed, talking with Chris Hadfield is a personal highlight. Lob him a good question, and he’s off. As the keynote speaker at an event focused on innovation, that was the theme of our conversation, which spanned the gamut from the Commander’s personal life to the role innovation can play in solving today’s global complexities. There are some lessons below that I hope everyone takes to heart.
Creativity and innovation are interrelated. This process often about being able to connect more than one disparate idea, concept and/or discipline. It can also be about how we relate the past, to the present, and with a vision of the future. How should people approach the process to be more innovative in their thinking?
The simplest clearest example is a field stone house. A lot of houses are built where every brick is the same shape. Makes it easy for the bricklayer, makes it a very predictable structure. All you really vary is colour and texture, but the shape is the same. But so many walls are built (everything from what the Inca’s did through to right now) where you use available stone, available materials, where the shapes are not regular and the density is not necessarily regular. So what you do is that you recognize that you have to work with what have, but you need a certain amount of skills, and sometimes you be able to build what you’re trying to build until you find the right piece. I think that way of thinking is how I’ve approached the problem [of creativity and innovation] my entire life.
You don’t even know what you need until the problem is already upon you, and if you have not built the skills in advance, if you haven’t thought about it, if you haven’t put yourself in a position to recognize that is actually what you need, then how are you going to progress?
I think you have to have a perpetual restless dissatisfaction with your own set of skills. You should always be trying to better understand how things work around you, and try to fill in the holes of your own knowledge, so that you can build your particular wall higher and more soundly.
You can just make a simple decision or you can really dig into it and try to look at your particular wall you’re trying to build and figure out the pieces that make sense to you and then make the right call. It’s a real combination between building the baseline of competence and experience so that then your innovation can be enabled and you creativity can be enabled sort of back and forth. They bounce off each other. But if you don’t have that fundamental basis, then all your really have is belief, and belief can collapse like a house of cards or a poorly built wall any time. So for me, real creativity and innovation are hand and glove, but they have to be based on a sound understanding of the principles that support them.
How do you fill these knowledge gaps? What does the role of mentors mean to you?
For me, there are very few things more satisfying than talking to an expert. I love it when I am given time with someone who really understands something in a field that I don’t. You can learn so much in a hurry and get them to explain it to you.
“I’ve kind of chosen a life that is rife with mentors and mentorship.”
The other revelation I had a few years ago was that every single person you ever meet is expert in something that you aren’t. A three-year-old knows stuff that you don’t know. He or she has done and experienced things that you just haven’t yet. Life is varied. So for me, the real key is to find the mentor in everybody.
I’ve been lucky in my life that I’ve kind of chosen a life that is rife with mentors and mentorship. As a university student at three different universities, and then as a pilot learning, and then as a fighter pilot learning, and then as a test pilot (the most rigorous academic year of my life), and then as an astronaut, all you really do is learn your entire career. You’re surrounded by people who have more expertise than you in some finite area, and you become the great integrator of your particular exposure and knowledge.
I think that’s a great way to view yourself. I am the integrator of all the mentorship of all of the raw and available knowledge that I’ve been exposed to in my life. And it’s really up to me to decide how much of this am I going to absorb, understand, and then use in order to be more creative and innovative, and fun loving and may be fruitful in the future.
I was almost seven, but have my own memories of Neil Armstrong’s momentous declaration, “this is one small step for a man, one giant leap for mankind.” So I wanted to ask you about your decision to become an astronaut. Was it a series of ah-ha moments, leading to one ah-ha moment?
Both. Sometimes the environment creeps up on you, you don’t really notice. Sometimes you don’t notice the mound of history has built up underneath you. You slowly accumulate a great swathe of ideas and influence and opinion, but then maybe something seminal happens like when two people walk on the moon.
Oh yeah, I knew that we were having rockets, and Sputnik happened, and Gagarin, and Alexei Leonov, but wow we just walked on the moon. For me it was that. I read science fiction. I was reading Arthur C. Clarke, Robert Heinlein, Ray Bradbury, and Edgar Rice Burroughs, and watched Star Trek and even Lost in Space. I’d watched 2001 A Space Odyssey, and listens to Bowie’s Space Oddity, and all of that was this sort of building wave of awareness of something that was happening that was interesting to me. I had a big picture on my on wall that came from National Geographic of what we knew about the moon. Then on July 20th, 1969, it’s like when you spin the dial on a microscope and you can sort of see everything, but suddenly, wow it comes into this sharp focus and you suddenly recognize what’s in front of you.
“Sometimes you don’t notice the mound of history has built up underneath you. But then maybe something seminal happens.”
So very much based on the past it all came clear to me at this is what I want to do. When I went outside afterwards and looked up at the moon. That’s really when it rang home for me. This what I want to do. There are people walking on the moon and that they’re not walking there because it was bound to happen, they’re not walking there because they had to, they are there because they just barely could.
It was immensely invitational at the time, but the key of course was what do you do with life’s invitations? I decided that day to start turning myself into an astronaut, which is a whole different process than wishing. I said okay, how do I do this? What changes do I make? And I just used this as a guideline for the rest of my life. When I try to make the small daily decisions, I use that as kind of the end game. If everything goes great, that’s where I want to be, so what do I do today? What do I do tonight? What do I do this weekend?
It occurred to me later that your life is not the big grandiose decisions. Your life is the answer to the question of what do I do next? Your life is the accumulation of that answer. Your choice, what you choose to do next defines who you’re going to be, defines what skills you have. And it really does define your life. Fortunately I choose something that really suited me, opportunity arose, I was lucky, I worked hard at it, and I’ve had some magnificent experiences as a result.
Earning your seat in space gives you a unique, special perspective. How has your rare view of our planet shaped your thinking about innovating to making a world of 11 billion people (projected by 2100) a more humane and sustainable one?
We’ve been riding the crest of an accelerating wave driven by enabling technology for a couple of hundred years. It has had incredibly good consequences. The world have never fed as many people as it does today; we have never had this standard of living on average for as many people we do today; literacy over that past 50 years is a good measure of that, with over 80% of the world having an incredible opening of opportunity. But we’ve built it in an accelerating phase and not a sustained phase and anything that’s done under acceleration is temporary. So how do we turn this into something sustainable?
“I decided that day to start turning myself into an astronaut, which is a whole different process than wishing.”
We didn’t get to where we are by being lackadaisical or unimaginative or hesitant. We got here by being driven and restless and hungry about ideas, and we tried to build structures that allowed the brightest among us to solve problems in new ways. Go to Silicon Valley, or go to The Perimeter Institute, or go to UBC and TRIUMF, or walk over to General Fusion – we’ve set up a structure that allows people to take thought and invention to a level that’s never been seen before.
Not everyone is scrambling for their next meal, not everyone is a hunter-gatherer or a farmer. And so we’ve built an amazing structure but it’s unsustainable. And it’s built largely in the past 150 years on the back of burning fossil fuels. We need a better solution.
So every advanced society reins in their population growth, and the accelerated rate of the integration of technology into both India and into China is phenomenal. It’s unprecedented. This isn’t a slow historic change from agrarian to technological with not many outside influences, with people slowly moving into the cities. This is very different. This is fast. You can draw models based on statistics that will predict anything. I’d be very surprised if we went to 11 billion.
I’m not even sure we will, because of the self-imposed limits of the climate. The way we’re changing the way we feed people, the way we house them and clothe them is so energy wasteful and so polluting that I don’t think the planet is going to allow us to grow at that rate. I think it’s the less developed economies and the more fragile environmental parts of the world that are really going to be the canaries in the coal mine that are going to drive that decision-making.
I think it’s a slowly self-balancing system but we have to find alternate energy sources to fossil fuels. We need to continue to educate people to make informed decisions and more than anything we need to raise the standard of living for as many people as possible and make it sustainable.
You know, the best basketball player in the world has probably never held a basketball in their hands; the brightest mind in the world could be out somewhere digging for potatoes, because that’s the only opportunity they’ve ever been given.
If we truly want our species to thrive, we have to free up the natural talents that exist amongst our species to push themselves to the limit of capability. We’ve done that in part of our society but not throughout. To me, that’s got to be the objective: to raise the standard of living for as many people as possible, but make it sustainable. We need this particular wave to crash as gently as possible to get to some sort of steady sea that allows that to happen.
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