It’s always amusing to read about businesses said to possess so-called “monopoly” power in the U.S., or much more disturbingly, about accusations of “monopoly” power from the ankle biters inside the Department of Justice and Federal Trade Commission. By definition these accusations are made well after the fact.
That is so simply because today’s “monopoly” is yesterday’s unknown, joke, or both. Which is just a hint that “monopolies” get that way by exposing the existing commercial order as hopelessly behind the times, only for the former unknown, joke or both to place a bull’s eye on itself that will eventually result in its own replacement. Translated, what antitrust types describe in pejorative fashion is actually a loud sign of progress.
Gary Shapiro, president and CEO of the Consumer Technology Association, knows all of the above well. He’s witnessed it up close for many years and decades. As he writes in the opening pages of his new book, Pivot or Die: How Leaders Thrive When Everything Changes, “In business, if you stand still and don’t change, the odds are high that some competitor will make your products or services cheaper, better, or more interesting.”
Shapiro’s passage explains why “monopoly” or “dominance” is always and everywhere ephemeral. While it’s accepted that change is good and essential, how to change when your product or service is beloved, and much more challenging, how to change when the competitors who want to replace you are doing things that don’t make sense? And to be clear, they don’t make sense. At least at first.
If Amazon’s online retail concept had been seen as the future, then it’s safe to say that Barnes & Noble would have purchased Amazon in 1995, Blockbuster would have bought Netflix in 1997, and Microsoft would have bought Google in 1998. About all three “should have” non-acquisitions, the antitrust attack dogs wouldn’t have batted an eye at any of them. Which is the point. Amazon, Netflix, and Google were too inconsequential to care about. Until they weren’t.
All of which speaks to the meaning of Shapiro’s new book. He writes that it’s “about pivoting – what it means, when to do it, and what happens when it goes wrong.” Shapiro knows that pivoting and change are essential, but the challenge is knowing when to do it, and where. The when and where are what keep startup founders and CEOs of massive corporations alike up at night simply because if it was obvious when to pivot, then the pivot would already be in motion.
The main thing is that change is a must as a way of keeping afloat. Shapiro vivifies the latter with all sorts of interesting examples. He notes that Nintendo got its start in the manufacture of playing cards before trying out the taxi business, YouTube began as a video dating site, and Panasonic started out as a maker of bicycles. Apparently Panasonic produces “high-quality bicycles for the Japanese market” to this day. Who knew?
Arguably the most famous pivot is Amazon’s. Shapiro writes of Amazon as a “technology company that had simply applied its technology to the retail space first.” Simple? Quite the opposite. Since most weren’t even convinced by online book sales (see Barnes & Noble yet again), how could Amazon’s desire to pivot from books, to books and CDs, to books, CDs and DVDs, all the way to the “everything store” have seemed obvious? The future is opaque.
Once again, no one doubts the need to pivot, but as always, when and where? In Amazon’s case, it’s not just that it expanded its retail technology well beyond books. Shapiro rightly sees fit to mention more Amazon pivots including Prime, AWS, Whole Foods, but there were many errors along the way. Think the smartphone. Amazon tried with the Fire, and failed quite publicly. Pivoting means exposing oneself to ridicule at times, but there’s no information without the leap. Or as Shapiro puts it, “failure fuels ingenuity.”
What’s important is that it’s not just the author of the failure learning from the errant leap. We all do. Wealth is information, and it’s the failures that propel us forward.
That’s what’s so exciting about the rush of investment into AI and its adjacent concepts at present. The lazy in thought refer to it all as a “bubble,” just as those same unoriginal thinkers termed the rush into internet technology as a “bubble.” The joke’s on them. There’s no such thing. In investing there’s always and everywhere a buyer and a seller.
Investment produces information, period. Which is why what the lazy refer to as “bubbles” in pejorative fashion is actually a beautiful signal of a giant leap taking place. In an AI sense, Shapiro writes of a device that “creates a ‘digital twin’ of a deceased loved one that allows family members to be able to talk with – not just to – those they have lost.” Other advances indicate that “we may learn how animals and even insects communicate – making it possible to ‘talk’ to other species!” A “tennis robot” will simulate the experience of “actually playing against another person.” What a world that’s ahead of us.
Which is why we want more, not less, investment. To the extent that machines can do for us, we’re all much, much better off. Same with more humans. Neither takes wealth or jobs, they create both. And they create both by expanding the very division of labor that drives all progress. Interesting about all this in a robots sense is that Shapiro reports “robot density” of 392 per 10,000 workers in China versus 285 per 10,000 workers in the U.S. The numbers reject the laughable assertion that China is “communist,” while at the same time giving us cause for optimism: every advance in robot capability will lift us humans in much the same way that the arrival of human capital routinely lifts humans.
At the same time, the mention of China speaks to some of the book’s demerits. Shapiro writes that China’s growth has come “at the expense of human rights and freedom.” Total nonsense, and Shapiro has to know it is? Why would force and a lack of freedom from government bureaucrats enhance economic progress? Governments are constrained by the known, while all economic progress is a function of intrepid, frequently ridiculed leaps into the unknown. What Shapiro should have written is what’s true, that China thrives economically despite the barriers it erects to human rights and freedom. Only for it to get more disappointing.
While Shapiro thinks it would be wrongheaded for the federal government to pursue the human rights and freedom-shrinking violations that have allegedly lifted China (you think?!), he wants industrial policy. He asserts that the “U.S. needs to get smart and build an innovation strategy that will keep us competitive.” Really? How? And who will build it? These are reasonable questions in light of Shapiro’s stat a third of the way through Pivot that “even in a boom cycle some 75 percent of startups will fail to return investors’ capital.” Say it as often as possible: the future is opaque. Incredibly so. Which means Shapiro’s calls for national economic strategies amount to empty platitudes that are incredibly dangerous insofar as they’re carried out.
About deficits and debt, Shapiro writes of “the problem we are creating for our children,” as though all the waste from government wouldn’t be so crippling if it were taxed away as opposed to being borrowed. The view here is that Shapiro has entered a stadium that could house countless Big Houses (Shapiro is a Michigander) comprised of people who mistake the real crisis. It’s not the debt that investors around the world line up to buy, it’s the extraction over the years of tens of trillions worth of precious wealth that would otherwise have funded essential leaps that drive all progress. The simple truth is that the focus on deficits and debt is a harmful distraction that obscures the real crisis for “our children”: an exponentially less evolved society that they’ll inherit due to so much government consumption of precious wealth, not to mention the massive government that they’ll inherit and by extension they’ll have to prop up. Paying off the debt will be the easy part.
What’s frustrating about this informative and useful book is that Shapiro at least implicitly agrees. If only he would just say it. See once again his statistic about the 75 percent failure rate for startups, along with the stat that precedes it: the $16 billion+ that CES startups have raised since 2012 alone. Imagine how much bigger the previous number would be, and how many more crucial startup failures there would be if politicians weren’t once again consuming so much precious capital. Yet Shapiro thinks the debt that investors eagerly buy is the threat?
It’s something to think about in a book that will happily make you think. Shapiro is so right about the need to pivot, and there’s no doubt he’s intimately aware that pivots are expensive. If only he’d put the two together to see that any comparisons between taxes collected and monies borrowed by governments amounts to drawing a distinction without a difference. The real problem and true crisis is the extraction of wealth by governments, and it is precisely because the extraction of wealth by governments makes the pivots we all agree are necessary much less likely.
This post was originally published on here
