Scott Galloway on the break up of big tech – notes and video from DLD18

I’ve been mostly travelling since the DLD conference, so just catching up on my notes and reflections now.

Scott Galloway was one of the people I was really keen to see speak in Munich. His recent book The Four was one of my best reads of 2017 – I bought several copies for our office and recommend on Brilliant Noise reading lists for our digital mindset and leadership programmes.

What sets Galloway apart from most tech commentators is that he does his homework, brings fresh insights and lays out his thinking in an engaging but above all provocative style. This year’s theme of his annual DLD talk was close to the bone for many of the attendees – the break up of big tech.

Galloway repeated and build on the themes in his book about “the four” – Amazon, Google, Facebook and Apple – essentially that they are now so big that they are destroying more value than they are creating. Amazon and Facebook seemed to take the most flak in the talk.

Here are some themes and highlights, depending on your point of view:

  • Facebook is a media company and disingenuous in pretending it isn’t: “[Facebook says] We can’t be arbiters of the truth and you don’t want us to be.’ No, we’d like you to try.”

The four treat fines from breaking the law as costs of doing business. In proportion to the size of deals they are getting “$25 parking tickets”.

While Amazon dwarfs all other retailers it pays hardly any tax (see below).

What happens when the most successful companies in the world don’t pay taxes? Simple, the less successful companies pay more taxes. We have opted for a regressive corporate tax system.

The four will destroy almost 200,000 jobs in the advertising industry.

These have been fantastic vessels for the transfer of wealth from the rest of the world to the United States and from the middle of the United States to the coasts.

He also used “the shitshow” of Amazon’s HQ2 location selection process. US cities effectively bid against one other to be the one that waived its tax and other. Laws the most to attract the company to settle there.

At one point he suggested that the Chinese response to big tech had been effective from a national security point of view – ban the US company, support local versions of e-commerce, search and social and effectively lock them out. “There haven’t been any concerns about Russian hackers interfering with elections in China.” The fact it is a totalitarian regime probably helps too, though, right?

At times, then, you could think that Galloway was completely in tune with the protectionists of the hard left and right. In fact, he showed a clip of him being introduced on a Fox News show as a socialist – although one suspects that Fox’s owners would love to Google and Facebook hobbled or broken up by governments. But Galloway insists that his call for the four big tech giants to be broken up is driven by capitalist logic. Like Microsoft in the 90s, he says, the big tech companies are shutting down challenger companies – think Facebook’s assimilation of Snap’s features – and need to be constrained to allow the next generation of tech innovators to emerge. Without the anti-trust suits against Microsoft, Google and Facebook might never have emerged.

This claim was categorically denied by The Second Machine Age author, Andrew McAfee on a later panel that morning. Microsoft was beaten in some markets by the Four because it failed to execute fast enough or well enough in search or mobile, says McAfee, and the responsibility to deal with their excesses is down to citizens and consumers.

Will it happen? If it does it will be the EU leading the charge, since US regulators seem to have no interest in hampering companies that hoover up the world’s cash and data so efficiently. Also, Galloway’s says: “The break up of big tech will not be easy because Jeff Bezos is smarter than all of us.”

You can watch the whole session here:

Lastly here are Galloway’s predictions for 2018. He started the session by showing all of the things he called wrong last year – but he still has a pretty good hit rate.

Endless and taste. Strategy and design.

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Image: from Endless Studios’ case study.

Last week I went to Christmas drinks with Brilliant Noise’s design partners, Endless Studios, in their new Brighton offices.

When I go somewhere like Endless, I realise my own taste is largely of the know-it-when-I-see-it variety, and that the creation of beautiful things – from spaces to typefaces to whole brand schemas – is of a whole order of magnitude beyond mine. I know and like stylish, well-designed things – for them it’s a full time job.

If there’s one thing we need from our partnership with Endless it is their taste – they have it by the barrow-load.

The most cutting remark Steve Jobs ever made about the Apple’s great rival of the time was that they had no taste. Yes, they could produce brilliant technology, code by the milliion-lines, but when it comes to taste, he said, they were nowhere.

Taste happens by seeking out beautiful, brilliant things, said Jobs:

“It comes down to exposing yourself to the best things humans have done and then trying to bring the same things into what you are doing.”

Good design creates beautiful things. Deeply beautiful – beyond the first impressions, beyond the surface, because good design means that someone has thought deeply about the created object, space or experience in every aspect. You feel the outcome, you see some of the outcome of a successful design process, but you may never see or understand all of it. Good design has depth and substance.

I recently finished Leander Kahney’s biography of Jonathan Ive. A recurring theme is the design of the inside of the machines by Ive’s team – sometimes to the consternation of their engineering colleagues – so that the circuit boards and innards of the computers were as elegant, in their own way, as the exteriors. That’s deep attention to detail.

When Endless designed the Brilliant Noise brand a couple of years ago, they made physical stencils of some of the shapes they’d created as part of the brand’s system. The shapes were made from the negative space between the letters of the logo and they began to develop them as a set of abstract icons. They also pored over photos and filters and ways of framing images – the right grid that things should align to, the right weight of Gotham for different documents.

I learned two things from them. First, the way that creating a visual brand is about looking at a system, a “kit of parts” that works with a steady logic – not just something that looks good. Second, that you need to go deep and explore an idea, a system of ideas, until you know you have the right answer.

I think I’d heard these things before, in relation to branding – but it wasn’t until I was part of the process of building a brand with design experts like Colin and Ben, the founders of Endless, that I grasped this as a threshold concept.

There’s a love affair between strategy and design. At least there should be. The processes are in parallel and can teach each other so much.

Samsung’s massive ad spend

This year Samsung spent a lot on advertising.

US$14 billion.

To give you some perspective, Coca-Cola spent about US$2.5 billion in 2012, across all of its brands, globally.

Want some more perspective? US$14 billion is more than Iceland’s GDP and more than Google paid for Motorola, according to an article from Reuters, which goes on to suggest that Samsung is spending a lot, but not necessarily seeing a return. It quotes Oh Jung-suk, a business school professor at Seoul National University.

“Samsung’s marketing is too much focused on projecting an image they aspire to: being innovative and ahead of the pack. They are failing to efficiently bridge the gap between the aspiration and how consumers actually respond to the campaign. It’s got to be more aligned.”

Apple spends a fraction of Samsung’s budget (about US$1 billion). Horace Dediu, an Asymco analyst says the lower spend is down to product strength:

“The stronger, more differentiated the product, the less it needs to be propped up by advertising.”

We’ve heard that before, haven’t we? Designer Yves Behar said “Advertising is the price companies pay for being unoriginal.”

To borrow from football, you could say Samsung is trying to do a Man City rather than a Manchester United – short-circuiting its rise to tech brand royalty with brute force spend. Following that logic, it won’t be concerned with the odd frosty reception for product placement or sponsorship.

Business model prisoners

While most companies become prisoners of their business models, one way to deal with this is to have a strong strategy that means you know when shift to new models and products when the time is right. 

Broadstuff’s “All you need to know about Apple in 3 easy steps” suggests that the Cupertino giant may have this kind of strategic fortitude, with the consequence that financial markets get huffy because it means quarter-on-quarter performance is not the first priority. 

look at Apple over 35 years and you will see that they:

1. Are typically a very early entrant, integrating a variety of existing systems in a hitherto poorly served early adopter sector with promise, to create an easy-to-use product.

2. Use great design to create a demand for a high margin product. In recent years they have also become “cuter” at doing software as well as hardware after being caught out by the MS-DOS ecosystem

3. As that market matures, retreat to the highest profit quartile. Follow the money, not the volume.

So great has been Apple’s performance in recent years that the markets have created their own expectations bubble about performance. 

Lazy narratives and how to be wrong

Apple-bashing is a game a lot of people these days.

John Gruber at Daring Fireball is challenging the emerging narrative of the company’s inevitable decline after the death of Steve Jobs. 

Apple was far from perfect under Steve Jobs. But in hindsight, critics and skeptics of the company now see fit to deem his reign flawless or nearly so. Here’s a guy on Yahoo Finance telling Henry Blodget that “Steve Jobs wasn’t wrong about anything ever.”

What you want is to be (1) right more often than wrong; (2) willing to recognize when you are wrong; and (3) able and willing to correct whatever is wrong. If you expect perfection, to be right all the time, you’re going to fail on all three of those — you will be wrong sometimes, that’s just human nature; you’ll be less willing or unwilling to recognize when you’re wrong because you’ve talked yourself into expecting perfection; and you won’t fix what’s wrong because you’ll have convinced yourself you weren’t wrong in the first place. The only way to come close to being right all the time is to be willing to change your mind and recognize mistakes — it’s never going to happen that you’re right all the time in the first place.

There’s some wisdom for us all in that…

iPad first impressions

iCrossing UK colleagues falling for the iPad (via @shortlisted)

Like most of the world, it seemed, I was perfectly prepared to offer an opinion on the iPad without having ever seen one. Like most of the pre-launch “analysis” I’m not sure I added much of value to the discussion around it, other than to caution that we will have to wait and see what its real impact would be.

Apple’s newest product became a kind of proxy war for all sorts of other interests: DRM, death/survival of publishing, Mac v PC (yawn) etc etc. Cory Doctorow’s discussion of why we should not buy iPads was both typical of this slew of writing and stand out brilliant. It got me thinking, it made me hesitate for a moment about buying one…

Now? Reader, I bought one. And all the hypotheticals fell away, and it became about being a user – and that’s a whole different matter… (more…)