Nathan Lustig

How to Survive and Be Successful in a Siren Server World

My post Siren Servers: Why Are We OK With Giving Away Our Data? did not get a single comment. It got two likes on Facebook and no retweets. But it’s been the post that’s generated the most emails from people of any post I’ve written in the past year.

It seems that a small group of people are realizing the changes that are happening as a result of human choices in technology, but not many are willing to comment publicly. I’m not sure why, but I’d like to keep the conversation going.

To recap, Jaron Lanier shows that we’ve decided that our data does not need to be compensated monetarily. This decision has wide ranging implications, but the biggest is that large companies with powerful servers end up sucking up most of the wealth, leaving the rest of us with the scraps.

So if you want to be successful in this coming world, there are only three choices:

1. Try to operate within the system

If you want to be successful and make money, you can try to become a siren server. But that’s really just like buying a lottery ticket. There are only a handful of successful siren servers in the world and your chances of being one is very small. If you can’t be the siren server, then it’s best to work at a siren server, or provide services to a siren server. These jobs aren’t all that safe, as you’re still exposed to massive competition and disruption.

You could also “sing for your supper” as Lanier likes to put it. You can give lectures, consult, do legal work and anything that’s labor intensive. These jobs will likely pay well while you are working but if you get sick, get old, have a kid, get married or decide you don’t want to physically perform every day of your life, you’re done. There’s little to no security. And to really make big money, you have to become a star, which is probably only an order of magnitude easier than being a siren server.

Put bluntly, if you want to be successful in a Siren Server world working within the current system, you’d better have top notch skills, an incredible work ethic, a bunch of luck and the drive to succeed. I’m talking the top 10%. And that 10% will likely get smaller every single day. If not, you’ll be relegated to menial work or unemployment. This is exactly what’s happening today.

2. Try to change the system and rewrite our social compact

Our current economy is simply a social compact. We’ve decided that our data is monetarily worthless. We’ve decided that we’ll go along with the narratives that those who are winning in today’s society deserve it 100% based on merit. We’ve decided that we believe in extreme meritocracy and we’re using it to justify just about anything. So if you want to be successful, you can work to change our social compact and change the system. You can raise awareness about what’s happening and why, although you’ll likely end up singing for your supper. You could try to create a new solution via technology that compensated people for their data. Or at least gave companies incentives to pay for data.

3. Decouple from technology and find a niche

In the long term, nearly all, if not all, industries will be affected by siren servers, but in the near and medium term, there are many industries will be slow to change or where change will allow people to be successful in niches. For example, even though the vast majority of food is manufactured via big agriculture, there’s a profitable niche for organic, free range and heirloom varieties at a premium price. In the age of Ikea, there’s a niche for handmade furniture that’s one of a kind. In the age of Starbucks, there’s a niche for a small premium coffee shop. In the age of Amazon, there’s a niche for super secure web hosting and niche products. You must be in the top couple percent in whatever niche you choose.

Most of these potential jobs are variations of singing for our supper, but they at least provide jobs that are less dependent on technology and siren servers, at least for the time being.

Conclusion

Notice that I don’t mention programming, nursing, science and engineering. I think as siren servers continue to develop, we’ll certainly still need these professions, but whereas now we can use the top 50% of people who have these skills, we’ll see a smaller and smaller amount who have useful skills.

I’ll use programming as an example. In 2005 if you wanted to create a personal website, you had to hire at least one programmer and one designer to custom build it for you. You’d likely spend at least $5,000 for a decently done personal website or blog, sometimes even upwards of $10,000. Fast forward to today. You can setup WordPress with a myriad of top-notch designs in minutes for as little as $100. Or free if you’re willing to torrent. I’m not a technical programmer, but even I understand enough to launch my own website, with decent design.

This same phenomenon is going to continue so that lay people will be able to do today’s seemingly difficult programming, just as I’m able to do a time consuming programming task from 2005 with software as a service. We’ll always need the top 1%-5% of talented people to do the big, tough groundbreaking work. But what will the rest do? No jobs are safe from the siren servers.

Long term, we face a stark choice. Do we continue to go down our current path of siren servers that accrue the benefits of technology and radiate the risk back into the system, while sucking up most of the monetary benefits? Or do we decide to make a change?

I’d love to get more of your thoughts, so if you’re thinking about similar topics, please comment here or send me a private message.

How to Make Chile a Better Place to Do Business

A Chilean newspaper asked me an interesting question this week:

What should Chile do in 2014 to make it a better place to be an entrepreneur?

I don’t think my entire answer will get published in the newspaper, so I’ll republish it here. What do you think? And what would you do to make Chile a better place to do business?

1. Continue to push ASECH inspired entrepreneurial reforms

ASECH, the Chilean entrepreneurs association, has pushed laws like making it possible to incorporate a business in one day, for free, without going to a notary, pushed banks to allow entrepreneurs to open bank accounts much more easily, a entrepreneurship bankruptcy law, and has pushed for laws that force large companies to pay in 30-45 days, instead of 90-120 that’s fairly common in Chile. It’s been an incredible success and should be continued.

2. Force large Chilean companies to follow Chile’s competition laws

If you want to foment entrepreneurship, you need a level playing field. Chile currently doesn’t have a level playing field, as large companies routinely price fix and squeeze out new entrants to the market. And many large companies receive little to no punishment when they break the law. No laws need to be changed. Just enforce the ones on the books.

3. Push for a law that requires payment in 30-45 days for most sales

The majority of large companies in Chile pay suppliers, especially new ones, in 90-120 days. In the US its 30. Sometimes 45. If you start a new company in the US, you only need two months or so of operating capital before your sales start to pay your bills. In Chile six or seven months. This kills most people’s ability to start a business before they’ve even started.

4. Pass a personal bankruptcy law

I think it’s very unjust that a bank can loan you money without taking risk. Chilean banks know that they’ll get 100% of their money back at some point because there’s no personal bankruptcy law to discharge a debt. Chilean loans are very one sided contracts, which makes it more difficult to take risks and be an entrepreneur.

5. Tell the truth about entrepreneurship

Entrepreneurs are NOT rockstars or superheroes. Having your own business is a lifestyle and it’s not for everyone. It’s really difficult, but there are many benefits. I’d like to see the government and entrepreneurship groups talk about the reality of being an entrepreneur, rather than blinding building up entrepreneurship as rockstars and superheroes. I fear that when the first crop of entrepreneurs who’ve been told they’re superheroes just for starting a business fails, as most entrepreneurs do, they’ll be so burned that they won’t start another business.

Three Years in Chile

Three years ago last week, I was in New York getting the last few things together before my trip to Chile. I’d never been to South America, barely spoke Spanish and really had no idea what to expect when I got off the plane. As I waited in the airport lounge at JFK, it still didn’t feel real. It was just like any other of the numerous flights that Jesse and I had taken during our year and a half running Entrustet.

It didn’t feel like we were going to a foreign country that had promised us $40,000 (that we couldn’t verify we’d actually receive), to a place where we didn’t speak the language, 16 hours from home.

Three years later, I’m still here. I’ve spent 27 of the past 36 months in Chile, learned Spanish, immersed myself into another culture, pushed myself out of my comfort zone, made incredible friends, started multiple businesses, taught at three universities, wrote two books and received my permanent residence. It’s been a long road, but after three years, I think I finally pretty much get Chile.

What have I learned over the past thee years? What’s changed in my life and in Chile? And why am I still here? Why did I stay? And what’s next?

It was a big change coming from the US and resettling in Chile. I’m very privileged in that in the US things usually came easily for me. I almost always knew what to say, how to talk my way into and out of situations, all the cool local tricks, the best places to eat, the best parks, the hidden treasures. I knew what body language meant and what each local reference or slang word really and truly meant. It wasn’t very difficult to be successful.

When I first got to Chile, I was completely lost. I could get around the city, order food, get a drink at a bar, but could barely keep a real conversation. I had to concentrate all the time. I wasn’t myself: I couldn’t be the leader that I was used to.

I didn’t know the culture, I didn’t know what slang meant. Even though most people were very friendly, I really learned what it is like to be an outsider. I wasn’t in on the inside jokes, the turns of phrase, longstanding friendships and so much more. It really made me appreciate how hard it must be to be an immigrant in the US. When people say “immigrants should just learn English” I used to think, yea, they should. But it takes a big effort and it’s not as easy I used to think.

Even after three years, I’m still not truly able to express myself perfectly in Spanish. I’m still not fast enough to make the same jokes I do in English. I probably tell half the stories that I would in English. And the ones that I do tell are half as good as the ones I tell in English! It’s really made me realize what it’s like to be an outsider, or at least someone without all of the built in advantages that I’ve been lucky enough to have.

I certainly miss things. First, my family and friends. In the US I lived my entire life in Milwaukee and Madison and was always within 90 minutes of my family and friends. I miss good customer service. I miss good cheese. I miss being able to listen to every conversation that’s going on around me without actually trying. I miss 250 different beer choices. I miss having a yard. I miss telling an awesome joke with perfect timing. I miss top quality, spicy and flavorful food that doesn’t cost an arm and a leg. I miss my bike. I miss going to northern Wisconsin. Kopps ice cream. Watching all of my favorite sports on a big HDTV instead of illegally streamed on my little computer.

chilean beach

But I can get used to many of the small things because Chile really is an amazing country. I love being close to the pacific and the beach. Amazing seafood. Some great new friends. Playing more soccer. Sun 80% of the year. Being close to Argentina for long weekends. Traveling and exploring in South America. Peruvian food. Pisco sours. Going out dancing. Friends that have taken me into their homes, their families. Asados. The metro. Incredible business opportunities. An amazing $7 bottle of wine. Hearing the entire country scream goaaaaaal, when Chile scores. I certainly miss these things when I go back to the US.

As with all things, there are things that I’ll never get used to. Santiago’s pollution, especially in winter, makes the city just a few notches above unlivable. I’ll never get used to the massive amounts of dust. The classism. The Chilean “two dogs meeting” interview ritual. The rigid conservatism and class structure. Price fixing in big businesses. Going to three separate cash registers to buy an empanada. Waiting in long lines. Customer service reps who flat out lie to you. Living in small apartments. My new expat friends leaving every 6-12 months. So many smokers! Massive inequality and the inability for many people to see outside their own bubble of their own experience.

santiago smog

 

Chile’s changed, mostly for the better, since I arrived in 2010. My two favorite changes are the smoking ban in public places, plus the crackdown on drunk driving. Both of these laws have made Chile much more livable. I might not even still be in Chile if they hadn’t passed the smoking ban. It used to be terrible!

There are way more foreigners in Chile now compared to 2010. When I first got to Chile people asked us incredulously “why are you here???” Now it’s fairly typical to see foreigners in parts of the city. Rents have gone up 30-100%, depending on neighborhoods. I wouldn’t be here if it weren’t for the ban. There’s been a micro brewery renaissance, with a huge increase in of good beer. People seem to be more accepting of foreigners. Chile has become much more livable over the past three years.

Business-wise, from 2010-2013, the startup scene is completely different. While there were a few successful Chilean startups and entrepreneurs prior to Startup Chile, the program really has changed the mentality in the country. In 2010, people would ask me what I did and when I answered that I had my own business, they’d ask “where do you work” again, then look at me as if I were homeless. Now its cool. Probably too cool. I worry that the country has been sold a narrative of startup rockstars, heroes, gurus and celebrities that when the first round fails might ruin entrepreneurship in the country.

Asech, the Chilean entrepreneurs association, should be the model for the rest of the world. They are a lobby group that pushed through a law that allowed companies to register online in one day, for free. Before it cost $2000+ and took 2-3 months. They’ve convinced banks to let entrepreneurs open bank accounts, which was nearly impossible before. There are way more coworking spaces. More chilean startups and some incredible opportunities.

But there’s still not much funding. Not many Chilean success stories. Big companies and established players still crowd out entrepreneurs. The people with money still generally have an aristocratic yet provincial, anticompetitive attitude that seeks to divide up the riches and keep their place in the economy, not create new innovation and grow the economy. And the new rich still isn’t thinking bigger. The government isn’t helping much by allowing anticompetitive banks and large companies to gouge consumers and price fix.

I used to socially liberal and be very free market: I believed that if you just got government out of the way, economies will work. After being in Chile for three years, I’m even more socially liberal and still generally believe in getting the government out of the way, but my zeal has been tempered.

In Chile, I’ve seen what happens when there’s little to no competition and the government doesn’t really enforce price fixing or monopoly laws or just doesn’t have big enough penalties to stop basically institutionalized price fixing and corruption by large companies. Along with tax structures that benefit those in power to keep their wealth, and be extractors, sucking out wealth from society, rather than creating new, innovation and expanding the economy for everyone.

I have a better realization of what its like to try to move up in the world and how hard many people work for little money. I see what a problem inequality is and can be. People are physically, mentally, emotionally divided. The rich live physically separated from the rest, consuming different entertainment, different food, different clothes, everything. They never meet and talk, which causes misunderstanding, jealousy and a lack of empathy. This phenomenon is happening more and more in the US and I don’t want it to happen after I’ve seen what its like in Chile.

Overall, coming to Chile has been an incredible experience. I’ve learned so much about myself and about the world, made great friends, learned spanish and gotten to explore an incredible country and part of the world. I’m currently teaching entrepreneurship at three universities and working on a two projects that I think have the potentially to be very interesting over the next few months. I don’t know what my future really holds, but I’ll always be thankful that Jesse and I took the risk to come to Chile back in 2010.

Thanks to everyone who’s helped me in Chile, helped me learn about myself and this great country. I couldn’t have done it without you all. A final thanks to my parents, who haven’t demanded that I come back yet.

Siren Servers: Why Are We Ok With Giving Away Our Data?

Note: Jaron Lanier is one of the most important thinkers in our world right now. Most of the ideas in this post are from Lanier’s book Who Owns The Future. Anything in quotes is directly from Lanier.

The most powerful entities in today’s word are those that have the most data and the most powerful computers to crunch this data in a meaningful way. They are the “gargantuan cloud computer services that are concentrating wealth and influence in our era.” Whether they are “national intelligence agencies, the famous silicon valley companies with nursery school names, the stealthy high finance schemes and others,”…”they use their gigantic corporate repositories of information about our lives for huge benefit by a super-rich few.” So says Jaron Lanier in his book Who Owns The Future.

The siren server business model is to suck up as much data as possible and use powerful computers to create massive profits, while pushing the risk away from the company, back into the system.  The model currently works by getting people to freely give up their data for non-monetary compensation, or sucking up the data surreptitiously.

Lanier continues:

All these schemes are quite similar. The biggest computers can predictably calculate wealth and clout on a broad, statistical level. For instance, an insurance company might use massive amounts of data to only insure people who are unlikely to get sick. The problem is that the risk and loss that can be avoided by having the biggest computer still exist. Everyone else must pay for the risk and loss that the Siren Server can avoid.

Siren Servers suck all data and a vast majority of profits, putting traditional businesses out of business and concentrating wealth and power in the hands of a small, elite few. Instead of paying people in dollars for their data, siren servers pay them in candy or lower front end costs. They convert industries that used to have a bell curve distribution into industries that have winner take all, star systems.

compensation in siren server world

Some examples:

  • Instagram – Takes your data in exchange for taking photos, putting filters and sharing them.
  • Twitter – Takes your data in exchange for connecting with friends and reading the news.
  • Foursquare – Your location data in exchange for restaurant reviews and social networking
  • Facebook – Takes your data in exchange for being able to brag about yourself and stalk your friends.
  • Amazon – Give us your reviews for free and purchase data and we’ll give you lower upfront prices.
  • Huffington Post, Medium – Give us your content for free and we’ll give you “exposure.”
  • Google – Use gmail, google docs, search, browser, android, blogger, youtube, calendar, google plus for free, in exchange for using your data.

All of these services then take your data and use it to concentrate wealth and power for themselves.

Put another way, what is Facebook worth with zero users? Zero dollars. But Facebook has 1.1b users and is worth $110b. All 1.1b users create monetary value for Facebook whenever they add a friend, post an update, add a photo or like a page. But the vast majority never see a dime.

So who gets monetary compensation on Facebook? Zuckerberg, who controls the entire company. The small group of VCs who invested. The public shareholders. And maybe a few million people who have businesses that run on top of Facebook. So if Facebook is worth $0 with 0 users, why do only a tiny percentage of people actually get any monetary compensation from Facebook?

Short term, the model works. Brilliantly. The company makes huge profits and eliminates competition from the marketplace, and gives people a useful new service. But long term, as more and more industries go to the siren server model, and more compensation is pushed off the books, how do people have income? How do they survive? In the internet age, fewer people are getting financially compensated for their actions that have real monetary value to others. We’ve designed technology to push value off the books for more people. See the candy graph above.

Fine you say. Facebook is just entertainment. But what happens when Google perfects the driverless car? Or a software company is able to write an algorithm to perform surgeries? Or take care of people in nursing homes? Or clean city streets? Or even write most basic computer code? All these software companies are able to perfect these tasks by watching real humans perform the task hundreds of thousands, if not millions, of times. Once they get the data for free or cheap, these future Siren Servers will be able to sell their software for money and take over the market, pushing monetary compensation to an elite few and eliminating the old industries.

There was always creative destruction and new industries have always replaced old ones. But the difference today is that we’ve decided to allow our inputs to be compensated with candy, rather than money and that these servers are now powerful enough to transform industries from what used to be a bell curve shaped distribution to a winner take all, star system.

Our decision to give our data away for candy instead of money to companies that push risk away from themselves and have little to no skin in the game is producing massive inequality and unemployment, eliminating the middle class. It paints a bleak picture of our future unless we change.

What do you think?

If you’re interested in reading more, pick up Jaron Lanier’s two books, You Are Not a Gadget and Who Owns the Future, or list to one of his podcasts.