Tag: siren server

My 2013

Every since I started blogging, I’ve done a year end post summarizing what I’ve done in the past year. These posts are mostly for me, so that I can look back and remember what I did, what I was thinking and what was important to me each year. Previous versions (2000s2009,20102011, 2012).

I started and ended 2012 in nearly the same place: on a friend’s rooftop in Santiago, champagne in hand, surrounded by great people, watching a multitude of fireworks explode across Santiago’s expansive skyline. In between, the first part of 2013 continued on 2012’s theme: a time in flux. I started out preparing to become a professor for the first time. My business partner and friend Enrique Fernandez and I completely revamped our entrepreneurship class How to Build a Startup and began teaching at Universidad Católica in Santiago and Universidad Católica del Norte in Antofagasta.

Antofagasta was a real challenge, but it was extremely rewarding. While the two hour flight eight times in twelve weeks was challenging, the hardest part was teaching a class solo, 100% in spanish. I was really nervous my first class and could see from the looks on my students’ faces that they weren’t looking forward to a whole semester with my gringo spanish, but by the second class, I started getting better and by the final class, my spanish was much better and I wasn’t nervous at all.

I’m glad I got to practice in Antofagasta, because in August I taught another class completely in spanish to undergrads at Universidad de Desarrollo in Santiago. It was rewarding to see my students actually learn something each semester, see their self belief growing each week, and seem projects go from ideas to reality.

My blog continues to build traffic and I was featured in multiple international publications again this year on Startup Chile, Entrustet, Chilean Real Estate and the Madison entrepreneurial ecosystem. It was cool to see Google implement their deceased account option that we’d pushed for back in 2009. While I haven’t written as much as I would have liked, I read more in 2013 than I did in 2012.

I traveled back to Wisconsin in August to help organize the fourth annual Forward Technology Festival and was happy to see it keep growing. Matt, Bryan, Forrest and Preston have done an awesome job since I moved to Chile. Forrest continues to grow Capital Entrepreneurs and Madison’s entrepreneurial scene continues to get more national prominence.

While the first half of the year was a year still in flux, the second half was much more focused. After coming back from my trip home in August, I started Andes Property, a real estate investment company focused in Santiago and published The Expat’s Guide to Chile, a book about living, working and doing business in Chile, which has been consistently ranked in the top ten most popular books about Chile on Amazon. I also launched an ecommerce business, La Condoneria, that sells condoms online. It’s been fun to start to build a business from scratch again and to work with two great business partners. In November, I celebrated three years in Chile.

I also made it back to Wisconsin for my family’s Thanksgiving and my group of friends’ 9th annual Friendsgiving. It really was great to get back and see my family twice this year and it was amazing to see our group continue to grow with more engagements and our group’s first kid. I expect both trends to continue in 2014.

I explored more of South America, but didn’t travel as much as I would have liked. I made it to Chiloé and Uruguay, then visited Mendoza when my parents visited Chile for two weeks, and Pucón, Puerto Varas and Frutillar when my friend Polsky came to visit from the US. I’ve done a better job of taking advantage of going to the beach more in 2013 than in 2012, but plan to do it more in 2014.

I didn’t exercise as much as I would have liked, but continued to play squash and increased my soccer. On the sports side, I went to a Chile world cup qualifying match, some chilean club matches and watched the US qualify for the world cup. Overall, it was a year of transitioning into my next projects that I’ve since been able to sink my teeth into. I expect 2014 to be a very interesting one!

Favorite posts of 2013

What Entrepreneurship is Really Like

Your Internet Business Probably Isn’t A Startup



How to Deal With A Smart Disruptive School Kid

My Talk From The Forward Technology Festival

How The Future Might Look

Seven Important Books

Siren Servers: Why are we ok with giving away our data?

How to Survive and Be Successful in a Siren Server World

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.

How The Future Might Look

favela luxuryOver the past few months I’ve been forming a thesis about where the world is heading. Much of my thinking comes from seven important books. Two of the most important authors who have influenced my thinking are Nassim Nicholas Taleb and Jaron Lanier. Many of the ideas that follow are theirs. And when Taleb’s and Lanier’s ideas intersect, you get very interesting hypotheses.

I’ll be expanding on my thinking over the next few blog posts, but I’ll start with some of the important ideas  that I think are at the core of where the world is heading. Understanding these ideas will be very important  if you want to succeed in the world going forward, or if you want to try to influence or change our future.

The Taleb Distribution – 99/1 instead of 80/20

The Pareto Distribution, better known as the 80/20 rule, states that 80% of the effects come from 20% of the causes. For example, in most businesses 20% of clients will generate 80% of the income, 20% of clients will generate the most customer service requests and so on. Taleb argues that we’re moving to a 99/1 distribution, away from 80/20. This shift has profound implications for our economy and society.

Little to No Skin in the Game

Entities are using big data and big computers to create businesses that introduce risk into the system, but don’t actually take on any of the risk. Instead they radiate it out to everyone else, taking all the benefits and leaving others with the downside. Think big banks, healthcare marketplaces, Facebook, outsourcing firms.

Siren Servers

Lanier coined this term to describe companies that use strong computers to suck up data and make money solely on information asymmetry, that have no skin in the game, radiating out new risk into the system. This new business model breaks with old entrepreneurial traditions: now the winners win solely because they have the strongest, fastest and most powerful computers, not because of innovation or value add. It’s arbitrage.

Strongest servers used for control

Whether its from governments like the US and the NSA or strong, overbearing policing, or large companies like wall street or web giants, the strongest servers will use their power to exert control.

Much of this control isn’t really done by algorithms, but people believe in technology, rather than humanism. For example, online dating sites claim they have an algorithm that matches people based on compatibility. In reality the algorithm “works” because it throws lots of people who want to get married together. Marriages are bound to happen. But people believe its the computer and give up control.

De Facto Monopolies

As power and money concentrate around the most powerful computer and radiate risk away from themselves, they create de facto monopolies. For example, Amazon automatically lowers its prices if there is a lower price anywhere it can find, then raises it if there isn’t a lower price anymore. They do this because they have the best data and the most powerful servers. They are willing to take a low or no margin on an item until you go out of business.

Amazon is not stopping you from starting a competitor. But you cannot compete on price. What used to be a monopoly is now just good business and competition. It’s moving toward a de facto monopoly. I expect this to happen in other industries.

Meritocracy used to excuse pretty much anything

As things go to 99/1 and de facto monopolies arise that radiate away risk from people who have little to no skin in the game, the winners will use merit and hard work to justify their outsized rewards. Since these companies are not using traditional, overt anticompetitive practices, the winners will justify their gains by meritocracy: anyone could have done it. It will be used to justify the commoditazation of work and the elimination of traditional levees.

Non Monetary Compensation

Facebook with 0 users is worth $0. Facebook with 1.1b users is worth $122b. It needs our free data to function. Yet its controlled by one guy and only a tiny percentage actually involved get monetary compensation. The rest get the equivalent of candy. The new bread and circus.

Taken one step further, in ten years robots are doing most basic surgeries. All benefits accrue to the software company that created the software. How’d they program this software? By watching real doctors perform hundreds of thousands of surgeries. But do these doctors get any compensation from the new data driven robots that needed their data to create the program? No. This will repeat across most industries.

Shrinking Markets

In a 99/1 world, where information is free and people aren’t paid for their data inputs, and as technology, powerful servers and de facto monopolies begin to emerge, markets will begin to shrink. These technologies cut out the middle men and people needed to do work. Sounds great and it is short term, but at scale, only the powerful handful have any monetary compensation and the rest have candy and no money to live, let alone purchase the winner’s goods.

Massive Inequality

The world will look more like South America, with massive physical, emotional, economic divisions between haves and have nots. In South America the top few percent almost never come in contact with the rest of the population, besides in service jobs. They don’t have the same culture. They don’t eat the same food. Follow the same sports. Watch the same tv shows. See the same movies. It might as well be two different worlds. Without a common experience, the haves lose empathy for their fellow man.

The metafication of everything

Everything we do is now broken down into tiny data pieces, mixed up and then put in a schema. Barriers go down, but we lose context. Do we lose truth with the lost context?

I understand this post sounds bleak and is very incomplete, but I don’t think all is lost. I’ll continue expanding on these ideas over the next few weeks in additional blog posts, including some ideas on how we can get off this track, and if we can’t get off the track, what some of the best strategies might be to survive in this type of a world.

Please add to the discussion.