Fred Wilson’s talk about Distruption

Fred Wilson gave a great vision talk about distruption at Google. Video can be found here, and here are some notes I took (Highly summarized):
1. Capital Efficiency: In less than five years, cost of starting an online business (hardware, bandwith, etc) has gone down to 1/10th of the price (order of magnitude)
2. Internet reduces and then eliminates transaction costs — reducing barriers to entry.
3. Josh Kopelman is Fred Wilson’s friend — and he wrote a post about ‘shrinking the market’: the willingness to take less than the existing player. “If you have a business that will allow you to take $5 of revenue from a competitor for every $1 you earn, it’s worth it.” As such, because of capital efficiency, it is much easier to start ‘me to’ services: easier to get market segments, lower costs to get them = higher potential profits.
4. Sustainability is thereby easier to accomplish;
5. Distruption of the internet will come to new businesses that can be end-to-end digital: never do bits need to become atoms.
6. Government can help by enabling existing industries that are potentially distruptable to be distrupted: consumer finance, education, energy, healthcare and government. All of these can be primarily bits:
6a: Money is just information, and thereby can be end-to-end bits. The “Unbank” would be a bank that literally works as a transferrer of bits. And once we fully understand money as bits, virtual currencies will soon become just as good as gold.
6b Education is information; the unschooling and home-schooling movement is strong, but the education system is powerful and entrenched. But as people can opt-out of the education system and get their kids educated in non-traditional environments, that industry is investable – -the economy of scale that made industrial-age schooling set up large schools is no longer as relevant. Capital efficiencies come into effect, and network effects make non-traditional environments even more efficient–and demanding services and products that can serve this new industry. Open courseware is a strong trend — and this can be commoditized, with classnotes and coursenotes being available for free like a commentary blog. (Alieza Salzberg points out that the intangibles–socialization, etc, might be a hidden cost of smaller educational institutions). Alternative degrees will arise, as accredidation will be less relevant (social networks will develop trust protocols that are alternative). Also, letting the students teach makes them smarter — democratic schools are helpful, and teaching things like languages forces students into cross-cultural interaction.
6c Energy: Electrons are NOT bits, but the system regulating itself is end-to-end digital. The smart grid will transform energy. This will enable peer-production of energy, leading to micro-utilities. Also, as electric cars will arise, a lot of data will arise as to transportation habits and the like, enabling a huge amount of potential analysis for people who are seeking to increase transportation efficiencies and optimize urban planning. As such, open database companies who enable testing and sharing of algorithms are good opportunities. (wireless charging will be awesome).
6d Medical: health is not necessarily digital — but getting information to and from doctors can be end-to-end digital. Prevention is also so much better than remediating disease — and as such there are healthcare cost-cutting opportunities through information sharing. Medical records are also a strong way to develop data points and increased efficiencies of service.
6e: Government: Information sharing from government (transparency) is a good start, but the real innovation will start on the local level. Something like SeeClickFix (google is working on it) is good, because today the way Government interacts with citizens is through closed channels; if you open the channels the interaction will be laid bare and that would enable more people to get involved in solving problems. Apps for Democracy of Washington DC is a good example: opening up the potential of writing applications to the general public.
During his talk he mentions their Hacking Education conference. I reformatted the transcript from the talk to make it readable and posted on my box account here.
You gotta love crowdsourcing.


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