Looking back at Enron and the net in 2000

Enron: even now is a byword for dodgy dealing and corruption. Back in the summer of 2000, Enron was a large respectable corporation.  Three people came over from Portland, Oregon to London. They looked to pioneer a new way of thinking about broadband capacity and they came to Europe to do peering agreements and business deals. They were ‘Enron Broadband Services’.

The whole thing was moving at ‘internet speed’, which is a euphemism for crazy fast and with money flittered everywhere.  So I ended up working agency side arranging everything from pre-paid mobile phones to a dinner for 150 internet geeks at The Hempel – a luxury hotel with a minimalist restaurant that used to be in Bayswater.

Enron acquired Portland General Electric (PGE) back in the mid-1990s. This was part of Enron’s play in deregulated electricity markets. With PGE also came an optical fibre network. The company had been dropping fibre into the ground every time it did reinstatements. Enron then built and leased optical fibre from the likes of Level3.

 

While I was trying to get these guys in front of the European telecoms press I was hearing from my media contacts that Level3 were actively briefing against them, saying that their business model was full of shit. They were right it was. Enron Broadband Services depended on their ‘Enron Intelligent Network’ a set of proprietary technologies that was supposed to prioritise traffic for quality of service and commercial traffic reasons.

Like many things at the time the technology was less developed than one would believe. Much of the functionality replicated existing technology such as MPLS. IBM developed their e-commerce offering on the back of ‘suckered’ customers like Boxman.com. Technology was a sketchy business at the time; but it seemed to matter less as the world was being changed. This was pre-9/11 and Gap was convincing many people that khakis were cool.

In the case of IBM, they seem to be still doing similar practices two decades later; this time with their Watson machine learning offering.

The problem was that the ‘Enron Intelligent Network‘ was a relatively minor sin compared to everything else that was going on in the corporation.

What happened to the companies mentioned in the Enron slides?

  • ARC
  • Atom Films – Founded in 1998, Atom was bought in 2006 by MTV Networks, Google had considered buying it when it eventually purchased YouTube. Eventually it was absorbed into Comedy Central
  • Avici Systems – was hit hard by the dot com bust. It eventually pulled out of the core network router business and changed its name to Soapstone Networks
  • Ciena – Ciena still exists as a networking equipment and software company. It managed to ride out the dot com bust by diversifying its portfolio of networking equipment
  • Cisco Systems – continues to be one of the world’s largest companies in networking equipment
  • Compaq – never managed to fully integrate its acquisition of the Digital Equipment Corporation (DEC) and ended up being acquired by Hewlett-Packard. In 2015; Hewlett Packard split into two businesses. HP held the PC, printers and related businesses. Hewlett Packard Enterprise contained business software (subsequently merged with Micro Focus), services business (merged with Computer Sciences Corporation) and a hardware business.
  • CountryCool.com – started as a country music site and seems to have morphed into an analogue of Comedy Central
  • The Drew Carey Show – ABC situation comedy that finished its run in 2004
  • EasyStreet – ISP that is still going, mostly reselling other vendors products
  • Epoch Internet – was the first tier one ISP on the west coast when it was founded in 1994 and played a crucial role in some of the first commercial peering points. It was eventually acquired by MegaPath in 2004. MegaPath in turn is owned by Fusion Connect, who were recently acquired by Birch Communications Inc. as part of a further consolidation of business ISPs in the US
  • Firstworld
  • FlashNet – FlashNet now only exist as a legacy domain that AT&T supports for customers. FlashNet Communications was founded in 1995 as a Fort Worth, Texas-based internet service provider. It had an IPO on the NASDAQ in March 1999 and was acquired by Prodigy Communications in November that year. Prodigy was acquired by AT&T in September 2001
  • FYINet.com – FYINet was a Houston, Texas based company that provided training materials on CD ROM about networking technology. They then moved their content to the web and promoted their 3D animation and interactive design capabilities. They seem to have disappeared sometime around 2002.
  • GST Telecommunications
  • GTE Internetworking – GTE Internetworking became Genuity when its parent company merged with Bell Atlantic to found Verizon. It was eventually acquired by Level3, which was in turn acquired by CenturyLink 2017
  • Inktomi- Inktomi was one of the leading providers of web caching for both content and streaming. It became a key provider for early content delivery networks. It was eventually acquired by Yahoo! in 2003. Yahoo! was acquired by Verizon and merged into Aol as part of Oath
  • iStream TV encoding – iStream continues to provide solutions for both video on demand and live streaming. Turner acquired a majority share in the business during 2015
  • latinsoccer.net – Mexican based site that covered Latin American football news. It featured both video and audio which wasn’t the norm for the time. According to Archive.org’s Wayback Machine, the site didn’t survive the dot com bust
  • Lucent Technologies – acquired in term by Alcatel and Nokia
  • MShow.com – Chicago-based Mshow provided interactive broadcast services. It was founded in 1986, had one round of funding in 2000 and is no longer in business
  • NetRail – provided backbone networks and hosting to ISPs. It was acquired by Cogent Communications Group in 2001
  • NextVenue – specialised in video and audio streaming, it was acquired by iBEAM Broadcasting – a satellite networking company. iBEAM went under in 2002, its assets were acquired by Williams Communications LLC. Williams is now owned by Level3
  • Oracle – Oracle remains a leading provider of enterprise software
  • OrcoNet.com – was a US ISP, eventually filed for chapter 7 bankruptcy in California
  • pdq.net – was an ISP. It was acquired by Internet America. Internet America was acquired by JAB Broadband and folded into Rise Broadband
  • Q4i.com – defunct online brokerage with video component for independent brokers
  • RCN – Boston-based ISP that has gone on to become the sixth largest cable and broadband provider in the US
  • rmi.net – Rocky Mountain Internet was an early provider of dial-up connectivity. It moved into e-business for SMEs and eventually became part of EarthLink, which went on to consolidate with Windstream
  • showdigital – provided broadband to the hospitality industry. Its assets were acquired in 2001 by STSN
  • Sun Microsystems – Sun Microsystems never managed to recover from the dot com bust and was eventually acquired by Oracle. Oracle now sells its own brand of hardware that can run Solaris UNIX – Solaris is now owned by Oracle who continues to maintain it alongside a distribution of Linux
  • Sycamore Networks – Sycamore Networks was wound up by its shareholders in early 2013. During the internet boom it had a market capitalisation of $44.8 billon. It was worth just $64 million when wound up.
  • TeleCommute Solutions – Atlanta based ISP that specialised in providing workforce connectivity to companies. Crunchbase lists it as closed
  • Telescan – founded in 1982 as a provider of stock charting tools, it eventually became part of TD Ameritrade’s Thinkorswim
  • TotalCricket
  • USWest – one of the original ‘baby Bells’. It merged with Qwest in 2000. Qwest was acquired by CenturyLink in 2011
  • Verio – founded as an ISP in Denver. Acquired by NTT of Japan in 2000
  • VillageNet – small Canadian ISP which is still running

ICYMI | 万一你错过了| 당신이 그것을 놓친 경우

FOMO in China is a $7 billion industry | Marketplace – the Chinese payment for knowledge Podcast business dwarves ad funding and Patreon-like services. Many of them are like bank analyst type reports as audio books

Luxury Daily Rimowa seeks to offer more than suitcases to its ‘purposeful travelers’ – marketing and design is going to rely on community and collaboration – sounds like Stüssy’s playbook for the past four decades

European Union has a plan for Asian infrastructure but will it collide with China’s belt and road? | South China Morning Post – this could get interesting

Google Announces That its Data Studio Tool is Now Available to All Users | Social Media Today – Interesting low end attack on Qlik and Tableau

Poundland To Open Stores At Up To 20 Former Poundworld Locations | Poundland Press Room – Jacks about to get hammered by Poundland with new stores. The stock inflating dream that Jacks is supposed to sell to Tesco shareholders may come unstuck very fast

Aldi and Lidl won’t be scared by Tesco’s new discount Jack’s | The Guardian – visually it might be an Aldi analogue, pricing strategy wise it seems closer to Poundstretcher with a bakery. It’s probably what all post-Brexit UK supermarkets will look like

Yom Kippur, a children’s bike festival on Israel’s deserted roads | Reuters – interesting evolution in consumer behaviour

Amazon Announces Echo Link, Echo Link Amp and Echo Sub • Gear Patrol – the (US only at the moment) Echo Link Amp looks lovely but you’d be better off with Schiit instead

Scott Galloway on the state of retailing at Recode Conference

This data viz maps Facebook connections across the country | Fast Company – well that’s another Facebook myth disproved

How to nail the Q&A portion of your presentation – good bits of advice

Apple-owned software company FileMaker does an ad that take aim at innovation hype

EU Starts Preliminary Probe into Amazon’s Treatment of Merchants | WSJ City  – the EU has economic reasons to do this as well

CTS – conserve the sound – a German project that preserves what would have been familiar sounds of now obsolete technology. Most are interesting, though the Krups coffee grinder sounds exactly the same as my more modern model

A few thoughts on innovation

I started thinking about a post on innovation, after an agency meeting about a possible project. My friend Nigel Scott has been researching the venture capital industry. His ideas fired some of the thoughts in this post.

It caused me to reflect again on innovation and the way we think about it.

Innovation rewards hard work?

We are often told that innovators work really hard and strive to achieve their goals. In Where Wizards Stay Up Late – there is a description of Silicon Valley culture. Late nights by engineers and takeout food was considered one of the factors that drove the early Internet. Engineers were building new technologies as they went at break-neck speeds.

The problem is that for many jobs there is no 9-to-5 now. When I worked in agencies 12+ hour days were typical depending on the client load. Yet we weren’t pulling Cannes Lions award-winning work out of our butts.

In China, many companies now work to ‘996‘. That is 9am to 9pm, 6 days a week as core hours. This is basic a minimum requirement for engineers. Somewhere like Huawei, try to build a ‘wolf’ mentality. They work their staff much harder and they’re expected to retire at 45 – presumably physically and mentally burned out.

Working hard is a hygiene factor, technology has made it that way. Your typical Uber driver is gamed by the driver app to put in excess of 12-hours/day. Both knowledge and unskilled workers would have a similar level of time poverty.

Innovation is like buses

For long-suffering public transport users in the UK many services are compared to buses. Due to road traffic and scheduling, there would often be an overly long time for a bus to arrive. When it eventually did, there would be another two following very closely behind.

You can see a similar thing with innovation.

Whilst we’re used to thinking of John Logie Baird as the inventor of television – and Baird worked very hard on television. The reality is that television was based on a series of inventions from the middle of the 19th century onwards.

There are at least 20 different inventors who had some claim to coming up with the light bulb. But Edison did manage to create the first commercially successful bulb. British school children are taught about Joseph Swan’s carbon filament bulb. This was let down by the vacuum process in manufacturing and poor quality electricity supplies so the bulbs didn’t last very long. Swan had solved his bulb’s problem and changed the filament.

It was only at this point that Edison started his research into electric light bulbs.

More recently, I was talking to an agency about a piece of work that didn’t come off in the end. The discussion turned to a drug that was very recently launched. The problem was that although they were first to market, they weren’t the only inventors. A large rival had launched drug approvals for their product in markets were original firm hadn’t focused on for its initial approvals. Another two companies were immediately behind them and likely to drop their prices (and profit margins) to make up for later market entry.

If one thinks about the modern computer with its graphical user interface. This was created by layers and layers of innovation. Doug Engelbart, whilst working at SRI International demonstrated the following to an audience of government officials in 1968

  • GUI interface
  • Mouse pointing device
  • Text manipulation
  • Collaborative editing
  • Video conferencing (a la Skype)

The Xerox PARC (Palo Alto Research Center) refined Engelbart’s concepts further with a complete modern office by 1973. Steve Jobs and his team got into see it, which drove work on the Lisa and then the Macintosh. Microsoft got in and eventually came up with Windows. Microsoft also learned from building software applications for the Macintosh.

Digital Research invented their own GUI layer called GEM. GEM was demoed at Comdex in 1984; right about the time Apple launched the Macintosh. Commodore launched the Amiga in 1985 and also added multi-tasking – the ability to run two or more apps at the same time.

These are just a few examples for the sake of brevity. But the inventor slaving away in isolation to come up with something, uniquely innovative is not rooted in evidence. Yet intellectual property law gives lie to this myth. I don’t want to belittle the work done, but it is as if there is a certain amount of predestination to invention based on prior innovations.

Innovation happens

This predestination of technological progress is something that Kevin Kelly labeled the Technium. In his book What Technology Wants he posited that technological progress can be slowed, but nothing short of an apocalypse can stop it completely.  Here’s what Kevin Kelly said in an interview with Edge.org when supporting the launch of What Technology Wants:

The technium is a superorganism of technology. It has its own force that it exerts. That force is part cultural (influenced by and influencing of humans), but it’s also partly non-human, partly indigenous to the physics of technology itself.

We understand the innovation process?

Nigel Scott has done some research on the historic records of venture capital companies. And a key finding was the Silicon Valley venture capital firms do a ‘random walk’ on Sandhill Road. It implies that much of the advice dispensed is survivor bias or post-rationalisation.

You hear the phrase ‘pivot’ which means changing the model to profitablity. Old time VCs used to talk about investing people or teams, which explains why research by Boston Consulting Group found that women get less funding than male entrepreneurs.

Venture capitalists have the monetary incentive and the budgets to develop a thorough understanding of innovation, yet they don’t seem to apply it successfully. Which begs the question – how much do we really understand about innovation?

Innovation: did software really eat the world?

Back in 2011, Marc Andreesen wrote an op-ed (opinion piece) in the Wall Street Journal ‘Why Software Is Eating The World‘.

Six decades into the computer revolution, four decades since the invention of the microprocessor, and two decades into the rise of the modern Internet, all of the technology required to transform industries through software finally works and can be widely delivered at global scale.

Over two billion people now use the broadband Internet, up from perhaps 50 million a decade ago, when I was at Netscape, the company I co-founded. In the next 10 years, I expect at least five billion people worldwide to own smartphones, giving every individual with such a phone instant access to the full power of the Internet, every moment of every day.

On the back end, software programming tools and Internet-based services make it easy to launch new global software-powered start-ups in many industries — without the need to invest in new infrastructure and train new employees. In 2000, when my partner Ben Horowitz was CEO of the first cloud computing company, Loudcloud, the cost of a customer running a basic Internet application was approximately $150,000 a month. Running that same application today in Amazon’s cloud costs about $1,500 a month.

As one can see Andreesen’s title is a bit of a misnomer. Software is only the front end of a technology stack that is transforming the world. That transformation started before the web, before broadband infrastructure; with the rise of integrated circuits. Machine learning is doing some impressive things, but they are part of a continuum. Machine learning in data mining is building on work done in academia in the 1980s. It is replicating work done in the 1990s on decision support systems and business intelligence software.

Even, back in the early 1990s, commercial chemical labs were using software to guide product development. Rather than having to test every combination religiously; you started inputting formulations and results. The software would then extrapulate possible combinations and narrow down on an ideal formulation much quicker.

Its_a_Sony

As for machine learning in consumer products; it mirrors the late 1980s. Fuzzy logic came out of a 1965 research paper by Lofti A Zadeh at the University of California, Berkeley.

Japanese manufacturers built lifts that optimised for traffic flows of people. Microwaves that set its own timer for defrosting an item. Washing machines customised spin cycles based on the drum load. Televisions adjusted their brightness based on the ambient conditions of the room. (When similar technology was rolled out on early Intel MacBook Pro screens and keyboard lights it was billed as game changing). It removed a lot of blur from camcorder videos. All applications that are not a million miles away from smart homes and consumer technology today. They improved energy efficiency, with precise lighting, heating or cooling.

A western analysis of Japanese technology companies; usually cites their ‘defeat’ by Silicon Valley as an apparent lack of software skills. I’d argue that this lacks an understanding of Japanese software capabilities. From gaming to rock solid RTOS (real time operating systems); Japanese products met Andreesen’s software definition. The Japanese didn’t manage to sell enterprise software in the same way as Silicon Valley. It is something to bear in mind given the current glut of machine learning-orientated businesses in Silicon Valley. Does it mean that we won’t have the type of general AI applications that we’ve been promised in the future? No far from it, though a technological idea often takes several tries before it breaks through.

What becomes apparent is that software making an impact is merely the last stage of previous innovations. The problem with Andreesen’s model is that it portends what Judy Estrin described as innovation entropy.

Andreesen’s model couldn’t exist without:

  • Packet-switched networks – 1960 (RAND)
  • Unix-type operating systems – mid 1960s (MIT, AT&T Bell Labs, General Electric)
  • C programming language – 1972 (Unix development team)
  • Optical fibre networks – 1965 (Telefunken)
  • Internet router – 1966 (UK National Physical Laboratory)
  • ADSL 1988 (Bellcore)
  • DOCSIS 1997 (CableLabs)

So the core technologies that Andreesen’s software relied upon to eat the world was between 15 and 50 years old. It also relied on a massive overinvestment in optical fiber.  The dark fiber was done as part of a telecoms boom that occurred around the same time as the dot com boom. Software isn’t eating the world, its just the cherry on top of innovation that’s gone before. More importantly, software seems to be an end point and  doesn’t seem to extend the base of innovation further.

A second problem is that semiconductors phenomenal progress in integrated circuits is slowing down. Part of the problem is that more money is being dumped into disrupting the supply and demand for service industries, rather than funding start-ups who will power the next wave of underlying innovation that future software will rely on.

Good strategy

Riffing of a couple of tweets on good strategy by Matt Holt. Strategy and planning are considered to be disrupted by changes in the advertising industry. It often boils down to ‘ who needs good strategy when you have big data / machine learning’.

Big data tells you retrospectively where you should have zigged rather than zagged. It doesn’t plot an overall direction.  It is usually pretty reductive only focusing on sales now. It doesn’t think about future sales through building a brand and its good standing.

In marketing automation, it is focused on ‘harvesting’ from the end of the marketing funnel.

Travelling

  • Good strategy is sacrifice. It’s about making choices and saying no
  • Good strategy is specific. There is a specific well-defined problem to be solved. 
  • Good strategy is simple to explain (even if the subject matter is complex). If you’re setting a direction, the roadmap has to be clear for all stakeholders.
  • Good strategy has elegance. Which is a good measure of its simplicity.
  • Good strategy steers tactics. It provides a directional lens to the data and helps in deciding KPIs (key performance indicators) and HVAs (high value actions).
  • Good strategy is stubborn in the face of the shiny and new. Strategy is not a fad is a long term roadmap. The shiny and new can be a facilitator at best. At worst its a distraction. 
  • Good strategy is saying no to excess. Keep the strategy focused on the objectives that it addresses
  • Good strategy has its own intrinsic quality.
  • Good strategy seems self evident in retrospect. It’s not just a way to solve the problem, but has been sweated out to optimise it to the point that it seems self evident in retrospect.
  • Good strategy is emergent, not realtime. A strategy needs to be able to flex as conditions change. Its the direction, not an exhaustive road map.
  • Good strategy is not ‘big data’. It can be a source of insights that will help develop a strategy, but it’s not a strategy in of itself. 

The Internet of Stupid Things

A more charitable phrase for what many consumers call the Internet of Shit. Yes lots of products can be internet enabled, but should they be? There is a mix of challenges:

  • Products that are internet enabled but shouldn’t be – the Happy Fork or the Griffin Smart Toaster being classic examples. I found the Griffin Smart Toaster particularly disappointing as the company’s products such as the PowerMate are generally really good
  • Products that would be benefit from tech, but shouldn’t rely on the the cloud. I’d argue that Nest would fit in this category where cloud outages could have serious impacts on the consumer

It is interesting to see that Li & Fung (who are famous for global supply chain management provided to western brands and retailers) are involved in this. The qualitative design research they did on skiing wearables for a client – which begs the question of what value Li & Fung’s client brings to the table.