Sil­i­con Val­ley in­no­va­tion isn’t dead, an­a­lyst says

South Florida Sun-Sentinel (Sunday) - - People On The Move - By El­iz­a­beth Dwoskin

SAN FRAN­CISCO — For years now, Sil­i­con Val­ley has been search­ing in frus­tra­tion for the next big break­through.

In­no­va­tive busi­nesses that launched a decade ago, such as Uber and Airbnb, are fi­nally mak­ing money or head­ing to­ward pub­lic of­fer­ings — but only af­ter years of bruis­ing fights with reg­u­la­tors and costly op­er­a­tional chal­lenges.

At the same time, the dom­i­nance of Face­book, Google, Ap­ple, and Ama­zon, has made it harder for new star­tups to burst on the scene. And the im­pact of pow­er­ful and much touted emerg­ing tech, such as ar­ti­fi­cial in­tel­li­gence and crypto-cur­ren­cies, has been more in­cre­men­tal than ex­plo­sive.

An­a­lyst Bene­dict Evans, of the ven­ture cap­i­tal firm An­dreessen Horowitz, says that de­spite these chal­lenges, so­ci­ety is in the midst of a ma­jor wave of in­no­va­tion.

In his an­nual slide deck — a doc­u­ment that many use to read the tea leaves in Sil­i­con Val­ley — Evans walks the line be­tween a tech cheer­leader and a re­al­ist.

He points out that while tech com­pa­nies have been A cus­tomer uses a Suica rail pass to pur­chase items at the cashier­less kiosk, pow­ered by Sign­post Corp., in Tokyo.

suc­cess­ful at putting smart­phones in ev­ery­one’s pocket and con­nect­ing peo­ple via so­cial me­dia, they have not been as good at con­vinc­ing peo­ple to shop or con­duct trans­ac­tions on these plat­forms. Just un­der 5 per­cent of con­sumer spend­ing is con­ducted on­line — let

alone through smart re­frig­er­a­tors, mi­crowaves, and other ap­pli­ances.

“It means we’re only at the be­gin­ning of that pen­e­tra­tion,” he said. “We’re at the end of the be­gin­ning, not at the end.”

But other ex­perts have said that these per­sis­tently

low num­bers may be due to lim­i­ta­tions in the way phys­i­cal ex­pe­ri­ences can be dig­i­tized. These e-com­merce an­a­lysts doubt all com­merce will move on­line or onto smart­phones be­cause many con­sumers sim­ply pre­fer to shop in per­son.

In an­other part of his pre­sen­ta­tion, Evans noted that well-known tech­nol­ogy com­pa­nies that launched in the late 90s and early 2000s, such as Google, Face­book, Yelp or Zil­low, have fo­cused on in­dex­ing mas­sive amounts of in­for­ma­tion and pre­sent­ing it to peo­ple in more ef­fi­cient ways.

Now, he said, a new crop of star­tups has ex­panded to de­liv­er­ing ser­vices on top of that in­for­ma­tion-in­dex­ing. If Zil­low pro­vided real es­tate list­ings and com­par­i­son shop­ping, 5-year-old startup Open­Door will buy and sell your house for you, Evans said.

If Yelp pro­vided a di­rec­tory of lo­cal busi­nesses, to­day any num­ber of food mar­ket­place apps will give you a sim­i­lar restau­rant search ex­pe­ri­ence — and then de­liver the food right to your door. Airbnb isn’t just in­dex­ing homes for trav­el­ers and Uber isn’t just in­dex­ing a di­rec­tory of cars; they are us­ing the In­ter­neten­abled, lo­ca­tion-aware smart­phone to cre­ate new types of trans­ac­tions and value in the phys­i­cal world. Even more re­cently, star­tups are now be­com­ing in­sur­ers, lenders, and credit providers. Not long ago they would have merely or­ga­nized fi­nan­cial in­for­ma­tion.

These dig­i­tal-to-phys­i­cal busi­nesses have faced im­mense chal­lenges in their quest to go be­yond soft­ware bits. They’ve dis­rupted en­tire in­dus­tries, but their growth has been slower than their pre­de­ces­sors be­cause their ser­vices come with large lo­gis­tics and reg­u­la­tory costs.

“We’re mov­ing from busi­ness mod­els that didn’t need much cap­i­tal, and were about in­for­ma­tion ar­bi­trage to pro­vid­ing the en­tire meal,” he said. “It costs a lot more money to make cars than to tell you what car to buy, but that is just a con­se­quence of the op­por­tu­nity. You’re also com­pletely chang­ing what the ex­pe­ri­ence of buy­ing a car might look like.”

Evans still be­lieves that the next phase of in­no­va­tion will be in blockchain, cryp­tocur­ren­cies, and AI. But like the In­ter­net in 2003, he said, it’s hard to see all the pos­si­ble ap­pli­ca­tions and ways that these tools will be used.

Blockchain-based apps will be able to over­come the dom­i­nance of tech­nol­ogy gi­ants by en­abling busi­nesses to grow with­out re­ly­ing on the ma­jor plat­forms for dis­tri­bu­tion, he said.

Ar­ti­fi­cial in­tel­li­gence, he said, will cre­ate more so­phis­ti­cated ways to un­der­stand the in­tent of cus­tomers, which will in turn en­gen­der new mod­els for com­merce.

KIYOSHI OTA/BLOOMBERG NEWS

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