The distributed network has gobbled up the hierarchical firm. Where once we had the ‘corporation’, now we are witnessing the ascendancy of the ‘platform’. The platform economy is in its early days, but to date, profits generated by these large internet platforms (Amazon, Google, Facebook, and Apple) have accrued to their owners. But the future of platforms provides promise for workers (through the current platform model, or through crypto networks) to build and own their own platforms. This provides opportunity for them to actual participate in and own the value being created, rather than having it be skimmed by remote investors or shareholders.
“The traditional structure of the firm might have reached its use-by date. But if societies can embrace the economics of the platform while shifting its ownership to workers, a more equitable, resilient and democratic society could well be in store.”
As part of its profile of Fortune 500 companies, Fortune provides a peak into Amazon’s Whole Foods strategy, a year since the merger took place. The online food delivery business is different than the traditional ecommerce business Amazon has perfected, but its Whole Foods purchase gives it just the door needed to win over the fridge space of its 100-million-strong Prime subscriber base. Indeed, many of Amazon’s most well-known and consumer-facing efforts – Amazon Key, the Ring purchase, Alexa – will all play critical roles in the ecommerce giant’s efforts to sell us our kale and avocados.
“’Food is the platform for selling you everything else,’ says Walter Robb, the former co-CEO of Whole Foods. ‘It’s an everyday way into your life. There’s nothing else that happens quite that way.'”
Around 2014, the hyper-local world of high school basketball began to change.
Zion Williams, a high-school phenom and Duke’s latest five-star recruit, has more than 1.5 million Instagram followers.
Short-form video began to proliferate on social networks and more digitally native high-school athletes, armed with their own cellphones, started posting clips of themselves and friends doing dunks and trick shots, and cobbling together their own highlight reels for YouTube. These clips spread like wildfire, amplified by the rise of basketball-focused media companies like Ballislife and Overtime, which have dedicated increasing resources to covering the high-school market.
It’s another fascinating story illustrating the way in which digital platforms have influenced the way we act in the physical world.
In one of the weirder internet-meets-sports stories since Manti Te’o and the dead girlfriend, The Ringer details the weird story of Philadelphia 76ers’ president of basketball operations, Bryan Colangelo and his five fake Twitter accounts. The accounts disclosed non-public information, debated 76ers’ front office moves and strategy, and crticized NBA players.
Amazon wants to own your home; Ring’s IP gives it the opportunity to do just that
By now, everyone has heard the news of Amazon’s $1+ billion acquisition of smart-home startup Ring, most famous for its video-enabled doorbell and “failed” Shark Tank appearance.
It’s become apparent that the $50 billion home security market is the first real use case or potential “killer app” for the smart home. With the Ring purchase and its recent purchase of another smart home startup, Blink, Amazon is positioning itself to win the space. But for Amazon, “winning” a space doesn’t simply mean gaining a few customers and selling them a bunch of stuff. Time and time again, they’ve executed against a very specific strategy:
Invest in a market with massive fixed costs but the potential to benefit from economies of scale
Build an integrated solution, justified by the fact that Amazon itself will use it
Open up the integrated solution to third parties, providing the “primitives” for continued development on top of the Amazon platform
The Amazon Marketplace (the core ecommerce offering) and Amazon Web Services are the two most prominent and realized exercises of this strategy, but it is actively pursuing the strategy in logistics, food services, and now, the smart home. Notably, Amazon’s moves into all of these markets feed off each other. For instance, its moves into logistics—particularly its goal to solve the “last mile problem”—is directly strengthened by its effort to own the smart home, particularly the home security system.
Amazon’s Super Bowl commercial featuring an under-the-weather Alexa has been circulating on the Internet for a few days now. It’s a funny spot featuring Cardi B, Anthony Hopkins, and other celebrities filling in for a coughing Alexa.
Earlier this week, I wrote about Amazon’s potential healthcare patents. It turns out they’ve got a patent for the question millions will be asking after this commercial airs during the Super Bowl too:
Why isn’t Alexa responding to her name from the TV?
In a patent filed shortly before the Amazon Echo was first released in 2014, Amazon details “devices, methods, and systems for detecting wake words and audio commands that should be disregarded,” for example, “in a television or radio advertisement.”
The patent primarily describes a matching technique to avoid unintentional waking of voice-activated devices. Amazon records and stores clips of the commercial in the (AWS) cloud, and when Alexa detects a wake word or an audible command, it compares the audio of the detected wake word or command to the commercial snippet. If the detected audio matches the commercial, the device recognizes that the detected audio is part of the ad and ignores it. Additionally, the device may record and buffer portions of detected audio that precede and/or follow the detected wake word. The preceding and/or following portion(s) may be used to assist in identifying if the detected audio matches a stored audio sample, for example from the advertisement.
Amazon also recently published a blog post about this, detailing how “teams build acoustic fingerprints on-the-fly within our AWS cloud. When multiple devices start waking up simultaneously from a broadcast event, similar audio is streaming to Alexa’s cloud services. An algorithm within Amazon’s cloud detects matching audio from distinct devices and prevents additional devices from responding. The dynamic fingerprinting isn’t perfect, but as many as 80 to 90 percent of devices won’t respond to these broadcasts thanks to the dynamic creation of the fingerprints.”
For example, when Jimmy Fallon opens his monologue with a bit about Alexa, Amazon has algorithms in place that may recognize that multiple devices are being inadvertently woken up, preventing additional devices from responding to the command.
The patent also details another method, by which an advertisement may be configured to include an audio signal inaudible to human that indicates to a detecting device that the audio of the wake word or other audible command in the program is an inadvertent wake word or command and that the device should disregard that particular command. Think of a dog whistle or those “mosquito devices” that play a sound at ultra-high frequencies to scare away the youths. Amazon’s blog post doesn’t mention this technique, but it’s possible Amazon’s ad employs both this method and the cloud-based comparison method.
Also, shouldn’t having a celebrity voice substitute as Alexa’s voice (as in the commercial) be some sort of premium feature?
Amazon is already one of the most advanced tech companies in the world. How will it bring this technology to healthcare?
There has been much speculation about what Amazon’s announcement that it’s creating an independent healthcare company with Berkshire Hathaway and JPMorgan may mean. Of course, I’ve been one of those prognosticators, speculating that it’s a long-term play to build an Amazon Health Marketplace. But, Amazon is already one of the most advanced technology companies in the world; I thought I’d look at some of its existing patents and see if the company had visions of using them in healthcare. As it turns out, Amazon has a number of patents and technologies that might be deployed to make the healthcare system a more efficient experience. There are more to be added as I comb through the USPTO database, but here’s a sampling of the things Amazon is already thinking about:
Automatic exchange of data with doctors
In 2016, Amazon was granted a patent for “a wireless device management environment… based on a determination of communication events.” Noting that wireless devices collect a variety of information and data, the patent claims a system allowing for the exchange of this data in a number of settings, but provides healthcare as an example:
“In [an] illustrative example, assume that the data processing component has determined that the wireless device is within proximity to a hospital or clinic. In conjunction with user calendaring information indicative of a calendar event corresponding to a doctor’s appointment, the data processing component can determine the communication event and begin the information exchange prior to the user arriving at the doctor’s office and powering down the wireless device”
In other words, imagine walking into a hospital or clinic, and your phone and Fitbit immediately start exchanging with your doctor all the information they’ve collected since your last visit (steps, sleep, heart rate, etc.).
Advanced location tracking
Another patent, granted in 2014, recognizes that mobile phones have multiple methods for tracking location. By being able to switch between these various methods, the phone can more accurately pinpoint a user’s location and provide directions. For example upon detecting a trigger (e.g., detecting a QR code or detecting an access point signal), a device can switch from using GPS to a second type of positioning element (e.g., using accelerometers, QR codes, etc.) in determining the user’s current location. By using the appropriate type of positioning element for each environment, the device may determine the user’s current location more accurately. The device may provide an overlay (e.g., arrows) for displaying the directions over images captured from the user’s surroundings to provide a more realistic and intuitive experience for the user. Again, Amazon gives hospitals as a preeminent application of this technology:
“In one example, a remote server may push a hospital map and additional information regarding the hospital to a user upon the user making a doctor’s appointment.”
With gigantic hospitals often spanning multiple city blocks, wayfinding is a major challenge, and Amazon may offer a unique solution to provide patients digital guidance to their appointments.
Inventory and bed management
Another patent claims a “method and system for transporting inventory items.” The patent essentially claims an inventory management system centered around a “mobile drive unit” (the wheeled item in the drawing) that can assist in automatically managing and transporting inventory in a variety of settings.
While the patent provides many examples where this may be used — airport luggage, custom-order manufacturing, and of course, ecommerce warehouses — it also gives hospital beds (with patients) as an example:
“inventory items may represent people. For example, in a hospital setting, inventory items may represent beds containing particular patients. Thus, [the] inventory system may be configured to provide a safe, effective system for moving hospital beds that limits the potential for injury to patients and reduces the possibility of mistakes arising from human error.”
Amazon has notorious integrated human and robot workers in its warehouses, so maybe its not long until they attempt to do the same in hospitals.
The list goes on
There are many more examples, for instance a patent “limiting the effects of faults in a data center,” which has immediate application in hospitals where “downtime may result in significant disruption and, in some cases, adversely affect health and safety. I’ll add more examples later, but wanted to illustrate how Amazon already has some of the technology the healthcare industry has long needed.
On January 22, Amazon opened Amazon Go, its cashier-less convenience store concept, to the public. Pictures of the store show a small, 7-Eleven-like space filled with grab-and-go items, meal kits, and even alcohol. Almost as soon as news of its opening spread, speculation of Amazon’s plans for the technology behind Amazon Go spread as well. Will they license the technology to others? (eh, maybe) Bring it to Whole Foods? (eventually) Build Amazon Go stores across the United States? (yep).
The opening of Amazon Go to the public, in addition to Amazon’s announcement that it plans to create an independent healthcare company along with fellow corporate giants Berkshire Hathaway and JPMorgan Chase, begins to illustrate a unifying theory motivating Amazon’s varying investments in physical assets. First, it’s another concerted move by Amazon to bring its digital network into the physical world, meeting the customer where he/she is. Next, it’s an effort to squeeze every ounce of productivity out of its consumers.
First, Amazon has repeatedly demonstrated it isn’t afraid to make investments in the sometimes messy physical world. Building data centers and distribution centers, buying grocery stores, trucks and planes — these moves have demonstrated that Amazon has a desire to build a completely integrated digital and physical platform. Whether in ecommerce and logistics or in cloud computing, Amazon brings together all the necessary components — digital and physical — for customers to easily come onto their platform and begin buying, developing, or selling (ecommerce, AWS, and logistics, respectively).
Next, Amazon is notoriously a glutton for productivity. There are three ways to improve productivity: (1) shift work to lower skilled labor, (2) replace labor with technology, or (3) shift work to customers. In its logistics chain, Amazon has obviously pursued the first two: it notoriously has legions of relatively low-wage package pickers in distribution centers that work alongside robots (from Amazon’s purchase of Kiva Systems in 2012). Amazon Go obviously achieves the second goal, replacing the marginal cost of convenience store labor with the high fixed costs associated with building out the software, cameras and everything else that went into the store. But, as Amazon Go stores spread across the country, they will also pursue the third method of improving productivity, shifting work to consumers.
“The healthcare system is complex, and we enter into this challenge open-eyed about the degree of difficulty.” –Jeff Bezos, CEO of Everything
Amazon Go will shift logistics work from Amazon to customers in a noticeable way. From two-day Prime shipping to same-day or two hour Prime Now shipping (to those who don’t have Prime, but come on, who doesn’t have Prime?), customers on Amazon have a variety of delivery options. Our need-it-now culture drives widespread inefficiency in the backend logistics serving up quickly delivered La Croix, gadgets or whatever else (not to mention the potential environmental impact of all this inefficiency). Amazon Go solves for this problem by giving consumers the option to walk down the street and quickly pick up an item, instead of ordering it on Amazon. In the long term, Amazon Go stores can take the strain off serving millions of logistics network endpoints, moving consumers to simply pick up items from down the street. This achieves the productivity goal of shifting work to customers, without customers even realizing it: the Amazon Go experience is so effortless and enjoyable, who wouldn’t want to pick up a meal kit and some chapstick from it? Whole Foods, Lockers, Pickup and Go stores — while on their face they seem to increase the number of nodes in Amazon’s logistics network, they actually decrease the nodes served, as customers shift to buying or picking up down the street instead of in their mailbox.
This brings us to the Amazon/Berkshire/JPM healthcare announcement. While scant on details, it promises to use technology to simplify care. It will initially cover the more than 1 million employees of the three companies, but with companies as ambitious as this, the goal is obviously to reach much larger scale. Much like Amazon Go stores, an Amazon healthcare marketplace will make it easier for employers and employees to shop for a variety of healthcare goods and services. While this shifts the work and choice to consumers, it also incentivizes them to make the more efficient decision for the system as a whole, just as having an Amazon Go store down the street can incentivize a consumer to do the “last mile” logistics work on his/her own and walk to the store.
Recall how Amazon Go started: For the past year, it’s been open to Amazon employees only as the company presumably worked out the kinks and got the technology just right. They’ve done the same with AWS (Amazon developers were the first and largest users of the AWS developer platform, providing almost instant scale for the project), logistics (Amazon eventually opened its logistics platform to third party suppliers, making it so anyone can sell on its website), etc. etc. And so it will be with healthcare.
Earlier, I mentioned that Amazon is perhaps the only company in the world with an integrated digital and physical platform. Nowhere is this model more critical to success than in healthcare. While there has been much hype about virtual care and advances in telemedicine, most people still prefer to visit a minute clinic or doctor for most of their healthcare needs.
When Amazon built the Amazon Marketplace, it didn’t immediately open it up to third-party suppliers. First, it simply sold millions of books that no physical store could possible inventory. Eventually, Amazon allowed third parties to sell on its platform, granting them access to the millions of loyal customers Amazon had captured by that point. These suppliers were able to compete on price to deliver consumers an ever-growing list of goods and services, allowing Amazon to become The Everything Store. Amazon even took over the physical distribution of goods for these third parties, building the warehouses and logistics network necessary to serve customers across the country.
Note that this approach to building a marketplace of consumer goods took decades. Not until the past couple years has the power and scale of Amazon truly become part of the public conversation. Building a similar healthcare marketplace will take even longer. The players are larger and often monopolistic. There are about three pharmacy benefits managers (PBMs), three insurers, two drug distributors in the U.S., two hospital suppliers, and local markets are often dominated by one or two health systems. Amazon will start slow, allowing employees to shop for just a few healthcare goods or services on its new healthcare marketplace (think of a good or service like books in the 1990s). It will slowly bring more employers and employees onto the marketplace before eventually opening up this infrastructure to healthcare suppliers of all types, allowing them to compete on price for any healthcare good or service under the sun. One of the biggest issues facing the healthcare industry is the lack of cost and quality transparency: Amazon’s healthcare marketplace, with its price and review tools right on the webpage, will bring immediate transparency to healthcare.
And now that Amazon has brought third parties onto its Marketplace, it often integrates backward, cutting out the third-party entirely by going directly to the manufacturer and playing hardball to get the product produced even more cheaply. Could it eventually do the same with healthcare? My instinct was to say yes, but if one looks at the many holdings of Berkshire Hathaway, it becomes apparent that a number of these holdings make perfect candidates for offering products or services on the Amazon healthcare marketplace. From Johnson & Johnson’s prescription drugs and consumer health products to DaVita’s dialysis services, these healthcare suppliers would be thrilled to offer services on the new marketplace, with access to the millions of employees Amazon will undoubtedly attract. Perhaps the perceived threat of Amazon attempting to integrate backwards and cutout the supplier will be incentive enough for these companies to keep prices low. In the long run, the Amazon healthcare marketplace will create an almost perfectly competitive market for suppliers, driving costs down for employers and squeezing profits for drug makers, insurance companies, and anyone else selling to employees, the way it has done for consumer goods. On the financial front, it’s always good to have JPMorgan on your side, seemingly buying into the long, long-term vision that is the Amazon healthcare marketplace.
As an aside, we haven’t even gotten to the massive data analytics and integration capabilities AWS can bring to a broken, fragmented electronic health records (EHR) system. In November, Amazon announced a partnership with Cerner to improve population health efforts by allowing for more advanced data collection and analytics. In addition, there are a plethora of new and exciting healthcare technologies and startups, from companies large and small. But, without an ability to easily integrate into an EHR, these technologies often have a hard time gaining traction with insurers or providers. AWS can change all this with developer-friendly APIs and protocols, providing increased integration and interoperability.
As always with Amazon, the possibilities are almost limitless. Healthcare has been one of the industries most resistant to technological change, with perverse incentives driving poor decision making at almost every level of the system. I’ll write more about this as details arise, but it’s an exciting development and should spur more investment in the already booming world of healthcare technology.
Oh, and we haven’t even talked about Alexa and her potential to revolutionize healthcare yet. Stay tuned.
Facebook Tricked Us Into Thinking Net Neutrality Is the Real Issue
It’s become all too easy to pick on Facebook. From its march to Capitol Hill with trusty allies Google and Twitter alongside to its struggle to do anything to adequately address fake news, Facebook had a pretty rough go of it in 2017. Facebook and its “open Internet” allies also lost the net neutrality battle in December when FCC Chairman Ajit Pai and his buds repealed the Obama era decision to treat broadband companies as “common carriers.”
Facebook, Google and many other Internet giants were stirred to action by the threat to (and eventual repeal of) net neutrality, and rightfully so. Rejecting net neutrality threatens the end-to-end design principle that dictates ISPs (e.g. Comcast) treat all content travelling over their pipes the same and serves as the foundation of the Internet. (Putting aside the fact, for now, that many of the largest Internet companies already have peering agreements with ISPs or have their own private CDNs within ISPs designed to facilitate faster speeds.)
But the debate over net neutrality only scratches the surface of the underlying issue that the principle should solve: neutrality of all network and information bottlenecks. ISPs are primarily regulated by the Telecommunications Act of 1996, which under its Title II, allows the FCC to classify them as “common carriers,” meaning they must provide access to all at the same rates (i.e. net neutrality). Other industries are also regulated as common carriers, including gas and oil pipelines and other public utilities. The common thread is that these common carriers control some bottleneck that society has decided members of the public should have equal access to.
As the country was coming online, it was important to recognize the common carrier status of ISPs: households needed a broadband connection to come online, but because of the high fixed costs it really only makes sense to run one line into each home (like the telephone companies of previous generations). Without a regulatory declaration that these ISPs needed to provide access to any member of the public equally, they would have been free to deny or discriminate. In other words, the ISPs controlled the critical bottleneck of allowing people to come online.
But, as more households have come online and physical access to the Internet becomes commonplace, information bottlenecks have developed elsewhere. I’m talking specifically about social networking and search. Nearly 80% of Internet referral traffic is routed through Facebook and Google, and a majority of Americans report getting at least some news from social media. These companies are all classified as “Title I information services” by the FCC, and even the Federal Trade Commission (FTC) has little oversight power. Remember when politicians sounded exasperated, at a loss for how to control the likes of Facebook, Google and Twitter when the companies testified on the Hill? This is exactly why. The government has extremely limited oversight power over the key information bottlenecks (Facebook, Google) on which most people discover most information they consume. I’ve drawn a parallel to the net neutrality debate to suggest that, similar to ISPs, Facebook and Google control bottlenecks, and we should demand neutrality from these companies just the way we demand it from ISPs.
A new “bottleneck” framework has been proposed before, by no less than Douglas Sicker, the head of engineering and policy at Carnegie Mellon. My interest is not only in open access to bottlenecks, as Sicker’s was, but in neutrality of all bottlenecks, wherever they exist.
Content on the Internet is abundant — essentially infinite — while the space on our screens and in our minds is finite. Algorithms, in a decidedly non-neutral way, decide what to feed us based on what they think we’re most likely to engage with (sprinkling a few ads on top for funsies). The algorithms serve as a bottleneck, deciding what content from the infinite web is worthy of our limited attention.
What’s worse, the companies controlling these algorithms have made commitments to “fix” the problems of fake news, abuse and hate on their platforms. This is a commitment to become even less neutral. In Mark Zuckerberg’s post on his “personal challenge” for 2018, he committed to just that, writing:
The world feels anxious and divided, and Facebook has a lot of work to do — whether it’s protecting our community from abuse and hate, defending against interference by nation states, or making sure that time spent on Facebook is time well spent.
My personal challenge for 2018 is to focus on fixing these important issues.
Worried yet? Let’s play the tape a bit longer:
This may not seem like a personal challenge on its face, but I think I’ll learn more by focusing intensely on these issues than I would by doing something completely separate. These issues touch on questions of history, civics, political philosophy, media, government, and of course technology. I’m looking forward to bringing groups of experts together to discuss and help work through these topics.
First, let me pause to say I’m all for minimizing abuse and hate on Facebook and other platforms. But I think this issue is completely separable from the goals which I believe to be non-neutral.
This isn’t the first time Zuckerberg has articulated his view that Facebook can play an integral in the creation of a new “social infrastructure” in hopes of building a global community. His commitment to being non-neutral is frankly the scariest resolution Zuck could have made, and the politicians that have urged Facebook and others to “do something” about the fake news problem don’t seem to realize the power they’re demanding these companies exert. More than ISPs could ever dream to do, Facebook and Google control the information fed to us on a daily basis, and having the leader of one of these companies feel empowered to exert influence over what its users spend time doing on said platform is a dangerous, slippery slope. It sounds fine for Zuck to want to “mak[e] sure that time on Facebook is well spent,” but what even does that mean? And what does it mean when Facebook’s General Counsel testified to the Senate that “we want our ad tools to be used for political discourse, certainly. But we do not want our ad tools to be used to inflame and divide.” Have you heard of our President? By its nature, politics inflames and divides, and it’s dangerous that one company is in a position to stamp out what it may consider inflammatory and divisive content.
Throughout 2017, I read with confusion as analysts and writers demanded net neutrality on the one hand, but also increased intervention by companies like Facebook to moderate content in a decidedly non-neutral manner. We’re beginning to see the consequences of a non-neutral network in other areas as well: remember how Google removed YouTube from Amazon devices? Blocking access to a platform is a level up from the kind of “fixing” Zuckerberg seems to contemplate, but if he wanted to begin blocking certain content from Facebook’s blue-walled garden, who’s to stop him? As these few Internet giants continue to encroach on each others’ territory, it’s critical, as both consumers, but most importantly, as citizens, that they play nice and openly with each other. If we truly want a neutral Internet, we should demand neutrality from the most powerful information bottlenecks, not just those mean ISPs.
This Week Amazon Should. . .
At least according to one technology analyst. Every week it’s something: from entering the pharmaceutical drug market to buying an upmarket coffee startup, “analysts” play a game amongst themselves, seeing who can suggest the most headline-grabbing click-baitey purchase for Bezos and company. I thought it’d be fun to track these outlandish claims each week at the end of my post. It’s become like the talking heads on ESPN: Dick Vitale picks Duke, Kentucky, UNC and Louisville for the Final Four every year, and twice a day, the broken clock is right! A quick Google of “Amazon should buy” will prompt results for not only Target but Kohl’s, FedEx, Twitter, and a host of other eligible bachelors and bachelorettes.