You might know Andreessen Horowitz as … oh, just one of the most successful investors in the history of tech. They have invested in 231 companies, and managed to exit their investments through 36 acquisitions and 4 IPOs according to Crunchbase. The venture capital company has no less than $2.7 billion under management.
Basically when a16z goes after something – you know the market will soon follow. And guess what’s the latest news?
Why … if it isn’t ecommerce.
Their latest monthly newsletter is dedicated to ecommerce. The venture capital company has mashed together a list of brilliant posts and podcasts on what it considers to be the the future of commerce.
The topics range from holiday shopping to logistics to competing with Amazon. My personal favorite, however, is “The End of Ownership“, an eye opening piece on what happens when people stop wanting to own stuff:
The sudden interest is actually not that sudden. In the past two years investors have increased investments in digital retail and connected areas. For example investments in logistics tech have increased by 1370% in 2014 compared to 2012. Andreessen Horowitz’s investments in ecommerce startups have also picked up. Some may still be working on reaching success (ex. Fab.com) and some may never find it (ex. Groupon). But others are growing by the day. Belly, Julep and Fanatics are doing just great.
“In China today, Bill Gates is Britney Spears. In America today Britney Spears is Britney Spears. And that’s our problem”. These three sentences perfectly describe the point I believe Thomas Friedman tries to get across in “The World is Flat“.
The world has been radically transformed by politics, technology and economics in the past five centuries. The industrial revolution helped western countries and than companies rule the world. It all lead to a disparity between developed and underdeveloped countries. In the past century the force of governments was overcome by the force of companies spreading globally. And that is about to change.
The past three decades or so, the companies themselves helped a new entity rise above, in a connected world: the motivated and empowered individual.
“The World is Flat” is about the global individual and how he can rise above his own limits, when given the chance. Thirty years ago the birthplace was a pretty good predictor on the chance one has for success. Not anymore. Things have changed and Friedman shows the ten factors that lead to the new status quo:
The ten Flatteners (Forces that Flattened the World)
This global change didn’t happened all at once. Neither was it caused by one single force. Thomas Friedman lists ten factors that made the world a flat (or more connected) world:
No.1: 11/9/89 – The day the Berlin Wall fell became the day when communism started to crumble. Following the fall of the Berlin Wall, countries grew closer together and the world became smaller.
No.2: 8/9/95 – The day when Netscape went public. We know that the world wide web changed the way computers talked to each other and how people connected to these computers. Few of us know how important Netscape, the company founded by Jim Clark and Mark Andreessen, and its Mosaic browser were when Netscape had its IPO. Before Microsoft embeded Internet Explorer into Windows, Mosaic was the tech wonder that allowed people to access websites in a friendly manner.
No.3: The Workflow software. We are now all familiar with some kind of workflow software, be it Microsoft Word, Adobe Photoshop or some 3D rendering software. But at some point such things didn’t exist. When people started using them they could split parts of business processes and outsource them
“Open-source is nothing more than peer reviewed science. Sometimes people contribute to these things because they make science, and they discover things, and the reward is reputation” – Marc Andreessen on open source software
No.4: Uploading – the power of communities. When people first got online they were using the web just like they were using the TV or other “old media” – consuming. But the Internet was a two-way highway – it allowed for downloading, as well as uploading. Soon people started building websites, writing blogs and developing open-source software. It allowed for better collaboration and a new type of empowerment for the individual that was previously nonexistent.
No.5: Outsourcing. In 1999 three seemingly unrelated but soon to be very important events started to converge in India. The first – the country started producing more and more software developers in its IIT college. Second – fiber optic extended all across the globe and reached Indiay. Third – the Y2K scare was pushing every large company to update its software. As India’s software support was way cheaper, companies started hiring new people to help with the update. The outsourcing movement accelerated and then spread throughout the world.
No.6: Offshoring. On December 11, 2001, China joined the World Trade Organization. By doing so it agreed to the WTO terms governing exports, imports and foreign investment. That became one of the biggest steps in global commerce in the past millennium. Companies started offshoring companies to China where they could manufacture products at lower costs, lower taxes and export them worldwide.
No.7: Supply Chaining. What do Walmart, Amazon, Zara and HP have in common? Probably a lot but one of the most important things that makes these companies what they are is their supply chain. When the world got connected companies such as these spread their supply chain all over the world, to the places where products can be manufactured cheapest and at the best quality. Their supply chains brought the world together in a way governments and armies never could.
No.8: Insourcing. While you might not know this, companies such as UPS or FedEx are doing a lot more than just moving things from point A to point B. Of course, they do that but they also fix your Toshiba laptop, pack, inspect and deliver your Nike shoes and all in all handle logistics for many of the companies you love. How do they do that? They get inside the companies that contract them and help them be better at delivering value.
No.9: Informing. We take Google for granted. We can navigate to the answer for any question. We can access content written all over the world. Information became accessible as never before in human history, to anyone with access to a computer and Internet. Google, Wikipedia and others allowed information to flow everywhere in the world.
No.10: The steroids. Digital, virtual, mobile. When the book came out in 2005, the author listed the HP’s iPaq as a steroid for flattening the world. The device was supposed to be omnipresent allowing for constant connectivity. The irony is that the iPaq is now dead and another i-something (the iPhone) became the revolutionary device HP went for. These steroids are the digital enhancements that allow all the others to converge constantly and empower the individual.
The World is Flat is a book that might feel unpopular …
…especially for anyone in the western world, people that were told all their lives that they will have a job, they will have a house, they will drive a good car and they will have a happy family. And then comes Thomas Friedman and says – not so fast. There is a kid in China, or India or Eastern Europe that will work 3 times as hard for half your pay and he will be happy about it.
Thomas Friedman gets some very unfriendly reviews on this book and sure, some may be true (the writing style tends to get a little boring and repetitive at time) but most are unfair. It is not Friedman’s fault that jobs are outsourced. You shouldn’t blame the book for having to work harder for the same pay. The world IS flattening (it is not yet flat) and soon we will all need to run a little faster, just like a gazelle and a lion in Africa ….
“Every morning in Africa, a gazelle wakes up.
It knows it must run faster than the fastest lion or it will be killed.
Every morning a lion wakes up. It knows it must outrun the slowest gazelle or it will starve to death.
It doesn’t matter whether you are a lion or a gazelle: when the sun comes up, you’d better be running.”
The book is a must read for any retailer looking into understanding how the global world shapes the global commerce and what ecommerce has to do with it. Before long – it might become mandatory to understand retail on a global scale if you’re willing to survive in business.