Chapter 4
Living Under the App Dictatorship
In the Vaporized Economy, platform owners frequently bully content creators and service providers who depend on their ecosystems. When digital giants collide, they weaponize their value control points to manipulate resources, traffic, money, and marketing exposure. Smaller companies and individuals become collateral damage in these battles.
I learned this harsh reality firsthand in the early 2000s while serving on the Game Developers Conference board. Despite the crude graphics of early mobile games, I recognized their potential and created GDC Mobile to bring together developers, phone manufacturers, and mobile operators. We tackled design challenges, hardware compatibility, and the biggest issue: how games would be sold to users. The telecom companies insisted on controlling all consumer access through their clumsy portals, refusing to share data with publishers and banishing anyone who tried establishing direct customer relationships.
When Apple launched the iPhone App Store in 2008, it seemed like salvation from the telecom companies' poor user experience. Within its first weekend, users downloaded 10 million apps, reaching 1 billion downloads within a year. By 2010, Apple had effectively eliminated competition from mobile operator app stores, creating what I'd warned might be an even more controlling master than the telecoms.
Apple's closed ecosystem requires all developers to submit their work for approval before reaching consumers. The company enforces arbitrary rules-rejecting apps for being "creepy," "amateur hour," or simply "less than good." Despite having 9 million registered developers by 2014, vanishingly few generate significant profit. Studies show 50-60% of app businesses are unsustainable, with only 1.6% earning substantial revenue while Apple takes a non-negotiable 30% cut of every transaction.
Content creators face numerous risks in the app ecosystem, including loss of pricing power, commoditization, and endless competition. For most developers, it's a profitless exercise akin to sharecropping, with all earnings going back into marketing. The App Dictatorship also raises free speech concerns-there's no concept of free speech inside these closed systems, which is troubling as mobile becomes the primary media consumption method (86% of smartphone time is spent in apps, not on the open web).
Developers can employ several strategies to survive: 1) Sell digital services that transact outside the App Store; 2) Port apps to every platform to maximize reach; 3) Offer apps for free with premium upsells; 4) Build your own marketplace outside the App Dictatorship; 5) Most importantly, study the platforms obsessively-even slight ecosystem changes can determine your fate.
Chapter 5
Big Data and the Everything Graph: The New Corporate Asset
In the Vaporized Economy, no question is more important than "What is your proprietary data asset?" As industries replace physical infrastructure with digital information, understanding company data assets becomes crucial. Venture capitalist Brad Burnham prioritizes investing in businesses that generate fresh data as a byproduct of normal use-the more users, the more valuable data.
Since Facebook's Zuckerberg borrowed "graph theory" to coin "social graph," Internet sites are now classified by the data graphs their users generate. These three-dimensional matrices capture relationships between users, interests, and behaviors. Union Square's portfolio companies each generate unique graphs-Foursquare creates location graphs, Kickstarter yields crowdfunding graphs, SoundCloud generates listening graphs, and Twitter pioneered the interest graph.
The brilliance of graphs is that data itself makes other data findable-solving the navigation problem of scale by cross-referencing information types to generate dynamic, algorithm-driven lists that respond instantly to user activity, making services more valuable with increased participation.
Traditional media businesses remain vulnerable to the cycle of hits and misses, investing huge sums in content that may or may not succeed. Companies that produce information by hiring staff perceive their data as expensive and precious, keeping it scarce. Those who invest in platforms enabling others to generate data reap endless harvests of information that compounds in value through sharing and interaction-a crucial survival skill in the Vaporized Era.
According to EMC Corporation's Digital Universe Study, humanity reached a milestone in 2010 by collectively generating a zettabyte (1 ZB) of data, with the amount doubling approximately every eighteen months. By 2020, we'll generate 44 ZB, or 1.7 megabytes of data for every person on the planet every second. Despite this abundance, information remains incredibly valuable when properly organized, yet few executives can quantify their data assets' worth.
The ancient Pythagorean notion that everything can be measured is finally becoming reality through cheap sensors, powerful microprocessors, and always-on wireless connectivity. These technologies enable measurement of millions of previously unrecorded micro-actions, bringing clarity to business decisions once made on gut instinct. As Moore's law drives sensors to become smaller, smarter and cheaper, and Metcalfe's law multiplies their networked value, we're entering an era where "everything that can be measured will be."
Chapter 6
Smart Things and the Invisible Data Layer
The Internet of Things (IoT) represents the next frontier of vaporization as microprocessors and connectivity are added to every conceivable product. The traditional separation between online and offline is dissolving as the Internet expands into an unseen dimension overlaying the physical world. Every product, appliance, vehicle, garment, building and package that can be connected will be, with all interactions tracked and stored in the cloud.
The humble lightbulb exemplifies how even the most standardized products can be revolutionized. Unchanged since Edison's time, the incandescent bulb has recently undergone more innovation in three years than in the previous 125 years. LEDs are transforming illumination from mere physical products into digital services. As semiconductors using solid-state technology, LEDs function as miniature programmable computers that convert light into digital content.
Brick-and-mortar retailers are finally fighting back against e-commerce competitors by adopting digital strategies. Digital technology should build relationships, not be seen as merely a competitive threat. Tactics include check-in rewards programs, digital delights like hologram mannequins and social media mirrors, gamelike experiences that drive traffic to low-visibility areas, and innovative mobile stores.
At the National Retail Federation's Big Show, technology vendors now offer sophisticated systems turning physical stores into 3D versions of websites with comparable analytics. These technologies include superior data collection that can match mobile devices to credit cards with 99% accuracy after two purchases, emotion tracking that reads shoppers' facial expressions, facial recognition that identifies shoplifters and VIPs, and beacons that wake up smartphone apps inside stores.
By 2025, nearly all human activity in urban centers will likely be recorded with unprecedented precision through six converging technologies: smartphones open to Wi-Fi networks, GPS tracking, ever-smaller high-resolution cameras, facial and license plate recognition, social network photo sharing, and massive government surveillance systems. We've created an opt-in Panopticon-Jeremy Bentham's circular prison design where inmates self-censor because they never know when they're being watched.
The real battle in IoT isn't about devices but control of the data layer connecting them to the cloud. Physical products still exist but are subordinated to this data layer-once disconnected, they cease functioning properly. Both Apple and Google are aggressively entering the IoT space by offering software suites, tools, and APIs in the most profitable categories: health care and fitness, home automation, automotive, and retail payments. The fundamental strategy is positioning smartphones as the central control point, harvesting user data while commoditizing hardware manufacturers.
Chapter 7
The Rise of the Peer-to-Peer Economy
Uber exemplifies a vaporized enterprise-owning no cars or employing drivers, yet providing transportation to millions in 300 cities by leveraging privately-owned vehicles through a smartphone app. Beyond ride-sharing, Uber is vaporizing car ownership itself. According to the company, each Uber driver has removed nine cars from the road. The US reached peak car ownership in 2006, but smartphones, internet platforms enabling real-time transactions, and available drivers with cars have made "access instead of ownership" increasingly preferable.
The trend toward "access instead of ownership" represents a significant shift in consumer behavior and an enormous business opportunity. In just eighteen months, Uber's valuation skyrocketed from $4 billion to over $40 billion. This success has inspired countless "Uber for X" startups across dozens of categories-from car sharing, house cleaning, and food delivery to legal advice, healthcare, and parking.
Crowdfunding has vaporized traditional fundraising, growing exponentially from $900 million in 2010 to over $5.1 billion in 2013, with projections reaching $90 billion by 2025-larger than today's entire global venture capital industry. Sites like Kickstarter and Indiegogo enable entrepreneurs to raise money directly from enthusiastic customers before products even exist, creating an inside-out startup model.
When P2P marketplaces like Uber disrupt established industries, incumbents fight back ferociously. Taxi cartels, whose medallions once represented the best investment in America with 15.5% annual returns, have seen their artificial scarcity-based business model threatened. In response, they've launched strikes, lawsuits, and regulatory battles in cities worldwide. Yet this resistance often backfires, generating publicity that increases Uber's downloads.
The conflicts between P2P markets and government regulators raise fundamental questions about licensing and regulation in our hyperconnected era. Nearly one-third of US workers now require licenses, up from just 5% in the 1950s. Today's mobile review apps provide more transparency and accountability than government inspections, creating reputation markets where both providers and customers are rated. These two-way systems naturally incentivize good behavior, as participants strive to maintain positive ratings.
Bitcoin emerged in 2009 as a cryptocurrency designed to enable private internet payments without middlemen. After wild price fluctuations, many dismissed it as too volatile. Yet 2014 saw record venture capital investments in bitcoin startups. Bitcoin's true significance lies in enabling frictionless transactions without banks, credit card companies, or their 3-5% fees. The blockchain-bitcoin's underlying protocol-functions as a distributed ledger that records transactions across a decentralized network rather than in a central database. Bitcoin entrepreneurs now realize the technology can record any transaction type-potentially substituting for institutions that regulate the economy.
Chapter 8
Robotics and the Vaporization of Labor
Robots are coming for our jobs-not just in alarmist headlines but in economic reality. Oxford researchers shocked the world by concluding that 47% of all US jobs could face automation. Unlike previous economic cycles where laid-off workers were eventually rehired, recent "jobless recoveries" reveal a disturbing pattern: machines are permanently replacing human workers, particularly in routine, middle-wage occupations.
A vast, unseen digital economy of automated systems now operates alongside the physical one. These software robots handle everything from packet routing and content recommendations to advertising placement and news generation. As economist W. Brian Arthur explains, this "second economy" consists of digitized business processes silently executing and triggering actions without human intervention. Arthur projects this second economy will match the entire 1995 physical economy by 2025.
The economic logic driving automation is irresistible. As robotics costs decrease while quality improves, systems like Kiva often pay for themselves within a year. Once robot labor becomes cheaper than human labor, employers gain additional benefits: machines are safer, more efficient, and more reliable for many tasks. Companies have enormous financial incentives to eliminate human employees and their associated costs-payroll taxes, benefits, insurance, training, and safety claims.
Artificial intelligence functions both as a substitute for human cognition and as an enhancement that augments human capabilities. It's not purely artificial but rather "vaporized human intelligence" distilled into computers. After sixty years of slow progress, AI is advancing rapidly due to new algorithms, improved hardware, and vast data resources. Cloud-based "intelligence on demand" services like IBM's Watson are emerging as platforms that could enable thousands of disruptive startups.
Smart robots aren't just mechanical devices but collections of sensors that interpret and react to the world around them. Their true value lies in the data they gather. Google's self-driving cars exemplify this concept-they're essentially data collection vehicles mapping the physical world with unprecedented precision. These aren't standalone machines but networked nodes moving through physical space, dependent on cloud services and connections to other network nodes.
Since 2009, $17 billion has been invested in artificial intelligence, with investment growing 60% annually over the past four years. Google has positioned itself as a dominant player by acquiring eight leading robotics companies in just six months. By controlling the invisible layer of data generated by robots, cars, drones, and satellites, Google creates a value control point where it can extract tolls.
Despite automation concerns, humans will retain jobs that robots struggle with: tasks requiring manual dexterity, snap judgments in unpredictable circumstances, custom solutions to unusual problems, and novel inventions. Human ingenuity continuously creates new needs and professions. Nearly all future jobs will incorporate computers and automation-your greatest future skill may be how well you collaborate with robots.
Chapter 9
The Vaporized Self: When Humans Transcend Biology
Ray Kurzweil, Google's engineering director and technological singularity proponent, envisions digital immortality-transferring human consciousness to computers. Motivated by his father's early death, Kurzweil predicts that by 2045, computing power will match or exceed the human brain's capabilities. Kurzweil views the mind as a biological computer that artificial systems will eventually surpass, but uniquely believes AI will enhance rather than replace human cognition.
We're already migrating significant portions of our existence to digital realms. With 7-12 hours of daily screen time plus 7-8 hours of sleep, we have remarkably little time for physical activities. Our digital lives revolve around social networks, email, and streaming media, with virtual reality poised to make digital immersion even more complete. This digital migration extends our presence and memory-social media platforms extend our presence across geography, while we increasingly outsource memory to the cloud through photos, updates, and lifelogging.
DARPA, created after Sputnik to prevent technological surprises, has an impressive record of transforming science fiction into reality. Their biological technologies office has already demonstrated mind-controlled prosthetics and flight simulators, with $7 million earmarked for neural interfaces allowing soldiers to control robots with brain waves. Dr. Phillip Alvelda's cortical modem project aims to develop a direct link to the visual cortex, bypassing eyes and optic nerves. This would enable data to generate graphic overlays mingling with normal vision-essentially creating augmented reality without hardware.
Three massive government-funded projects are racing to map and model the human brain. Israeli scientist Henry Markram secured 1 billion euros and an IBM supercomputer for his Human Brain Project after successfully modeling a rat's neocortical column. The computational demands are staggering-his project currently simulates just 1% of brain neurons but requires supercomputers 1,000 times more powerful than today's machines.
Biology has transformed from a "wet" science of beakers and test tubes into an information science. Today's biologists are more likely to work with computer models and large data sets than in traditional labs. The field will likely see more change in the next decade than in the previous century, advancing from "read only" biology to "read/write" biology-where we not only understand life but actively reprogram it.
Space exploration faces fundamental limitations when humans are involved. If substrate-independent mind technology succeeds, human consciousness could explore space without biological bodies, eliminating the need for life-support systems. The pilot wouldn't be a passenger but would become the spacecraft itself, potentially undertaking centuries-long journeys to other stars.
Beyond space exploration, substrate-independent minds could transform human connection on Earth. Mobile video allows us to see through others' eyes, but networked minds could take this connection further. As Randal Koene notes, "Much of what we think of as progress, civilization, and human development has been achieved through ever-greater and better communication." Whole brain emulation could free humanity from skull-bound isolation, allowing us to share the previously inexpressible.
The shift from a solid industrialized economy to a weightless software-defined one means many familiar artifacts will erode under "the elemental force of information in ceaseless motion." This vaporization is unstoppable and will likely transform education, labor, corporations, and possibly government institutions and even our biological bodies. Rather than denying this rapid change, we should cultivate a "what if?" mindset. Our reality is constructed from ideas that can be reconfigured by anyone with a better concept. Pick a topic, any thing or institution or company or product or service or tradition, and ask yourself: how might I replace that with software?
