Facebook is accused of abetting age discrimination, which raises many of 2017’s most prominent themes. So does the news that Apple slows down iPhones.
The most popular and most important posts on Stratechery in 2017.
The Disney-21st Century Fox was certainly the biggest acquisition that happened last week, but it wasn’t the only one. Netflix may loom large, but Amazon arguably looms larger.
The Disney-21st Century Fox deal is official, and the antitrust questions continue to loom large: there are clear issues with regards to a horizontal merger, but is having a vertical competitor to Netflix worth it?
Patreon recently changed its fee structure — and then changed it back. The problem is rooted in Patreon’s history and it its misunderstanding of the value chain in which it operates.
Understanding regional sports networks, and why they make sense with ESPN — but why ESPN makes less and less sense with Disney. Then, a brief — and final — follow-up on Title II and Net Neutrality.
Disney’s rumored acquisition of 21st Century Fox is all about competing with Netflix; whether or not that is a good thing depends on your frame of reference.
Snap has a more cogent vision than the one it presented in its S-1; the problem is it might be too late. Tencent, meanwhile, fresh off its Snap investment has picked up a piece of Spotify.
I don’t know if this will be an annual thing, but I couldn’t help but piggyback on TIME’s coattails this year.
On to the update:
Tech’s Person of the Year
TIME announced their annual person of the year yesterday, and in this case, it was people — The Silence Breakers:
This reckoning appears to have sprung up overnight. But it has actually been simmering for years, decades, centuries. Women have had it with bosses and co-workers who not only cross boundaries but don’t even seem to know that boundaries exist. They’ve had it with the fear of retaliation, of being blackballed, of being fired from a job they can’t afford to lose. They’ve had it with the code of going along to get along. They’ve had it with men who use their power to take what they want from women. These silence breakers have started a revolution of refusal, gathering strength by the day, and in the past two months alone, their collective anger has spurred immediate and shocking results: nearly every day, CEOs have been fired, moguls toppled, icons disgraced. In some cases, criminal charges have been brought.
I applaud the choice, and thought it worthwhile to focus on one of the people featured on TIME’s cover: Susan Fowler. She is, without question, tech’s person of the year.
I know you all know the story, so I’ll recap quickly: on February 19, 2017, Fowler published a post on her personal blog entitled Reflecting on One Very, Very Strange Year at Uber. What followed was a dispassionate overview of a fundamentally broken and actively harmful workplace, for women in particular. Fowler told TIME the tone was deliberate:
When other women spoke out, they were retaliated against. So there were certain things I thought I could avoid: ‘I’m not going to sue, because they’ll make me sign a nondisclosure agreement. I’m not going to do press right afterward, because they’ll say I’m doing it for attention. I can’t have any emotion in my blog. I have to be very, very, detached.’ And I had to make sure that every single thing thatI included in there had extensive physical documentation, so it couldn’t be ‘he said, she said.’ And that’s what I did.
The blurb that includes this quote notes that Fowler’s post led to “an investigation that led to the ousting of [Uber’s] CEO Travis Kalanick and more than 20 other employees”, and while that is true, I think it actually understate’s Fowler’s impact; thus this post.
Uber at the End of 2017
Start with Kalanick and Uber: TIME’s summary of the situation is certainly not wrong — it was the publication of the Holder Report, from an investigation initiated by Fowler’s post, that led to Kalanick first taking a leave of absence and then, a week later, resigning under pressure.
The intervening four months, though, were filled with a whole host of additional controversies: more reports of improper behavior from top executives, Waymo’s lawsuit, and the revelation of Greyball, leading to an ongoing U.S. Department of Justice investigation. Perhaps all of these stories would have come out without Fowler’s post, but I’m not so sure: nothing happens in a vacuum, and Fowler’s post and the subsequent outcry undoubtedly affected the willingness of people to come forward, to report bad behavior, and, in the case of Google, to calculate that the political winds of Silicon Valley would at that precise moment be very much in their favor. I don’t mean that to be cynical, but even if you take it as such there can be no question that the impact of all those subsequent revelations was magnified by Fowler’s post.
Moreover, it wasn’t simply that Kalanick lost his job, which, while deserved, certainly had repercussions for Uber’s business. It’s that the entire enterprise is far less of a sure thing than it was before Fowler’s post. In the United States Lyft is telling investors it “will have boosted its share of U.S. ride-hailing business some 61 percent by the end of the year, climbing to about a third of the market”; what is even more damaging is Lyft’s partnership with Waymo, which made Lyft the best way to invest in Google’s self-driving technology — Google apparently agreed, leading a $1.5 billion investment that Lyft announced this week.
The situation is arguably worse internationally: in Europe the company is facing the usual regulatory problems, but the even bigger issue is Asia, where Softbank is consolidating all of Uber’s competitors. I wrote in July:
The chief way to fight a network effect (or to accelerate one) is to drive down the price, and that means capital. This is why Uber raised money so rapidly, but by the same token, it is why the company is uniquely vulnerable, particularly in markets where it is not dominant, to a company — Softbank — that has even more. In other words, if owning the customer is the source of power, owning the means of acquiring the customers — that is to say, huge amounts of capital — is the most powerful of all.
To that end Softbank has pulled a neat trick: its actions in Asia have helped drive down Uber’s valuation such that Softbank can buy in at a lower price — a $48 billion valuation for the shares it buys from current investors, according to Bloomberg, about 30 percent lower than Uber’s last valuation of $69 billion (under the terms of the deal, Softbank will also invest $1 billion directly in Uber at that prior valuation, preserving the cap table). Recode is reporting that Benchmark plans to sell some of its shares, which isn’t surprising: the governance reforms the firm won in recent months are tied to the Softbank deal going through, and Benchmark is best placed to ensure Softbank acquires the necessary 13.4% share of the company to make the deal a reality.
Fowler’s True Impact, and Means
One could argue that everything that has happened to Uber this year was inevitable, particularly what I covered in the last few paragraphs: Lyft partnering with Waymo, Google investing, Softbank negotiating. I certainly believe that Fowler created the conditions for much of this, but I’m not going to belabor the point: I think her true impact was far greater.
The most obvious point is that sexual harassment came to the forefront in Silicon Valley in a way it never has previously. There absolutely have long been whispers and scattered reports, but Fowler’s post was the initial note in a drumbeat of sexual harassment allegations that, given the structure of venture capital, were sadly unsurprising.
Fowler herself, though, captured an equally important development in TIME’s article:
Corporate boards, wary of alienating female employees and customers and of drawing bad press, have been among the quickest to make changes. Uber, for example, which built its reputation on a willingness to flout norms, used to be a guiding light for small startups. Now nobody is pitching their company as the next Uber, says Fowler. “There’s a shift to, ‘We’re not disrupting anymore. We’re trying to build something that’s good for consumers and treats employees fairly.'” It’s a start.
I suspect Fowler and I have different definitions for the word “disrupt” (under my definition, startups are definitely still looking to disrupt, appropriately so!), but I think the broader point that few are modeling themselves on Uber is correct, and a relief.
Something that happened over the last few years — for which I am as guilty as anyone — is that the idea of Uber became separated in the minds of many from the reality of Uber. For example, leveraging sunk costs is a great idea, cajoling uninformed drivers into predatory leasing arrangements, less so. Bringing local constituent pressure to bear on corrupt local governments is a great idea, purposely deceiving regulators, less so. Raising massive amounts of capital to capture a massive market that actually makes the world better is a fabulous idea, making obviously irrational investments because you can, less so.
I will continue to argue that the Uber I wrote about in November, 2014, remains the incredible company and investment opportunity it was then; I also believe, as I wrote after Fowler’s post, that November, 2014 is when it all went off the rails. That is when Travis Kalanick chose personal loyalty over what was best for the company, creating the exact sort of culture that Fowler wrote about.
So to review: in 2014 a high-ranking Uber executive commits a clearly fireable offense, but he is not only not fired, he is lauded, while the company as a whole is further validated by investors. Given that, the real surprise would have been if this week’s crisis had never happened; culture is the accumulation of decisions, and Uber had long since decided that unacceptable behavior would be tolerated as long as the perpetrator was a “high performer”. Rigetti’s [Fowler’s] allegations were set in motion years ago.
I concluded that piece with the following:
This is rapidly becoming an existential question for Uber: exactly how much of the company’s success was due to the idea, and how much was due to the executives? The surest route to a company allegedly rife with the behavior documented this week is to strongly credit people, who soon come to believe that nothing matters but the (short-term) bottom line; the potential casualty for being wrong, though — for rewarding people who just happened to be in the right place at the right time — is the very idea itself.
This is a question I have wrestled with for a long time: on one hand, things happen when they were meant to happen. If Bill Gates hadn’t started Microsoft, someone else would have. If Steve Jobs wouldn’t have introduced the iPhone, someone else would have. History is rife with truly important discoveries being made simultaneously — everything from calculus to the transistor. Doesn’t that suggest that circumstances matter more than individuals?
Moreover, you could make the same argument about The Silence Breakers: I wrote in Goodbye Gatekeepers that the Internet is disrupting structures that created the conditions for sexual harassment. Note too Fowler’s method: an individual blog post, completely free of editorial (or lawyer or publisher) interference that completely shook a $69 billion company. Indeed, it is the Internet and social media, so derided as of late, that created the conditions for The Silence Breakers.
And yet, there are still those that, in Steve Jobs’ words, “put a ding in the universe.” The conditions may be ripe, but it falls on that one individual to actually do something about it. Uber may have been ripe for a fall, the Internet may have made it possible to lift the veil on an ugly side of Silicon Valley, but Susan Fowler is the one who actually did it.
She is tech’s person of the year.
Society collectively decides what is wrong through laws: that’s a useful bright line for platforms. Then, YouTube is demonstrating its market power, and Google and Amazon are acting like monopolies.