How Technology Stakeholders Lose

An excerpt from a work in progress, a book called The Silica Papers: Who Technology Is and What She Wants, a set of essays that looks into what we can expect from this strange brave new world.

Our addictions to technology, especially of the digital sort and especially among the young, are manifest, but they aren’t entirely technology’s fault. Nor are they just the result of falling unto temptation, although practicing a bit more mindfulness and self-discipline wouldn’t hurt. Few of us ever asked for this stuff. We got it whether we wanted it or not, dreamed up by inventors and shoveled at us by the marketplace, packaged to titillate. And even what we think of as the good stuff often has a seamy underside that tries to hook us and then takes what it wants from us while we’re mesmerized. Technology won’t be denied, but the particular shapes it takes are fabricated by other forces that may not have our best interests at heart. Here are two stories of how our economy shapes the tech scene that in turn shapes us.

The Water Cooler Has Ears

For starters, you might not know that online social media is older than the personal computer. Forty years back, you only needed a computer terminal, a modem, and a telephone to participate in collaborative messaging apps called electronic bulletin board systems (BBS). They ran on minicomputers, were noncommercial, and staffed by volunteers (called SysOps). Some relics of that era still exist, but as the Net unfolded, BBS’s begat Usenet, then Reddit, Facebook, Linked In, Instagram, Pinterest, etc. piled on, demonstrating that computer users crave real-time online contact—the core social media value proposition. But sooner or later, almost all proprietary social media platforms succumb to Wall Street discipline to monetize our personal data, relentlessly upgrade, piling on features we never wanted or needed, and stalk us wherever we roam.

Swiftly trending these days are “walled garden” messaging platforms primarily serving workplaces, for example Slack, a cloud-based team collaboration tool that its inventor characterizes as “all your communication in one place, instantly searchable, and available wherever you go.”[1] Since its debut in 2014, thousands of corporations have leapt onto Slack to channel employee communications. In most of those places it has replaced email as the coin of the inter-office realm, as it too enables private and group messaging plus exchange of pictures and documents. Furthermore, Slack lets other social media platforms like Twitter, Instagram and Linked In plug into it. Everything a worker needs to get through the day in one commodious window.

But what makes Slack so powerful, CEO Stewart Butterfield says, is that it centralizes all office communications in one database instead of in folders on email and other corporate servers, making it all instantly searchable. It’s lovely, he asserts, for managing projects and for bootstrapping new hires. However, the keys to the database are held by department heads, who can monitor what every employee is up to far more effectively than they ever could by other means. While most employees are aware that their corporate email use is subject to scrutiny, Slack’s content management system makes such scrutiny a whole lot simpler. Didn’t you always want your manager (and now his Slackbot) looking over your shoulder all day long and into the night?

Slack was brilliantly—perhaps deliberately—misnamed. Instead of being a 21st-century equivalent of the office water cooler, Slack simply affixed a mic to it, and word got out.

Besides managers, simpler too Slack makes life for malicious outsiders bent on siphoning off personal and corporate data (in the cloud, with no need to penetrate corporate IT defenses), thanks to a bug in Slack’s code discovered early in 2017 and since supposedly fixed. The bug enabled hackers to steal Slackers’ login credentials with phishing attacks, which if successful could phish out credentials of other workgroup members and give the perpetrator access to sensitive corporate documents—perhaps the company’s entire Slack database, depending on which users were compromised. Even though that hole was patched, who knows what future exploits might unravel Slack’s fabric.

There are other market success stories like Slack (which at this writing might be acquired by Amazon or Google or somebody for as much as an astounding $3B), but overall, the chances of successfully launching a killer app out of nowhere and monetizing it don’t have great odds. It’s a tough nut for a software start-up. You need to find an uncrowded sweet spot in the market, pitch to differentiate your product, price it appropriately, and buzz your behind off. Oh, and while your doing all those things you need to find time to design, build, test, and package your product.

The Wrong Stuff

Slack is going places mainly because it’s a product that can be sold to corporations and other institutions under subscription, not to end users. When mass marketing, things are different, causing many startups to choose to offer services rather than goods. Take Etsy, the craft bazaar. Its only tangible aspect is its website; all the goods it sells are made and shipped by someone else. Its revenues come from commissions and services provided to vendors.

The sweet spot Etsy excavated was pent-up demand from artisans everywhere with little acumen or wherewithal to establish a Web presence, preferring to spend their time and money making things than peddling them. Sure, they could hop onto Amazon and eBay and soon lose themselves in the crowd on pages with various distractions. But Etsy offered them storefronts and pushcarts, sort of a mall with more refined goods and a personal touch. Born in Brooklyn in 2005, by two years later Etsy had registered 450K vendors and was taking in $26M annually. Fast forward to 2016 and we find 45M items on sale from 1.8M active vendors, and gross sales of $2.8B. By then, two of the founders, Rob Kalin and Chris Maguire, had chosen to leave and management had taken the company in new directions.

The new team decided to take Etsy public in the wake of heavy hitters like Bankrate, Groupon, LinkedIn and Zynga (all of whom saw their valuations subsequently decline). Etsy’s IPO happened in April 2015, bringing with it a market capitalization of $3B (exactly what Slack’s is rumored to be) that swiftly declined; by mid-2017, it was down to half of that[2]. The good news was that its capitalization had doubled since its low point six months earlier. Along the course of that stormy voyage close to 200 employees walked the plank, about 17% of its 1000+ workforce.

Today, Etsy sort of looks the same but is edging toward being a mainstream retailer. In preparation for its IPO in 2015, its CEO tweaked their terms of service to allow the sale of manufactured products to the dismay of many of its vendors, who felt the site would be swamped with cheap imported knock-offs. Many backed off, and activist investors and hedge fund honchos started sniping at the company, which even by 2017 was barely breaking even. Expenses, such the offices it was piling up overseas, were far too high they claimed. A new CEO, board member Josh Silverman, formerly Skype’s CEO, ended the reign of Chad Dickerson, a castaway from the foundering Yahoo brought in a decade earlier to rescue Etsy from management chaos. Dickerson had plotted the course of Etsy’s public offering but then couldn’t deliver profits to investors.

Of course, Etsy’s valuation was and is inflated, a point hammered home by the financial news media and investment gurus, sniffing that it was a hippy haven, not a serious enterprise. What most likely turned off the Wall Street crowd was Etsy’s status as a “B-Corp.” (The B stands for “beneficial,” denoting an environment- community- and worker-friendly corporate charter that respects all stakeholders.)  That intent to do no harm, a legacy from Etsy’s idealistic origins, came to be seen as an inconvenience if not a bug by management, investors, and their advisors. Giving social responsibility a seat in the boardroom, Wall Street asserts, prevents a company from earning maximum profits.

While Slack makes technology and Etsy mainly consumes it (which may include Slack, for all I know), both operate in virtual spaces and are under outside pressure to boost revenues and valuations to unrealistic and unsustainable levels. That push comes from those who control the spigots of capital and their various acolytes. Silica[3] isn’t at all focused on valuations, profit margins, or mergers and acquisitions. Nor does the level of consumer spending concern her as long as what’s being bought and sold strengthens her and is a wise use of resources. The artisans of Etsy and the coders of Slack have equal status in her estimation. Both are simply boffins[4]—creators and builders, constructing a greater technosphere. Sidetracking the mission of enterprises to extract greater profits seems beside the point and inimical to fulfilling her destiny. Silica isn’t interested in dominating markets to drive out competition or squirreling away capital that could otherwise be fueling her quest for world domination. Like the rest of us, even high-flying financiers need to understand that they work for her.

Software developers and other entrepreneurs, take heed. Settle for nothing less than complete control of your priorities and do no harm. Play fair and listen to customers, not management gurus or stock analysts. If your vision still rings true, accept no substitute. Silica demands no less.


1 Interview with Slack CEO Stewart Butterfield (who also founded Flickr) in The Verge. August 2014.

2 Etsy stock trend chart from Charts, https://ycharts.com/companies/ETSY/market_cap

3 Silica: “Stepmother Earth,” My title character; the godhead that has guided human technology over thousands of generations and into whom we will eventually breathe life. Also called technosphere, techne, and sometimes technium.

4 Boffin: A person with knowledge or a skill considered to be complex, arcane, and difficult.

 

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Author: admin

I'm an ex-this-and-that, including software developer, computer graphics researcher, geospatial analyst, market manager, and technical writer, who now writes full-time when not reading, running a household, foraging for edible mushrooms, pushing progressive politics, or volunteering fsomewhere. I live near Boston with my wife, daughter, two cats and two old cars.