(part 1 in a series on the considerations of human nature and its evolving reliance upon and the implications of ubiquitous mobile networks)
To paraphrase Hemingway’s perception of life in Paris, If you are lucky enough to have lived on the web as a young man, then wherever you go for the rest of your life, it stays with you, for the internet is a moveable beast.
Here at TradeWithDave.com we’ve done our share of blogging about topics such as Facebook, net neutrality and privacy in the age of the internet. One of the most popular articles that was ever written on this site was title Trust and the Trillion Dollar Brain and it explored many of these issues particularly in light of the rise of geo-locating applications and the importance of “place” and “checking in” within context of the internet as a tool for marketing and communications. Regardless of whether you agree with Time’s Person of the Year selection or believe that Wikileaks is free speech or criminal enterprise, the power of communications to change the world is undisputed. For the past several months we’ve been digging a little deeper than normal with an eye towards gaining a better understanding of the implications of all things internet to the future of our cherished and growing base of readers. In less than a year, you have helped us reach our goal and the purpose of this series (A Moveable Beast) is to help you reach yours while understanding the risks and rewards along the way.
Twice a day, every business day since September 12th 1919 there’s a been a ritual that occurs tying together London, Paris and Zurich and the five members of the London Gold Pool. This ritual is culminated with the lowering of a tiny desk-top Union Jack symbolizing the setting of the gold price for that half-day. The anti-thesis of high frequency trading, this ritual literally set the standard from the Rothschild office on St. Swithin’s Lane until May 5, 2004 when N. M. Rothschild abdicated their seat to Barclay’s and now the chairmanship rotates annually among the five members.
1 King William Street – offices of N. M. Rothschild
Currently the five members agree on a bid and ask price twice each day by lowering their miniature desktop Union Jack flag as the chair pronounces “They’re are no flags and we’re fixed.”
Today the five members of the gold pool are Scotia-Mocata, Barclays Capital, Deutsche Bank, HSBC and Societe Generale
To gain a more complete understanding of the significant of this daily telephone ritual and the beastly power of the mobile web, we’re going to take a look back to Sunday, June 18, 1815 to a small town in Belgium known as Waterloo. It was here that Napoleon and his armies met their demise at the hand of England’s Duke of Wellington supported by the Prussian army who shared in common with the British the same financial support of the Rothschild banking family.
Nothing has changed about the legendary power to profit from the cycle of war and peace as proven by Nathan Rothschild’s speculation on the rise in the value of British bonds as a result of the eventual decrease in borrowings by the government two years following the victory at Waterloo and the economic stabilization. Not only did the Rothschild family finance the war profitably, the 40% profit on the temporary rise in bond values created legendary gain.
Whether it is truth or financial folklore, the story of the Rothschild family employing an intelligence network and couriers across Europe leading to Nathan’s ability to front-run the news of Wellington’s victory at Waterloo a full day before the government’s messengers delivered their reports depicts the value of proprietary information. Whether the early delivery reporting Napoleon’s defeat was fact or fiction the massive earnings from the war bonds transaction was realized in full.
To fully appreciate the value of information and networks, we can go back another three hundred and fifty years or so and examine Europe’s famed House of Thurn und Taxis and their Brussels-based postal network that reached out to Rome, Naples, Spain, Germany and France. If you believe that making money off of information and networks is a new phenomenon, then you haven’t met the man who was the world’s youngest billionaire before he was replaced by Facebook founder Mark Zuckerberg. You see Albert Prinz von Thurn and Taxis had been a billionaire since he was eight years old and was only dethroned from the top position by Zuckerberg in 2010. Where did both of their fortunes come from?… essentially messaging services.
Facebook may look like a social media site, but it is essentially a communications network and a very efficient one indeed. Unlike a conventional postal service that is labor and energy intensive, or even an email-based communication system that requires a targeting model for blasting out communications, Facebook operates as a beacon model. You see a beacon is similar to a lighthouse or an airport beacon, or even a radio or TV station. The message is being “beamed out” and all you have to do is to tune into it and you get a continuous stream of information. That’s essentially how Facebook works but with the added user control of a permission based broadcast model where membership and admission to the network is approved by the broadcaster.
Does it seem coincidental to you that the world’s two youngest billionaires, one whose family launched their business in the year 1489 and another that launched in 2004 were both beneficiaries of businesses that enabled effective communications? Add the Rothschild story of front-running the market for war bonds and you can start to see a pattern here. He who has the gold may make the rules, but he who has the information may make the gold. Why is that exactly?
We saw a great example of the value of advance information just this week. As reported by Bloomberg.com, it is customary for public corporations to release their earnings figures at 4 p.m. after the stock market closes. It seems that some corporations were posting the earnings to their websites at say 2 p.m. without publicly displaying the links until 4 p.m. A few savvy web surfers at Bloomberg discovered that if the second quarter earnings report for Disney was for example www.disney.com/earnings/Q22010release, then there was a decent chance that the third quarter release would be posted under www.disney.com/earnings/Q32010release. The folks at Bloomberg.com simply put together a computer to check for these postings and uncovered their own source to advance information that would otherwise be considered confidential. Add Michael Bloomberg as Mayor of New York City and the 10th richest person in the United States as yet another communications company with a modern version of the postal delivery system. Are we seeing a pattern here?
If we take a walk across Paris’ Seine river with Hemingway we will traverse Paris’ Le Pont Neuf (translated as “the bridge – new”). How exactly you can name a bridge commissioned by King Henry III in 1577 as “new” and get away with it, we’re not sure. Bridges are big business and helping people connect is a desire that renews itself everyday. Whether your building bridges or computer networks, the success of these projects serve as a reminder to us of the value of making connections. The idea isn’t new, but the result is the same – profits, big profits.
The most recent example of the massive profits created from enabling people to connect can be found through the success of Steve Job’s and the Apple Iphone. The company’s success may not last, but there’s more than one expert who says the stock will soon be worth $1,000 per share based on the growth and earnings. What was it exactly that transformed Steve Jobs, the Apple Computer billionaire into a cultural rock star? It wasn’t the computer. It was the bridge that was created through the combination of mobility with the technology found in the Iphone. Jobs leveraged the same advantage that Rothschild did at Waterloo in 1815 when he unleased a mobile network of intelligence agents by putting the world’s largest information and communications network into the hands of every Iphone user – the internet. What appears to be a powerful tool for connectivity is actual a data collection device that is being used for an entirely separate agenda.
You see the proposition of letting people take their computers into the street so to speak is the benefit side of the equation. Think of it as the payroll that was made to the information agents in the field. The real value doesn’t happen at the perimeter of the network. The monetary value occurs in the node where the information collected can be parsed in such a way as to gain understanding of what is on the minds and hearts of the millions of users. When Steve Jobs set people free to take their computers with them, he unleased the massive power of both mobility and behavior to create an economic explosion. If behavioral information is the dynamite, then mobility is the blasting cap for an explosion in earnings. We’re not just talking about Amazon, E-bay and CraigsList here, we’re talking about every business on every street in America is now accessible to the impact of a consumer that is empowered with technology.
Not only can you find a restaurant or a car repair while you’re in the field, you can now report on your experience. The two-way flow of the potential of not only finding what you need in the real world, right now, the ability to crowdsource the information reporting on consumer experiences and channel them back to that same web has changed everything. What tends to be overlooked in the estimation of the potential of these opportunities is the human condition. For you see, where the human goes, so goes all the needs of the human. People have to eat. They need clothes and they need transportation and facilities. Once you break out of the home and the ability for the home to meet those needs you have unlocked an entirely new opportunity not only for communications but for commerce. If you’re sitting at your home computer and you’re thirsty, it’s a short walk to the fridge. The same does not apply when you’re on your Iphone while sitting in the parking lot at the mall wondering where the nearest Starbucks is.
The holy grail of marketers is the behavior of their customers and the ability to predict such behavior in advance. When you combine the dynamite of behavioral analysis with the field deployment of technology-empowered consumers through mobile two-way web-based communications nearly everything changes. Whether you’re talking real-time price comparison shopping, downloading coupons with Groupon or being able to connect with friends and family through applications such as Foursquare, nearly everything changes. Although the power would appear to be in the hands of the user, the truth is that the it’s in the hands of the aggregators.
In the next installment of this series we’ll explore the high stakes game of regulating the communications industry and who owns the value of your whereabouts and the right to use the publicly regulated infrastructure.
(to read part 2 in this series click here: http://tradewithdave.com/?p=4290