Everybody was talking about it in 2006…

When did it become clear to you that the browser will be more important than the operating system?  Beneath the AJAX and pretty colors, this was seemingly the underpinning of Web 2.0.  But when did people really start talking about the internet as a platform?  As far as I could remember, the idea was popularized right around when Google acquired Writely and turned it into Google Documents in 2006, and fully solidified when Facebook launched its platform in 2007.

The visionary in hindsight

…but did anyone see this earlier? I mean…way earlier?  Like 1995 early?

What do you suppose was going on in Bill Gates’ head when he said that Java “scares the hell out of me”?  Looking at Microsoft’s aggressive Internet Explorer and Java strategy in the following years, I believe his vision of the internet must have been frightening accurate: that “write once, run anywhere” will erode the relevance of host operating systems, leaving them dumb interfaces good only for controlling hardware.  No wonder he fought Java so hard, and mobilized Microsoft’s A-team to rework IE from the ground up for the big 4.0.  (IE 4.0 was the money shot to to Netscape)

It’s not surprising that he would have this insight.  After all, Gate’s is widely praised for the vision that it is software, not hardware which will command the most profits as soon as hardware makers commoditize themselves by adopting the IBM-PC standard.  He knew this while the big boys were still drinking the hardware koolaid.

Wait…but that was software killing hardware.  What does that have to do with web services killing software?

The fear of openness

Lets dig deeper into Gates’ first insight.  Hardware wasn’t always divided between Mac-vs-PC.  The PC standard is actually what was originally the IBM hardware platform, amongst many other hardware makers with their own incompatible specs.  As IBM PCs grew to dominance in the early 80s, they also had the best range of software, many of which developed by IBM.  To piggyback on this advantage, other manufacturers soon adopted the “IBM-PC Compatible” spec (remember those stickers?).

This is the event which commoditized hardware, and made software the differentiating factor.  The moment hardware opened up, it handed its pricing power to software—a vertical shift which I believe was the fundamental force behind the Windows and Office cash cows.

But now the same thing is happening to software.  The rise of cross-platform browsers and web standards didn’t just make the lives of web developers easier; it commoditized software, and made web services the differentiating factor.

We are sliding along a gradient.  As downstream products demand openness from the upstream platforms on which they sit, they also commoditize the platform and thereby yank profits from upstream.

What do you think happens when Facebook-MySpace-Bebo become inter-compatible, and embrace unfettered data potability?  People stop caring which social network they’re on, and the platform applications become the killer apps, in other words the differentiating factor.

I think this is the fundamental reason why strategists are weary of openness, and explains Facebook and Apple’s “evil walled garden” behavior.  Openness and interoperability has dethroned the last two kings of technology: IBM then Microsoft.  If I were them I’d say openness “scares the hell out of me” too.

Some people wish for a world with cleaner cars, smaller computers, faster mobile internet, and sustainable energy.  I for one can’t wait til we crack the battery problem—it is easily the greatest bottleneck in technology in the medium-term. Here are just a few examples; and I’m sure there are plenty more.

Battery bottleneck

Laptops — Form factors are getting smaller and sleeker, but the battery isn’t getting any smaller.  Not to mention, screen size/brightness and CPU speeds are effectively capped by battery life constraints, which have remained ~3hours for past 5 years.

Cellphones/mobile internet – On top of the screen and CPU, now you’ve got a radio competing for power.  For the same Blackberry model, the jump from 2.5G to 3G halves talk-time.  The picture looks even uglier when you talk about uplink transmission.  As radio technology improves over time, the battery will become the single choke point to mobile broadband.

All-electric cars — The challenge is building a battery that takes you at least around town without breaking anyone’s bank.  Thus far no one (except maybe Tesla) has figured how to do this with major sacrifice in price and performance.  Meanwhile, did you know that process of producing lithium ion batteries has a godawful carbon footprint?

And finally…

Solar energy — While the geniuses in sunny California are pushing towards the all-important 7c/kW-hr milestone, the problem of weather dependence still remains unsolved.  How can you power entire cities at night, or through a few consecutive days of gloom?  The key to linking daytime power generation to night time use is the ability to store excess energy.

The power of liquidity

There’s a common theme to all this; it is the importance of being able to disaggregate energy, and decouple production from consumption.  It’s about liquidity.

The importance of decoupling is illustrated in solar and auto: today, we are forced to produce and consume energy in either the same place or at the same time.  To have to produce energy on the spot is a huge disadvantage; resulting in use of a portable, yet dirty and scarce fuel such as fossil fuels, and wasteful engines such as internal combustion.

This concept is not foreign: we do this all the time with economic wealth.  One could say the entire money system is designed to seperate the production and consumption of wealth with the help of liquid markets.  Batteries are a similar form of liquidity creation, or currency, which connect efficient production sources with convenient consumption preferences.

I’m really loving the Firefox 3 smart location bar.  The ability to retrace my steps by typing one or two keywords I remembered seeing in the title really speeds things up by skipping Google.  Wait a minute…did I just say “skip Google”?  Raise any red flags?  That’s right: a great deal of search engine activity isn’t actually searching at all, it’s really locating stuff people have already found.

Indirect competition, it’s a subtle little bitch =)

It’s hard to imagine why Jobs would have such a grudge against Flash to have prevented the single most popular piece of software in the world from working on the iPhone.  (yes Flash is more popular than any particular browser or OS)  But now it’s quite clear:

Had iPhone supported Flash, most of the killer apps would have been developed in Flash, and then easily ported over to the next hit phone

Many people focus on the first 2 benefits of first mover advantage: that you can have a head start in market share, and the extra time-value of money is nice too.  But what’s really the sweet spot is to develop a proprietary platform that wil be incompatible with anyone who tries to play catch-up further down the road.

To re-enforce my thesis that web “value chain is lengthening”, check out the lastest move by Meebo.  It’s a tell-tale sign of industry maturation and specialization, as products are more and more like assemblies of features developed by different parties.  Don’t immediately confuse this with the “loosely connected parts” theory though…that implies a world of data portability.  These are tightly coupled bundles branded under a single name that deliver an easily managed product experience.