Content Business

Jon Nathanson: Apple, Disruption, Fire Phone and Content Business

Jon nathanson is a technology and business columnist for Slate. He is also an angel investor and a strategy consultant in San Francisco and Los Angeles.

The following is an interview with Jon Nathanson about Disruptive Innovation, Apple, Amazon’s Fire Phone, Disrupting Hollywood and Future of Content Business. The interview has been edited for brevity:

Niaz: Dear Jon, thank you so much for finding time to join us at eTalks in the midst of your busy schedule. We are thrilled and honored to have you at eTalks.

Jon: Thanks for having me! It’s a pleasure and an honor.

Niaz: You are a technology columnist, startup investor, and strategy consultant in San Francisco and Los Angeles. At the beginning of our interview can you please tell us more about yourself, your works, and current involvements?

Jon: It sounds so corny, right? “Technology columnist, startup investor, and strategy consultant.” Those are some of the things I do every week—but put them together like that, and they don’t amount to a coherent job description. Unfortunately, I’m the one who put them together that way, when I was asked by Slate to give a tagline for my column, “The Bet.”

But let’s unpack the list. I’m a columnist for Slate, and that’s a fairly recent turn of events. I’ve been writing my whole life. I doubt anyone will give me credit for it, but I was the editor-in-chief of my high school paper, which won numerous national awards and was consistently ranked at the top of the nation…for a high-school paper. For whatever that’s worth. (Probably not much.) That was, sadly, the beginning and the pinnacle of my un-storied career in journalism. After graduation, I packed up my proverbial press pass and moved on with my life. But it still called to me. I successfully ignored that call for the first decade of my professional life.

That was up until early last year, when I realized I’d been wasting an unseemly amount of time commenting on Hacker News every day, and I came across a listing on HN for Priceonomics. Priceonomics is a Y Combinator company that started a blog initially as a content marketing effort, but who came to specialize in writing top-quality blog posts. They became so good at it, in fact, that they were regularly charting to the front page of HN, and I was regularly reading their stuff. I saw they were looking for writers, and I applied that instant. Through my work with Priceonomics, I started getting attention from other journalists and media outlets, and I was invited onto NPR a few times. It was very quick and very surreal. Next thing I knew, I had an agent, and soon after that, the gig with Slate. It was one of those cases, as they say, where my “overnight” success was the result of 20 years of preparation. When I was invited up to the big leagues, I’d been practicing my swing for decades. (So you’d think I’d be better at writing job descriptions for myself…)

As for the investing and consulting—those, too, are fairly recent ventures a long time in the making. I’ve been informally advising friends’ startups for years now. And in 2013 I started putting my money where my mouth is, investing at the seed stage in several companies I knew well and believed had a serious shot at success. It’s funny how the angel community works. You invest in a few companies, and next thing you know, more companies and more opportunities are coming your way, all because the founders and co-investors you’ve gone in with are friendly with others. And platforms like AngelList have made the process even more social. Next thing I knew, I was investing or advising enough startups—and devoting a scary amount of my workweek to doing so—that I felt justified in taking a step back, evaluating it, and calling it a significant part-time job. Investing and consulting had earned their fair place on my motley tagline.

Niaz: I would like to start our interview discussing about disruptive innovation. The last few weeks were pretty interesting and there was much discussion for and against disruptive innovation. Jill Lepore, a Harvard professor, has written an extraordinary piece on The New Yorker where she cited disruptive innovation as a myth. Even the father of disruptive innovation, Professor Clayton Christensen, now thinks disruption has become a cliché. You have seen how disrupt, disruptive, disruption and some other buzzword around disruptive innovation have become a common phenomenon in the tech industry. Can you please tell us what do you think about disruptive innovation? How a buzzword or myth or cliché like disruptive innovation is changing the world revolutionary? Or there is something else [like mindset] behind the scene, which is the original reinforcement of these revolutionary changes?

Jon: First of all, I think it’s intellectually—and, dare I say, emotionally—consistent to appreciate Jill Lepore’s article and to maintain a healthy respect for Christensen’s thesis. People will say that Lepore has chipped away at the very foundations of Christensen’s theories of disruptive innovation. I don’t necessarily agree. The analogy I’d use is that she’s shone a very bright light on it. She’s walked down into the basement of the building, and she’s lit a floodlight on everything there, exposing the cracks, the structural weaknesses, and the clutter. But the building itself is still (mostly) sound.

It helps to frame Christensen’s original thesis in context of the intellectual climate of his day. “Disruptive innovation,” as Christensen originally charted it out, was a theory of market competition that sought to expand upon the work of Michael Porter and his “Five Forces” framework. Porter argued that there are five major forces in play in any given market: competitive intensity between existing players; suppliers’ bargaining power; buyers’ bargaining power; the threat of substitute products or services; and the threat of new entrants into the marketplace. Christensen, to put it in physics-geek terms, sought to unify two of the five forces: the threat of new entrants, and the threat of substitution.

“Disruptive innovation” occurs, in Christense’s framework, when less-than-perfect substitutes arise for existing products, capitalizing on benefits (in solution, in cost, or in feature set) that the current players in the market either don’t think are important, or think are inferior. Christensen argued that new entrants—startups, as we now call them—are usually the bearers of the substitute products, because they have no legacy supply chains, cost structures, or customer requirements to satisfy. And he argued, in a Schumpeterian sense, that these new entrants would usually, or even inevitably, “disrupt” the existing market and unseat the established players.

Lepore’s research disputes the second of those premises, but not the first. She showed that new entrants tend not to survive the shakeup. Their function is usually catalytic. They enter a market, stir the pot, and get acquired or driven out by the legacy players once the legacy players catch up. But shakeups can and do happen, and they often play out in the dynamic that Christensen outlined in The Innovator’s Dilemma.

So it appears that Christensen was largely right about the dynamics of disruption, but less right about the outcome of disruption, or about the inevitability of its winners and losers. He raised valid and provocative ideas. But his project for the unification of two forces—new entrants and substitution—was not entirely successful.

That said, I’d still recommend The Innovator’s Dilemma as mandatory reading in any core business school curriculum or strategy class. Readers should simply place it in context. Darwin’s On the Origin of Species was foundational in outlining the theory of evolution by natural selection—but it’s a very old text these days, and it got some things wrong, and others have come along and corrected or expanded upon them. Those corrections, and those amendments, do not invalidate the importance of Charles Darwin to the field of evolutionary biology. Similarly, modern challenges and updates to Christensen’s work don’t necessarily invalidate the significance of his work.

This isn’t a baby we should throw out with the bathwater. As for the cult of “disruption” that has sprung up around Christensen’s work over the last few decades: that’s a different story. Disruption, in and of itself, shouldn’t be the driving goal of any given startup. Innovation is the goal. Disruption is the means to the end. And not all kinds of innovation are necessarily “disruptive.” Even the big kinds.

If founders and thinkers take away one thing from Lepore’s challenge to Christensen’s work, it should be that disruptive innovation is a theory. It is not the only theory people need to know, and it is neither universally applicable nor wholly actionable. The innovator’s Dilemma deserves a place on you bookshelf, but it shouldn’t be the only book there.

Niaz: Folks have long been waiting for the disruption of Hollywood. But Hollywood has been out of touch from the massive disruption for years. You have an interesting column on Slate, Why Hollywood Resists Disruption, where you compare the likeness of Hollywood to the Roman Empire, particularly that the Roman Empire did not actually fall but instead divided and dispersed. Can you please briefly tell us about Why Hollywood Resists Disruption? Do you feel your opinion is influenced by your experience at NBC and 20th Century Fox? What will be the outcome of massive disruption of Hollywood?

Jon: The analogy to the Roman Empire was a colorful and nerdy one, no doubt spurred by my inability, after all these years, to stop playing Rome: Total War or watching movies like Gladiator. But the analogy is this: Rome was a remarkably adaptable political organism. It was constantly shifting its boundaries, incorporating its former enemies, and bringing them into the fold. By the end of the Empire, Rome was so thoroughly, demographically changed that a “barbarian” of Germanic bloodline was leading its army against Germanic barbarians at its gates. Hollywood is similar in that respect: companies like Netflix have disrupted and shifted the borderlands, so to speak. Distribution of movies and TV shows and music is wildly different now, and none of it to Hollywood’s real benefit. But Hollywood has maintained control over talent, over means of production, over storymaking-to-filmmaking process—and has maintained an indispensable role in the process of creating and distributing entertainment to the masses. More and more people get their shows through Netflix, but Netflix’s shows are still made by Hollywood studios and Hollywood production companies, at Hollywood prices.

Here’s where things will get interesting: Hollywood owns very few of the the “last miles” in any of its consumer pipelines right now. Movie studios don’t own the major theater chains, at least in this country. They don’t own the customer relationships at iTunes, Amazon, Netflix, or XBox Live. TV networks still have a direct pipeline to viewers, but that pipeline is eroding or obscuring—fewer and fewer people watch their network programming on the networks themselves, at the appointed days, dates, and times.

And so Hollywood is at a crossroads. Should it abandon the fight for last-mile distribution, and focus entirely on creating and licensing content? If so, a lot of very big, very consolidated media companies are going to need to do some major restructuring. Should it keep up the fight for relevance in distribution? If so, studios or production companies will need to build a credible alternative to Netflix, iTunes, etc. HBO Go is a very interesting example, and I think its success will be a bellwether for the next few years. Already we’re seeing just about every network under the sun releasing its own “HBO Go” app. And consumers seem to be fine with that—an app for every network. But they’ll be fine with it up to a point. A future in which every network has its own app necessarily means that every consumer needs to keep track of which shows belong to which networks, and can be found on which apps. That’s a high cognitive load to bear, and it’s a consumer-unfriendly burden to impose. Consumers love convenience, and Netflix is very convenient. I don’t think an ecosystem of 20 different HBO Go-alikes is a viable, consumer-preferred alternative to Netflix. But maybe a handful of apps are. Apps differentiated by genre. Or subscription streams based on dynamics the major players aren’t thinking about today, like group subscriptions, or customizable subscriptions for only the shows you want, and not the stuff you don’t want.

I spent many years in Hollywood, working on primetime shows at NBC, Fox, and elsewhere. I think my time there gave me a deep appreciation for just how hard it will be to disrupt Hollywood, and at the same time, just how much disruption probably should take place. It’s a paradox, and to circle back to your earlier question, I wonder whether Christensen’s framework gives us any guidance as to how this will play out. Christensen’s work might argue that YouTube and Vine are changing the nature of entertainment content, and that inevitably, full-length, TV-style shows will fall to the wayside. And yet that’s not entirely true. Teenagers are probably watching YouTube and Vine to the exclusion of more and more TV-style programming. And yet, uber-premium TV programming like Game of Thrones and Breaking Bad are more relevant than ever before. Perhaps the middle is falling out this time, and we’ll live in a world with supergood content and superdisposable content. Nothing in between.

Niaz: You’ve spent a lot of time in the content business. We are now living in an exciting era of content creation, curation and distribution, where there is a popular belief that ‘content is king’. From hardcore tech companies to venture capital firms to social media companies to marketing companies to media companies …. everyone is actually into content business. Does that mean if you not doing content, you’re missing something really big?

Jon: “Content marketing” is having a moment right now. Everyone feels that adding something substantial to the conversation is necessary to winning business and maintaining credibility in whatever industry they happen to play in. Witness companies like Google Ventures, who are creating libraries of advice, content, etc., to their arsenals in an attempt to become better full-service providers to portfolio companies. Or companies like Priceonomics, whom I mentioned earlier—research companies that regularly publish accessible, in-depth, top-quality articles for anyone to read, regardless of whether they’ll be users of Priceonomics’s core services.

Some companies will get content marketing right, and many will embarrass themselves. The ones who’ll get it right will realize it’s a full-time task. It’s more than a full-time task. It’s a way of thinking. It’s an editorial sensibility. The folks at Priceonomics spend as much time writing, editing, and investing in their blog as they do their data-analytics services. If Google Ventures is going to fulfill its very exciting ambitions in the content space, it’s going to need to elevate content to the forefront of what it does, right alongside investing.

Content can be king, but if it’s going to be king for you, then you need to treat it like royalty. Take it as seriously as anything else. Don’t half-ass it. Bad content marketing is blatantly obvious to all who come across it, and it’ll actually hurt your company. Great content will do wonders for your company. But you’re going to need to commit to it and commit fully. If your company wants to do content marketing, then everyone at your company should be prepared to chip in every week. Including your CEO. Making world-class content takes a ridiculous amount of time and effort, and the bar for world-class will be raised in the years to come.

Niaz: You’re the co-author of a Harvard Business School case study on Netflix and its use of collaborative filtering technology to disrupt traditional models of consumer discovery and consumption of entertainment.With the massive entrance and existence of Google, Apple, and Amazon into content business, how do you think that will affect the future of Netflix?

Jon: To understand Netflix’s situation right now, it helps to understand HBO’s situation 15-20 years ago. HBO—the acronym stands for “Home Box Office”—started out licensing and replaying movies. That’s it. It was a distributor of movies shortly after their theatrical release, and before their home video release. And that was a brilliant business model in the days when windowing mattered a great deal, and there were few other ways to see movies after they’d left theaters. But HBO had to adapt as the years went by. Other networks popped up with similar business models. The DVD player came along and revitalized the home video market. The internet was starting to provide rough, but credible means for getting one’s hands on movies. Local TV stations were getting more aggressive about licensing first-run movies. And so HBO needed to create original content. It started with documentaries, then moved up the value chain to original, scripted series. And it focused a hell of a lot of money, time, and effort to ensure that it’s series were great. HBO’s executives in the early 1990s would hardly recognize the HBO of today, and vice versa. Today’s HBO is best described as a premium TV-show network, and not a premium movie-licensing network.

Netflix is in a similar situation. It got to where it is today by being the most convenient, optimized, consumer-friendly way to watch movies and TV shows. But networks and studios realized that Netflix was a threat to their business model, and they started threatening Netflix with higher licensing fees. Some pulled their content altogether. And so Netflix faced a choice: fight tooth and nail to be a commodity provider of everyone else’s content, or start developing exclusive, original content of its own. And it’s started to diversify its mix with the latter. The problem is, now Netflix is in the hit-driven business of TV development. It might spend $100 million on a show that flops. Or it might spend $100 million on a show that temporarily drives subscriptions and maintains customer loyalty, but whose run expires in a few years. Meanwhile, it’s still spending close to a billion dollars a year licensing everyone else’s content. Netflix’s operating costs are going to skyrocket in the years to come. At the same time, Netflix is still the most convenient and ubiquitous way for many, many people to get the shows they want to see.

Apple doesn’t seem to have the taste for developing original shows, nor do most analysts think it should. I’d probably agree (for now). Amazon has the muscle and the clout to compete with Netflix, but its efforts in the originals-development space have been lackluster to date. Friends within and without the company tell me it’s not taking development as seriously as it could. But that doesn’t mean it can’t, or that it won’t. Google is a very interesting dark horse. It owns the “low end” with YouTube, and that low-end will be very lucrative. Meanwhile, it’s building out its own infrastructure with Fiber, and its own platforms with Chrome and Android. All it needs to do now is shell out the cash on originals and on premium licenses—but we’d be talking hundreds of millions, and possibly even billions, to outcompete Netflix with Hollywood-quality programming. To date, Google hasn’t really shown the desire or the capacity to do that. It’s had a lot of false starts inking expensive deals with celebrities, writers, and producers—but very little has come of that. As I mentioned earlier, content is an all-or-nothing proposition. You’re going big or you’re going home. Google can go big, but it needs to go quite big, and I think it’s been a little scared of just how big “big” really is.

Niaz: I believe Apple’s purchase of Beats is a pretty big deal when we consider the integration of culture and creativity. We have seen both culture and creativity are at the heart of Apple’s whole ecosystem. At the same time, Beats will give Apple access to a different customer segment that is pretty huge not only for music but also for healthcare. I am excited to see some integration of Beats Headphone with Apple’s healthcare in near future. On the other hand, executives like Jimmy Lovine and Dr. Dre, will make Apple’s path a lot easier to play big game in content business. Can you please tell us about your ideas and takes on Apple’s purchase of Beats? What new innovations do you expect to see from the integration of both Beat and Apple’s ecosystem?

Jon: I wrote a bit about Apple and Beats in Slate recently, and the long and short of it is this: I think it was a smart buy. Apple needed a streaming service; it needed to diversify its customer base; it needed to establish credibility in the creative community and in Hollywood to place itself on competitive footing with Amazon and its other competitors, real or putative. And it gets some high-margin, bestselling hardware as part of the package. The icing on the cake is that Apple was sitting on a literal mountain of cash, partly because there are almost no great ways to get a respectable return on cash right now in any market. So this was a good, productive use of free cash.

How will Iovine and Dre get involved? A lot of people are speculating that they’ll start a sort of mini-studio within Apple, commissioning original content. That has never really been a focus of Apple’s, but it would be very interesting to see. The thing is, everyone needs originals right now. Everyone needs exclusives. Apple’s strategy, to date, has been to let its platform (iOS) be the soil in which developers plant and nurture the seeds. And I believe Apple will still operate a content business from that worldview. You won’t see Apple producing its own shows, but you may well see Apple shelling out serious money for exclusive distribution windows, or for first-look deals, or maybe even for first-run programming. But other people will make those shows for Apple. Apple won’t make them itself.

Niaz: Let’s talk about WWDC. Apple has announced iOS8 and OS X 10.10 Yosemite in WWDC 2014 in addition to some other major updates. With all these great new updates, it seems inevitable that they will be accompanied by larger screens on the iPhone, iWatch, and probably Apple TV later this year. What has fascinated me most is that Tim Cook has been able to transform Apple and make it his own in such a short amount of time. It seems like Apple is ready to kick start again with remarkable products and services. I have seen some hints of new product from Eddy Cue, Apple’s senior vice president of Internet Software and Services, at Code conference. What are you takes on WWDC? What do you think about all these new updates?

Jon: I was very excited by WWDC, and I would echo a lot of the sentiments coming out of the Apple blogosphere. I am very excited by the expansive platform potential of iOS. It could well become Apple’s Windows, ironically enough: a ubiquitous operating system that is embedded into, plays with, or powers everyone else’s hardware. The difference between the Windows era and the iOS era, of course, is that Apple is a hardware company—so any distributed ecosystem involving iOS would, by necessity, mean every other device merely uses iOS, but you’ll need Apple devices to control them all. Apple devices will be the hub, and everyone else will be a spoke.

Niaz: With the release of latest iPhone 5C, entrance in a new market, new openings of Apple stores globally, and overall performance in China and Japan, it seems like Apple is going truly global with massive scale. What do you think the future holds for Apple, a company with $600 billion market cap, $45.6 billion in quarterly revenue, and a 39.3 percent gross margin? Should they focus on becoming dominant in entertainment and communication or expand their products and services to other things?  And how will Apple’s competitors compete with this massive scale of product, service, content, and global distribution?

Jon: I mentioned how Apple envisions a future in which it’s the hub, and everyone else is a spoke. Well, that future is by no means assured. Google is putting up very credible competition. Apple is selling a remarkable number of devices in markets like China, and nominally speaking, it’s growing. But worldwide, its rate of growth might be slowing. So the question will soon become: how does Apple transition from its current growth model—putting an iDevice into everyone’s hands—toward a more mature growth model, capturing the value from all those iDevices in all those hands? Sooner or later, there will be a limit to how many device refreshes consumers will tolerate at Apple’s margins. That’s why Apple is getting increasingly serious about iOS as a platform, to ensure the continued necessity of iDevice refreshes.

It’s somewhat fashionable, once again, to look toward a future of slowed, or at least less explosive iDevice sales growth, and predict doom and gloom for Apple. I think that’s a simplistic view. Apple isn’t going anywhere. But it’s in transition. Apple is maturing as a company, and its mature business model is going to look more steady, more stable, and less notionally explosive than its model has over the last decade. I don’t think that’s a bad thing; it’s the aftereffect of so much success for so long. Apple has planted the world’s lushest orchard; now it’s got to make something of the fruit.

Niaz: As you know, the smartphone industry has been facing fierce head to head competition, and now Amazon is entering the ring with the release of Fire Phone. In a recent interview with the New York Times, Jeff Bezos, Amazon’s Chief Executive, asserts, ‘I think in the whole evolution of this [smartphone], we’re still pretty early’. Do you agree that Amazon’s arrival in the smartphone industry is pretty early when we have started imaging a world without any device like a smartphone? What is your overall evaluation on Amazon’s Fire Phone? How do you feel about its exclusivity with AT&T? Is it going to be huge? What further steps should Amazon take to compete with other smartphones?

 Jon: It’s important to place the Fire Phone not just in the context of the smartphone market, but also in the context of Amazon’s corporate strategy.

Let’s think back to the tail end of the last decade and the beginning of this one. Amazon is the king of ecommerce. It’s the world’s largest bookseller, and it’s a credible force—if not necessarily an undisputed leader—in movies, video games, music, and other entertainment categories. Along comes Apple with iOS, and eventually the iPad. Suddenly, Amazon is facing a serious threat to its book and entertainment businesses. So it releases the Kindle, a purpose-built book reader. It turns out that no one’s satisfied with a purpose-built book reader. A book reader is insufficient to compete with more feature-complete hardware like the iPad (and the emerging Android device ecosystem). So Amazon releases the Kindle Fire, a full-featured device. But that’s not enough. Amazon feels it needs a full mobile hardware platform. Hence, the Fire Phone.

There are some problems here, not the least of which is that nobody has been able to crack the Apple/Google stranglehold on the mobile device market in a serious way. Fire Phone, like the Fire tablet, might wind up a day late and a dollar short. At the same time, Amazon needs to do something. The future of books, games, movies, TV, and music is probably streaming or subscription services, and that’s all going to happen outside of Amazon—on other people’s apps and on other people’s devices—unless Amazon figures out a way to own the point-of-purchase customer relationship. So it’s trying to do that with hardware. I’m not sure that’s necessary; I think Amazon could do just as well positioning itself as the premiere shopping, streaming, and media consumption app on everyone else’s devices. But the present-day competitive landscape makes that very hard to do. Every hardware platform wants to own the point-of-purchase for content, too.

Jeff Bezos is probably the smartest CEO in the entire country, and high in the running for smartest in the world. He’s the most brilliant retail mind since Sam Walton. He may be the best pure businessperson of our generation. If anyone can figure out a way to crack this space, he can. But if he’s serious about hardware, he’ll need to figure out how to add something new and exciting to his hardware. Something exclusive. Retail is all about price, selection, and convenience. Hardware is still very much about razzle-dazzle. Amazon has never been a razzle-dazzle company. Amazon released the Kindle because it needed a reader. Amazon released the Fire because it needed a full-featured tablet. It can’t just release a phone because it needs a phone. Consumers need more than that.

But I agree with Bezos’s assertion that the smartphone market is still in its infancy. The best is yet to come. But Amazon will need to deliver the best—stuff we’ve not even thought of yet—if it’s going to make a serious bid for a place at the table.

Niaz: What do you think about the Future of Social Media? How things are going to evolve with Facebook and Twitter? We have text (Twitter), photos (Instagram), videos (Vine), and the combination (Facebook); what’s the next platform for social media? Should we expect additions to social media or the simplification/streamlining of it?

 Jon: Two major, semi-competing forces are going to shape social media in the next few years. The first is unbundling. Facebook, Twitter, and other players are going to put out, or buy, dozens of single-purpose apps and networks in an attempt to occupy as much real estate on your home screen as they can. Because they know your attention span is limited, and that the home screen is all-important. The second force is what I’ll call app fatigue, or perhaps more accurately, marginal app utility. There comes a point where people have more apps than they know what to do with, and hence, apps that get relegated outside the home screen are going to fall by the wayside. This creates a countervailing pressure to make your core app as relevant as possible, so that it maintains its place in the user’s daily mindset, and occupies the Fifth Avenue real estate that is the home screen, or better yet, the dock.

A lot of people mocked Facebook’s acquisitions of Instagram and WhatsApp, but Facebook is keenly aware that Instagram and WhatsApp are home screen apps for hundreds of millions of people. That’s why it hasn’t shut those apps down and integrated them into the Facebook app. Instagram is probably the single most important app to most young people’s lives, and Facebook would have been crazy to kill it or marginalize it. It will go down in recent history as the smartest acquisition Facebook has ever made, and the decision to keep it quasi-independent was a very smart move.

Niaz: As you have seen there are hundreds of sites, apps and platforms dedicate to content curation. What do you think about content curation? Are we going to have some kind of social media that’s exclusively dedicated to curation?

 Jon: Curation is increasingly necessary in a world with more content than we know what to do with. How do I sort through the pile? How do I find things I’ll like? As an app developer, how in the heck do I get my app in front of the people who’ll like it? Let me tell you: we haven’t even begun to see the future of curation. It’s an important one. Apps, content, and entertainment will be curated through all manner of interesting means: tailored or self-tailored subscriptions, influencers, collaborative filtering methods and other algorithms, tastemakers, lists, and category-centric curation apps.

If someone can become the Google search of the app world, or the Netflix of the app world, or even the New York Times book review of the app world, these are very valuable and very lucrative things to become.

Niaz: What do you think about Silicon Valley? Is it a mindset or something very special? Do you foresee Silicon Valley expanding or rather replicating in other areas around the world/country?

 Jon: Silicon Valley has succeeded because it’s Silicon Valley. That sounds tautological and circular. But it’s important to understand what makes Silicon Valley work if we’re to understand how other locations—or, as I think is more likely, how a more global, distributed system—can replicate it. Silicon Valley has several of the world’s leading technical universities situated in its back yard. It has received decades of investment and government support. It has an unprecedented concentration of risk-seeking capital. It has a feedback loop of successful founders and funders, each of whom plows money, connections, and expertise back into the system. And it has a big tolerance for exploration, for failure, and for dangerously innovative thinking.

Now, none of those things in isolation is sufficient to replicate the whole. But some of those things came from the others. A playbook for replicating Silicon Valley should start with capital, government support (but not government prescription), and top-tier university research and cooperation. In fact, I think it’s virtually impossible to recreate Silicon Valley in a single location in the absence of a world-class technical university. This is why you see the new Silicon Valleys—the ones that actually have a shot at replicating the entire SV ecosystem—springing up in fertile soil that has all the right characteristics, including strong academic systems. Places like Israel, for instance.

But in some cases, I think the race to rebuild, replace, or create anew Silicon Valley is a half-step. The new Silicon Valley will be a distributed ecosystem, powered by services like AngelList and FundersClub, in cooperation with universities and institutions, with distributed access to talent, capital, and mentors. Conventional wisdom holds that you need to concentrate all of these things in one place. I’d say that’s still nominally true, but it can be done virtually. What Amazon Web Services was to the server, so will distributed access be to geographic and physical concentration of the necessary resources.

Niaz: Any last comment?

 Jon: As a content person, and as an entertainment person, I’m always on the lookout for people trying new and exciting things in these spaces. I have no desire to “disrupt” Hollywood, but I have a strong desire to shake it up a little, and to direct its energies toward more forward-thinking and customer-centric means of creation and distribution. I’m always happy to chat with entrepreneurs in any space, but in particular, I’d love to talk to anyone and everyone thinking about this space. Feel free to hit me up anytime on Twitter (@jonnathanson) or via email (jonfnathanson @ gmail.com)

Niaz: Thanks a lot for joining and sharing with us your great ideas, insights, and knowledge. We are wishing you good luck for all of your upcoming great endeavors.

 Jon: Thanks so much for having me! I am a big fan of your interviews, and I am honored to have talked with you.

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Further Reading:

1. Horace Dediu on Asymco, Apple and Future of Computing

2. Irving Wladawsky-Berger on Evolution of Technology and Innovation

3. James Allworth on Disruptive Innovation

4. Gerd Leonhard on Big Data and the Future of Media, Marketing and Technology

5. James Kobielus on Big Data, Cognitive Computing and Future of Product

6. Viktor Mayer-Schönberger on Big Data Revolution

7. Ely Kahn on Big Data, Startup and Entrepreneurship

8. Brian Keegan on Big Data

9. danah boyd on Future of Technology and Social Media