Most industries are dominated by monopolies. How we enforce antitrust law explains far more than you might think.Photo courtesy of BP Miller.
My first monopoly was AT&T.
I lived on a commune until I was eight. We didn’t have toilets, but we did have phones. We didn’t own them. It was a commune, after all. But they were in our house and we got to use them.
When we reentered “normal” civilization, we still didn’t own our phones. AT&T did. This was 1984, the same year Congress broke them up. I was more confused than injured by their power. Capitalism was new to me. Every single thing in our house was ours, for the first time, except that one. We had to lease it from Ma Bell. Even weirder, the lines in our house were apparently not ours. (I mean. We were renters. But you get the idea.) We had to pay to attach other objects to ports in our own house.
This confounded me. “Some… outside company I’ve never heard of makes rules about what we have in our house?” Yes indeed.
Thankfully, it didn’t last. With five siblings, we needed but could not have paid for those extra phones.
My second monopoly was Microsoft.
They had complete dominance of desktop operating systems and software (the Office suite, plus Outlook/Exchange for email). I went to Reed College, so I exited school as a Mac user, in the middle of their dark days. In hopes of avoiding Windows I tried everything else: BeOS, Linux, Solaris, you name it. No matter how fast I ran, I was often stuck on Windows at work because, well, everyone was.
Microsoft abused its monopoly heavily and freely until being taken to court. Microsoft’s abusive behavior is usually discussed in terms of its effect on the web. But I’ll never forgive them for Outlook. It taught multiple generations of people to do email incorrectly. To this day, the average business user is incapable of having sophisticated discussions over email because Outlook trained them not to.
Ironically, Microsoft itself likely only exists because of Congressional antitrust action against IBM. The government eventually withdrew its case against Big Blue, but not before convincing it of the importance of leaving room for others.
The Paradox of Antitrust Choice
Kids coming up today are lucky. They have so many monopolies to choose from.
Of course, I don’t actually mean “choose”. You pretty much have to use all of them. Google for search, Facebook for social, Amazon for e-commerce and cloud infrastructure, and Apple for hardware and apps worth paying for.
Tech is absolutely rife with monopolies. (And monopolists.) But the industry itself is largely in denial about that. “We’re different!”
The last month has highlighted this. Congress has dragged the richest, most powerful tech founders and CEOs in to testify. More importantly, a Judiciary subcommittee has produced a huge report on concentration in the tech industry.
I’m going to focus on that last link, from Ben Thompson. He makes a throwaway comment:
consumer harm, which is the de facto standard for antitrust in the United States
The article itself is interesting and informative, as most of Ben’s writing is. But this small line shows that Ben is in a box that limits how he thinks about antitrust. And if he can’t see out, few others are likely to.
I think he should. I think you should. I think everyone should.
America doesn’t have a tech monopoly problem. We have a plain old monopoly problem.
Ben works hard to explain that the tech monopolies are natural because of what he calls Aggregation Theory. He implies this makes their monopolies more acceptable, even inevitable. He accepts there is abuse, but a very narrow definition of it. Even if his theory is sound (which I am not convinced of), it doesn’t explain the rest of the monopolies that plague us.
Something else does.
The “consumer welfare” standard is not the law
Ben is right that US antitrust law focuses on consumer welfare. That’s pretty much the work of one person: Robert Bork. His book, The Antitrust Paradox, successfully rewrote the history of American antitrust enforcement. Gone were concerns about competitive markets, or any discussions of the downsides of market power. Nope. If prices are low, it’s good. That’s it.
He didn’t get any new laws passed. He just convinced our country to enforce them differently.
Yes, consumer welfare is an important input in the laws themselves. But there’s far more to it, including a healthy focus on market power. Yet Bork managed to gut everything else with one book. (To be fair, there were a lot of rich and powerful people set who became even more so once he won.)
To be clear: The laws themselves have not changed. Only how we enforce them, within the government and the courts.
It is impossible to understand antitrust enforcement in our country without accepting this fact: We have strong antitrust laws and are choosing not to enforce them. They have been gutted by an extreme interpretation, and fifty years later, nearly every industry demonstrates the ruinous consequences.
Revisiting Consumer Welfare
Bork successfully reframed the downsides of market power, with a lot of help from the Chicago School of Law. But there have always been people fighting back.
Lena Khan produced the seminal work in this category, Amazon’s Antitrust Paradox. She lays bare how powerful Amazon is, and how useless consumer welfare is as a means of assessing monopoly abuse. Its impact has allowed her to carry the flag even further.
In particular, she was part of the team that ran that Judiciary subcommittee hearing, and produced the related report.
Yes, her argument - and thus at least partly, the argument made by Congress - is that Amazon and its peers have too much power, and they are abusing it to gain even more.
But more importantly, she’s arguing that you cannot have a conversation about market power without also talking about standards other than consumer welfare.
That’s what Ben Thompson (and Ben Evans) and all the other tech commentators need to understand.
The argument is not really whether one of these companies is a monopoly. It’s what standard we should use to assess their behavior.
Do we let Bork decide, and use a light hand and generally tolerate heavy concentration of power?
Or should we follow the original intent of the laws, focusing more on encouraging a competitive landscape and a market free from companies that are too big and too powerful?
The Tech Monopoly Minefield
Every tech founder I know builds their business around the reality of these monopolies. If you’re in e-commerce, your business is defined by the space Amazon leaves you. You don’t necessarily have to be on Amazon, but prepare to be attacked if you’re not. If you’re in social, you have to ensure Facebook doesn’t want your business. If you make apps, you can only make or sell them the way Apple lets you.
I expect most founders and investors don’t even realize how much we’ve given up on doing because of these monopolies (and all the smaller industry heavyweights, like Salesforce). We talk big about agile startups outwitting the big players, but… that only works if they can’t choke off your suppliers, outbid you for engineers, or take hundreds of millions in losses to destroy your company.
What could we build if we didn’t have to fear so many big players?
I’m still haunted by that AT&T phone we didn’t own.
I could not be happier that the government is finally revisiting our antitrust standards. And honestly, I’d rather they make mistakes in regulating the huge players than not regulate them all. We’ve seen what five decades of almost no action results in.
Like everyone, I love fast cheap shipping. But it’s not worth destroying independent retailers over. Honestly, I can’t stand using any of Facebook’s products, but maybe I could if they were stand-alone instead of part of a soulless corporation bent on domination.
I believe in the free market. But none of the markets I’m interested in are. They’re all dominated by players so large, so powerful, that our only choice is to work with or around them.
It’s long past time to get rid of the consumer welfare standard, and bring back to true antitrust enforcement.
Privacy expectations are changing. How will companies change with them?
Photo courtesy of Tobias Tullius
Change is coming to how tech companies handle privacy. Everyone is going to have to adjust, but new startups are caught in the middle: Be as useful as the companies built in the old world, while following the new rules.
Today’s dominant tech companies don’t care much about privacy. Many of their businesses couldn’t exist if people were careful with their data. Facebook only survives if people are willing to share widely and publicly. Google’s ad engines feed on reams of public data.
Privacy will matter far more to new companies. Google has taught companies the cost of sharing their data publicly. Consumers are slowly waking up to how pernicious Facebook’s data practices are. And the laws themselves are changing.
Regulation is already happening at the state level, and internationally. You might not want federal legislation, but state by state rules would strangle growth of new startups.
I know some say government can only create problems, not fix them. I am not so cynical. The creation of the EPA is a great example of government taking industry in hand and making the world better. I am eager for Congress to take privacy as seriously.
The Business of Privacy
But I’m not a legislator. I’m a builder. I’m more interested in understanding how people’s behavior will change, and what that means for the products I’m creating.
For some, the future of privacy is already here. DuckDuckGo is thriving (despite its silly name) on promises of providing great search without all the tracking. The Brave browser is growing for similar reasons.
But how big is this change? Will the average person in the next decade expect to retain privacy, demand companies respect their data? (I originally wrote “computer user” here instead of “person.” With the smartphone, there is no difference.)
Or will privacy concerns continue to be like security concerns have been for the past decade: the domain of the few, the nerds?
But it’s also a business question. What kinds of companies thrive in the current privacy framework? Will they thrive in ten years? What about a world with little privacy? Which companies might do better if people cared more about it?
It’s worth elaborating on what I mean by privacy. Google and Facebook have very different definitions, for example. Facebook’s business is built on promising as little privacy as possible, and delivering even less. They share your data with pretty much everyone. Google just uses your data internally. They don’t share your browsing history; they just use it to market ads.
There are far more companies out there like Google than Facebook. Everyone shouting “data is the new oil” is advocating for Google’s business model: Collect a ton of data and profit off of it. It might start as your customers’ data, but if you collect enough it, and tie it all together, it becomes your data.
By policy, these companies (usually) care more about privacy than Facebook does. They rarely sell or share your data. This is better. But privacy isn’t restricting data to only a few trillion-dollar companies. It’s sharing my data with people, not companies.
It’s instructive to look at one company offering less privacy today than in the past: Microsoft. In the old days, all of my documents sat on my computers. My email ran through servers run by corporate. Microsoft could never have gotten to any of them.
Now it’s all “on the cloud.” What does that mean? Microsoft has it. They might not be sharing it with others, but they’re certainly looking at it. Oh, maybe individuals aren’t. But their programs are.
This can be good. Usage data can help vendors improve their software.
But mostly, it’s bad. These promises of better software tend to be hollow. I don’t want better ads. I don’t want your algorithm picking what I see. And I certainly don’t want machine-learning recommendations based on a statistically average user.
People are beginning to see the downsides of handing all of their data to companies. They know that Facebook, Google, Microsoft, Apple, and Amazon have too much power. They are changing their privacy expectations. Not just the nerds, but average people.
But how much? How fast?
The Cloud Conundrum
Privacy in the modern era is a special quandary. The cloud is pretty great. No synchronization. No management. Easy sharing.
No one wants to give that up. Yet today, cloud usually brings severe privacy compromises.
Do I try to build without the cloud, enabling more privacy, and try to compete with what might be less functionality? Or do I build on the tools everyone else uses, where a lack of privacy means there’s little limit to what I do?
Is there a world where you get all of the benefits of centralization, of the cloud, of being online, but don’t have to sacrifice your privacy? Can you be in the cloud, but keep your own data instead of letting a company put it all into one bucket?
I think so. For many cases, I don’t even think it will be that hard. It will just require thinking differently. It will require new answers, maybe slightly harder ones. But not whole new forms of math or science. Something attainable and reasonable today.
As a founder and investor, there still might be big downsides. It might mean you can’t be the next Google. The next Facebook. Or even the next Salesforce.
It might be that a company is worth less if it does not exploit your data.
What if ethical, privacy-conscious companies stay small, and unethical privacy-destroying companies get to keep growing? There is precedent. Prior to the creation of the EPA, an industrial plant would be committing fiscal suicide to spend money reducing pollution.
I worry about this. I’d sure love to see better behaved companies get rewarded with growth. But that’s certainly not the world right now.
Of course, this is partially why we need new regulation. The rules need to change. There was a time when big business just dumped all of its waste in the local rivers. It was cheap. Why should they care if it killed people and ecosystems? Gotta protect shareholder value! But then the rules changed. Nixon (!) created the EPA, and now we take it for granted that industrial players are forced to protect the air and water at least a bit.
The rules will matter less if enough people change. If you stop buying from companies who abuse your data, they’ll stop doing it. If the next Facebook can’t be built off of your data, then someone will need to find a new way - and hopefully a better one! - to meet your needs.
But maybe those businesses won’t be quite as big. Or get there quite as fast.
Are you ok with that? Is that a reasonable trade off?
It is for me. Facebook didn’t make me a billionaire. I’m not at risk of some other data-centric company making me rich. I’m not investing in companies that collect and exploit your data.
But a lot of people are. A lot of our industry is built on the idea that access to this data is good. Many companies could work without it, but choose not to.
Take the smart home, for example. My smart thermostat is in my house with me, right next to my phone. On the same network. But how does my phone configure it? Not by talking directly! No. My phone contacts cloud services, which then contact my thermostat. Why? Partially because it’s easier. But mostly it’s about data.
There’s no chance Google would have bought Nest for $3.2B if that data weren’t available.
Maybe Nest would be a better company if it were more concerned with making better devices instead of extracting our data. But I don’t think Google would be as excited about that other company. Investors like the multiples that all that data gives them. And product people like what the data allows.
Like industrial effluent, this data is toxic. Dangerous. I’m afraid of what’s being done with what leaks out. I’m afraid of all of the bias. I’m afraid of businesses built on my lack of privacy, my lack of boundaries.
My Bet on Privacy
My new company assumes people will care more about privacy than they have. I expect I’m giving up some long-term potential by doing so. There are things we can’t do as a result. Things that our competitors might find easy to do.
But we’ll be able to make promises no one else can. And we’ll find new ways - hopefully better ones - to solve our customers’ most important problems.
Even writing this frightens me a bit.
I’d love to believe that promising privacy would make my company more valuable, make it easier to raise money. I know it will make it easier to hire people.
Some users will choose us specifically because of our privacy model. But how many? And will it be enough?
The limitations of mobile devices perfectly complement the strength of the cloud, as foretold by Sun Microsystems two decades ago: Your computers will be weak and hold no data, and the servers will be powerful and store everything. They were just wrong about what form those weak computers took (and, of course, who would be selling the servers).
I obviously love the benefits of mobility, of having an amazing computer in my pocket and having access to the world’s information pretty much wherever I am. And there are many capabilities we take for granted that you just could not provide without large central collections of data that the cloud enables.
But many of the changes in our tech landscape are accidental outcomes of cloud + smartphone. I regret them. And I want to fix them.
One of those big changes is the demise of the document.
You might think, no, I still have documents. I mean, yeah, I used to have Microsoft Word documents, but now I have Google Documents. Right?
No. The content you have in Google Docs is stored in a big database. Sometimes, when they choose to, you can treat it like a collection of documents. But it’s not.
This is pretty obvious when you try to use Google Drive. Compare using documents there to a Dropbox folder full of Word (or Pages1) documents. One comfortably exists in a world of folders, hard drives, and file systems, and the other just feels…. not quite right. That’s because Google Drive is wearing the camouflage of a filesystem, but it’s a database in the back end, and the truth leaks through. We’re not fooled that easily.
It starts with a miserable user experience, but doesn’t end there. Because Google is storing all of your data centrally, you need their permission to use it. This is new.
Until the smartphone and cloud took off, Microsoft had a comprehensive monopoly in digital documents, in text, spreadsheets, and presentations.2 To participate in business, you pretty much had to own Office. Their position was so strong they built a Mac version just to prop that platform up enough for it to look like a viable competitor. The market just didn’t see an OS as competitive without office.
But lo and behold, times change, and now you want all of your files online. Google wants to help you do it, and just happens to have a couple of fancy features you couldn’t (at the time) get without uploading everything. Real-time collaborative editing is actually pretty sweet.
Microsoft worked for years to prevent other apps from reading their documents, but they seem to have stopped that at some point. I don’t know if they just gave up the arms race, realized they had already won so it didn’t matter, or actually felt the need to reduce their market power. But by the time Google acquired Writely and rebranded it as Google Docs, it wasn’t that hard to read these docs separately. This was a massive boost for Google (and theoretically smaller companies, but it didn’t turn out that way).
After all, all the docs you care about were right there, on your computer. You didn’t need to ask Microsoft for a copy; you did not have to export them, wondering what data was included and what was kept back. And the form you’d send to Google is the exact form you’d send to anyone else, via email or on a USB drive. Their ingesting of all of your critical data was pretty easy as a result.
But in 2019, things are very different. Want all of your data from Google Docs in the next new company’s fancy web app? Step 1: Export. That’s right. You have to ask Google to give your data. Because, and I hate to belabor this, you don’t have it.
Then your fancy app needs the ability to import the special arbitrary 100% proprietary format Google exports in. It’s true that some apps might allow you to skip this step: They’ll authenticate directly to Google and slurp your data down. But just like when Facebook shut down data access for Twitter and other competitors after building its own network by copying data from Friendster and others, Google will only tolerate this kind of integration when they don’t feel threatened.
You need their permission, their tolerance. Given their use of monopoly power to weaken Yelp, among many others, you can be sure they’ll have no qualms about quashing a budding competitor by making this hard if someone gets close.
So here we have two analogous situations, with almost identical data, but in one case you have your data, and in the other, you’ve got to ask permission for it. There are downsides to each, but there’s no argument they’re different.
Note that this isn’t really a question of data “ownership”. Google would probably argue that you do actually own your data, as might Facebook. You just can’t access it in a useful way.
I’m thrilled that the cryptocurrency/blockchain communities are driving a conversation around data ownership, but it’s still disappointingly naive. This concept runs up hard against the reality that digital copies are free, and it’s basically impossible to prevent people from copying data you’ve given them read access to. Conversely, “ownership” means nothing if I can’t get all - and I mean all - of my data in a useful form.
What they need to talk about instead is rights. Realistically, I can’t own my birthday. Would that be a copyright? Trademark? Patent? Of course not. It’s just a fact, and facts can’t be property. But we all know that my birthdate matters.3 I need the ability to prevent you from, say, publishing it widely, or using it in combination with other facts to impersonate me. These are legal rights, not aspects of ownership.
I miss the rights that documents gave us, now that we no longer have them. Because these rights were implicit, a consequence of the technology reality at the time, we did not even know we were giving them up. But we’ve got to fight now to get them back.
The first thing you can do is be conscious of this when you choose your tools. All life is a compromise, and sometimes it’s the right answer to give up rights for functionality. But many apps are functionally equivalent, yet make vastly different choices about your rights.
As one example, I recently migrated away from Evernote, because their business model is shifting to a focus on businesses, which, well, I am not. It was a nightmare. Even though everything in my Evernote notebooks was either a text file or a PDF, I couldn’t export literally a single thing as text or PDF. Well, that’s not true. I could export each individual item that way. But not the whole collection. My choices were HTML or a proprietary format. It took hours of manual work, and a lot of it I just dumped in a folder, never to look at again unless disaster strikes, because it wasn’t worth it.
Compare that to what I’m replacing it with: Keep It (as of today, anyway). I’m sure I’ll give up some features to pick it, but, ah, I haven’t found any yet. And all the files I put in it? They’re just - hold on to your seat, folks - files. I can open that directory on my Mac. I can add things to it. I can remove them. Then I can see them in Keep It. If I stopped using it tomorrow, I would have to, um, add the files to something else. Or use the Finder, or Dropbox, or something similar.
It’s obvious that Keep It respects the document, and they see their value as adding functionality on top of it, rather than subsuming it in some way.
This should be the gold standard. You should be able to adopt an app that gives you functionality, but does not take away rights.
In the age of documents, apps like Microsoft Word could try to curtail your rights, but other developers would be on your side trying to give them back. In the age of the cloud, and the smartphone, you don’t get that option. You no longer have rights, you have “permission”, with a side of binding arbitration.
I don’t think we can go back to the era of documents on a disk. But it’s worth looking back and asking: As we’ve gained so much, what have lost?
And then demanding that our software providers begin to give some of that back.
Although even Pages, and all of Apple’s productivity apps, weaken the definition of a document, because they use bundles instead of a single file. ↩
Look, I have to say it: You’re weird. Even if I don’t know you, I’m confident: Somewhere, maybe lurking deep inside, something about you is just not right. I don’t know what, specifically. For all I know, you might be one of those weirdos whose particular strangeness is just how authentically normal you are. shudder.
This might be insulting to you, calling you weird. It happens a lot: I think I’m complimenting someone and they get all huffy. Conversely, people are often afraid I’ll be hurt when they shyly let me know that I, ah, don’t really fit. Don’t worry; you’d need to know me a lot better to successfully offend me.
Society is not a huge fan of weirdness - I mean, the definition is pretty much, “does not fit into society” - and it trains you away from it. We’re social animals, so you probably do what you can to conceal, or at least downplay, anything different. It makes sense. It’s a basic survival mechanism.
I know I do it. I can’t hide everything - some stuff just can’t be covered up - but I can usually skate through a conversation or two before people back up a step and give me that funny, sometimes frightened, look. Being on the west coast helps; I’m a little less weird here than I was in the south. It probably also helps that I cut my mohawk, and the spiked leather jacket and knee high boots stay in the closet now.
I’ve written a bit about my struggles to balance authenticity and fitting in. I think it’s important to call out it out, because those who experience this struggle rarely have the luxury of admitting it. I’m lucky enough in multiple ways that I can be up front about it now. But resolving this conflict matters for more than psychological reasons. Our own goals usually require that we learn to embrace our weird. Not just grab on to it, actually, but really live in it. Inhabit it.
That weirdness is how we win.
This is easiest to show in investing. We have a natural tendency to do what is proven to work, but that is only assured of getting “market” - in other words, mediocre - returns. If you study the best investors, they’re all doing something that seems weird. Or at least, it did when they started. The first people who paid to string fiber from NYC to Chicago to make trades a couple milliseconds faster were considered pretty weird, but they knew the truth: Normal behavior gets normal returns, anything more requires true weirdness. (Well, or fraud. There’s always that if you’re afraid to stand out.)
It’s the same way in life. You can’t say you want something different, you want to be special, but then follow the same path as everyone else. “I’ll embrace what makes me special just as soon as I get financial security via a well-trodden path to success.” Oh yeah. We definitely believe that.
There’s a nice sleight of hand you can do, where you can say you’re doing something different, but really you’re a rare form of normal. The first few doctors and nurses were really weird. Those who recommended you wash hands before surgery were literally laughed at, considered dangerous crackpots1. But now? Most people become a doctor in pretty much the same way. Being a doctor is normal now, even if it’s not common. That’s probably good.
But what if your job is innovation? What if you’re whole story revolves around being different? Can you still follow a common path?
Because that’s what too many entrepreneurs today are doing: Trying to succeed at something different, by doing what everyone else is doing.
I mean. Not literally everyone else. But close enough.
It starts out innocently enough. There aren’t many people starting tech companies at first, and boy howdy are they weird. Someone makes a ton of money, all their weirdness gets written up - “hah hah, see how he has no sense of humanity but is somehow still a billionaire?” - and now we’ve got something to compare to. Hmm. Well. We can’t consistently duplicate Jobs, Gates, Packard. But if we tell enough stories enough times, we find some kind of average path through them. Ah! Enlightenment!
Now that we know what “most” people do, we can try it too. I mean, we have no idea if the stories about those people have anything to do with why they succeeded, but why let that get in our way? Conveniently, every time it works we’ll loudly claim success, but silently skip publishing any failures. Just ask Jim Collins: He got rich by cherry-picking data in Good to Great to “prove” there was a common path to business success. It turned out to have as much predictive value as an astrological reading, and is just business garbage dressed up in intellectual rigor, but that doesn’t seem to have hurt him.
The business world keeps buying his books. They need to believe there’s a common path that anyone can travel to victory. Otherwise, what would they sell? What would they buy?
Obviously this doesn’t work. There is no standard playbook to winning an arms race. Once there’s even a sniff of one, people copy it until it doesn’t work any more. This is pretty much the definition of the efficient market hypothesis: There’s no standard way to get above-average results. Once Warren Buffet got sufficiently rich as a value investor, so many people adopted the strategy that, well, it’s hard to make money that way. Not impossible, but nowhere near as easy as it was fifty years ago.
Of course, you can go too far in being weird. There has to be something in your business, in your strategy, that makes you different enough that you just might win. But adding a lot of other strangeness for no good reason worsens already long odds. The fact that Steve Jobs did so well even though he was a raging asshole, even to his best friends, made his success just that much less likely. Most people are a bit more like Gates and Bezos: Utterly ruthless in business, and caring not a whit for the downsides of their success, but perfectly capable of coming off as a decent person whenever required.
I’m rarely accused of being a world-class jerk, but I don’t pass the smell test as normal for very long. Jim Collins might say maybe if I were more pathological I would have succeeded more. With Jobs and Musk as examples, it seems reasonable, right? In truth, it’s just as reasonable that I would have done better by dropping out of Reed College, like Jobs did, rather than foolishly graduating from it. Think it’s too late to retroactively quit early?
Yes, you have to learn to love your weird, but it shouldn’t be arbitrary. You can’t realistically say that you’re going to rock it in business because you’re addicted to collecting gum wrappers from the 50s. I agree that that’s weird, but is it usefully so? Being a jerk is weird, and bad, but it’s not helpfully so. And really, dropping out of college isn’t that weird for someone in Jobs’s financial position at the time. It’s only if you have a bunch of money that it seems so.
I recommend you take the time, think deeply on what opinions you hold that no one else seems to, what beliefs you have that constantly surprise you by their lack in others. What do you find easy that others find impossible? What’s natural to you, but somewhere between confounding and an abomination to those who notice you doing it?
Those things aren’t all good. And in many cases, you’ll need to spend your entire professional life managing their downsides, like I have. But somewhere in that list is what sets you apart, what gives you the opportunity to truly stand out. They’re the ground you need to build your future on.
Unless you just want to be normal. In that case, I don’t think I can help you.
This is an amazing example of sexism. The doctor’s wards had three times the fatality rates of the midwife wards, but of course, they were doing nothing wrong at all. ↩
I am a tool junkie. I love the effortless balance of a well-known chef’s knife, like my hands know what to do all on their own. Heavy usage builds callouses and tunes muscles, its usefulness evidenced by scuff marks and changed infrastructure. Failure leaves blisters or even hospital visits in its wake.
A good tool proves its utility. Knives slowly shrink with sharpening, work pants thin, machines need oil. If they don’t, you’re either not maintaining your tools, or barely using them.
This wear is proof of your usage. They should be scratched. Dented. Aged. Patinas should be acquired from the shop, not factory treatments. Their callouses should pair yours. Tools can not be precious. They’ll just live on a shelf, then retire to your attic. You should seek that perfect middle ground, where you spend enough money that your kids can inherit them, but not so much that you are squeamish about giving them a job.
Tools only deserve the label if they help you work.
You might say I have strong feelings about them. I’m assuming this love led to my focus as a software entrepreneur on helping people people work. Or maybe my experience with tools in the physical world led me to seek them in the digital world, learning to make what I could not buy.
Given my tool fetish, you’d think I’d have a solid grasp of what I mean when I use the word. Apparently, not so much. I was recently pulled up short by a simple question, asked by Jordan Hayles of the Radical Brand Lab: What do you mean by tools?
What do you mean, what do I mean? It’s a simple question, right? The above text gives one example, but I would have thought I could answer it in a bunch of reasonable ways, none of which seem terribly controversial.
But the more I explored, the less simple the question became.
I’ve been describing my goal as building power tools for people. This phrase comes from my time building houses with my dad, and ‘power tools’ just meant the things you plugged in. You know? Because they needed power? It’s a common usage, maybe the word choice here did not mean much.
Except… I’ve spent more than a decade learning product management, describing myself as a product-oriented founder, managing that function in a growing company, and attempting to teach it to others. Yet here I am ignoring both the term and the field entirely. Why am I so quickly dumping my work of the last ten years? Is it just creative branding? Cynicism about my industry?
Why not power products? That’s a motor boat of alliteration: ‘power products for people.’ Awesome, right?
Ok, maybe not.
Product management as we know it began in the consumer goods industry. You’re handed a train car full of dish soap and told to sell it. You’ve got to package it, set pricing, convince a local store to carry it, argue with them about location, move it away from competitors, all that. Every product you see in your local grocery store is loved by a product manager who fights for its shelf space, believes it is beautiful, and wants you to give it a good home.
Product management can also be used for evil. Laser printers had toner cartridges you could just refill. Not very clean, but cheap and reliable to run once you plonked down the cash for the expensive printer. Modern inkjet printers instead use disposable cartridges. To sustain profit margins in a rapidly commoditizing industry, manufacturers started putting rules in place on the cartridges: You had to buy them from the manufacturer, they had to be replaced every year, you could not refill them, you could not print in black and white if any color cartridges are empty.
That’s good product management. Well, it’s evil, but you know what I mean. It’s effective. We’re talking big-B revenue effective. Hmm. A moral distinction begins to reveal itself.
These are examples of companies forcing their business model onto their customers. There’s no difference between the dish soap sold at retail and the one sold in bulk, yet they’re separate products, differentiated through packaging, shipping needs, and labeling. You pay much more for the retail package than the wholesale one, primarily because the business model behind them is so different.
But when I think of a tool, these complications are missing. When I use a hammer, it just has to fit my hand and smash stuff. When I pick up my drill, it works with every bit I own, regardless of the logo. The battery and charger are proprietary, but the vendor’s most visible role in my life is color choice. My yellow drill works just fine with bits from the blue or green companies. (You probably visualized brands by my just mentioning colors. That’s still effective here.) It does not matter whether I bought the drill from Home Depot or inherited it from my dad; once in my hands, it just works.
I think this begins to answer the question of what a tool is.
It helps you do your job, without your worrying about the vendor’s needs.
I know that DeWalt and Mikita need to make money to sell me a drill, but I don’t think about it when I’m using their tools. Even after more than two decades without one, I can comfortably recite that “my” hammer is the Estwing 22oz waffle head with a straight claw1, but none of those details mean I need the vendor’s permission to hit a nail with it. I make a decision about the right tool, I buy it, I use it. End of story.
It is small. If you call something a tool, not a product, you’re saying it’s less, it’s not as complete a solution. This can be belittling, insulting, but it does not have to be. It’s also a statement of independence. Of freedom. Of, and this is going to sound crazy, compatibility.
Products have an implicit, ongoing dependence on their vendor. If that’s me, I love it: I want you to pay me all the time, not just once. That ongoing relationship is how I afford to keep improving what I’ve built for you. This can be a great way to ensure we have a long-term, sustainable partnership. But it’s not always a healthy relationship. The more you have to deal with how I make money, the worse the experience is for you.
I think this is what I like about tools. They’re self-contained. Independent. Using them is fundamentally pragmatic, not a lifetime commitment.
That independence has downsides for me as a vendor. You don’t get any of those delicious growth-hacker buzzwords. Your product isn’t “sticky”, there’s no “moat.” Those are examples of my customers being constrained by my business model, and their absence means revenue is harder to build, to protect.
One might argue I’m better off because treating my customers with more respect makes a better business in the long term, and I’d probably agree. This kind of respectful partnership should deliver higher returns than one that traps and mistreats its customers. I think this is often the right answer, but it’s not a popular one. It’s harder to get funding, to get off the ground. I might be accused of not “wanting to build a real company,” or I might have Silicon Valley’s most dire insult hurled at me: “That’s just a lifestyle business”.
Tell that to Adobe. Or AutoDesk. These are great tools companies. They are the behemoths we know today because they knuckled down and solved their customers’ problems. They worried about that, rather than how they could extract maximum revenue over time. It was a different time, but people have not changed.
I don’t think that every product is compromised when the vendor’s needs show up in the customer’s life, but I think most are. Some of it is laziness, shoring up product limitations with business model innovations, but a lot of it is strategy, recognizing the value of painting your customer into a corner.
Honestly, some of it is just survival. A lot of those inkjet printers are unaffordably cheap, but buyers care only about cost, not value. Some markets are intrinsically dysfunctional, with users and vendors slowly killing each through bad deals and cynical behavior. But as a vendor, I get to make a choice about what markets to play in, and how to work with my customers.
I am a simple person with a simple dream: I want to build something that helps someone work. I have to make money while doing it, because that’s the nature of the job, but I’m more interested in my customers’ work than my own. I know I need a business model, a go-to-market strategy, a plan for growing and supporting my business. But my customers should not need to care about that, should they? If they like what I’m building, they should be able to buy it, and use it. And tell all their friends how great it is. They should not wake up one day to find they’ve accidentally gotten married to me.
I just want to build tools. And I’m proud of it.
We told with great pleasure the (most likely apocryphal) story that this hammer was illegal in Florida because the metal haft could cut your thumb off. ↩