For aggregating audiences and eyeballs, nothing works so well as giving services away for “free.” Sergey Brin asked the crucial question early in Google’s history: “How does the strategy change if the price is zero?”2 The answer turned out to be: “We win the entire market.” In 2014, Google summoned Jeremy Rifkin to its lecture series to sum it all up. He heralded a “zero marginal cost society.” Under the new regime, the price of every incremental good and service, from search to software, from news to energy, will plunge toward “free” as every device and entity in the world is subsumed in an Internet of Things, where exponential network effects yield a new economy of leisure and abundance.3 Rifkin assured his audience that it is indeed a Google world.
But not only is “free” a lie, as we’ve seen, but a price of zero signifies a return to the barter system, a morass of incommensurable exchanges that the human race left behind in the Stone Age. You pay not with money but with your attention.
Above all, you pay in time. Time is what money measures and represents—what remains scarce when all else becomes abundant in the “zero marginal cost” economy. Money signals the real scarcities of the world concealed in the false infinities of free.
Larry Page’s burning ambition in starting Google, according to Doug Edwards, “Google Employee Number 59,” was to “stop the world wasting his time.”4 He may well have succeeded by now, save for the occasional subpoena from an officious regulator somewhere. But for the rest of us, all the free stuff leads to transactional tricks and traps: offers of only rarely desired subscriptions automatically renewable, spurious prizes, bonuses, and jackpots, with new pop-up or pop-under perils at every step.
It’s the “Free World,” and it is reaching past your wallet, spurning your earned money, to seize your time—which is actually your life.
Slowly but surely the advertising model is decaying. According to a 2014 study quoted by Needham & Company’s Laura Martin, over the past seventy years daily media usage has doubled from five hours to ten hours per person. Free porn is both a vessel and a symbol of the addictive properties of free stuff. Meanwhile, ads delivered per person have remained stable at around 350 per day. Ads viewed per hour of media use, including print media, have dropped by half. In a world of digital devices, people are learning to cancel, mute, or avoid advertisements that they do not want to see. As soon as the next generation of innovators creates a new payment and security model, this trend will accelerate.
While I was researching the economic effects of Google’s preoccupation with “free” goods, Jonathan Taplin revealed in Move Fast and Break Things that Google owns five of the top six multibillion-user Web platforms and thirteen of the top fourteen commercial functions of the Net, and yet it collects less than 5 percent of its revenue from final customers.5
Beyond the suppliers of ads that no one wishes to see, Google’s main role is intermediator. Although Google’s list of business principles leads off with “The customer comes first,” Google has few end customers at all. Beyond the coddled purchasers of its ads, Google’s customer base is tiny compared with Amazon’s, which unlike Google was never shy about collecting money.
A blogger called Daniel Colin James came to my attention through a post on my Telecosm Lounge message board. Writing at a blog called Hacker Noon—“where hackers start their afternoons”6—James has cogently documented Google’s advertising vulnerabilities. His revelations begin with Apple’s decision late in 2015 to introduce an ad blocker in its iPhone. This was a major blow against the online strategy of “aggregate and advertise,” which was widely alleged to be Google’s path to permanent near-monopoly. Since the iPhone is the source of some 75 percent of all Google’s mobile ad revenues, Apple’s move struck at the heart of Google’s mobile strategy. Beyond its free, open source, “sharing-economy” Android platform, Google’s response did not arrive until a year later. Then it chose deceptively to copy Apple.
Google’s industry-leading advertising Analytics tools apparently revealed that its users liked the idea of blocking ads. Customers come first, so in its Chrome browser, Google introduced its own ad-blocker. Google’s angle was that its blocker would apply only to ads condemned by the Coalition for Better Ads. In other words, since Google’s ads were famously discreet and camouflaged, it announced it would block the ads of flagrant, garish, or slaphappy rivals. James speculates that this action might be illegal for a search engine.
As James recognizes, for the online unwanted ads industry, ad-blocking is ultimately suicidal. Between 2015 and 2016, he reported, ad-blocking rose 102 percent, with 16 percent of smartphone users globally using the technology. In the United States—the source of 47 percent of Google’s revenues—25 percent of desktop and laptop users were auto-deleting commercials. Leading this movement were youthful cohorts coveted by advertisers. As James notes with some relish, only 0.06 percent of smartphone ads were clicked through. Since more than 50 percent of the clicks were by mistake, according to the surveys, the intentional response rate was 0.03 percent.7 Acceptable chiefly for spammers, this result cannot be part of Google’s plan.
At the same time that Google was cagily capitulating to anti-ad sentiment, it was offering its YouTube users a taste of ad-free nirvana, dubbed YouTubeRed. A devout YouTubeRed user, I can attest that it is a revel—a truly lavish offering of “life after television” for $9.95 a month. I am an addict, and I wish that Google were adequately compensating its content suppliers. But it is not. The world’s largest streaming music site, with a 52 percent share, YouTube pays only 13 percent of all music streaming royalties. Google faces intense competition from scores of vendors of streaming video for pay. In this field, Google is just another player, experiencing the slings and arrows of real price discovery.
James’s second key point is that while pure info-search is still dominated by Google, commercial search—intentional searches for products to buy—is shifting dramatically to Amazon. By 2017, Amazon had 52 percent of the product-search market, and its gains were accelerating; Google languished at 26 percent. Viewers who wanted to buy something were beginning their searches with Amazon. The Seattle giant could actually sell it to them—with one click, no less—rather than leading them to the product with an ad followed by a rigmarole of passwords, user names, CAPTCHAs, EULAs, and credit card bumf. Amazon’s reviews, spurious though many presumably are, are simply more trusted than Google’s paid ads and intermediations. Why not?
This success followed Amazon’s coup in cloud services. Although Google by all measures commanded the world’s leading cloud deployment, somehow Amazon defeated them in marketing cloud services by 57 percent to 16 percent as of 2017. This advance in collecting money from real customers must have been baffling to Google. It fought back, as it normally does, with a stream of YouTube speeches and technical presentations demonstrating the superiority of Google’s cloud offerings, its global SQL reach, its facile user interfaces, its instant responses, its MapReduce, Hadoop, and “Spanner” big-database schemes, its massive fiber deployments and world-spanning data centers, its idealism, its tech conference éclat. But somehow when people had to choose a cloud service, they were turning not to Google but to Amazon Web Services. Who would have thunk it?
Google, meanwhile, under its new CEO, Sundar Pichai, pivoted away from its highly publicized “mobile first” mantra, which had led to its acquisitions of Android and Ad Mob, and toward “AI first.” Google was the recognized intellectual leader of the industry, and its AI ostentation was widely acclaimed. Indeed it signed up most of the world’s AI celebrities, including its spearheads of “deep learning” prowess, from Geoffrey Hinton and Andrew Ng to Jeff Dean, the beleaguered Anthony Levandowski, and Demis Hassabis of DeepMind.
If Google had been a university, it would have utterly outshone all others in AI talent. It must have been discouraging, then, to find that Amazon had shrewdly captured much of the market for AI services with its 2014 Alexa and Echo projects. It launched actual hardware to bring AI to everyone’s
household in the form of elegantly designed devices that answered questions and ordered products while eschewing ads.
Amazon’s edge, once again, was attributable to its not fearing customers. Google had applied its AI tools to the unseen back end, where it targeted ads and analyzed responses to them. It took a full two years to respond with household devices that copied Amazon’s. But there was a deeper problem. Both Google’s mobile-first strategy and Amazon’s Alexa turned the industry toward voice-accessed AI. Voice access largely nullifies Google’s search-ad dominance. Barking voice ads into a search stream differs radically from inserting decorous text amid thousands of responses to a textual search request. This was a retrograde strategy harking back to the world of radio in its death spiral. Here more and more ads were needed to prop up a dwindling supply of content, and the chief winners were charismatic un-Googly talkers, such as Rush Limbaugh.
Now Google Assistant is winning plaudits as the best of the speech recognizers, and LG has enlisted it for all ninety of its home appliances. Pioneering voice in the Internet of Things, Google and LG envisage people confiding their inner ids and desires to their washing machines, ovens, refrigerators, gas ranges, heating-and-air-conditioning systems, dishwashers, and lighting panels. No longer will Google be restricted to data about online purchases. When Amazon’s Whole Foods loads up the refrigerator, Google will know. It hopes to use these data to enrich its advertising systems and escape the problems of voice ads in the Google Assistant stream. But if people don’t want ads in their search results, YouTube videos, and news streams, they won’t want them in their dishwashers either.
The most important effect of free, though, is not avoidance of liabilities to real customers. It is escape from the challenges of security. Who wants to steal free goods? If the vast bulk of your product line is free, you avoid many of the real time demands of preventing hacks and thefts. You rarely have to establish a ground state and defend it. Indeed, in a stream of free goods, the chief hacker is Google and its insidious ad-insert hocus pocus. Google can post cavalier assurances on its websites that place the burden of security on the customers. “If you see something say something,” implies Google, echoing the TSA’s feel-good strategy, chiefly designed to shift the responsibility to the “customers.”
This very lack of concern with security, however, will be Google’s undoing. For every other player on the Net, the lack of security is the most relevant threat to its current business model. The problem will be solved. Some thousands of companies you’ve never heard of are investing billions right now in that effort. Collectively they will give birth to a new network whose most powerful architectural imperative will be security of transactions as a property of the system rather than an afterthought. So fundamental will security be to this new system that its very name will be derived from it. It will be the cryptocosm.
CHAPTER 5
Ten Laws of the Cryptocosm
Google’s security foibles, its “aggregate and advertise” model, its avoidance of price signals, its vertical silos of customer data, and its visions of machine mind are unlikely to survive the root-and-branch revolution of distributed peer-to-peer technology, which I call the “cryptocosm.”
Today, all around us, scores of thousands of engineers and entrepreneurs are contriving a new system of the world that transcends the limits and illusions of the Google realm.
In the Google era, the prime rule of the Internet is “Communications first.” That means everything is free to be copied, moved, and mutated. While most of us welcome “free” on the understanding that it means “no charge,” what we really want is to get what we ordered rather than what the authority chooses to provide. In practice, “free” means insecure, amorphous, unmoored, and changeable from the top.
This communications-first principle served us well for many years. The Internet is a giant asynchronous replicator that communicates by copying. Regulating all property rights in the information economy are the copy-master kings, chiefly at Google.
In this system, security is a function of the network, applied from the top, rather than a property of the device and its owner. So everything rises to the top, the Googleplex, which achieves its speed and efficiency by treating its users as if they were making random choices. That’s the essence of the mathematical model behind their search engine. You are a random function of Google.
But you are not random; you are a unique genetic entity that cannot be factored back into an egg and a sperm. You are unbreakably encrypted by biology. These asymmetrical natural codes are the ruling model and metaphor for enduring security. You start by defining not the goal but the ground state. Before you build the function or the structure, you build the foundation. It is the ultimate non-random reality. The ground state is you.
Utterly different from Google’s rule of communications first is the law of the cryptocosm. The first rule is the barn-door law: “Security first.” Security is not a procedure or a mechanism; it is an architecture. Its keys and doors, walls and channels, roofs and windows define property and privacy at the device-level. They determine who can go where and do what. Security cannot be retrofitted, patched, or improvised from above.
For you, security means not some average level of surveillance at the network level but the safety of your own identity, your own device, and your own property. You occupy and control a specific time and space. You cannot be blended or averaged. Just as you are part of a biological ledger, inscribed through time in DNA codes and irreversible by outside power, your properties and transactions compose an immutable ledger. Just as you are bound in time, every entry in the cryptocosmic ledger is timestamped.
The second rule of the cryptocosm derives from the first: “Centralization is not safe.” Secure positions are decentralized ones, as human minds and DNA code are decentralized. Darwin’s mistake, and Google’s today, is to imagine that identity is a blend rather than a code—that machines can be a singularity, but human beings are random outcomes.
Centralization tells thieves what digital assets are most valuable and where they are. It solves their most difficult problems. Unless power and information are distributed throughout the system peer to peer, they are vulnerable to manipulation and theft from the blenders at the top.
The third rule is “Safety last.”1 Unless the architecture achieves its desired goals, safety and security are irrelevant. Security is a crucial asset of a functional system. Requiring the system to be safe at every step of construction results in a kludge: a machine too complex to use.
The fourth rule is “Nothing is free. This rule is fundamental to human dignity and worth. Capitalism requires companies to serve their customers and to accept their proof of work, which is money. Banishing money, companies devalue their customers.
The fifth rule is “Time is the final measure of cost.” Time is what remains scarce when all else becomes abundant: the speed of light and the span of life. The scarcity of time trumps an abundance of money.
The sixth rule: “Stable money endows humans with dignity and control.” Stable money reflects the scarcity of time. Without stable money, an economy is governed only by time and power.
The seventh rule is the “asymmetry law,” reproducing biological asymmetry. A message coded by a public key can be decrypted only by the private key, but the private key cannot be calculated from the public key. Asymmetric codes that are prohibitively difficult to break but easy to verify give power to the people. By contrast, symmetrical encryption gives power to the owners of the most costly computers.
The eighth rule is “Private keys rule.” They are what is secure. They cannot be blended or changed from on top any more than your DNA can be changed or blended from above.
The ninth rule is “Private keys are held by individual human beings, not by governments or Google.” Private keys enforce property rights and identities. In a challenge-response interaction, the challenger takes the public key and encrypts a message. The private responder proves identity by decrypting, am
ending, and returning the message encrypted anew with his private key. This process is a digital signature. By decrypting the new message with a public key, the final recipient is assured that the sender is who he says he is. The document has been digitally signed.
Ownership of private keys distributes power. The owner of a private key (ID) can always respond to a challenge by proving ownership of the identity of a public address and the contents of a public ledger. Thus, in response to government claims and charges, the owner of the private key can prove his work and his record. By signing with a private key, the owner can always prove title to an item of property defined by a public key on a digital ledger.
The tenth rule is “Behind every private key and its public key is the human interpreter.” A focus on individual human beings makes meaningful security.
How will your experience of the world change when these ten rules define the new system?
Google is hierarchical. Life after Google will be heterarchical. Google is top-down. Life after Google will be bottom-up. Google rules by the insecurity of all the lower layers in the stack. A porous stack enables the money and power to be sucked up to the top. In life after Google, a secure ground state in the individual human being, registered and timestamped in a digital ledger, will prevent this suction of hierarchical power.
Whereas Google now controls your information and uses it free of charge, you will be master of your own information and charge for it freely. Try the Brave Browser of Brendan Eich, formerly of Mozilla and the author of JavaScript. It gives you power over your data and enables you to charge for them.
Whereas Google envisages an era of machine dominance through artificial intelligence, you will rule your machines, and they will serve you as intelligent, willing slaves. You will be the “oracle” that programs your life and dictates to your tools.
Life After Google Page 5