First I’ll briefly describe the books, then go over some of the consequences of their theses for the global economy, and then move onto what this has meant for IT in the last 30 years. Specifically, I got interested in why the DevRel position has arisen, and what it means for IT in general.
Richard Baldwin explains our modern civilization’s economic history and future based on three key economic constraints:
- The cost of moving goods
- The cost of moving ideas
- Cost of moving people
The first industrial revolution (1820-1990) removed the need for physical proximity for viable trade in goods (the ‘first unbundling’). This led to the ‘great divergence’ of wealth between nations, as large production centres became key wealth generators for countries that could take the ‘comparative advantage’. Baldwin also characterises this historical turn as ‘globalising local economies’: production microclusters (ie large factories) rose in significance due to the ease of moving goods vs the difficulty of moving people and ideas. The big winners of this era were steelmakers, for example.
Baldwin dates the ‘second unbundling’ of the cost of moving ideas to 1990, and equates its significance to the original industrial revolution in terms of its impact on the global economy. The need for physical proximity for the movement of ideas and skills was removed due to enormous changes in communication technologies. Baldwin characterises this as ‘globalising factories’. The big winners of this era are information traders, such as Google and Facebook.
To illustrate the significance of the change, he cites a few interesting facts I wasn’t aware of, such as that the share of rich nations’ wealth to global wealth is now back to where it was in 1914 (and declining), falling as the Internet has grown.
Note that the G7’s dominance is a blip compared to China and India’s long-standing supremacy.
The third industrial revolution around the cost of moving people is yet to come. It’s still expensive to move people around to do their jobs (think of the highly trained surgeon, for example, or political leader), and although the cost of moving a person has dropped along with the cost of moving goods, it’s still an enormous constraint, as people are conscious beings who need hotels, food and and other conducements to travel that inert materials do not. Baldwin points out that change may be coming here, and is already seen in smaller ways. He cites telerobotics (eg remote surgery), or holographic conferencing, which is prohibitively expensive (and probably unreliable) at the moment, but could become significantly cheaper as its supporting technologies improve.
Some interesting facts cited along the way
The Newcomen steam engine (which went into commercial use in 1712),
pumped water out of coal mines that had previously required 500 horses
Between 1986 and 2007, world information storage capacity grew at 23 percent per year, telecommunications at 28 percent, and computation power at 58 percent per year
The value added by manufacturing has been reducing and reducing.
Of the $2bn value of iPhones, $0.2bn comes from manufacturing
The Albert Bridge was entirely constructed in the 19th
century in England, and shipped to Adelaide for assembly
This book is similar to the first in that it makes an observation about recent history and extrapolates consequences from that. In this case that intangible value has become more and more significant for the economy over the last decades.
Intuitively, this is fairly uncontroversial. Whereas 100 years ago physical assets were a central part of every major business (think big steel, the car factory, the tool-maker, the oil company), the biggest companies now include many who primarily own intangible assets. For example, in 2006, Microsoft’s $250bn market value contained only $10bn of physical assets. And ‘only’ $60bn of it was cash or financial instruments. The remainder is intangible value: brands, software, service capabilities etc.
The book argues nimbly that intangibles differ significantly from traditional business assets in four key ways:
- Scalability (costs nothing to reuse, say, an idea or brand)
- Sunkenness (once you’ve invested in an intangible, it’s hard to move or repurpose it)
- Spillovers (if you have an idea, others can easily use it or recombine it with other ideas)
- Synergies (putting ideas together than create significant further value with little cost)
They also differ in other more concrete ways. Intangible assets are hard to account for, leading to some interesting accounting nuances. For example, if you invest in a brand, it seems that the value of that investment can not be turned into an asset value within your business accounts. However, if you buy someone else’s company and their value is partly intangible, that’s written down as ‘goodwill’ on the company accounts. This creates some interesting consequences discussed later.
GDP also has an ambivalent relationship to intangible assets. Many types of intangible asset don’t figure in GDP calculations. If intangible investment and production is becoming more and more the norm, then this may go some way to explain why G7 economies appear to be doing relatively badly compared to so-called ‘developing’ nations that show year after year of strong GDP growth.
Some other interesting facts gleaned
Edgar Rice Burrows acquired a trademark for Tarzan in the 1920s.
The beginning of movies’ obsession with building intangible but legally defensible IP
rather than, y’know, drama of any discernible quality
(I’m looking at you, Star Wars and Marvel)
Mickey Mouse’s copyright is due to expire in 2023, which might explain why Disney don’t invest in him
In 1961 , the world produced $746bn through agriculture.
In 2009, $2,260bn, an output rise of 203%, far more than population growth (~130%).
In 1961 world had 4.46bn hectares of land under cultivation; in 2009, 4.89bn (+10%)
‘Peak horse’ happened around 1910, 80 years after introduction of the first railway
Amazon warehouse workers walk up to 15 miles per shift
Henry P. Crowell’s invention of Quaker Oats in 1879 required a strenuous
advertising campaign to convince consumers that the food was not horse fodder
Consequences For Economies
Some of the consequences of these books’ theses will not be surprising. Obviously, improved communications has increased the viability of remote working, and increased the already-existing trends towards offshoring significant parts of the value chain.
Also fairly obvious is that the most successful companies trade more and more on their intangible value. A social network is almost purely an intangible enterprise (and partly explains their fragility as businesses). A car-sharing business’s value is almost entirely composed of intangible property such as its brand and its software.
Even an old-fashioned heavy goods manufacturing business like Tesla has a significant amount of intangible value via its brand and the Musk halo effect. This helps it trade far above the values the raw production and sales figures suggest, as well as attract key staff and customer loyalty.
More subtly, these books suggest that these trends encourage the loosening of traditional working bonds. If you’re not constrained to work for the local factory owner due to your location, but can easily move your labour to anywhere in the world, then the power relationship between leader and led is very much altered.
By the same token, however, your boss is no longer dependent on their business’s physical location either. Rather than owning an effectively immovable plant and depending on people in the local area to supply labour, they can freely source labour across the world wherever it may be that has a usable internet connection.
The end result of this is an even more fluid relationship between employer and employed than has existed in the past. The success of this relationship will depend far more on leadership than management, where management is ‘telling people what to do’, which leadership is ‘motivating people towards a goal’. Indeed, relative mentions of ‘leadership’ over ‘management’ in the Harvard Business Review show that talk of ‘leadership’ is growing much faster.
If ideas and skills can be moved easily, then collating and harnessing those skills becomes more important. If skills are more and more mobile while being in demand then ‘telling people what to do’ is going to be less and less what businesses do. ‘Telling people what to do’ has traditionally been called ‘management’ – think of Taylor and his time and motion studies.
Exchanging Leadership For Capital
If leadership (as opposed to management) is now at a premium, then we would expect to see businesses exist to build up that intangible asset and exchange it for capital. And that’s exactly what we do see.
For example, many small technical consultancies get eaten up by larger-scale businesses simply because they have mind-share in a particular area. This, despite the fact that those businesses might not even turn a profit or even show any promise of doing so in the future. Just having that credibility is enough. In other words, their intangible value exceeds their book value.
Perhaps the most obvious example of this was virtualization behemoth VMWare’s purchase of various cloud native businesses in recent years. I won’t comment on any of these business’s specific profitability prior to purchase, but suffice it to say that I’m informed that some of them were made offers that were difficult for their owners to refuse given their book value…
The DevRel and Public Validation
All these things taken together explain something that had mystified me until recently: the rise of the DevRel role. I don’t even know how to formally state it: a ‘developer relations expert’, or ‘develop relationship manager’, or what? Commonly it’s just known as a ‘developer relations’ role (so ‘DevRel’ for short), and formally defined (by a quick google search, natch) as ‘a marketing policy that prioritizes relationships with developers’. But it still makes no grammatical sense to say ‘I am a Developer Relations for X’.
Anyway, a DevRel is a bridge between internal knowledge and external consumption of that value. In other words, it’s a sales role, albeit with a different focus. DevRels frequently get wheeled out to demonstrate technical competence to potential customers (at the low end), or as travelling rock stars (at the high end) to demonstrate credibility, or just dazzle the client with star power.
This is similar to the old ‘pre-sales’ role, but the twist is that the value DevRels bring is demonstrating publicly-validated credibility through conference talks and social media followers rather than demonstrating that an enterprise system can be integrated to your org with a little effort in a few days as a proof of concept.
There’s also some interesting parallels with traditional salespeople here. While the old salesperson was partly valued by the contents of their private Rolodex, the DevRel is valued partly by the publicly-validated status of their profile. Their public profile serves as a kind of ‘proof of credibility’ system for establishing their credibility (I have to physically resist mentioning ‘blockchain’ here…).
It’s hard to fake followers on Twitter these days. You have to either cheat and risk getting thrown off – which has become harder lately – or just show up and engage positively for a long, long time. It’s also difficult to get a reputation as a conference speaker by faking it.
In other words, technical leadership is becoming a publicly-tradeable commodity that in turn gives a company credibility to sell. You may begin to wonder: what value does a company actually have if good marketing can even be an intangible proxy for another (arguably less) intangible product (software expertise)? As in many industries, it’s becoming increasingly difficult to explain to people what it is you actually do, a situation sent up in a radio show recently:
I don’t really know where these trends are going, but it be just a matter of time before there are courses on gaining technical credibility in the marketplace, just as there are courses on marketing and PR now. Maybe there already are…
If you liked this, then other posts about books I’ve read might be of interest: