Volume 102: A future made by design.
1. A future made by design.
tl;dr: A prediction from the Nostradamus of Business, aka NoB.
OK. So, I’m not generally in the business of making predictions. Because, as I’ve pointed out many times, the only thing we can predict with absolute certainty is that humans are consistently awful at predicting the future.
But, a few things I’ve predicted have come to pass. I first wrote about brand purpose in 2009, and we know where that ended up. Around that time, I also predicted that digital advertising would become a subset of sales rather than marketing, which played out. And finally, I predicted that marketing automation would be transformative, just not necessarily in a good way. And that also panned out (basically, the more you can automate, the more spam you can execute because the cost of doing so essentially drops to zero. Cough, email marketing, cough, cough).
Anyway, since I have selective memory and have conveniently forgotten all the predictions I made that failed, I now get to present myself to you as the Nostradamus of Business (NoB for short). So what does this NoB think comes next?
First, let’s quickly look back to look forward. In the run-up to the dot com crash of 2000, there were a bunch of speculative businesses - remember Boo.com or Clickmango - that collapsed spectacularly. This was often because the vision outstripped the available infrastructure, while others - Google, Facebook, Amazon - went on to thrive, often because they were building the infrastructure as they went. We then went through 8 years of consolidation until the 2008 financial crisis drove interest rates to zero. We didn’t know then, but zero percent interest rate policies (ZIRP) were about to fuel another huge speculative bubble in tech, where profitless businesses, often with negative unit economics, became the norm. And while WeWork was the poster child for this speculative nonsense, Uber is perhaps the most salient example of a huge non-tech tech business (it’s a taxi company) using technology to scale negative unit economics into a business that’s never likely to make a profit. (Although its CFO has a great future as a fantasy fiction writer.)
Behind all of this free-money-fueled speculation, however, there was an unprecedented and transformative shift in the infrastructure of the Internet. A shift, I believe, is the foundation for what happens next.
Because businesses like Boo.com couldn’t exist if the infrastructure to support them didn’t exist, we spent over twenty years investing heavily in engineering as a driver of competitive advantage, which ultimately metastasized into where we are today: A world built by engineers.
But, as the old saying goes, “the seeds of future destruction are sown in today’s successes.” In other words, will engineering continue to drive competitive advantage in a future where the infrastructure has largely been built, or will it fall back toward being a commodity again?
As a metaphor for this future, let’s compare Netflix with Disney. For Netflix to be Netflix, it had to build everything necessary to deliver streaming, which required a boatload of technical staff and resulted in a heavily engineering-driven culture. Disney didn’t need to build this same infrastructure; it just had to plug it in. Disney isn’t an engineering-driven culture; it’s an IP and consumer experience-driven culture. So, who’s going to win?
I like Netflix very much, but it’s clearly floundering, unlike Disney. What’s most apparent as they throw shit against the wall in the hope that some of it might stick is that the engineering and data-driven culture of Netflix is holding it back. Fundamentally this is not a creative company; it just threw a lot of money at storytellers who were.
Its UX stinks, its content discovery is awful, its data-driven stories are unwatchable, its foray into gaming is a bust, it’s playing at experiences and merch, it’s now making cheap and lousy reality TV just like the networks, and it’s about to do the brand harm by launching an advertising-driven tier. (Which is the laziest monetization strategy possible. This isn’t innovation; it’s the equivalent of an airline charging baggage fees) And, all the while, it burns through CMOs like my dog goes through chew toys.
One of the things the great Roger Martin says is that data can only get you so far. By definition, it’s backward-looking, and no amount of agile engineering fiddling around the edges will change that. His view is that the key to great decision-making lies in the imagination: Specifically the ability to picture something new and different that will change the trajectory of the business.
I think he’s right but on an even bigger scale. Imagination will define the future in a world where the infrastructure has already been built. This means the competitive advantage driving business skills of tomorrow likely won’t be technical, won’t be software engineering, AI, or data-science, or anything like that. Instead, it’ll be those with the imagination to piece a myriad of components together into a compelling experience for which people are willing to pay good money. In other words, we’re likely leaving behind a world that engineering built toward a future that design will make.
Just think of all the experiences that need superior design rather than superior engineering. Try buying ads on Facebook. There are pages and pages to wade through on targeting and almost nothing you can do with the actual ad. Or look at Shopify, which I don’t think has ever hired anyone who understands retail to work on its product. Or any banking app, which all look and work exactly the damn same, or the broader shift toward digital utilitarianism, which is a sure sign of the hand of engineering on the tiller. Or literally anything in healthcare, which remains the land that design forgot. I’ll just leave that there.
But, and it’s a big but, we need to get out of our own way first. Stop shooting our own feet off. Stop wallowing in the crumbs left by engineers and calling it a meal.
In order for design to transform business, it must first transform itself. It must leave behind the language and mindset of engineering. Get past scalability and extensibility. Systems and components. Agility and usability. Usefulness and seamlessness. Efficiency and friction. Data and metrics. Patterns and code. It’s impossible to be the force of imagination if the language you use forces you to think along straight lines and across grids.
We must also leave behind our obsession with small problems and even smaller solutions. The kerning doesn’t matter when we’re thinking bigger about business and more broadly about society. And we need to fear less about what other designers might think of our work in order to be more fearless in expanding the scope across which that work can happen.
And finally, we must stop doing boring shit and pretending it’s transformative. There’s nothing transformative about minimal utilitarianism. There’s nothing transformative about an experience without any aesthetic qualities to speak of. There’s nothing transformative about an idea without imagination.
So, yes. The future will likely be a world made by design. But it won’t be made by any old designers. It’ll be made by those few who stand apart. Who choose to question the way things are. Who apply their skills to big business problems. Who step out from under the thumb of the engineers. And fundamentally, those that stop worrying about what other designers might think. Because design, to its long-standing detriment, remains a deeply conservative field of the small-c variety.
But these designers will come. And I literally cannot wait. And to quote my 14-year-old son, “LET’S GO!!!”
2. Lying cheating cheaters gonna cheat.
tl;dr: Accountants fined for cheating & covering it up.
OK. So there are loads of things corporations do that could become an Onion headline, but it’s rare that one does something that’s literally an Onion headline. Until now.
Because EY (formerly known as Ernst & Young), one of the “Big 4” accounting firms trusted to verify the accounts of our largest and most important publicly owned corporations, just paid a $100 million fine for their accountants systematically cheating on…wait for it…their ethics exams. And then the company tried to cover it up.
Ha ha ha ha ha. Oh, my God. I’m crying here. I’m laughing so hard. This is just so ridiculous. If it weren’t so serious, I’d be laughing even harder. What’s frightening, though, is they’re not alone. This cheating scandal follows a previous case by KPMG in 2019. And PwC was recently fined in Canada for doing exactly the same thing.
And that’s the point I really want to make. As the old saying goes, power corrupts, and absolute power corrupts absolutely. When any industry concentrates down to just a few players, those few players obtain massive power. Oligopoly is the economic term for any market where only a few players matter. And oligopolies of the powerful tend toward bad behavior. Just look at the oil majors, the tobacco companies, big tech, or the airlines as just a few examples.
So, let’s drill into the Big 4 accounting firms for a second. As I mentioned, this is an oligopoly trusted to audit the financial records of publicly traded corporations. Their work is extremely serious. Trillions of dollars of market value depend upon what they say being true. Yet, these firms appear riddled with scandal and incompetence. Let’s look at a few examples.
The Public Company Accounting Oversight Board (PCAOB), a joint US/UK pseudo regulatory board, stated in 2019 that the big four screwed up public company audits about 30% of the time. Sometimes leading to fines. For example, in the UK, KPMG was fined for falsifying documents after Carillon’s collapse and for failures in their audit of Rolls Royce. A couple of years earlier, Deloitte was fined for audit failings following the collapse of Autonomy, and PwC were recently fined for their shoddy auditing of UK construction firms. And EY, again, is currently being investigated in Germany for its failure to identify fraud at Wirecard.
The above was from a 2 minute Google search. Unfortunately, their fraudulent and incompetent behavior is so systemic that I don’t have room to list every example. However, according to Good Jobs First, since 2000, EY has had to pay $165m in fines for accounting fraud and related offenses, KPMG $91m, Deloitte $68m, and PwC $49m. (They’ve all been fined much more than that overall; I’m just focusing on accounting fraud). Now, I’m going to guess that these are only the examples where they were caught red-handed, so this may be the tip of the iceberg relative to everything that happens.
So, when put into the context of such systemic issues, accountants cheating on their ethics exams and their employer covering it up doesn’t seem even remotely out of character.
Worrying for the Big 4 is that their scale, power, and seemingly systemic ethical issues are leading to louder and louder calls for them to be broken up. A call that started in the UK then spread to Germany, and which a current SEC investigation might soon support. This investigation asking whether there are conflicts of interest in providing consulting, tax, and other non-audit services by firms that also act as independent auditors. (Let’s cut to the chase, of course there’s a conflict).
So, while it’s fun to laugh at accountants cheating on ethics exams, the implications of this and other bad behaviors are potentially severe. It might just lead to them being broken up. Which, of course, sounds good until you realize the profit potential. Recent reports of a pending IPO suggest EY partners might reap as much as $8m each.
I’m in the wrong damn business. Should’ve become an accountant. An easily bought look-the-other-way unethical one.
3. Blessed are the liquid, for they shall inherit the earth.
tl;dr: FTX sweeping up crypto exchanges for pennies on the dollar.
As I’ve written before, Crypto might be one of those situations where two things are true simultaneously. It might be exactly the kind of fraudulent Ponzi scheme the naysayers say it is, and it might be just as revolutionary as the true believers believe. We simply don’t know yet.
What we do know is that the past few months have been a crypto bloodbath. And, because of opportune timing on the fund-raising front and conservative cash management, FTX is looking like the biggest net gainer, using its liquidity to snap up competing crypto exchanges for pennies on the dollar. The most noteworthy thing being, of course, how truly fantastical VC-driven private market valuations have become. Highlighted with great clarity by BlockFi, valued at $4bn just a few short months ago, now on the block for a sum reputed to be as low as $25m.
Of course, while crypto exchanges were melting, stablecoins collapsing, crypto-centric hedge funds folding, and used Rolex prices falling, we still had to listen to Gary Vee hyping NFTs as the great disruptor of advertising at the Cannes Festival of Creativity last week. Oh my God, please just kill me now.
You’d think that as the fraudulent and shady world of NFTs literally fell off a cliff that perhaps this kind of talking head boosterism would’ve let up. But nope. Apparently, consumers don’t engage with advertising (tell us all something we’ve never heard before, will ‘ya), but we’re all going to save our artistically designed one-of-a-kind NFT gig tickets. Or something. Because, of course, everyone will want that NFT collectible from when you went to see Duran Duran arthritically stumble around the stage. But, what I really want to know, is how you found out about that gig in the first place? I mean, come on. Gary Vee has been full of shit for years, but this takes the biscuit. Only he could conflate a niche opportunity in digital collectibles with something that will “disrupt” all of advertising.
But of course, this brand of non-ironic boosterism can mean only one thing. And it didn’t take long to find. Gary Vee owns an NFT company. Because as sure as the sun rises in the East and sets in the West, any advice from Gary Vee will line his own pockets first and foremost.
But while the Gary Vee brand of bullshit-hucksterism fits right into the crypto landscape, he appears positively normal relative to the odd and scary you find at its heart. The publicly weirdest, and definitely the one with the most HR-related lawsuits in his future, is Jesse Powell, CEO of crypto exchange Kraken. In a bizarro document entitled “Kraken Culture Explained,” he recently laid out a set of “crypto cypherpunk libertarian values,” and well. It’s a doozy.
To save you the time, I read this hateful screed of drivel masquerading as an amusing guide to the company so that you don’t have to. Here’s the cliff-notes version: We’re libertarian white men, and we’ve had it up to here with your DEI bullshit. So check your woke privilege at the door because your identity doesn’t matter. From now on, you will give everything in pursuit of The Mission. Oh, and if you’re offended by any of the horrendous shit we might say to you in pursuit of The Mission, that’s on you, snowflake.
As an aside, there’s a particular hypocrisy rampant right now, where certain people claim that it’s a perfectly reasonable privilege for them to offend anyone else whenever, and howsoever they please. But then have such thin skin that even tiny things, like someone asking to be called they instead of him or her, seem to trigger an immediate frothing meltdown.
Anyway, the only good thing about reading a document that’s so icky I had to shower afterward is that:
I now know never to do business with Kraken, and
A whole array of workplace discrimination lawyers are literally salivating at the possibilities.
Anway, FTX. Here’s a thought. If Kraken finds itself in the shit, don’t bother bailing it out. It just ain’t worth it.