The living dead.

The living dead.

I have written more than once that innovation becomes destructive if there is an obstacle between supply and demand. When something (as happens in the world of rented houses, or taxis, or places of sociality) is between demand and supply, demanding a heavy tax to allow the two to meet, is on the black list of innovation.

The absurd thing is that, when this happens, everyone makes the same mistakes. When those who live in a position income discover they are under the attack of innovation actors, they always react in the same way. And he is condemned to death.

I see three death row inmates on the market. Banks, telecommunications, social networks and television. I'll talk about the latter in a separate post.

And in all three cases, they are playing the same comedy of stupid reaction, even if they are in three different stages of the death sentence. The death sentence, from the condemned's point of view, takes place in three phases:

  • Maybe I can avoid it if I can handle the process well.
  • I was convicted, but maybe they will accept the appeal.
  • The hangman is waiting for me, but if a miracle happens, maybe I'll be saved.

When they are in the first phase, the actors behave as if the decision were still to be made. As if the advance of artificial intelligence in the world of finance could be stopped, the banks continue to say "but without us you cannot stand, there is no alternative". The world of banks believes that there is no alternative to the bank, and that at most it will be a matter of cutting down branches (like Unicredit) or cutting off the employees responsible for managing portfolios (Deutsche Bank). In reality, the bank itself is to be renounced. If we examine what a bank does, we find that today it sells the work of some relational software that runs on a mainframe. In fact, they are obsolete clouds that offer a database service to financial actors. Nothing unbeatable, and Revolut is just the first example that comes to mind.

But the concept is that the existence of banks is based on a regulatory barrier between those who own the money (savers and companies in financial assets) and those who ask for money (those who ask for loans).

Same thing for telcos. They are still in the phase in which they say "but there is no alternative to us", without realizing that they are living on the inefficiency that lies between the supply of frequencies (normally sold by the state) and the demand for frequencies.

If you can't make your city WIMAX network (thus satisfying ~ 90% of the communications between users) it's not because the technologies are missing, it's because there is a gigantic ineffectiveness in the frequency assignment process. If you had a fast and efficient city-wide frequency segment, you wouldn't pay tens of euros a month to stay on the net. You would have a local ISP covering the city, and since 90% of communications take place between A and B in the same city (so the location of services on mobile phones works so well), you would be fine.

Since the process of selling the frequencies is inefficient, then only the telcos take them, so nobody can open a mini-ISP on a city scale.

The telco market is based on a regulatory barrier between those who would like passband (including users) and those who offer it (carrier and status, in the case of frequencies).

The same applies to the social network market. The question that satisfies is that of a place of free sociality, or of negligible cost. If you want to leave home with friends, to say, what you have to do is go "somewhere". But if you examine carefully what is "somewhere", you will find that "being with friends" costs you, and a lot. There are no longer any social places for adults who are also free: whatever you do with friends, it has costs. The same can be said of the costs of the so-called "dating": if an adult wants to meet people hoping to find a partner, he can choose between clubs, gyms, hobbies to play in special clubs and associations, which have considerable costs. Moreover, there is a very strong regulatory system for which it is no longer possible to use public places except for transit. Anything that may arise in a public place, including a game of ball among kids, is now forbidden. If our generation could think of going to play football in a square or in any public place, including small gardens, today it is impossible to organize such a thing due to a regulatory system that allocates public places for the transit of people who go to go shopping or eat something in some place, or to people who are traveling in a car.

On the other hand, there is more than one regulatory barrier to building online social networks in Europe. This is a legal facility concerning the construction of these services. If Facebook had been born in Europe, the regulatory system would have forced it to make itself available to the police, and being a local subject it would have been overwhelmed by injunctions to remove this and that, and by lawsuits about possible damages. Therefore, there is a very strong regulatory system that hampers the birth of social networks: remember that in Europe it is not possible to do anything without being able to guarantee the law enforcement interception, which happens today about 5% of traffic (one in twenty).

Social networks exist thanks to the existence of regulatory and lobbying barriers, which lead all city spaces to be no longer usable for free social networking, and to a regulatory framework that prevents a European social network from existing without being targeted from countless and asphyxiating legal obligations. To understand: nowadays BBS would not only be illegal, but even criminal under different profiles. If there are still some, it is only because it is a very marginal phenomenon.

So the first phase is the one in which the actors say "let's go ahead, so you have no alternative".

The second phase comes when the alternatives become visible. Then these companies decide to move on to the second phase of the false sense of security. This is often the long tail of the first "the regulatory barrier protects us". As the past regulatory barrier protected them, when a technology overcomes the regulatory barrier these actors delude themselves that the regulator will make new barriers.

The management of the banks is aware of their conceptual obsolescence. They know very well that anyone who can build a crowdfunding system could easily give credit to companies. They know very well that any startups making a deal with a credit card circuit could become a second-generation bank, like Revolut. They know very well that anyone with IT experience can put up a transactional system capable of doing the job of a bank.

They know they are doomed and know well that they have no chance. What they are doing then is to take refuge in Helm's ditch. They hope that the regulator will help them again, because they realize that the mass of obligations put in place to protect them today makes them slow as dinosaurs compared to the new actors who fulfill the same obligations with a much lower cost.

So they are lulled into the idea that yes, second-generation financial services will sooner or later be blocked by the regulator. They see Google, Facebook and Apple experimenting with e-commerce, e-payment and e-banking systems, and say they are "quiet, the regulator will stop these companies, with some legal restrictions".

The same applies to telecommunications companies. They are realizing that more and more economical satellite communication systems are being developed, they see that the costs of satellite installation are being reduced in the USA. They see well that the Chinese are lowering the cost of network devices, and have seen good pirates like Iliad who can attack a market by throwing a few tens of billions on the plate just to break up the price system, until (due to the low cost technologies) can build their own telco.

They do not wonder what will happen when mobile devices cost much less and many, many actors will have ten billion in their pockets. Or rather, if they ask, and you know what they believe? They say "but the regulator will stop this trend". They think that everyone will do as Trump with Huawei, and that to enter the world of telcos there will be ever stronger barriers, such as suffocating requirements of legal interception (even on theoretically encrypted traffic), network resilience and geo-redundancy, to which are being added increasingly stringent requirements for places where "the power plants" (I central office, in jargon) are locked up. They will come to ask that they can only be located inside police and army barracks, in order to stop the birth of new telcos.

But it can't happen, for one reason: the market for smart devices is growing, and they are DOING to produce an adequate service platform. Smart devices will soon need to talk to each other, and there is no public frequency to do so.

The same for social networks. They are beginning to hear the death knell beating. They saw what Tiktok can do, and they realized that they have no monopoly: just a foreigner and poof come into play, the startup you thought you were strangling and then buying ends up in the hands of a Chinese.

They are seeing decentralized social networks born, but they do not pose the problem. They are seeing foreign regulators putting more and more taxes and heavy taxes on their business, but they are still convinced that a regulator, the Trump of the situation will be enough to make the big voice to stop everything.

Moreover they are not realizing that they have failed to satisfy the need for which they were born, that is to provide a place of sociality at a negligible cost. The cost remains negligible (apparently), but the place of sociality has simply become a place of reputation management. Which is part of sociality, but not all of sociality. Access is individual, not group, which cancels the phenomenon of belonging.

They are not seeing the world of videogames, and all connected social networks, grow (Discord et al), as a threat. They pardon on the young, but do not understand where their nemesis is, that is in the world of video games and connected social networks.

They think, as usual, that if these competitors become fearsome, the regulator will stop them.

The third phase of the death sentence is when we know that the appeal has already failed, and hopefully a miracle. We surrender to our own destiny, but we believe that to be docile and to do what is asked by the executioner, at a good pace, can bring clemency. I mean, if I go to the scaffold with a smile, saying they are good at killing me, and that I'm completely on the executioner's side, then maybe someone will say "come on, this is a good guy, don't you see? Now it's changed. Do we really want to kill him? "

So now we see the big banks, those that had moved seas and mountains to counter new-generation finance, that are starting to replace clerks at the counter with home banking, and who hunt finance employees to replace them with AI.

The living dead.

The same is true of the telcos that today abound in IoT objects sold in their antediluvian "stores", and for the social networks that strive to make marketplaces and "want to unite people". It's too late.

It's too late because now the reputation of social networks is falling more and more, banks today are associated with the word "crisis", and telcos are associated with the idea of ​​"slow, obsolete and suffocating".

The legislator knows very well that none of these institutions is by now sympathetic. And since he is a political regulator, he knows very well that he will find himself in the situation of those wishing to defend motorways. Autostrade is now synonymous with "a rate that always increases before the holidays". With the collapse of the bridges it has become unpleasant. No politician has any interest in defending them.

Their illusion that someone will move to defend them in politics is ridiculous. By now a law "saves banks" is seen as a waste of public money, and no matter how systemic they are, almost no one apart from a few rich people asks to save a bank using public money. By now "saving a bank" is a taboo when "doing anal with mom". The same applies, at least in the EU, for large social networks. For the telcos, then, they have not spent enough words: "obsolete", "caravans", "legacy", "too expensive", "suckers", are the words that are most associated with their names.

These conditions in the regulator can only help them secretly , hoping that no one will report these "helpers" using the web. But let's understand: if today in Italy an anti-Iliad law was made, even hidden, Iliad would immediately give breath to the trumpets, and to hide the operation would not speak of its own. Same thing for Pro-Facebook laws, or "save-banks".

Ultimately, it's only a matter of time.

How long I don't know, but it's only a matter of time.

The legislator is beginning to consider them a ball and chain in terms of consent, and cannot be seen in their company. How much time will pass before regulatory barriers fall?


Leave a Reply

Your email address will not be published.