What Does A Hyperconnected Business Look Like?

By Shawn Smith,

Published on Nov 10, 2011   —   4 min read

If you follow Mark Pesce's vision for the next billion seconds, you see that there's a rather large emphasis on APIs. APIs are what will transform our standard economic model to a kind of hypereconomics where individual control the means of production. What does that mean exactly, and how it is possible? Does it mean that I, Shawn Smith, can become just as influential in the mobile phone space as HTC? Through the power of APIs, Pesce argues that I can. Here's how.

According to Pesce, there will be an API for every piece of the business puzzle. In their current form, these APIs are rather young and rough around the edges – and I agree, so is mine. You can put a business together with them today, but it's hardly instant. You need to do a lot extra work, and more importantly, you need to spend a lot of money just to get the ball rolling.

Let me give you an example. You want to design your own mobile phone to compete with Motorola. In today's world, you would design the phone, source the parts, hire someone to assemble them, hire someone to distribute them, and then you'd pay a retailer to sell them.

Today, most of this is done by calling up each part of the supply chain and arranging a deal. But you could do it with online tools. You could find a manufacturer on Alibaba.com, use DHL to ship the goods to the country you're selling them in, and then you could list your product on Ebay to sell it. Each of these pieces is a sort of API. The only problem is that you still need to be directly involved at each step. You can't just send your design off to Alibaba.com. You have to find a good manufacturer for it. Ditto with Ebay. You can't just hand your product over to them. You have to take all of the pictures, write the description, and then once you make a sale, you still have to ship to your customers.

The eBays of today are the APIs of tomorrow

If I'm getting what Pesce is saying, we won't need to be directly involved in any of this stuff in the future. Well, let me put that another way. We'll be more involved with the fun stuff and less involved with the not-so-fun stuff. So as a mobile phone designer, I get to focus on picking exactly what I want in a mobile phone. I can make it thinner, give it a bigger battery, or design it to have a louder speaker so I can annoy everyone around me with my fancy ringtones – literally whatever I want.

In Pesce's future, Alibaba.com isn't just some website I browse to find a Chinese wholesaler/manufacturer. It's hooked up to my design software and everything else I use. The manufacturer becomes a reliable part of the supply chain, which I control. Every API is connected to another API, making the entire process seamless. Taking a product to market is a matter of picking whatever settings I want and then pressing publish.

So what happens when the world is connected? What do we make of all these APIs? When it's so easy for ordinary people to bring products to the market, what happens to business? Can I just wake up one day, decide I want to startup a mobile phone design company, play with some APIs on my phone, and make my first sale by the end of the day?

It's easier to process one order of 1,000 widgets than 1,000 orders of 1 different widget.

I don't think so, and the reason is the added efficiency you get from specialisation. The same software that made the market frictionless can't equalise prices for all buyers. Specialisation is the reason why Apple can dominate the market with its iPad. Apple can place millions of orders on the same equipment. They can get millions built according to the same production procedures. Factories can produce the iPad at much lower price because they don't have any learning curve after a certain point.

Every product you build requires some amount of research, development, and testing. Better software, more open software, doesn't negate this fact. It's just like changing the source code in a program you write. When you make just one change or combine one piece with another, you have to go back and test the entire program. You can't just mix and match a bunch of different product recipes, no matter how sophisticated your APIs have become. Each recipe requires testing and proof of its feasibility. There is no such thing as a small change.

Money rules the world. It does today, and it will tomorrow. We can build APIs to help different aspects of a business communicate with other aspects, but that won't help us drive down the cost of production. Only specialisation and large sums of money can do that. You have to buy a huge quantity of mobile phones in order to compete in the mobile phone marketplace. That's a cold hard reality that's not likely to change anytime soon, not even in the next billion seconds.

Someday, I as a customer, might be able to purchase whatever custom T.V. I want. It won't happen because the manufacturers on the other end of the chain are willing to work with me personally (I don't have the money to put a large order through). It will happen because a big company like Motorola decides to make some gimmicky app. I'll get to choose the colors, the screen size, the battery, or whatever, and Motorola will produce it. They'll have the capability to do so because the companies on the other side will be willing to work with them. And those companies will work with Motorola because Motorola has money.

I'll leave you with this thought. Imagine a world where the great equaliser that is the API has put everyone on a level playing field. As an entrepreneur, I can produce whatever I want in whatever quantity for whatever market size. But guess what? So can everyone else! How then, can I offer something unique to my customers when anyone can just copy what I'm doing, press send, and eat away at my profit margins? Who could make money in such a challenging marketplace?

There goes the dream of owning a business. Looks like we'll have to get jobs mowing the lawns of the guy who owns all the APIs.

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