18 Things, Part 1

18 Things is a slightly different take on the usual “Annual Predictions” posts. Over the next few weeks I’ll be posting 18 things I believe might happen in 2018, with a brief overview of why. Each will also have a confidence level (an idea nicked from Scott Alexander), so I can come back at the end of the year and see how I went. I’ve mostly stuck to my circle of competence, but please don’t read in to anything too much, and definitely don’t go betting your house on any of these…

1: 2018 is not the year of VR because there won’t be a year of VR

The consumer use-case for VR still hasn’t been worked out, and the reality may be that there isn’t one. The hardware is pretty much there, and still nobody in the real world cares. While VR will continue to develop in niche professional areas, expect less than 20 million units to be shipped worldwide in 2018 - despite lower price points.

Google and Facebook continue to push their hardware efforts forward - with Oculus Go announced at $199, and the updated Daydream at $99. Both are backed by significant software efforts to build gaming and entertainment experiences, and in the case of Facebook also social VR. But in a world where the average person spends upwards of 3 hours a day watching TV and 40 minutes on Facebook, it’s hard to find anybody who even uses VR weekly.

The failure of consumer VR highlights the gap between Silicon Valley’s understanding of people and reality. Zuckerberg says “We want to get a billion people in virtual reality”, but it’s probably worthwhile to start by finding a million people who think it’s a good use of their time.

All is not lost though. AR is the one to watch this year. Apple released ARKit mid-year, and there’s been a bunch of maybe-actually-useful demos appear since. There’s over 1 billion iOS devices in the world - even if we assume only 20% of those can run iOS11 (required for AR apps), it dwarfs the 10 million VR headsets sold in 2016.

Confidence level: 80%

2: The rise of a new tech giant on the wave of a new tech era

We are now a decade in to the mobile era, and it’s time for the next big shift, which in turn will launch the next giant tech company. And so 2018 may see a new business emerge that becomes the next $100B+ tech giant.

Mobile usurped Web 2.0 (which itself had a good 10-year run), allowing the growth and dominance of Google (Android, maps, mobile search), Facebook (a UX perfectly suited to mobile, plus cameras), Apple (hardware), and arguably Netflix and Amazon through the proliferation of screens.

It’s tempting to think that the last decade has seen immense innovation. But there are many that argue these new giants have done as much to dull innovation as to drive it (just ask Snap).

The next era will take us beyond mobile. For now, cognitive technology and IoT seem to be the leading contenders (sorry blockchain fans). It probably won’t be a case of one or the other - it’s likely to be both combined well.

This new giant will remain independent. It will succeed because it will not come with the baggage of a “traditional” tech company. And sorry brands, but it won’t be built on a foundation of ads.

Confidence level: 60% (although we may have to wait a while to find out)

3: GDPR will come in to effect with much confusion, shortly followed by a fine over €50 million for a data breach

Over the past year it’s been clear that marketers are struggling to grasp the EU’s General Data Protection Regulation, but they’re not the ones who should worry about getting fines.

GDPR kicks in on May 25, yet every time I’ve been in Europe this year it seems like the confusion around GDPR for marketers is only growing. Given the state of most CRM data I’ve ever come across, it’s unlikely many will be operating fully within the law come GDPR-Day.

But it’s not marketers that should be worried about getting fined. GDPR revolves around four key areas: consent (telling customers how and why you’re collecting data, and giving them the ability to see it), security (storing data in the right way), right to be forgotten (allowing customers to delete their data), and portability (allowing customers to take their data to another company).

Marketers will fail initially on the consent piece. But the first big (>€50 million) fine in 2018 will likely be for a data breach which includes personal information of millions of EU citizens. We’ve seen over, and over, and over again this year how likely data breaches are, and how they affect hundreds of millions of people. Companies don’t seem to be learning, so expect regulators to pull out a big stick to help them.

Confidence level: 70%

4: More huge failures for IoT security

The Internet of Things was a buzzword that took a while to arrive, but now it’s here it turns out to be way more dangerous than expected. As more and more gadgets and widgets connect the internet to the real world, security remains an afterthought. It’s likely 2018 will see IoT security continue to fail, with a single attack affecting more than 5 million devices.

Like so much else, we can blame smartphones for this one. The explosion of smartphones meant an explosion of cheap electronic components, particularly for networking. With the cost of adding wifi to an electronic device at a couple dollars, everything that can be connected is connected. Internet security legend Bruce Schneier paints a dark picture - “Sensors are the eyes and ears of the Internet, actuators are hands and feet… We’re building a robot the size of the world and most people don’t even realize it.”

With potentially dozens of devices in a single home, there’s a lot of opportunities for security to fail. An 11 year-old demonstrated to a conference this year how easy it is to hack in to a connected teddy bear. At the other end of the scale, the Mirai hack used millions of routers, cameras, printers, and other devices to create a botnet aimed at bringing down several high-profile websites.

As we move to a world where our power meters, cars, and even medical devices are online, something needs to change. No doubt 2018 will also see some talk of regulation of this space (most likely in the EU, where Germany has already banned some kids’ smartwatches), but we’ll likely end the year with things pretty much the same in this regard.

Confidence: 70%

5: Bitcoin will grow as a store of value

Despite ongoing confusion and warnings from flummoxed bank CEOs, bitcoin will continue to grow as a store of value, and finish 2018 with positive returns.

The last couple of years has seen significant change in what Bitcoin is, and why it’s succeeding at being that. The core promise of Bitcoin was that it was a global payment network. It has essentially failed at that goal, and instead has become a significant store of value.

Why the change? Bitcoin survives because of the almost magical structure of its mining incentives, combined with the network effects of being first to market. While the price of bitcoin is highly volatile, mining incentives act as bumpers that make it near impossible for a death-spiral to take hold.

As long as people want in on bitcoin, its value will grow. Bitcoin (and blockchains in general) require wrapping your head around concepts in computer science, cryptography, economics, sociology, and history. Over the past few years I’ve seen people perform this head wrapping - and once done they want in more often than not. There’s plenty more people yet to wrap their heads around it.

But it isn’t just individuals wrapping their heads around it. Hedge funds have finally worked out how to get in, and have driven some of the volume and price growth this year, and institutional investors are itching to get in.

When I’m asked if bitcoin is overvalued, my response is “how much should it be worth?”. The only correct answers are “more than it is now”, or “zero”. bitcoin is now a store of value with a market cap of $110bn. The current value of all bitcoin that will ever exist is less than the value of all gold mined in 2017. Bitcoin has a lot of headroom, and a long line of people wanting in.

Confidence level: 90%

6: Facebook admits it is a media company. And so it launches a media company.

If governments are going to start treating Facebook like a media company, Facebook will launch a media company.

With revenue of $40B, still growing at over 40% every year, there’s plenty of cash to splash around. At the moment Facebook (and Google) spend most of that cash on what they call “optionality” - making sure they’re the ones to invent the future. For Facebook this means investing $3B in to VR in the next 3 years, and probably even more than that in AI. So investing $1B in the creation of Facebook News Network isn’t too far fetched (that’s less than it costs to keep the New York Times running).

In fact, Facebook News Network might not even need to cost $1B. Facebook is now responsible for around 40% of all referrals to digital publishers - so creating their own journalism that exists only within Facebook’s walls will increase the opportunity for displaying ads.

Of course FNN is impossible because regulation, no? The answer to that depends on who you expect to regulate. In the US, Facebook are starting to understand the power of lobbying money, and the fact is that Facebook - along with Google and Amazon - seem to increasingly exist above the limits of nation states.

Confidence level: 30% (which I realise is actually a bet against this happening, but I still think it’s an interesting possibility)

- November 2017