The Mad World of Monopolies Over Brains

Microsoft bought semantic machines.

Google, FB etc keep buying smart companies all the time.

A handful of global companies keep buying smart companies before they can get a product out to the market.They are essentially creating monopolistic moats over not just cutting edge intellectual property, but also the intellectuals – the men and women capable of creating/ leveraging new technologies.

So many startups now start with the end in mind, the vaulted ‘exit’. What happens when all the technological advancements get concentrated in fewer and fewer hands? The only anti-dote to Marx’s dystopia of ever accumulating capital was the intellectual capital that allowed anyone to give it a go with limited risk and succeed. Is that anti-dote of intellectual capabilities relevant any more?

Any body can learn to code, etc. But can everyone access the infrastructure and the necessary accelerating feedback loops to improve as fast as these few companies can? That pace of accelerating innovations is the new Capital for 21st century.

If we don’t want an increasingly unequal world, we will need to view this capacity to rapidly innovate as a capital that needs to be seen similarly to other capital assets – land, machinery, channels of access to consumers.

Which means, it is time for regulations. We can’t let ever fewer investors and companies to corner the ability to rapidly innovate.

This is essential. Unlike 15 years ago, when a zukerberg could code out of his dorm and build an empire. Now another zukerberg could code just as well, but if his idea & code is any good, it will either get copied by these juggernauts or get bought early on. Look at how FB is copying snapchat to its death. It is not a level playing field anymore. A successful digital company now will require a war chest of billions. There are investors ready to fund these war chests. But the problem is, that these investors are same few folks from California (and one notable Japanese guy).

There is no Nigerian, no Indian, no Brazilian, no Greek, no Swedish….(and a 190 countries later) person among those few people who control the new engine of human innovations.

A side effect of this narrow competition is the poverty of ideas that the best minds are working on – google glasses, automated vehicles, AI assistants … are these the biggest challenges for the humanity? As Climate change, growing inequality and rising xenophobia tear the world apart, should the people who can create the infrastructure of the new world be spending their times on elitist pursuits?

It is not difficult to copy them and become the new age capitalist. However they have created a high-entry barrier by turning it into a mad game of bluff. Their tactic is to value companies at ridiculous valuations. The valuation is divorced from reality and based solely on the potential of possible monopolistic leverage. Naturally, most sensible people, stay away from this capricious game.

These people are feverishly gambling with the intellectual capacity of humanity. It is a mad mad world. They need to be stopped if we want a better world.

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The triad of Consultancies, FB and Google will neuter creative agencies globally, unless…

First: The digital disruption.

Globally, Facebook and Google now dominate advertising dollars, not WPP or Publicis or other agency companies. (For comparison about the market muscle – Combined market cap of FB and G was $812Bn as of June 2016. How did WPP, Omnicom, IPG, Publicis stack up? The four combined were at $70 Bn. And the less said about the growth, the better.) So there’s that.

And now consultancies are entering the fray to steal the lunch from agencies. And agencies have largely been too busy in denial to notice their impending irrelevance and gutting of their margins.

Second: The value of ideas.

Adweek recently wrote about the trend of Global consultancy goliaths buying up small agencies to make inroads into the branding industry. And similarly, creative agencies have also been trying to make inroads into consultancy businesses.

Who is more likely to succeed? Which industry will prevail, which will shake-up?

To me the answer is obvious. Why? Here’s why –

  1. Relative Value: Consultancy’s service is typically valued at higher valuations than creative agencies. In another world, where creative agencies didn’t get too complacent early on and put more emphasis on effectiveness beyond awards, perhaps, creatives would have earned more, grew bigger by creatively solving newer and varied problems and given bigger business growth for brands. But we don’t live in that world. Consultancies are good at convincing with numbers how they affect businesses positively.
    P.S. – There should be a research done in success rate of consultancies versus agencies in actually delivering growth.
  2. Positioning: Consulting is positioned as a house of experts. Consultancies typically house ‘domain experts’ that the CXO knows he can access. So, it is not a big stretch to imagine that consultancies house creative experts too. It is a stretch to imagine the chaotic agency to house a supply chain expert though.
    So even if a CXO trusts a creative mind’s judgement in his/her field, I doubt he/she would extend the assumption of competency to other matters of business growth.  As against a typical consultant – no matter how dumb/ smart he/she might be, the CXO trusts him/her to create access to competent people for most business needs.
  3. Ear of CXOs – Both agencies and consultants get to interact and influence CXOs. But, agencies only cater to propaganda need, while consultancies can affect change in almost all facets of a business – supply chain, production, legal etc. So consultancies have a better view of the business and what it needs, and hence better opportunity to offer more services.
  4. Plurality of ‘closed thinking’ projects – Pardon the generalization, but while consultants are masters of ‘closed’ thinking, creatives are masters of ‘open’ thinking. I estimate that there are more ‘closed thinking’ services that a company typically needs help with, than ‘open thinking’ services.
  5. When you can’t innovate, advertise!: Growth in 21st century is about innovations – consolidative tech innovations (FB and G consolidating the ad and comm tech market) or fragmenting tech innovations (innovations in CPG that is creating new breed of many niche players – online or offline.) There is no substitute for actual, real innovation to grow in 21st century.
    While agencies are known for their ‘big ideas’, they are not known for path-breaking ideas that inform a business model or product development. Most of the time, the idea comes from within the company for it to be truly adopted with conviction. And to execute these ideas, they go to the consultancies for help, not to advertisers.
    Can advertising agencies create new business ideas? sure they can. But the evidence is lacking as of now.
    Advertising agencies instead are now becoming home to companies that fail to innovate and then want the advertising to push the ship stuck in the muck.

There have been attempts by agencies to get into consultancy shoes – most recently by R/GA. I wish them best of luck. I really hope someone cracks it and in the process, ‘pivots’ to a higher value service. But so far the trend has not been encouraging.

Here’s an idea for a better future for the industry – start putting your money where your ideas are.

UPDATE:

Two strategies to improve agency prospects –

  1. Agency as a platform
  2. Pivot to go after biggest opportunities