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The New Brave New World

Published 01/24/2018

In 1931, English author Aldous Huxley described a undesirable and frightening society set in 2540 London.

The novel, Brave New World, anticipates developments in reproductive technology, sleep-learning, psychological manipulation, and classical conditioning that are combined to make a profound change in society.

In the novel, the majority of the population live in World States, where citizens are engineered through artificial wombs and childhood indoctrination programs into predetermined classes (or castes) based on intelligence and labour.

The government controls the people, but the people don’t know any better.

Pure fiction.

Or is it?

Sure, in today’s society, we have the illusion of control.

I mean, the government isn’t breeding us and putting us into predetermined classes for crying out loud.

But what about corporations?

Are there a handful of corporation controlling the world population – controlling our thoughts and actions even though we don’t know it?

That might be taking it a bit too far, but we are certainly experiencing the consolidation of multinational corporations who are responsible for more and more of our daily lives.

In our view, technology will be the battleground for control, so you shouldn’t be surprised that three of our Big Five were born of the Internet or technology and rose to power with the Internet.

Everyone has heard of these five companies, but how did they get to where they are and what exactly are their spheres of influence?

Let’s break it down.

Disney

The oldest of the four and the only one not whelped by the Internet/technology (although the Internet certainly hasn’t hurt the Mouse’s Empire).

In our view, Disney will be your entertainment provider, producing most of the entertainment content (movies, television, sports, etc) you consume on a daily basis.

The Walt Disney Corporation was founded on October 16, 1923 – by brothers Walt Disney and Roy O. Disney – as the Disney Brothers Cartoon Studio and established itself as a leader in the American animation industry.

In fact, from it’s founding in 1923 to until 1955, Disney was virtually 100% an animation studio, making cartoons for movies and television.

In 1954, Walt Disney used his Disneyland series to unveil what would become Disneyland, an idea conceived out of a desire for a place where parents and children could both have fun at the same time. On July 18, 1955, in the middle of what used to be orange groves, Walt Disney opened Disneyland to the general public.

With one theme park running and more animated content being pumped out, Disney expanded into Florida – in what used to be a huge swamp.

On October 1, 1971, Walt Disney World opened to the public, with Roy Disney dedicating the facility in person later that month.

However, not all was well in Mouse world and a string of poor performances from 1972 to 1984 almost doomed the company,

In fact, in 1984, financier Saul Steinberg’s Reliance Group Holdings launched a hostile takeover bid for Walt Disney Productions with the intent of selling off some of its operations.

Disney bought out Reliance’s 11.1% stake in the company. However, another shareholder filed suit claiming the deal devaluated Disney’s stock and for Disney management to retain their positions.

The shareholder lawsuit was settled in 1989 for a total of $45 million from Disney and Reliance.

Michael Eisner from Paramount as CEO and Frank Wells from Warner Bros. as president were brought in to shake up Disney and the two began emphasizing Touchstone with Down and Out in Beverly Hills.

This started leading to increased output with Good Morning, Vietnam, Dead Poets Society, Pretty Woman and additional hits.

Eisner used expanding cable and home video markets to sign deals using Disney shows and films with a long-term deal with Showtime Networks for Disney/Touchstone releases through 1996 and entering television with syndication and distribution for TV series as The Golden Girls and Home Improvement.

Eisner had saved Disney and a string of animation smash hits, such as The Little Mermaid, Beauty and the Beast, Aladdin and The Lion King gave the company some spending money and clout, which Eisner used to expand the empire.

In 1991, hotels, home video distribution, and Disney merchandising became 28 percent of total company revenues with international revenues contributed 22 percent of revenues.

Disney also broadened its adult offerings in film when then-Disney Studio Chairman Jeffrey Katzenberg acquired Miramax Films in 1993. That same year Disney created the NHL team the Mighty Ducks of Anaheim, named after the 1992 hit film of the same name. Disney purchased a minority stake in the Anaheim Angels baseball team around the same time.

Disney acquired many other media sources during the decade, including a merger with Capital Cities/ABC in 1995 which brought broadcast network ABC and its assets, including the A&E Television Networks and ESPN networks, into the Disney fold.

After more acquisitions and some infighting, Eisner resigned in 2005 both as an executive and as a member of the Board of Directors, which gave rise to the Bob Iger era.

To make a long story short, Iger continued the expansion Eisner begun and Disney took over companies such as Pixar, BamTech, Marvel and Lucasfilms and finally, 21st Century Fox.

Today, Disney is the world’s second largest media conglomerate in terms of revenue ($55 billion), after Comcast and that does not include the Fox deal.

Facebook

Facebook’s history is not nearly as long, but it’s no less interesting.

And if Disney is going to be the global source of content, Facebook is going to be your source of communication – both whom you communicate with and how you do it.

That’s because with over 2 billion users, Facebook is bigger than most countries and knows more about their users than just about anyone.

Founded by Harvard dropout, Mark Zuckerberg, Facebook began, well, as a college “face book” for Harvard University.

In 2003, there were no universal online facebooks at Harvard, with only paper sheets distributed and private online directories.

Zuckerberg told the school paper that he could build in a week what the university had been saying would take years.

In January 2004, Zuckerberg began writing code for a new website, known as “TheFacebook”, which became just that.

Membership was initially restricted to students of Harvard College; within the first month, more than half the undergraduates at Harvard were registered on the service.

In March 2004, Facebook expanded to the universities of Columbia, Stanford, and Yale.

It later opened to all Ivy League colleges, Boston University, New York University, MIT, and gradually most universities in the United States and Canada.

In June 2004, Facebook moved its operations base to Palo Alto, California.

It received its first investment later that month from PayPal co-founder Peter Thiel.

In 2005, the company dropped “the” from its name after purchasing the domain name facebook.com for $200,000 from AboutFace Corporation.

In May 2005, Accel Partners invested $12.7 million in Facebook, and Jim Breyer added $1 million of his own money.

A high-school version of the site was launched in September 2005 and required an invitation to join.

Facebook also expanded membership eligibility to employees of several companies, including Apple Inc. and Microsoft.

Facebook certainly wasn’t the first social network, but this gradual rollout helped it succeed where others had failed.

MySpace, and before it, Friendster, collapsed under their own weight as the sites become cesspools for the public at large.

Facebook existed for more than two years before the general public got access on September 26, 2006.

Pages (Facebook profiles for businesses) began rolling out for businesses in May 2009.

On October 24, 2007, Microsoft announced that it had purchased a 1.6% share of Facebook for $240 million, giving Facebook a total implied value of around $15 billion.

Microsoft’s purchase included rights to place international advertisements on the social networking site.

Despite all this, Facebook wasn’t cash-flow positive until 2009 and then it was off to the races.

In November 2010, Facebook’s value was $41 billion.

The company had slightly surpassed eBay to become the third largest American web company after Google and Amazon.com

But how did Facebook turn from a money pit into a company generating nearly $30 billion in annual revenue?

Advertising.

One thing Facebook has always been good at is knowing its users.

What they “Like”, what they look at, who they look at – everything you do on Facebook is recorded, analyzed and made available to advertisers, most of which operate a Business Profile on the site.

And while these advertisers can’t look a user up and see all this data, they can create content, such as a boat ad, and target it to Facebook users who say they “like” water sports and live near the water, for example.

That insight is extremely powerful and allows Facebook to know more about you than just about any other company or person.

In fact, Facebook may know more about you than you know.

That knowledge and sheer size puts it in direct competition with Google for advertising dollars.

Google

The little search engine that could.

Google has become synonymous for “search.”

If you want to know something or find something, you go to Google.

So Disney will control your entertainment.

Facebook will control your communication on the Internet.

Google will control what you see on the Internet.

Unlike the Facebook and Disney, Google’s history is pretty well-known.

Google began in January 1996 as a research project by Larry Page and Sergey Brin when they were both PhD students at Stanford University in Stanford, California.

While conventional search engines ranked results by counting how many times the search terms appeared on the page, the two theorized about a better system that analyzed the relationships among websites.

They called this new technology PageRank; it determined a website’s relevance by the number of pages, and the importance of those pages that linked back to the original site.

Like the previous company, Google has expanded tremendously – into phones, laptops, social networks, ISPs and everything in-between, but it’s core competency has remained search.

And like Facebook, it’s leveraged that core into a $30 billion a year company.

And much like Facebook, Google knows a lot about its users (which is pretty much everyone) and makes that data available for advertisers to buy ads on their sites.

This is even more powerful than Facebook, because, unlike Facebook, when you’re searching on Google, you’re looking for something.

So to take our previous example, if you search for “boats for sale,” there’s a pretty good chance you’re looking to buy a boat and that’s powerful information to a boat company.

Google now processes over 40,000 search queries every second on average, which translates to over 3.5 billion searches per day and 1.2 trillion searches per year worldwide.

Let that sink in.

Amazon

Amazon is the last of the three “Internet” companies of the five, but not in terms of power.

Amazon, surprisingly, is going to control what and how you buy things.

On July 5, 1994, Jeff Bezos initially incorporated the company with the name Cadabra, Inc.

Bezos changed the name to Amazon.com, Inc. a few months later, after a lawyer misheard its original name as “cadaver” and went online as Amazon.com in 1995.

The company began as an online bookstore.

Amazon was able to access books at wholesale from Ingram Books, and in the first two months of business, Amazon sold to all 50 states and over 45 countries.

Within two months, Amazon’s sales were up to $20,000/week.

While the largest brick and mortar bookstores and mail order catalogs might offer 200,000 titles, an online bookstore could “carry” several times more, since it would have a practically unlimited virtual warehouse: those of the actual product makers/suppliers.

Amazon’s initial business plan was unusual in that it did not expect to make a profit for four to five years.

This caused stockholders to complain that the company was not reaching profitability fast enough to justify their investment or even survive in the long-term.

The dot-com bubble burst at the start of the 21st century and destroyed many e-companies in the process, but Amazon survived and moved forward beyond the tech crash to become a huge player in online sales.

The company finally turned its first profit in the fourth quarter of 2001: $5 million (i.e., 1¢ per share), on revenues of more than $1 billion.

Amazon continued to rely on lower operating costs to slash prices on everything to the point where traditional brick and mortar stores (even Walmart) couldn’t keep up with the falling prices.

Amazon also invested heavily in logistics and automation technology which allowed them to launch Amazon Prime – a membership program that allows them to deliver most products in two days or less.

In fact, many of the products Amazon sells, it does so at a loss to maintain it’s position as “the place to buy anything.”

And if Amazon itself doesn’t carry something, one of its 2 million sellers worldwide probably does.

Amazon allows these sellers to use its platform to sell their own goods and takes a smaller percentage of each sale.

With the advancements in technology, Amazon realized it had another opportunity in cloud computing.

Amazon Web Services (AWS) is a subsidiary of Amazon.com that provides on-demand cloud computing platforms to individuals, companies and governments, on a paid subscription basis with a free-tier option available for 12 months.

The technology allows subscribers to have at their disposal a full-fledged virtual cluster of computers, available all the time, through the Internet.

AWS’s version of virtual computers have most of the attributes of a real computer including hardware (CPU(s) & GPU(s) for processing, local/RAM memory, hard-disk/SSD storage); a choice of operating systems; networking; and pre-loaded application software such as web servers, databases, CRM, etc

The AWS platform was launched in July 2002 to “expose technology and product data from Amazon and its affiliates, enabling developers to build innovative and entrepreneurial applications on their own” but sputtered for the first few years until it was relaunched in 2006.

As of 2017, AWS had annual revenue of $18 billion (Amazon, in total had annual revenue of $135.98 billion) and owned a dominant 34% of all cloud (Iaas, Paas) while the next three competitors Microsoft, Google, and IBM have 11%, 8%, 6% respectively.

So there’s a good chance that, when you’re using the Internet, the site or app you’re on is using AWS in some capacity.

Yeah, but, what is in your hand that allows you to access the Internet?

Apple

And so we come to the final of the five, which at $229.234 billion in annual revenue, happens to be the largest of the five.

As we alluded to, in our New Brave New World, Apple will be who controls the devices on which you access the Internet.

However, much like Disney, Apple almost flamed out in the 80s and 90s.

Apple Computer Company was founded on April 1, 1976, by Steve Jobs, Steve Wozniak and Ronald Wayne.

The company’s first product was the Apple I, a computer single-handedly designed and hand-built by Wozniak.

Apple I was sold as a motherboard (with CPU, RAM, and basic textual-video chips), which was less than what is now considered a complete personal computer.

The Apple I went on sale in July 1976 and was market-priced at $666.66 ($2,867 in 2017 dollars, adjusted for inflation).

Apple Computer, Inc. was incorporated on January 3, 1977, without Wayne, who left and sold his share of the company back to Jobs and Wozniak for $800 only a couple weeks after co-founding Apple.

Between September 1977 and September 1980 yearly sales grew from $775,000 to $118 million, an average annual growth rate of 533%

Jobs was convinced that all computers would use a graphical user interface (GUI), and development of a GUI began for the Apple Lisa.

In 1982, however, he was pushed from the Lisa team due to infighting and took over the low-cost-computer project, the Macintosh.

A race broke out between the Lisa team and the Macintosh team over which product would ship first.

Lisa won the race in 1983 and became the first personal computer sold to the public with a GUI, but was a commercial failure due to its high price tag and limited software titles.

On December 12, 1980, Apple went public at $22 per share, generating more capital than any IPO since Ford Motor Company in 1956 and immediately creating 300 millionaires.

In 1984, Apple launched the Macintosh, the first personal computer to be sold without a programming language.

Its debut was signified by “1984”, a $1.5 million television commercial directed by Ridley Scott that aired during the third quarter of Super Bowl XVIII on January 22, 1984.

The Macintosh initially sold well, but follow-up sales were not strong due to its high price and limited range of software titles.

The machine’s fortunes changed with the introduction of the LaserWriter, the first PostScript laser printer to be sold at a reasonable price, and PageMaker, an early desktop publishing package.

The combination of these three products were responsible for the creation of the desktop publishing market, and the Macintosh was particularly powerful in the desktop publishing market due to its advanced graphics capabilities, which had necessarily been built in to create the intuitive Macintosh GUI.

In 1985, a power struggle developed between Jobs and CEO John Sculley, who had been hired two years earlier.

Jobs attempted to oust Sculley from his leadership role at Apple, but Sculley found out and called a board meeting at which Apple’s board of directors sided with Sculley and removed Jobs from his managerial duties.

Jobs resigned from Apple and founded NeXT Inc. the same year.

Wozniak also left Apple in 1985 to pursue other ventures.

The Christmas season of 1989 was the first in the company’s history that saw declining sales, and led to a 20% drop in Apple’s stock price.

Apple bounced around between successes and failures for the next year, dabbling in the palm pilot and laptop markets until 1996 when Apple began falling behind computer makers because their operating system failed to improve.

Because of this, Apple decided to purchase NeXT and its NeXTSTEP operating system and bring Steve Jobs back to Apple.

During the next few years, Apple made some modest advancements and achievements, including the all-in-one computer called the “iMac,” but it wasn’t until 2001 that Apple had its next big break through with the iPod.

While Apple’s computers still remained relatively niche – confined to the print and entertainment world, the iPod became the defacto way to listen to music.

It’s sleek design and easy interface made it a hit and Jobs a cult hero.

The product, which was first sold on November 10, 2001, was phenomenally successful with over 100 million units sold within six years.

In 2003, Apple’s iTunes Store was introduced.

The service offered online music downloads for $0.99 a song and integration with the iPod.

The iTunes Store quickly became the market leader in online music services, with over five billion downloads by June 19, 2008.

Two years later, the iTunes Store was the world’s largest music retailer.

During his keynote speech at the Macworld Expo on January 9, 2007, Jobs announced that Apple Computer, Inc. would thereafter be known as “Apple Inc.”, because the company had shifted its emphasis from computers to consumer electronics.

This event also saw the announcement of the iPhone and the Apple TV.

The company sold 270,000 iPhone units during the first 30 hours of sales, and the rest, well the rest was history and the future.

Not only did the iPhone become the way to access the Internet in much the way the iPod became the way to listen to music, it gave Apple the shot in the arm it needed to make a comeback in the personal computing market.

At 7.1%, Apple ranked 5th in market share, but had the most consolidated operating system share.

Apple also has a 34% marketshare in the mobile phone division and  a leading 24.6% marketshare in the tablet division.

Between Mac computers (Macbook, Macbook Pro, Mac Pro, iMac) and other devices (Apple TV, iPhone, iPad), Apple has become the gateway to the Internet.

So we’ve looked briefly at how these companies have come to where they are, but what’s next for these giants?

Some of their direction has already started to take shape and we’ll take a look at that next.