The Great Age of Infrastructure

Stephen J. Alexander

I had an interesting discussion with James Frey, author of ‘A Million Little Pieces’ and ‘Bright Shiny Morning’ the other day.  He was showing me all the books he was reading on his Kindle. I think if Jeff Bezos would have been at this barbeque, he would have signed up James to do his ads.  But the interesting point James raised was that the value isn’t the device, but the pipe. Kindle isn’t really beautiful, or incredibly versatile. But because Amazon has built the means to virtually access books, magazines and other literature anytime, anywhere, our reading behavior is being transformed.

Like iPod’s value is in iTunes, and iPhone in its applications, infrastructure is once again, king. Just as Tom Friedman pointed out that cheap fiber optics after the 2000 recession enabled global commerce, the investments of the early part of this decade by Amazon, Apple, Cisco and others are now bearing fruit as this recession begins to abate. And this is creating value for a whole host of new partners. Consider my conversations last week with Andrew Rashbass, CEO of the Economist, they have found a burgeoning Kindle audience, which supplements their existing print readership.

New infrastructure = new channels = growing audience = greater profitability

Profit is an interesting word to focus on. Because Amazon was routinely criticized for not turning one. Yet we now see that careful, capable long term strategic thinking (e.g. At the expense of short term shareholder value creation)  may inevitably lead to greater shareholder value over the long run. Then if we consider PIMCO CEO Mohamed El-Erian’s description of a “new normal”, where returns will be more modest, perhaps its time we think more about building.

Also include in your analysis of this issue the fact that innovation is revolutionizing in terms of time to market for innovations. The impact of massively scaled innovation cycle is that Schumpeter’s creative destruction will reach rates never before experienced. Therefore you as a business have only one path that you must take and that is to build and build fast, even if that means compromising profitability in the short term. We are shaking things out right now, so take your profits where you can get them, but dare not rest on your laurels because the network age doesn’t abide roadblocks for profit.

To close let’s bring it back to today’s media obsession, Twitter who faces the same question’s Amazon faced ten years ago ‘What’s the business model? I have no idea, but I know they’ve got a valuable asset that others are building businesses on. There is no doubt that Twitter and other businesses need to make money, but making money for the long term is a slog sometimes.  If you’re building the infrastructure for the future of communications do it right.

Tagged as: amazon, App Store, Apple, infrastructure, iphone, kindle, long term, platforms, Tom Friedman, Twitter