Living on the edge

For the past 20 years, the way you and I have made money in this business has been to pick a spot at the edge of the network and invest – I in the private market, you in the public market. Whole industries were doing the same thing. By moving intelligence to the head ends of their networks, the cable companies one-upped the broadcasters. Then the satellite companies trumped the cable guys by moving intelligence from the head end to the consumer.

But what happens when the edge of my network is the heart of your network? Clash of the Titans. This is why the ongoing catfight between the Creative Guys (read: Hollywood) and the Innovation Nerds (read: Intel and the Silicon Valley crowd) is great theater, and why they are spitting and cursing at each other and finally going to Washington to ask Mommy Congress to send the other guy to his room.

This is about Enemies with a capital E. The Innovation Nerds go postal when the Creative Guys suggest that the government rein in technological breakthroughs through legislation such as the Inducing Infringement of Copyrights Act of 2004, contending that doing so stifles innovation. The Creative Guys don’t say they are scared witless of losing money; they say that this bill will help reduce kiddie porn and piracy.

So where are we going to make money over the next 10 years? The future belongs to those who can bridge the gap between content and technology. Look at Steve Jobs – the iPod is the first product to bridge hardware and entertainment, and iTunes is the first service where both sides have something to gain.

Let me tell you about my friend Todd Dagres. He used to work for The Yankee Group running our data communications group. Then he went to Battery Ventures, where he made an ungodly amount of money by investing in the edge of the network (River Delta, Qtera, Akamai Technologies). He left Battery and moved to Los Angeles, where he is looking at deals that cross over – content and technology.

Dagres is on my board at YankeeTek Ventures, so I am waiting to see what kinds of deals we will do together. Here is what I expect: The first few will out-and-out suck – Spider-man meets 802.16 – but then the next few will be out-and-out grand slams. The future belongs to the contrarians. What most of the industry does is try to organize according to technological bias, but new hypergrowth markets move across technologies, and that is where breakthroughs happen. Stupendous new markets open when you can cascade technologies. What would happen if I could cascade neural computing with GPS? Or voice recognition with data mining? You get the idea.

Hollywood is realizing that the old way of making movies through the star system is dead – unlike a real actor, Buzz Lightyear (produced through the genius of Silicon Graphics) is a star his creators own forever. How about a movie where you are Buzz’s good buddy and the two of you fight the forces of Evil in an interactive game where you have achieved Level 9 against a team from China? The winner will get a role in the next movie/video game/reality show, plus $5 million. This is the strange area where reality and fiction are so intermingled that they are indistinguishable.

That is where you are going to find me – hunkered down among the crazies. Hurry or you might be too late for this new industry sector. You’ll know you are when:

Time Warner/AOL gets out of it.

GE gets into it.

IDG launches a new magazine to explain it.

The Harvard Business School offers two cases on it.

Two new trade shows start up to sell it.

All of the above.

So get there early!