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Culture War Roundup for the week of November 28, 2022

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Is continuous service, or the lack of discrete, typically annualized product cycles, killing innovation in prevailing economic sectors? Can we spur growth by productizing more goods and services into annualized release cycles?

Seeing the recent headlines of large layoffs at tech companies, sometimes accompanied by snide comments that nothing of value was lost due to bloat at fat and efficient firms that enable quiet quitting, I thought about just how much innovation actually takes place in corporations that employ large numbers of knowledge workers.

Certain consumer products prominently feature measurable progress. Smartphones are constantly coming out with improved display (e.g., less bezel, more brightness/resolution), processing (speed), memory (size), camera (zoom, software magic) etc. Laptops can also boast longer battery life and lower weight, while gaming desktops have CPUs and GPUs with FPS improvements in major titles. EVs feature increasing range and acceleration.

But everything else in the economy just feels... stagnant?

Maybe a lot takes place behind the scenes and is invisible to laymen. But it's very unclear to me what all the white collar knowledge workers have created in most other large companies with all of their time. Some ad hoc examples that come to mind:

  • Banking: What has Chase, BofA, Wells Fargo, or Citi done in the last 5-10 years for the retail banking customer? Sure, everyone has a solid mobile app now. But how has core services improved? Is there anything measurable new or improved with checking, savings, or loans? Transfers still do not work over weekends or holidays. I guess maybe the public doesn't really expect innovation from the banks, but then what's with the massive payrolls? What does their R&D do all day/year/decade?

  • Tech services: Google search seems worse now thanks to SEO farms; Facebook is trying to innovate with Meta, but everyone seems skeptical; Instagram seems to be forever catching up to younger upstarts Snap or TikTok.

  • Shipping: Has FedEx/UPS/USPS improved in any measurable way in the last decade? Shipping fees and times for retail customers are as high as ever.

I think I could spend hours outlining all the sectors from the S&P 500. But I think my point applies broadly: when products are released in discrete, annual cycles, consumers can expect real improvements and even leaps. For everything else, mostly goods and services sold as subscriptions or free but supported by ads, real innovation seems intangible. The worst part is not only has innovation been slow historically, there is no real expectation that anything will change in the coming years either.

The cause seems fairly obvious--it's the lack of incentives: when you don't innovate a phone or car, consumers have no reason to buy the new thing, and you make no money. So you are forced to invest in R&D to deliver actual, marketable improvements. Meanwhile, Chase, Google, and FedEx will continue to make the same amount of money delivering continuous service at last year's SLA, and it's far easier to not churn than to convince someone to give you more money. Unfortunately for consumers, traditionally innovative sectors are catching onto the fact that it's easier to deliver continuous service instead--see how car companies are now charging monthly subscriptions for heated seats and remote unlocks.

What if we could change this paradigm entirely? What if a sufficient number of customers displayed willingness to pay more for substantially and measurably improved performance, and upstarts or visionary new CEOs of existing companies catered to this? Could that accelerate society into the future?

I admit it's hard to map out how this would work. Though I would have also said it's not possible for car companies to generate subscription revenue either, and here we are. So maybe the Motte has fun ideas for how at least some sectors can deliver much faster innovation than today by being incentivized to do so by moving from continuous service to discrete product cycles.

Continuous release is if anything better for innovation. It allows for constant updates meaning continuous innovation. Long development cycles lead to slow feedback, and updates have to be planned long in advance which means it takes years for innovation to reach production and that taking risks with the next big development is scarrier. It is easier to roll back a release when continuously delivering, rolling back a product that has been in development for 18 months is harder. Hardware is more natural to do in larger cycles than software but software doesn't really have any benefits from long dev cycles.

I think we are partially seeing diminishing returns on investment. It is simply much harder to make a freezer 10% more energy efficient today compared to in 1970. Expecting a radically new toaster every year isn't really feasible.

As for the big banks they have so much legacy code and so many entrenched interests that I think it is hard for them to make big changes. The fin-tech scene is moving fast and I think that consumers are going to be using other services soon.

2 claims here:

  1. Your argument makes sense theoretically, but can you name any MAJOR innovations by companies that are known to use this model? Cause I can't think of one.

  2. I understand your argument about diminishing returns on investment, but I'm now reminded of the Ford quote,

"If I had asked people what they wanted, they would have said faster horses.”

And I think that the continuous release cycles reemphasize feedback from people saying they want faster horses, so people make faster horses. You don't get the larger POV that their are fundamentally different ways of approaching a problem which occasionally come with far better outcomes. I don't want to make any claim that continuous development and agile have no place, but it seems to me that it doesn't contribute to larger innovations that can update the fundamentals of society the way the car did.