Budcaddell

Back in 2011, there were only a handful of startup accelerators and incubators in the burgeoning LA tech scene. Of course, as “Silicon Beach” has grown over the past few years, this has changed. Amplify was one of the initial accelerators that debuted a few years ago, with backing from big names like Eric Schmidt, reality TV king Mark Burnett and Accel Partners. Today, Amplify is announcing its second fund, which is just over $8 million from yet another list of marquee investors.

The list includes a mic of traditional tech investors and CEOs as well as a few well-known names in the media and entertainment worlds. Amplify’s backers include Accel, Greycroft, Siemer Ventures, Deep Fork Capital, Karlin Ventures, Jarl Mohn (ex CEO Liberty Digital), Ron Burkle (Yucaipa),  Jim Wiatt (ex CEO William Morris Agency), Ed Wilson (ex President Fox Television, Tribune and CBS), Ben Silverman (ex co-Chairman NBC Entertainment), Rick Barry (founder & CTO Sycamore Networks), Rob Glaser (Founder/Chairman Real Networks), Joe Lewis (head of Amazon Studios), and David Baron (VP of content Hulu), among others.

The accelerator, which is the brainchild of Greycroft venture partner and former William Morris exec Paul Bricault, Oded Noy, Richard Wolpert and Jeff Solomon, has backed 26 companies with its first fund, resulting in 3 exits and more than $30 million in additional seed and Series A funds raised. Bricault tells me that Amplify has aimed to differentiate itself from the growing sea of accelerators in a number of ways.

First, Amplify doesn’t have set classes/semesters. The accelerator accepts applications from founders and startups on a rolling basis. This is beneficial to startups for a number of reasons, he explains. First, because development process for startups differs (i.e. enterprise vs. gaming), having a set three-month long program doesn’t necessarily work for all companies. Another benefit to not having classes is that not every startup is fundraising at the same time, and this creates a more collegial atmosphere among founders because most of them are not competing for investors. In fact, Bricault has observed that founders tend to share information and contacts more freely when it comes to investors.

The second differentiating aspect of Amplify is not having set terms/financing for all startups joining the program. Not each startup gets the same amount of cash for the same amount of equity (i.e. $50,000 for 6 percent of the company). “Not all companies are created equally,” Bricault says. Bricault and Solomon will take into account how for along the startup is, the quality of the team, customers and more when accepting and financing a startup. And he adds that increasingly companies come to the program having already developed and/or launched a product, so the traditional accelerator terms don’t necessarily fit. Amplify has also brought on a CTO, a director of investments and a business development exec to help startups with raising money, marketing and more.

Bricault says this approach has paid off for the founders themselves. Out of first 26 companies, 24 raised seed rounds over the past two years, including Stack Social, Bitium, and Battlefy. Many are raising their Series A rounds at the moment, he adds. The three exits mentioned above include Look.io to LivePerson, Shipmate to Cruiseline.com, and Kingmaker to Joyus.

As for the new investments, Solomon and Bricault decided to raise more money so they could put more money to work in each company, and do more follow-ons within the portfolio. The Amplify team will also begin to experiment with a few in-house incubations of ideas into companies.

Is it a coincidence that some of tech’s hottest companies like Snapchat, Tinder, and Whisper, are all based in LA? As for the strength of the LA tech scene, Bricault says he’s never seen this level of startup activity in LA, combined with the strength of the companies that are being started in the region. And as many say, more money in the region, is a very good thing for the ecosystem.

Google is acquiring Nest, makers of a smart thermostat, for a reported $3.2 billion. 

Perhaps it seems obvious why Google would want to buy the company, founded by former Apple executive Tony Faddell. The comments on Twitter were immediate, for sure. For example, investor Howard Lindzon wrote, "[Google] wants all your home data."

But I think it's easier to slot in this purchase with Google's recent push into robotics, led by the former head of Android, Andy Rubin.

Nest always thought of itself as a robotics company; the robot is just hidden inside this sleek Appleish case. 

Look at who the company brought in as its VP of technology: Yoky Matsuoka, a roboticist and artificial intelligence expert from the University of Washington.

In an interview I did with her in 2012, Matsuoka explained why that made sense. She saw Nest positioned right in a place where it could help machine and human intelligence work together: "The intersection of neuroscience and robotics is about how the human brain learns to do things and how machine learning comes in to augment that."

We brought Matsuoka to a summit in Silicon Valley where she described her work in robotics in rehabilitation and how it related to Nest. She put a picture of a yin yang on the screen and said this:

This is the picture I constantly come back to. The yin yang between understanding human learning and machine learning and that combination, that intersection, is exactly where I live. Some things, machines shouldn't learn it. We should let people learn it. Because otherwise people are gonna get lazy and never adapt. And that's a bad thing for rehabilitation. If we want them to get better. Machines probably shouldn't do all the things. But at the same time, things humans are really bad at, maybe machines should be learning that for them, ahead of time. Understand exactly how humans are like and then slowly maybe let humans take control back. This is what we're going to come back to. I wanted to tell you the history of why I'm fascinated with this intersection because this is going to help you save energy. 

In other words: Nest is a cryptorobotics company. It deals in sensing, automation, and control. It may not make a personable, humanoid robot, but it is producing machine intelligences that can do things in the physical world. 

If mobile is eating the world, as analyst Benedict Evans contends, then journalism should be worried. 

The app analytics firm Flurry put out a new chart showing the year over year growth in app usage among various categories. Messaging and social apps continued to surge, as did productivity apps. Even games, which consumed an enormous amount of time already, continued to grow at a rapid clip.

But take a look at the shortest bar in the chart: News & Magazines. Media companies have spent so much time and money generating apps, but they just aren't working. Sure, they're growing, but far slower than the rest of the mobile world. 

One mitigating factor is that many social apps rely on links to news and magazine websites. So, at the individual story level, journalists are probably doing better than this chart shows. 

But apps were a chance for media companies to wrest at least partial control of the distribution channel back from Facebook, Twitter, and Reddit. At least according to this chart, and general observation of the industry, exactly the opposite is happening. 

The weird and fascinating world of Reddit has been too large to comprehend all at once, at least until now. Randy Olson, a PhD student from Michigan State University researched how Reddit has changed since its conception in 2005, and made a few stunning graphs that illustrate the rise and fall of topics. The most striking graph provides a stratigraphic look at at the website's past, showing how topics that ruled Reddit in 2006 like "NSFW" and "programming" are no where near as sought out now as topics like "funny" and "WTF." It's almost possible to pinpoint when the most dramatic change occurred by using the graph as well — it came around 2008 when Reddit added a feature that allowed users to create their own subreddits. That small...

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Speaking of lexical distance and connectedness: I made this graph a while back. It depicts a rough “connectedness” metric – messages exchanged between individuals in Google Apps – through line weight. If a Director-level person was on the email, the line is blue. If not, the line is orange. I left out the Founders because their messages to Lucy (previously their EA) screwed up the chart.

I badly want an active, real-time thing like this for teams; I believe you’d see that some teams are more connected, and that those teams would be more successful, all else being equal.

Obviously, you’d need to include some other data sources. We’re looking into using Peak for something similar, but it won’t capture Hipchat/iMessage traffic, and no finished system exists that will capture physical interaction.

Careful watchers will note that some folks on this graph are UC Alumni (Hi, Alumni!).

Nintendo's Robotic Operating Buddy is finally getting a proper successor — only this time it's for your mobile device. Unveiled today at CES 2014, the new Ozobot platform is described as an "intelligent robot" that can be used for both physical and digital gaming. The tiny, 1-inch-tall machine is compatible with both iOS and Android, as well as physical game boards. According to the creators, Ozobot is able to interact with games by reading lines, colors, and lights and then acting appropriately. The company claims that Ozobot is capable of recognizing and reacting to "over 1,000 different digital codes and instructions" and it features a rechargeable battery that lasts for an estimated 40 minutes on a single charge.

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Valve Software’s Steam Machine seems to be moving towards becoming a real consumer product — today at the Consumer Electronics Show, the company officially announced the first 13 partners building Steam Machines, and it shared the pricing and basic specs.

The Steam Machine initiative was announced last fall. Valve co-founder Gabe Newell reiterated today that it’s meant to bring the openness of the PC into the living room, particularly for gaming. At the time, the company only created 300 prototypes for beta testers, so it seemed like it would be relying on third-party hardware manufacturers to bring Steam Machines into the homes of consumers.

The initial lineup of partners includes Alienware, Digital Storm, Gigabyte, Materiel.net, Origin PC, Webhallen, Zotac, Alternate, CyberPowerPC, Falcon Northwest, iBuyPower, Next, and Scan Computers. (Engadget actually got ahold of the list before it was officially announced.)

Asked whether Valve is going to make any more devices of its own, Newell said, “We’re going to continue to make that decision as we go along.” He said that the company is happy with the results so far, although it’s been prodding testers for more negative feedback.

Anyway, here’s the Valve brochure with the details. Release dates were not announced.

Steam Machines Brochure by TechCrunch

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What is to be done with Europe? As The New York Times wrote just two days ago, there are not enough people in Europe qualified to fill all the technology jobs available. At the same time, Europe is not producing really big platforms to take on the global players. Too much of European technology has been caught up producing client-driven businesses in enterprise. As it is often said, where are the platforms like Google, Facebook and or Twitter in Europe? We can’t recycle stories about Skype forever. There are some amazing companies coming though. But more are needed.

So it is that the European Commission wants European member states to develop ‘a new generation of web services’, and of course, reap the economic benefits from those.

Of course, the Commission is not the magic bullet, or the super hero to save the day. But it wants to try.

There’s no getting around it. For a long time Europeans have looked with envy upon the sheer scale of technology innovation coming out of places like the USA (in software and internet platforms) and Asia (in hardware). The Commission, quite rightly, wants to help do something about this.

So back in May 2013 it introduce a set of ’6 actions’ by the EC VP for Industry & Entrepreneurship, Antonio Tajani as part of its grandly titled “Entrepreneurship 2020 Action Plan”. The little unit inside the Commission to deliver this is one year old, which, in EU Commission terms, is a teeny tiny baby.

So the question is, can they do it, and what the hell is their action plan?

Well, their Action Plan described as a blueprint for “decisive action to unleash Europe’s entrepreneurial potential, to remove existing obstacles and to revolutionise the culture of entrepreneurship in Europe.” (This was developed after a public consultation process with a number of European entrepreneurs).

The aim is to invest in in changing the public perception of entrepreneurs (typically poor in risk-averse European business culture), in entrepreneurship education and to support groups that are underrepresented among entrepreneurs. The aim is to revitalise an entrepreneurial spirit which has considerably declined in the postwar years. And let’s face it most jobs are created by SMEs and micro-firms that did not exist even 5 years ago.

The Commission wants to under-pin the idea that it is only when a large number of Europeans recognise an entrepreneurial career as a rewarding and attractive option that entrepreneurial activity in Europe will thrive in the long term.

So, what in each is in this “Entrepreneurship 2020 Action Plan”. Well, it has three main pillars: Entrepreneurial education and training; the creation of a business environment where entrepreneurs can flourish and grow; and finally, highlighting role models while also reaching out to specific groups whose entrepreneurial potential is not being tapped to its fullest extent.

Since it issued it’s action plan, the Commission has delivered six initiatives aimed at each of the above actions, which I’ll go into in a moment.

• Setting up a Startup Europe Partnership
• The “Leaders Club” of entrepreneurs
• MOOCs for increasing web talent in Europe
• Accelerators Assembly – A Commission-funded network of tech Accelerators who are asked to share knowledge and information.
• A network of EU investors active in raising venture capital
• An EU crowd-funding network

These activities are, in theory targeted as ‘web entrepreneurship’ (or W.E. as they like to call it) and is all about helping to cultivate more ambitious tech start-ups which, crucially, are also able to scale into full-blown going companies, while boosting overall economic growth and jobs in the internet-based economy.

The EU Commission has a motto for this action plan which is ‘start in Europe and stay in Europe’. Of course, it’s not going to suit every business, but it’s a laudable thought.

In order for this to happen they want to overcome what obstacles there are in Europe to starting up and to work out how they can enhance startups to ‘scale up’ inside the EU and compete internationally.

Here we detect a slight problem in the thinking. Many startups will want to scale internationally from the word go, not just in the EU.

But, of course, it’s only the EU area of member states that the Commission can deal with anyway. That said, if the EU can create some sort of ‘best practise’ there’s nothing to stop nearby non-EU states taking a leaf out of their book.

One area the Commission thinks it is ‘doing OK’ in is the area of the Telecom Single Market legislation – an area championed during Neelie Kroes’ second term in office, with it’s aim to reduce the cost and legislative burden on companies, and the geographical asymmetries that prevent ‘single market’ economies of scale. And to be fair, she has been pummelling the networks to reduce roaming costs – and it does indeed look like those will come down year over the next few years.

So what has the Commission been doing in a concrete manner on the ground, and where do they go next?

The answer is six main initiatives, with a couple of ancillary activities tacked onto the end.

• Startup Europe

They set up the Startup Europe which covers a a wide range of activities and calls on private sector to come together to support European startups. A number of these are listed here.

Confusingly, They have registered, and promote this URL StartupEurope.eu

which simply re-directs to this long URL. Meanwhile, they also have Launch.StartupEuropePartnership.eu which isn’t doing anything right now.

Under the banner of Startup Europe, the Commission ran “Tech All Stars”, which was basically a European Commission-backed effort to run a startup pitch competition. Except they did not run it. It was a series of two competitions run by AngelsBootcamp and Founders Forum culminating in the overall winner, Trustev, being showcased at the Digital Agenda Assembly in Dublin on the 19th June.

Note that this has a different logo to the StartupEurope Partnership. Confused yet?

Under the list of achievements is the expression of interest and the quality of the corporate ‘pledges’ received so far from companies such as Telefonica, Microsoft, Adobe, Google.

The pledges they are after include things like mentoring, Open office hours, access to office spaces, funding, training, etc etc. All things corporates are famously bad at, of course, but at least it’s something.

They’ve had Telefonica bring Campus Party to Europe. Microsoft pledged to create CoEntrepreneurs.eu as a “a platform, a community and a collection of 2.0 initiatives enabling massive entrepreneurship support by the entrepreneurs themselves” – however, the site re-directs to CoEntrepreneurs.be, a Belgian domain, and a site with a couple of guys taking in French about startups. Not very Microsoft.

There’s also a vague commitment from Microsoft BizSpark to engage with European Institutions, but since this is simply cover for MS to sell software then you’d expect them to do this anyway.

• The Leaders Club

“The Leader’s Club” is a group of six successful web entrepreneurs assembled by the Commission to basically come up with a list of things they think Europe should do, which they called the Startup Manifesto.

These are: Daniel Ek (Spotify), Kaj Hed (Rovio), Joanna Shields (Tech City UK), Reshma Sohoni (Seedcamp), Boris Veldhuijzen van Zanten (The Next Web), Zaryn Dentzel (Tuenti), Niklas Zennström (Atomico) and Lars Hinrichs (formely of Hackfwd).

In March last year they met EC VP Neelie Kroes and in September launched their Manifesto of 22 actions needed to boost entrepreneurship for internet-driven economic growth across Europe. They boiled down to five headings: improving tech skills and education in Europe; making it easier to access talent in and outside the EU; increasing access to capital; modernising data laws across the EU; getting European countries to take ‘thought leadership’ in tech.

They tested the interest in the manifesto by subjecting it to public vote, but that garnered a relatively low 3,000 or so votes. That said, the ideas were rock solid. Indeed, the Leader’s Club has probably come up with amongst the best output of any Commission initiative to date – assuming anyone is listening.

If this were to go any further, one might suggest they look at the UK’s Tech City policy of creating a ‘Fast 50′ layer of much larger startups on their way to an IPO.

• Fostering Web Skills

The Commission has put out to tender a project to study the capability of MOOCs to improve web skills in Europe, for EUR 90,000. The study is due to report later in 2014, and will map the supply and demand for these, with the results to be published at a conference Q3 2015. The MOOCs Tender was launched to explore short term and long term objectives in developing massive online courses, such as the ones launched by Stanford’s Coursera, or MIT’s EdX which have had an explosive growth.

Massive Online Courses have clearly aided the development of skills, though, arguably, basic Computer Science combined with trawling the web for the usual coding resources works equally well.

There’s little to say about this initiative other than it’s probably a good idea to get data on MOOC usage in Europe.

• The Accelerators Assembly

This is a network of tech Accelerators which was launched in the first half of 2013. It was set up as an on-line group but has had some offline meetings. It has some 200 active accelerator members who are supposed to be sharing knowledge and information about access to funding opportunities. The Commission has commissioned a report expected Q1 2014 to summarize the overall situation in Europe with respect to the growth of accelerators.

• Web Investors Forum – A network of EU VCs

This is the work to create a network of Venture Capital firms, ongoing since March 2013. Oddly, although this is to “create awareness” about the growth of web services, you can probably agree that they already know this already. However, there is more specific work going on to survey of over 60 VCs and publish the results later this year.

• Crowdfunding Network – the EU crowd funding network

Once again we have a separate web site for a pretty related project. Launched in June 2013 by various Commission departments, the idea here is to make EU member states aware of the movement of Crowdfunding and ‘Crowd-Equity’ financing for startups. Why? Well, to put it bluntly, this who thing has apparently not been noticed at policy-making levels by quite a lot of EU states. This has led to some very non-EU friendly behaviour, such as the fact that legislation in Germany and Italy has a completely different view of what crowd funding actually is. Thus, ‘harmonisation’ – a favourite EU word – of the on-line crowd funding market is very relevant. If EU platforms played by the same rules, then they would be able to raise much bigger sums of funding. The Commission plans to commission a report analysing the policy priorities in the EU and run an event around this issue in the second half of 2014.

Other Activities

Aside from all this, the Commission has started some work on trying to dynamically map what is going on in Europe across the EU ecosystem, but there has not been results of that published yet.

In addition, the Commission has been dabbling in what amounts of PR works for startups.

It created the Europioneers awards to use its media profile to highlight the work of startups, alongside the Techallstars activity.

So there you have it, a long laundry list of things the Commission is planning or already implementing.

The question is, can they achieve what they have set out to do?

And should the Commission even be dabbling in these initiatives at all?

The questions is, are these the right things? Many would argue that the Commission would be better off emphasising that EU Members States invest vastly more into Computer Science and Engineering skills, than dabbling in startup competitions usually better run by the private sector.

With Europe facing a skills and entrepreneurship gap over the next few years, it would seem they have to do something.

We live in the age of cryptocurrency heists, Chinese moon landings, eco-disasters and electronic cigarettes. Sounds like something out of a cyberpunk novel.

Well, a cyberpunk novel without the brain implants, but don’t worry, those are coming, too. But one big cyberpunk theme that hasn’t come to pass is the rise of mega-corporations — those huge multinational conglomerates, like Robocop‘s OCP, that owned everything from baby food companies to police departments.

Corporations are arguably more powerful today than ever before. But the economy isn’t dominated by a handful of megalithic conglomerates. it consists of hundreds or thousands of smaller, more specialized firms. Our cyberpunk future-present is dominated instead by a new power structure: the mega-network.

The Incredible Shrinking Firm

Science fiction is more about the present than the future, as the saying goes. And in the late 1970s and early 1980s — when the original cyberpunk stories were written — Wall Street was in love with conglomerates. But the love affair was over by 1990, according to a 1994 paper published in the American Sociological Review aptly titled “The Decline and Fall of the Conglomerate Firm in the 1980s.”

These diversified firms performed poorly on the stock market, and relaxed antitrust regulations meant that growing vertically was a safer legal bet than it was in the 1960s and 1970s, when conglomerates first took off. Many companies sold off their assets, becoming leaner and more focused on core competencies. Conglomorates are still popular in Asia and other parts of the world, but the U.S. business community generally agreed that conglomerates were a big mistake.

The fall of the conglomerate corresponded with white-collar downsizing, the rise of “permatemping,” and a general tendency towards smaller firms. But before we can answer why companies trended smaller, we should answer a more basic question: why do companies exist at all?

In 1937 Ronald Coase wrote a groundbreaking essay titled “The Nature of the Firm.” He set out to answer a question that vexed economists of his time: If markets were efficient, why was there a need for firm at all? Why didn’t all economic activity take place at the level of the individual, with everyone contracting everyone else? Coase concluded that there were transactional costs associated with doing business, such as negotiating contracts and protecting trade secrets. But a company could minimize those transaction costs by making it possible to avoid negotiating a contract for every single transaction, for example.

But technologies from shipping containers to software to web-based marketplaces are starting to smooth out those transaction costs, said Chris DeVore of Founders Co-Op in a talk at the Defrag conference last year.

“WordPerfect and VisiCalc transformed highly proprietary, document-based knowledge work into standardized digital files that could be copied, shared and modified by workers inside or outside the company,” he said. “This reduced friction in the transmission and reuse of information and further reduced the ‘hidden costs’ of distributing knowledge work among trading partners. As a result, more and more previously ‘core’ departmental functions — finance, accounting, marketing, sales — could now be farmed out to outside partners without a loss of fidelity.”

What’s arisen instead — and this was recognized as far back as the late 1980s — are virtual corporations: temporary alliances of businesses pursuing common goals. In other words, networks.

The Network

Take Y Combinator. “It gives the benefit of being part of a large company without being part of a big company,” Founder Paul Graham told Fast Company in 2012. “The problem with doing a startup — even though it’s better in almost every other respect — is that you don’t have the resources of a big company to draw on. It’s very lonely; you have no one to give you advice or help you out. In a big company, you might be horribly constrained, but there are like 1,000 other people you can go to to deal with any number of problems. Now [with YC] you have 1,000 people you can go to to deal with problems, and you don’t have all the restrictions of a big company.”

Y Combinator is just one sub-network of a larger network made up of angel investors, venture capitalists and entrepreneurs investing in each other, advising each other and occasionally also working for each other. Y Combinator is a slightly more formal network of individuals who have agreed to help each other out while the larger tech startup network includes many more informal connections between its members.

The “PayPal Mafia” is another famous sub-network within the tech network. PayPal co-founder Peter Thiel is a prolific investor in other startups, as are many early employees such as Jawed Karim and Dave McClure. And it’s not just individuals — companies invest in each other as well. Google has its own venture fund, Google Ventures. And in many cases the nodes of the network are in competition with each other. For example, Oracle invested in Salesforce.com and Netsuite — companies founded by former Oracle employees — which compete with each other and Oracle.

These aren’t subsidiaries. The individual pieces are truly independent companies. And though there’s a pecking order — some members of the network obviously hold more power than others — it’s non-hierarchical in the sense that there is no central authority. Instead there are islands of power distributed throughout the network.

It’s tempting to refer to this network as simply “Silicon Valley,” but it’s not actually limited to the Bay Area. Historically there was Route 128, and more recently cities like Austin and Seattle have become tech hubs. The tech network doesn’t end at the borders of the U.S. — there’s a bit of Russian oligarch money in the network, for example.

The network also crosses the public/private divide. In-Q-Tel is a venture capital firm started by the CIA but has now expanded to involve the larger intelligence community, including the National Geospatial-Intelligence Agency (NGA), Defense Intelligence Agency (DIA) and Department of Homeland Security Science and Technology Directorate (DHS S&T). The firm is an independent organization that makes investments in companies seen as useful to the intelligence community. For example, database startups 10gen (now known as MongoDB) and Cloudant both took investments from In-Q-Tel in 2012. And then there’s the surveillance industrial complex, which includes the Thiel-backed Palantir.

“Good old boy networks” and regional clusters of particular industries (like Wall Street and Madison Avenue) have existed before. But what seems to be happening now is that the tech industry network is growing and expanding. It’s not just a regional cluster, or a collection of regional clusters, dedicated to the technology industry. It’s growing to encompass many other industries.

When we say “software is eating the world,” what we really mean is that the software industry is eating the world. Information technology has long been a part of most industries. Back in 2004 Nicholas Carr declared the IT revolution over in his book Does IT Matter?, arguing that IT had gone from being a strategic advantage to simply being a cost of doing business.

But now the tech network competes with other industries instead of just selling software to them. Uber is the canonical example of software eating the world, but what it doesn’t do is as instructive as what it does. Uber doesn’t sell a white label dispatching software platform to existing taxi companies. Instead it started its own car service staffed by independent contractors.

Then there’s Tesla — another PayPal Mafia company — which is actually making cars. Or look at Silicon Valley’s obsession with reinventing food. Companies like Beyond Meat and Hampton Creek Foods aren’t software companies, but they’re backed by software investors. And while companies like 23andme and WellnessFX have a significant software component, the bigger story is that tech investors and entrepreneurs have moved beyond selling software to healthcare companies to starting healthcare companies.

The software network is diversifying and growing into the networked equivalent of a mega-conglomerate.

Forecast

The trend towards smaller companies and more startups is driven by another economic trend: more people are becoming rich. One in five Americans will reach affluence, at least temporarily, according to the Associated Press.

Make no mistake, many more people are entering poverty than are becoming rich — around 54 percent of Americans will experience poverty, according to the same AP study. But the growing number of wealthy people means there are more people with cash on hand and looking for places to invest it. Angel investing in tech companies has become an attractive option. Self-help author Timothy Ferris is forthcoming about this strategy, writing that he would rather invest in companies that he can influence and promote rather than put his money in stocks. Each successful startup means more newly rich startup founders looking for a place to park their money.

There’s a cultural issue as well. To paraphrase freelance writer and technologist Joshua Ellis, sometimes doing a startup just means that you’re too rich to work for someone else.

But there’s a dark side to this cycle. Peter Turchin of the University of Connecticut makes the case that although the wealth gap is a problem, the increase in the number of elites is an even bigger problem because it has historically led to more instability as the wealthy compete for a finite number of elite positions.

Maybe this won’t last. Maybe Google, which is becoming pretty diverse itself, will become the dystopian mega-corporation the cyberpunks feared. But for now it seems that the mega-network is here to stay. And if Turchin is right, we’re in for stormy weather.

Digital music sales declined for the first time in 2013 since the iTunes Store opened a decade before, according to new data from Nielsen SoundScan. Billboard reports that sales of tracks declined 5.7 percent, to 1.34 billion units, while album sales fell 0.1 percent, to 117.6 million. The chief culprit, according to executives interviewed by Billboard: streaming services like Spotify and Pandora.

At around $10 a month for unlimited listening, the streaming services are proving to be an attractive alternative to albums that cost $10 apiece. The good news for record labels: so far, revenue from streaming services has offset the decline in sales. And digital sales are falling much more slowly than sales of physical media — CD sales fell...

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