Every Blockbuster is a policy failure

The top companies in tech don't trust markets. Why do we?

Blockbuster Video was founded in 1985. Its physical media rental stores expanded rapidly throughout the 1990s, peaking at 9,094 locations.

TCP/IP, the protocol that forms the backbone of the modern internet, was developed throughout the 1970s and became the standard on ARPANET in 1983.

The discrete cosine transform algorithm, which undergirds MPEG video coding standards and makes digital transmission of video practical, was developed in 1974 and productionized in 1988.

Broadband internet was developed in the 1990s. Household penetration of broadband reached 4% in the US by 2000 and 50% by 2007.

Netflix began its DVD-by-mail service in 1997, swiftly cutting into Blockbuster’s market. Automated rental machines like those from Redbox were installed in grocery stores across the country, further decimating Blockbuster’s sales.

YouTube was launched in 2005. Netflix began its transition to streaming content in 2007.

Today, every Blockbuster store except one has closed. Their hundreds of thousands of employees (peaking at 84,300 in 2004) have had to find new jobs. The locations, usually found in high-traffic shopping centers, have been converted into other national chains, or sit empty.

Blockbuster store locations are uniformly hideous. Built in an era of rapid expansion of suburban shopping centers, the buildings’ inefficient footprints made poor public spaces even when they were open. We will be stuck with these monuments to poor technological planning for generations to come.

If our society had a robust technological planning apparatus, technical planners could have seen that what was a business in 1990 would not be a business in 2010.

It became apparent that the production of society at large was ruled by absence of plan, by accident, by anarchy; and this anarchy grew to greater and greater height.
Frederick Engels, Socialism: Utopian and Scientific

This year Apple announced that Macs, like iPhones and iPads, would now be built around chips designed by Apple. Technical planners at Apple have been preparing for this change at least since 2011, but probably for years before that.

Over the decade that this transition has been in the works, Apple has applied its vertically-integrated engineering organization to preparing for the switch. Chip designers signal new features to operating system developers five or more years in advance so that when chip manufacturing processes are scaled the software that runs on new chips can take advantage of technical advances. Technological breakthroughs advance from material science to design to manufacturing to operating system software to application platforms to client applications in an orchestrated process.

Apple has integrated this process because the anarchy of the market cannot deliver innovation at a pace that can take advantage of society’s technical advancement.

If only Walmart’s operational efficiency, its logistical genius, its architecture of agile economic planning could be captured and transformed by those who aim toward a more egalitarian, liberatory society!
People’s Republic of Walmart

Let’s imagine a new kind of job in a different kind of society. A Technical Planner absorbs information about technology and society and synthesizes it into predictions about the future. The planner uses their technical expertise to make estimates of what science and technology will make practical in the future. They use their understanding of society to investigate the conveniences people want from technology and how they prioritize these wants. The planners combine these insights into advocacy for bets they believe will provide value in excess of the required investment. The best bets receive investment and then are measured. Groups of planners who consistently make bets that return positive value are revered for their skill and are empowered to make more and more substantial bets.

This job might sound like that of a venture capitalist, but it is not. A venture capitalist uses all the knowledge that society has invested in them to make bets not on what will return value but what will return capital. An investment could ultimately waste resources relative to the value created, like 9,094 Blockbusters-cum-eyesores, but it would, over the time horizon of interest, deliver growth on capital invested. A capitalist would embrace such a bet and hope to get out of it before the crash.

A technical planner has to understand value more accurately, and over a longer time horizon, than a capitalist. The planner serves society, and you can’t get out of society at the top of the market. Planners have to imbibe the complexity of the world and balance all the competing interests that entails.

Let’s imagine a different world of electronic entertainment, starting in a fictional 1980s. Seeing the development of digital media in the forms of magnetic and then optical storage, arts organizations fight for expanded entertainment options in their communities. People demand new ways to unwind after working and they deserve access to the artistic creations of our society. They agitate to planners that they want physical locations to exchange media. They want a Blockbuster full of media in their neighborhood.

Library Planners, looking to keep their offerings fresh and relevant to young people, advocate for creating Entertainment Centers. They’re like small libraries focused on popular media, and they want to build thousands of them rapidly, as delivering content to people is the goal of the library system. The librarians push the technical planners to develop mass manufacturing of physical media, and they push space planners to find locations for the new microlibraries.

Technical planners absorb the demands for new forms of media and evaluate them. They look at the state of physical media in the 1980s. It’s understood that magnetic tape cassettes have a theoretical maximum of data density that is too low to store high-definition video in a cost-effective way. The trendlines of the underlying material science show magnetic tape is not the future. Optical storage, where digital data is encoded on a compact plastic and metal disc using a laser, seems likely to succeed magnetic tape cassettes as the premiere form of physical media within the decade.

The technical planners also note that the density of networked computers is increasing superlinearly. The quality of video that can be sent over a digital connection is low but increasing in 1985. The trendlines say networked video would match physical media in quality in between one and five decades. The planners also evaluate the physical resources that go into the manufacture of optical storage: non-renewable fossil fuels and metals that are expensive to extract. Some planners publish a recommendation: investment in physical media distribution is a waste of society’s resources, and physical media will be replaced by networked distribution in a timeline that makes investment in physical media distribution centers a waste. Don’t build the Blockbusters.

The arts organizations dissent, saying this is a denial of a citizen’s right to the fruits of artistic production. Community groups complain that their communities are stagnating without sufficient investment. Librarians defend the importance of public spaces over the digital. A political process ensues to evaluate what kind of investments to make into entertainment media.

We know now that the skeptical technical planners would have been right and everyone else wrong. It was probably not really possible to know this for sure in the 1980s, but what’s a shame is that we didn’t even try. We ceded the decision-making responsibility to the market, and the market made locally-optimal, globally-suboptimal decisions. Billions of dollars changed hands; some owners got rich, some owners lost money, and our communities are left with the blight of abandoned storefronts.