AI and Enshittification

"Enshittification" is a term that describes a specific corporate economic activity. In short, products and services start out great for consumers, and over time become more expensive and offer lower quality.

My take: "enshittifcation" is a company adjusting prices and quality to maximize profits. They don't do it to irritate users. They don't do it to annoy employees (enshittification happens to employees too; witness the conversion of employer-paid pensions with employee-paid 401-k plans). Companies "enshittify"products and services to increase profits.

So let's look at AI.

If "enshittification" is simply "maximizing profits", then what will happen to AI services?

The "free" AI services (such as Google's search engine and Microsoft's Bing) will see more advertisements and more sponsored results.

The paid-for services will see... price increases.

I expect that AI services will follow the path set by video streaming services. They will start with simple and inexpensive plans, and then change to include multiple tiers with different capabilities at each (differently priced) tier. Just as video streaming has ad-supported and ad-free tiers, AI will develop tiers, although perhaps not split into ad-supported and ad-free.

And, just like video streaming services, AI services will increase their fees (for all tiers, although perhaps not all at once) over time. And increase them faster than inflation, just like video streaming services.

How high will prices go? If an AI engine can replace a human at certain jobs, then the cost for that AI engine should rise to match that cost. If employers are willing to pay a certain amount for a human to provide coding (for example) then those same employers should be willing to pay just as much for an AI bot to provide coding.

For the AI enthusiasts, these price increases are in a blind spot. I suspect that the enthusiasm for AI in the workplace is driven not by what AI can produce, but by the cost. I also suspect that many employers think that AI costs will remain the same, or roughly the same, over time. They are not expecting the higher-than-inflation cost increases that I am predicting here.

There are, of course, multiple AI services. One can argue that competition will act as a brake on price increases. That doesn't hold for video streaming services, because streaming services are not interchangeable. Each service has its own proprietary content, and that "locks in" customers.

The ability to lock in customers is not immediately obvious for AI services. Today's services are different but also very similar. AI companies may be working on ways to lock in customers, probably by building custom models (or custom weights) for each customer. Or possibly by offering custom APIs for specific capabilities. I'm not sure of the form, but I'm confident that some will be attempted.

In the long term, I think that those who adopt AI will find that it is not as cheap as they thought, and that it will be expensive to move to another (also not so cheap) AI service, and especially difficult to switch back to humans.

Apple and cloud computing

 Apple's tussle with Epic (the creators of Fortnite) shows a deeper problem for Apple. That problem is cloud computing.

Apple has avoided cloud computing, at least from its customers' perspectives. Apple is the last company to use the "run locally" model for its application. Apps for iPhones and iPads run on those devices, applications for Macbooks run on them. (Apple does use servers and possible cloud computing for iCloud storage and Siri, but those are accessories to macOS, not a front-and-center service.)

In contrast, Google's cloud-based Documents and Sheets apps let one build documents and spreadsheets in the cloud, with data stored on Google's servers and available from any device. I can create a document on a Chromebook, then open it on my Android phone, and later update it on a desktop PC with a Chrome browser. This works because the data is stored on Google's servers, and each device pulls the latest version when it is needed.

Microsoft is moving in this direction with its online version of Office tools. Even Oracle is moving to cloud-based computing.

Apple is staying with the old "local data, local execution" model, in which computing and data is on the local device. Bur Apple does let one move from one device to another (such as from an iPad to a Macbook) by synchronizing the data onto Apple's servers.

The difference is the location of processing. In Google's model (and in Microsoft's new model), processing occurs on the server. Apple keeps processing on the local device.

For simple tasks such as word processing and spreadsheets, the difference is negligible. One might even claim that local processing is better as it offers more options for documents and spreadsheets. (More fonts, more chart options, more functions in spreadsheets.) The counter-argument is that the simpler cloud-based apps are better because they are simpler and easier to use.

Regardless of your preference for simple or complex word processors, cloud computing is also used by games, and games are a significant market. More and more games are shifting from a model of "local processing with come communication to other users" to a model of "some local processing to communications with servers for more processing". In other words, games are using a hybrid model of local processing and cloud processing.

This shift is a problem for Apple, because it breaks from the "all processing is local" model that Apple uses.

What is Apple to do? They have two choices. They can stay with the "all processing is local" model (and ignore cloud computing) or they can adopt cloud computing (most likely as a hybrid form, with some processing in the cloud and some processing remaining on the local computer).

Ignoring cloud computing seems risky. Everyone is moving to cloud computing, and Apple would be left out of a lot of innovations (and markets). So let's assume that Apple adopts some form of cloud computing, and enables developers of applications for Apple devices to run some functions in the cloud.

How will Apple host their cloud platform? Here again there are two choices. Apple can build their own cloud platform, or they can use someone else's.

Building their own cloud infrastructure is not easy. Apple comes late to cloud computing, and will have a lot of work to build their infrastructure. Apple probably has the time to do it, and most definitely has the cash to build data centers and hire the engineers and system administrators.

But the alternative -- using someone else's cloud -- is also not easy. Apple is not friends with the major cloud providers (Amazon.com, Microsoft, Google) but it may form alliances with one of the smaller providers (Oracle, Dell, IBM) or it might purchase a small cloud provider (Linode, Digital Ocean, OVH). Apple has the cash to make such a purchase. While possible, a purchase may not be what Apple wants.

My guess is that Apple will build their own cloud platform, and will make it different from the existing cloud platforms. Apple will need some way to distinguish their cloud platform and make it appealing to app developers.

Perhaps Apple will focus on security, and build a self-contained cloud platform, one that offers services to Apple devices but not others, and one that is isolated from other cloud platforms and services. An "Apple only" cloud platform with no connection to the outside world would allow Apple to ensure the security of customer data -- with no connection to the outside world, data would have no way to escape or be extracted.

Apple may go so far as to mandate the use of their cloud platform, prohibiting apps from communicating with other cloud platforms. iPhone apps and Macbook applications could use Apple's cloud, but not AWS or Azure. This would be a significant restriction, but would guarantee revenue to Apple.

(Assuming that Apple charges for cloud services, which seems a reasonable assumption. Exactly how to charge for cloud services is a challenge, and may be the only thing preventing Apple from offering cloud services today.)

The outcome of the dispute between Apple and Epic may foreshadow such a strategy. If Apple prevails, they may go on to create a locked cloud platform, one that does not allow competition but does ensure security of data. (Or perhaps a milder strategy of offering the Apple cloud, but only on the condition that the Apple cloud is the only cloud used by an app. Classic apps that use other clouds may continue to run, but they could use Apple cloud. Moving any services to the Apple cloud would mean moving all services to the Apple cloud.)

I don't know how things will play out. I don't know what discussions are being held in Apple's headquarters. These ideas seem reasonable to me, so they may come to pass. Of course, Apple has surprised us in the past, and they may surprise us again!

Cloud vendor lock-in is different from PC vendor lock-in

The IBM PC hardware was open, yet the business model of the PC software market was a fragmented one, with each vendor providing a mostly closed system.

The emerging model of cloud-based computing is a fragmented market, with each vendor providing a mostly closed system, but the nature of the closed-ness is quite different from the PC market.

In the PC market, the strategy was to allow data on any platform but use proprietary formats to tie data to an application. Microsoft Office applications used complex formats for their files, formats that made it difficult to use the files with any other application.

For cloud-based systems the fragmentation will be around data storage, not applications or the format of data. Vendors will strive to keep data in their storage system (Google Docs, Microsoft OneDrive) and push apps onto multiple platforms (Windows, iOS, Android).

Google Docs, Microsoft Office 365, and other cloud-based services use private storage systems. Create a document in Google Docs and it is stored in Google Drive. Create a spreadsheet in Office 365 and it is stored in Microsoft's OneDrive. These are private storage systems -- only the Google Docs apps can access Google Drive, and only Office 365 can access OneDrive.

We have limited visibility into these private storage systems. We cannot "see" our data, other than through the API and UI offered by the vendor. We cannot directly access our data. This allows the vendor to store the data in any convenient format: as a file, in a relational database, or in some other form.

Accessibility is what allows one to change from one office suite to another and still read your old documents. The new office suite must be able to read the format, of course, but such operations are possible. Microsoft used this trick to convert users from Wordperfect and Lotus 1-2-3 to Microsoft Word and Excel. Open Office uses this trick to read .DOC and .XLS files.

Cloud-based offerings don't allow such tricks. One cannot use Office 365 to read a document stored in Google Drive. (Not because the format is different, but because Office 365 cannot reach into Google Drive. Google Docs cannot reach into OneDrive, either.)

Cloud-based systems do allow one to download documents to your PC. When you do, they are stored in files (that's what PCs use). You can they upload the document to a different cloud-based system. But keep in mind: this download/upload trick works only while the cloud-based systems allow you to download a document to your PC. The owners of the cloud-based system can change or remove that capability at any time.

Switching from one cloud-based system to another may be difficult, and perhaps impossible. If a cloud vendor offers no way to get data "out", then the data, once entered into the system, remains there.

Vendors want to lock customers into their systems. The strategy for PC software was to use storage formats that tied data to an application. The strategy for cloud-based systems is not the format but the storage location. Look for Microsoft, Google, and others to offer convenient ways to transfer your data from your PC into their cloud.

And also look for convenient ways to get the data out of that cloud.