The Online Services That Didn’t Exist 20 Years Ago. – Fat Tail Daily

Digital infrastructure laid the foundation for companies like Amazon to build entirely new industries.

Amazon began its dark fibre acquisitions and then later launched Amazon Web Services (AWS), its cloud service, in March 2006.

AWS created a new market: renting computing power by the hour. It now generates ~$130 billion in annual revenue from this service.

It didn’t exist 20 years ago.

Think about that when we consider the current AI buildout and space-based infrastructure. New markets are emerging. And history provides a framework for thinking about them.

In Part 1, “The Last Pre-Internet Generation, and What’s Next…” we walked through the stumbles and first steps of the digital economy as it grew into the World Wide Web.

The internet was new and exciting. The build-out was a race. Builders generated mountains of debt while scaling, and many went bust, leaving the fibre they laid ‘dark’ (unused).

Today, I’ll walk you through how the wreckage was rebuilt.

The short version: cooperation built the platform. Who shared, who hoarded and who’s doing it now tells us who wins next.

In 2001, when the dot-com bubble popped, things were in bad shape. The vision of the digital economy was close. But the bare-knuckle competition had to stop.

Like most Auskick coaches will tell their team of 12-year-olds before a game, the key to success is teamwork. The wild west free-for-all wasn’t going to scale.

In the years that followed, industry cooperation became the norm. And the foundations for that thinking had been laid more than a decade earlier.

Two instances come to mind. In 1989, two engineers—one from IBM, one from Cisco—sketched the Border Gateway Protocol on a napkin at lunch. It’s still the protocol every router uses today.

Built by two rivals, the designs given away for free.

Then, in 1993, there was a moment when the World Wide Web could have been patented and owned by one man, Tim Berners-Lee. He refused and released it into the public domain.

Cooperation is the philosophy on which the Internet was built.

Mutually Beneficial Infrastructure

In the present day, we have institutions like the W3C and the IETF — the World Wide Web Consortium and the Internet Engineering Task Force — developing the standards that let the network communicate with itself.

Both are technical bodies where competing companies show up and agree on the rules. No regulator forces them.

The IETF’s motto distils the philosophy: “We reject kings, presidents and voting. We believe in rough consensus and running code.”

You can see the result every day.

Think of the variety of online banking, email, social media and software platforms you use. These systems work together because it is in everyone’s best interest. Banks want your payments cleared. Retailers want a receipt, and shippers want your address verified.

Gmail reaches Outlook because of a shared standard. Chrome opens a page written for Safari because HTML is a shared standard.

The interoperability is organised and invisible.

Importantly, the AI buildout skipped this step. There are no shared rules for foundation models. No joint task force for training data. Standards around data ownership and copyright never got built.

That horse has bolted. The conversation is now emerging around sovereign data and compute. We’ll return to that problem later.

Web 2.0

Let’s get back to Amazon. It was sitting on miles of dark fibre and outsized internal infrastructure. They’d built it to handle Christmas retail peaks. But for 11 months a year, it sat idle.

Amazon’s answer was AWS — rent out the excess computing power as a service.

Similarly equipped competitors moved fast. Microsoft launched Windows Azure in 2010. Google’s Cloud Platform dates back to 2008.

Streaming, storage and compute became the features of Web 2.0. And Amazon’s AWS was the start.

The technology allowed new, disruptive businesses to take shape. Household names like Netflix, Airbnb, Dropbox, and Reddit were built on top of it.

The proof is in the numbers. The digital advertising market, which is roughly $700 billion today, was zero in 1995; e-commerce had roughly $6 trillion in sales, again, it had zero in 1995.

Apple, Microsoft, Google/Alphabet, Amazon, Meta, and Nvidia are 6 of the 8 largest companies on Earth. They built this infrastructure layer.

Cooperation paid off.

The buyers of the telco and dot-com bubble wreckage opened the door to everyone else.

Team Spirit

In May this year, Elon Musk’s Space-X-xAI handed Anthropic the entire 300 megawatts of compute capacity at Colossus 1 — its Memphis supercomputer running 220,000 Nvidia GPUs.

Meaning, two of the most aggressive rivals in AI (Anthropic and xAI) now share infrastructure. The same deal flagged interest in jointly developing multiple gigawatts of AI compute in orbit.

They’re not alone in the universe.

Google and Planet Labs announced Project Suncatcher last year. A company called Sophia Space is partnering with AWS on 88,000 solar-powered compute satellites. Starcloud and Crusoe are targeting the first public cloud in space by 2027.

The survivors of the next infrastructure build will come about through shared interests.

Communication Breakdown

There is usually one kid on the playground who doesn’t want to play fair.

The US government isn’t here for the kumbaya. Its legislation reaches into data stored anywhere by American companies. This is a problem.

Weak rules around copyright and AI training make the situation worse.

The US sits at the centre of the architecture by design, and every country is trying to route around it.

Offer a valuable service, and people will be willing to pay.

It’s Amazon’s own story in reverse.

Schwarz Group, the German parent of Lidl and Kaufland, built its own internal cloud in 2018 to host retail data under EU sovereignty rules.

By 2021, they opened it to external customers and launched their platform, STACKIT. Schwarz has committed €11 billion to develop STACKIT and has partnerships with the German Federal Security Office and CrowdStrike.

Meaning a discount supermarket chain is now one of Europe’s most serious sovereign cloud providers. Sovereign cloud is the first crack in the US power grab.

The internet itself was built through a collaborative effort.

Try to exercise control and concentrate power over the network, and the community routes around you.

Sharing beats hoarding. The cooperators survived the dot-com bubble and won the cloud build-out.

In today’s infrastructure buildout, three questions matter.

• Who’s sharing infrastructure?
• Who’s hoarding it?
• Who’ll be holding the assets in five or 10 years?

These are the questions that will shape the coming decade

Next, I’ll look at the massive data centre build-out that is having such a massive influence on financial markets and economies right now.