Just before Greece and Italy went to war, the Italian Ambassador came to General Metaxas and told him the terms for peace. Metaxas apparently replied in French that they both spoke: ‘Alors c’est la guerre.’

What had happened was that the irreconcilable differences between the two great nations created war. The goals of the Fascist Italian leadership and the national goals of Metaxas made war. And this in spite of the ideological alignment between the two leaders. Mussolini and Metaxas were both fascists.

Apple’s decision to create ad blockers was inevitable. Apple is primarily aligned with the folks who buy their devices. They are absolutely committed to building a compelling experience on their platform at the expense of everyone on their platform. Customers pay for the platform and Apple’s biggest source of revenue is that platform. That single-minded focus on the platform experience had to lead to ad-blocking because ads are the single biggest source of irritation in the web-ecosystem.

Google because it was aligned to maximizing ad revenues and not maximizing the web-ecosystem experience, left Google vulnerable and by extension the web vulnerable to Apple’s decision.

Google had about 15 years to make the web better, instead they focused on extracting even better revenues from the web through more efficient ad-revenues. Google never took ownership of the web-platform. It’s unclear that Google could have taken ownership or stewardship. Because Google didn’t own the platform.

This outcome, the  assault on the ad system that powers the web to the detriment of the user experience was inevitable. The only option is for Google and the ad networks it supports to figure out how to make ad’s better.

Over the last few months I’ve discussed the evolution of the valley’s innovation profile, mocking the term Full Stack, and bemoaning the collapse of investment in true hard core technology . And at times, I wondered if I was engaging in a form of #gamergate… I felt like I was whining that my club was being invaded and throwing an inappropriate hissy fit.

Yesterday I went for a walk with a brilliant friend of my wife’s and as often happens when you talk to someone who is effortlessly smarter than you, things that were unclear become clear.

Let me start with what the world used to look like to my grandfather.  But … First let me talk a little bit about my grandfather Kostas Roussos.

Kostas  worked at NCR in Greece from about the early 30’s to the late 70’s. He was personally responsible for transforming the back office’s of hundreds of large enterprises across the Eastern Mediterranean and North Africa. In what could only be described as bizarre, IT and tech, in many ways, is a family business …

In his world, there were businesses that produced products that moved the product to middle men that sold the product to consumers. Those businesses had three basic layers, a sales/channel team that sold the product to middlemen, a product development arm that built the product, and a back office that supported both with things like billing and legal support etc.

The problem a lot of those companies had was how to make their back-offices more efficient and reliable. At the time they relied on human beings to tabulate figures and close the books. And errors, and theft, and inefficiency were rampant. Enter NCR with it’s automation systems and all of a sudden back-offices became more efficient freeing up dollars to spend in product development and sales/channel activities.

The entire business IT/Tech industry emerged as the way to fix back-office systems across the world.

The folks at IBM/NCR understood this world very clearly and understood how to sell to that world.

To my grandfather, each of those companies were ‘full stack companies’. Where the stack, in his mind was all three layers: sales, product development and back-office.

When building a company you had to build all three layers. And one of the hardest layers to go build was the sales channel because the incumbents owned that channel. You had to go basically flip one sales guy at a time, one day at a time.

But in 1993 the world changed.

What the web did was that it allowed you to reach customers without building a sales channel through advertising. Essentially you could build a company that looked like this:

The theory was that you could directly reach customers who would find you because of how you spent advertising dollars. And as a result, you could more efficiently scale your business because the painful and slow process of sales channel creation could be bypassed entirely. And the other theory is you could capture more value because you could avoid paying the middleman.

Who can forget the phrase “disintermediation”…

What happened was that real companies tried to re-engineer their back-offices to be able to directly sell to their customers bypassing sales channels and middle men. Who can forget the whole ‘what is your web strategy’ and ‘e-business’ ads from that era?

Most of the investment from a tech perspective in that era was technology to improve the back-offices or to create middlemen (web-portals!) that would be where people bought advertising dollars to reach customers.

What is ironic of course is that it turns out that the scale and volume of the businesses that were trying to advertise was so gargantuan that a middle man did emerge, possibly the most powerful and rich middleman of all time:

Basically Google became the middleman of the new era.

And so the world looked a lot like what my grandfather remembered:

Once fortunes become titanic, then of course competition emerges. As entrepreneurs saw the staggering value available in being Google, competition emerged to try and take a piece of the action. And so companies like Facebook and Twitter and Yelp and God knows who else have been trying to own a piece of the middle man action ever since.

Except of course the sales and channel still remained super critical for most people because you don’t buy things from the web unless it’s a pure commodity…

In the modern era, then the Valley has either funded companies that tried to improve your back-office infrastructure or tried to be a better middleman for the electronic era. And those were ridiculously profitable areas of investment.  Because a small amount of capital could produce very quick returns. And ultimately, VC’s are just middlemen between owners of capital and entrepreneurs and rate of return is important to their customers.

As an aside, what’s astonishing about SaaS is that we are able to achieve the same rates of quick returns that middleman companies used to enjoy in selling to the back-office. The idea that you can grow that fast into the enterprise back-office is nothing short of astounding and mind-blowing.

Returning to our original story… if you think about it, the valley has never really made its specialty investing in building companies that built products that didn’t fit into back-office or middleman kind of areas.

Although it is inevitable that we would eventually build full companies. As we became middle-men, we would see opportunities for products and eventually some of us would want to build the product.

And this is a new thing. Tesla, for example, is a full stack company in that the core of the business is building a car. Alt-School is another example, the business is building a school, IT is just back-office stuff that makes it better.

the Internet is a Twitter when Tom Goodwin  discovered that being a middleman is very lucrative. He called it a user interface and thus its new.

Amazing.

This is similar to how we call a business a full stack business in the valley. And equally absurd.

My great grandfather who made a fortune being a middleman between the Russian nobility and western purchasers of grain and got my grandparents out of grinding poverty and made me would be … Amused.

Being a middleman is lucrative. And what is amazing is that the web that was supposed to disintermediate middleman has made them more powerful than ever.

And yes, having a great relationship is key to being a great middleman. The user interface, in our digital age, is the way to have that relationship.

Grandpa Iannis would have been proud. And disappointed I never became a middleman.

There is this discussion going around VC circles about full stack startups. The notion that the business doesn’t just build a gadget but a complete end-to-end business. This a profoundly different kind of business investment for the valley and worth mulling over…

Over the last fourty or so years, Silicon Valley has been about making technology investments. Companies were created to build things that other businesses turned into products that real people consumed.

Put differently, technology was created to be in the service of a business like Starbucks. Silicon Valley built the technology that enabled Starbucks to sell more coffee, better treats and yet Starbucks is just another entrant in the restaurant business. Essentially companies outsourced their IT engineering budgets to high tech Silicon Valley companies.

The emergance of companies like uber and airbnb and altschool and Luxe and of course Amazon are not about technology companies but instead companies that happen to leverage technology. These companies may have a tech budget but their business, their products and the bulk of their staff are not technology. They use technology, they may invent technology but engineering exists to serve. Engineering is a service inside of the business not the business…

Sure tech is important to uber but the drivers are vastly more important…

These are just normal businesses that happen to get funded by VC’s… They are not traditional high tech companies…

As more of these companies get founded and succeed the valley becomes more about a place where entrepreneurs set up shop and less a place where technology gets built. As investors look to find the next business to fund instead of the next piece of innovative technology there is a real risk to the original valley ecosystem… No longer are technologists the winners but conventional business men…

Over time if this pattern holds these business men will succeed and become investors who will look to create more businesses that happen to use tech or… not.

After all our current business heroes are not guys who built technology but guys who understood a business need and found some tech guys to build it. Heck when Twitter paid 10 million for A VP of engineering the discussion on business insider . com was about how overpaid he was. I mean seriously no engineering leader should be that much – because they are just a service to the business after all….

The demographic and the core of what is the valley will change and the path to success will change.

We engineers that created a small corner of the world where geeky engineering could rules will find ourselves displaced by a new very different kind of world.

Engineers may become relegated once more to being shoved in the back room while the real power within companies has meetings…

Then the question remains what does this portend for future tech investments? My gut tells me that we will see a movement of investment outside of the valley over time. As this becomes home to large conventional businesses and investors pursue more of them… The guys who want to build tech will move elsewhere because their ability to find people and get investment will be better elsewhere. The valley relied on engineers investing in each other…

My wife says change is what you can rely on. And this change feels real andd it does mean that the future will look very different….

Still remaining bullish for the valley, I am just no longer certain the term Silicon will be appropriate… Maybe entrepreneur valley…