Seven Ways to Spot the Next Big Thing
2: Surf the exponentials.
2. Surf the exponentials.
Some trends are so constant, they verge on cliché. Just mentioning Moore’s law can cause eyes to roll, but that overfamiliarity doesn’t make Gordon Moore’s 1965 insight — that chips will steadily, exponentially get smaller, cheaper, faster — any less remarkable.
Not only has it been the engine of the information age, it has also given us good reason to believe in our capacity to invent our future, not just submit to it. After all, Moore’s law doesn’t know which silicon innovation will take us to the next level. It just says that if the previous 50 years are any indication, something will come along. And so far, it always has.
Moore’s law has been joined by — and has itself propelled — exponential progress in other technologies: in networks, sensors, and data storage (the first iPod, in 2001, offered 5 gigabytes for $399, while today’s “classic” model offers 160 gigs for $249, a 51-fold improvement). Each of these cyclically improving technologies creates the opportunity to “surf exponentials,” in the words of synthetic biologist Drew Endy — to catch the wave of smaller, cheaper, and faster and to channel that steady improvement into business plans and research agendas.
This was the great insight that inspired YouTube, when cofounder Jawed Karim realized (while reading Wired, it so happens) that broadband was becoming so cheap and ubiquitous that it was on the verge of disrupting how people watched videos. And it’s what Dropbox did with digital storage. As the cost of disc space was dropping at an exponential rate, Dropbox provided a service capitalizing on that phenomenon, offering to store people’s data in the cloud, gratis. In 2007 the two free gigabytes the company offered were really worth something. These days 2 gigs is a pittance, but it remains enough of a lure that people are still signing up in droves—some fraction of whom then upgrade to the paid service and more storage.
And it’s what allowed Fitbit to outdo Nike+. As accelerometers dropped in cost and size, Fitbit could use them to measure not just jogging, but any activity where movement matters, from walking to sleep. For all its marketing muscle, Nike didn’t recognize that accelerometers were the dynamo of a personal health revolution. The new FuelBand shows that the company has now caught on, but Fitbit recognized the bigger trend first.
Exponentials, it turns out, are everywhere. Just choose one, look where it leads, and take a ride.
3. Favor the liberators
3. Favor the liberators.
Liberation comes in two flavors. First are those who recognize an artificial scarcity and move to eliminate it by creating access to goods. See the MP3 revolutionaries who untethered music from the CD, or the BitTorrent anti-tyrannists who created real video-on-demand.
Sometimes, of course, the revolution takes longer than expected. Back in 1993, George Gilder pointed out in these pages that the cost of bandwidth was plummeting so fast as to be imminently free. Gilder’s vision has been proven correct, paving the way for Netflix and Hulu. And yet telcos are today—still!—trying to throttle bandwidth. But this is just biding time on the scaffold. In the words of investor Fred Wilson, “scarcity is a sh**** business model.”
The second flavor of liberation takes a more subtle approach to turning scarcity into plenty. These liberators use the advent of powerful software to put fallow infrastructure to work. Think of how Netflix piggybacked on a national distribution infrastructure by having the US Postal Service carry its red envelopes. Or how the founders of Airbnb recognized our homes as a massive stock of underutilized beds, ready to be put into the lodging market. Or how Uber turns idling drivers into on-call icons on a Google map, blipping their way to you in mere minutes.
Reid Hoffman, the philosopher-investor, describes these companies as bringing liquidity to locked-up assets. He means this in the financial sense of “liquidity,” the ability to turn capital into currency, but it also works in a more evocative sense. These companies turn static into flow, bringing motion where there was obstruction.
What’s it like to live in the future? Ask an Uber driver — these guys are electrons pulsing through a real-life network, and they’re delighted by it. So should we all be.
4. Give points for audacity.
4. Give points for audacity.
When “big hairy audacious goal” entered the lexicon in 1994 (courtesy of Built to Last, the management tome by James Collins and Jerry Porras), it applied to ambitious executives eager to set high targets for annual revenue growth and increased market share. Yawn. But the term — shortened to BHAG — also coincided with the birth of the web, when innovators began to posit a whole new sort of audacity: to make every book, in every language, available in less than a minute; to organize all the world’s information; or to make financial transactions frictionless and transparent.
Audacity is easily written off as naïveté, as overshooting your resources or talents. And that’s a danger. Plenty of would-be Napoleons have called for revolutions that never found an army. But you can’t make the future without imagining what it might look like.
Too much of the technology world is trying to build clever solutions to picayune problems. Better parking apps or restaurant finders might appeal to venture capitalists looking for a niche, but they are not ideas that seed revolutions. Instead, take a lesson from Tesla Motors , which had the pluck to spend $42 million of its precious capital to buy a factory roughly the size of the Pentagon, stock it with state-of-the-art robots, and begin making wholly viable electric cars. Or look to Square, which has pronounced the cash register a counter-cluttering vestige of the 19th century and created an alternative that will not only make buying things easier but will deliver retailers from their sclerotic relationship with credit card companies.
These times especially call for more than mere incrementalism. Let’s demand that our leaders get in over their heads, that they remain a little bit naive about what they’re getting into. As venture capitalist Peter Thiel told wired two years ago, “Am I right and early, or am I just wrong? You always have to wonder.” This kind of willingness to take a chance and be early is what keeps the world moving.
