Jan 24, 2018

4 min read

What’s common between The East India Company, RailRoads, Amazon, Apple and FaceBook ?

Network Effect : They have all found some way to connect people. Alternatively, they have found a market where people can trade goods.

In all the above cases, the power has come from joining people via new Technology at that time or creating a ubiquitous product suited for that time.Strength, thus is a function of its — ability to connect.

How will the world evolve in a future ? Where would we have new forms of connections? These are question which every entrepreneur should ask himself. Perhaps, a new network which would make it transact money via the internet, like “cryptocurrency”. Perhaps, it would be via new web which would connect all machines through “Internet of things”. Or perhaps, a new kind of device which may yield to communicate in a much faster way than possible via the mobile phones of the day. I don’t know the answer. I am less worried about machines, taking over our world and more excited about the possibility of them making our life easier.

Whatever it may be, if it has to be preeminent, then it needs to pass the “network” test or an “ubiquoutos” product.

Unlike, whatever, humans may want to think, the truth is that, our needs are simple. We need to connect and we need a product for that. It would be your mobile device. It could via facebook. It could be via twitter. Further, we need a market to satiate our daily needs. It could be a market for books. It could a market to buy grocery. It could be a market to buy fish. A market could be in the form of a mall or it would be in the form of a network like Amazon. These thing never change. It would not change ever.

We however need to be wary of — Govt intervention. Whenever, a product becomes ubiquitous and starts influencing lives of people, it gets noticed by the “Big Brother”, The Govt. The only thing which can stop Govt from acting against these companies is “ the ability of large companies to stay under the radar”. Large companies like Google do so by masquerading themselves as benevolent companies or companies. Google’s manta — don’t be evil, is a classic example of them, trying to stay below the radar. However, Govt intervention is inevitable. Like in the case of Facebook and Google who are now facing a wrath of international issues. Stay away from such markets, were consolidation has already begun. Eventually, these companies will be broken up into smaller insignificant players. Further, this is a “tell” that the markets have matured enough since Govt which is like this gargantuan ship, has taken notice. You can’t escape the notice once you are found.

So, Rules of engagement for new companies are — Networking (either product or service), fresh(new)markets, staying under the radar (avoid hubris). Further, staying in a market which doesn’t come under too much supervision of the Govt. It could be synonymous with new areas, but not quite. Let’s look at the example of a company, Theranos. Elizabeth Holmes the founder of this company was operating a space which concerned with the lives of people — healthcare. The revolutionary technology which this company proposed was to take a sample of blood via a special device which would “not cause pain” and thus making the process of “ sampling blood ”much easier. However, the company was operating in a area which is highly regulated. Any innovation here needs to be vetted by large organisations like FDA before it can be launched. In one such vetting process, FDA was found that the sampling technique of this company had some flaws. Today, the company is scrambling for funding and is most certainly going to die. This is a classic example of a company which tries to innovate in an regulated market. But if this company was operating in transportation or social media, it would have survived the incipient stage of development. Nobody cared about facebook until it became too big to ignore.

Thus be very wary of sectors like Defence and Healthcare. They are very sensitive sectors and Govt takes them very seriously. Another sector is “Finance”. What you don’t want is to make a splash here. Stay under the radar for as long as you can. The recent crackdown on “blockchain” markets is a classic example of this phenomenon.

There is reason why Technology, became synonymous with innovation. Technology is unassuming. It’s benign and most importantly its something which mostly people don’t understand. If you don’t understand something, it unlikely that you will be able to control it. Also, Technology doesn’t seem to disrupt any visible thing. If you need to lay a road you need to disrupt the house nearby. If you need to build a bridge there has to be a clearing of the way. Unless, its green field “building stuff” is hard. Thus don’t take the existing industry head on like politician often do.

Surface transport is already conquered. So the only way is up or down. That’s why Elon Musk is building “the boring company”. While boring a tunnel is hard task, its under the radar. People don’t see it thus they don’t speculate about it. No houses are removed in the process. So that's it !

In conclusion, we spoke about the commonalities between companies in the past and present. They all were able to connect people. Be it with their ability to link trade or with their ability to link travel, or their ability to link money, or their ability to link markets. WhatsApp, Amazon, Facebook, East India Company, HSBC had one thing in common - They linked people. Secondly, we spoke about ubiquitous products. Be it the smartphone. These are hard to come by, but there are products which we all need from a toothbrush to an iphone. The key is “ubiquity”. Something small to hold but everyone needs it.

Finally, we spoke about the possible areas one should avoid. Areas which are under Govt control, like Defence or Areas which related to lives of people like Health care. Thus, we concluded, that, Technology which is new, ubiquitous and non invasive was able to have such a large impact in today’s world.