Think back to the last time you attended a concert (ages ago, but bear with me).
Perhaps at one point, a few excited people in the crowd started waving their hands or clapping. At first, they’re the only ones participating, at the back where no one can see them. But being at the back is precisely what lets them express what they’re feeling.
The concert-goers near the stage are visibly aware of the pressure of thousands of eyes staring at the back of their heads. As a result, the self-conscious many go with the crowd. They do what the band wants them to when the band wants them to.
But the fans at the back? Freed from the pressure of thousands of eyes watching, they’re a case study in innovation & movement.
Suddenly, as in this viral video shared by @david_perell, the rest of the crowd starts to notice these excited fans, their shouts, their joyful faces, & they copy them. Row by row, the contagion spreads from the back toward the stage, until finally, the waves & claps have become the rule rather than the exception. The risk is now of being left behind rather than laughed at, & everyone has joined in, all the way up to the fans at the front.
It’s exactly the same for technological innovation.
The companies that are the most front-and-center, the Google’s & Apple’s, advance technology the least. They have the most to lose by taking risks, & a lot to gain by coasting as they are.
It’s the upstart players, the crazy people on the fringes, that move the world forward. They work in obscurity for years, expanding their reach little by little, until suddenly, the Google’s & Apple’s feel threatened. But now, adoption by a good portion of others has finally emboldened the Google’s & Apple’s to venture into the now-not-so-upstart technology, either by acquisition, or by building it themselves.
The great injustice is that often, by bringing an innovation mainstream – whether self-driving cars, VR, or facial recognition – the Google’s & Apple’s get all the credit, at least in the eyes of the public. But no matter what the narrative might say, you can’t erase the fact that the innovation started at the back.
Of course, Google & Apple deserve their fair share of credit for innovations, especially ones that occurred before they became front-and-center. At their most innovative, they were still at the back.
Before grabbing 90% Internet share, Google was a younger brother of Netscape & Yahoo!, 15 years younger than AOL, & 20 years younger than Microsoft. And when Jobs & Wozniak were working out of their garage, Apple was just another scrappy startup, trying to escape the shadows of Atari, Microsoft & IBM.
Fast forward 20 years, and Google & Apple are trillion dollar companies who’d rather let others push technology forward for them, just swooping in to scoop up the winners.
Google could have built gaming in-house, but built Google Stadia via an acquisition instead, & did similarly with Google Cloud. Even Google Ads & Google Maps wouldn’t be the same without the acquisitions of DoubleClick & Waze.
Similarly at Apple, acquisitions have been crucial to the development of Siri, Touch & Face ID, ARKit, & more. Technology didn’t come from within Apple, but from the fringes, elevated to the mainstream thanks to distribution on Apple’s billions of devices.
Every startup either fails, or lives long enough to see itself become the incumbent.
We might apply this thinking to investing, & consider great investors to be those able to identify great innovations while they’re still fringe, like Amazon in 2002, or Tesla in 2013. Great investors are either able to see through the fog & understand fringe innovations better than everyone else, or are just willing to make lots of small, riskier bets. To continue with our analogy at the beginning, great investors are willing to bet on innovation while it’s still just a 2-person dance, sometime quite literally, a 2-person start-up.
The most obvious example of innovation at the fringes might be Tesla.
GM or Ford could have produced the best electric car, but they didn’t. They iterated slightly on old gas models, making “safe” bets that couldn’t fail, but their “safe” bets didn’t succeed either.
True innovation arrived with Tesla & a first-principles-driven Elon, who proved to the entire industry that a new type of car was possible & inevitable.
In conclusion, just because we don’t notice innovation until it’s been adopted by the people at the front, doesn’t mean that that’s where innovation comes from.
For truly innovative innovation, the people who push it forward must be crazy enough to believe in something that no one else does, & patient enough to guard & foster it over a period of many years. Often, they must endure not just obscurity, but even defamation. Mainstream adoption is not for the mainstream.
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