GOLDEN AGE OF TECHNOLOGY

Bubble to Burst

Those of us who had understanding of world in in the beginning of century, are very familiar with the term “Bursting of bubble”, IT revolution, dotcoms etc etc & those born around 80’s (specially in India) have seen both brick & mortar models and also new age technology driven models. But I would go a little, not little but about 16 years back from 2000. It was 1984, when Steve Jobs came up with his “1984” ad which I relate with starting of use of technology as a business model. Why I particularly pointed out as Job’s Apple as a business model and not Microsoft(both Jobs and Bill were contemporaries) which was also flourishing at that time, is because still I believe Microsoft was technology leap whereas, what Jobs did was a creation of business model using raw technology - packed it in a nice wrapper, made it a little closed for user and sold it as a life easing concept.

My article concerns with what is called the golden age of technology where the emphasis is no longer on raw technology, but on how to make it easy to use, reliable and secure. It is this golden age of technology that has contributed significantly to economic value creation, creation of jobs & ease for the consumers. Whether it is Uber, or Zomato or Gaming apps all these are the children of “Golden age of technology”. 

For those who don’t know, commercial use of internet was restricted until late 1992 and partly due to the lack of user-friendly web browsers. It was in 1993, with the release of the Mosaic web browser, we got access to the World Wide Web & HTTP. This new invention triggered this growth & internet use increased as a result of the reduction of the "digital divide" and advances in connectivity.

Mosaic became Netscape, which released its Navigator browser in late 1994 and from about 20% of the browser market in January 1995 to almost 80% less than 12 months later & Netscape launched IPO in August ’95. Within five months, Netscape stock had shot up from $28 to $174 per share. This was the start of what Alan Greenspan had given the word “Irrational Exuberance “. Yahoo! went public in April ’96 with an $848 million valuation, Amazon at $438 million, PE multiples were higher than those for any Old economy company. This Dot-com mania was intense, and it was in March 2000 that the burst happened. Technology in this era was considered as a “sales” and not product. Investors flocked to get share in the companies which even existed in idea only without any product. When the leap is so huge, and the fundamentals are weak this kind of boom to burst is bound to happen. I remember Jac Ma saying, there are three stake holders in company - investors, employees and customers. It is the investors who tend to leave first and that is what happened. NASDAQ fell from some 5000 to 1100 from 2000 March to 2002 October. The investors who had flocked to get a pie were withdrawing their investments in no time of whatever was left. A chance was missed here, to make it a Golden age of technology because the focus was on raw technology itself.

New Business models

We are sitting right now in 2020 and nearly two decades have passed and we have same Google which earns about 17-18 Billon dollars in revenues per annum with parent company earning about $136 Bn annually, revenue of Amazon has become $265 billion annually with about 7.5 Lac employees, Uber has posted about $50 Billion in annual payments collected, air bnb has revenue of about $4 Bn annually & not to forget topping the chart is Apple with about $265Bn annual revenue. Consumer technology market has become about 1000 billion dollars annually. 

It was in 1984 at the sales conference Steve Jobs decided to play the showdown to the hilt. He took the stage & described how it was now trying to take over the market for personal computers: “Will Big Blue dominate the entire computer industry? The entire information age? Was George Orwell right about 1984?” & a screen came down from the ceiling and showed a preview of an upcoming sixty-second television ad for the Macintosh. In was destined to make not only advertising history, but also laying the foundation of turning raw technology into - ease, reliable and secure way of turning our lives into something else. Jobs had said to his CEO that “founders have found the company, but you and I are founding the future”. It is the future in the form of iPads, or Macs that millions are using, and It has made the life easy to the hilt. But it took another three decades to “really pull a screen from ceiling and for big blue to dominate” if we take the words of legend, Jobs. 

All these intermediate years were people playing with raw technology, no real use which brought ease in the life of masses had happened. This technology brought the computing power to hilt; helping in biotechnology, ultra-powerful military equipment’s, removing man with machine across the industry. But I would again say, it impacted not more than 5% of the universe of population. It was when the impact was on masses that this whole prism has changed, and Golden age has come.

Golden Age Companies

Now let us venture into what are these Golden age companies. These golden age companies and the ones boomed during bubble period have the ability to generate cash flow in the future. The characteristics which made them a successful model differentiates them from the bubble era companies. The few fundamental characteristics:

1. First, they are the monopolies in their stream of chosen field. Look at Uber or Amazon or e Bay, all of them were monopolies and were not competing with anyone. Actually, they were out of what we call as perfect competition. 
2. There was no raw use of technology but an application which brought ease in the lives of people. Take for example Uber, it totally changed the way local conveyance used to operate. 
3. Now, most of these golden age companies would be in huge operating losses since their origination, but one thing separates them is they have constant revenue stream even if the operating profit is negative for initial period of incubation.
4. They improved the output as compared to existing models in same sphere of influence by more than 10-20X times. Google, it improved the search by not less than 100X.
5. Lastly, you don’t see them vanishing for next 10 years, rather you would see that they would encompass more services and give you an experience. Amazon started as an online bookstore and now you see “n” number of more services provided by it in addition to enhanced experience which you got from otherwise brick and mortar model.

The question now is that, where is this Golden age going to take us and what lies in the future, is there going to be a lull before a next level change, or the exponential change would continue. 

Future : Platinum age

All the revolutions go thru similar long-term cycles, first would be an installation period, then there would be exuberance and there might be a bubble as we had already seen. Then, this revolution turns into a deployment period where internal and external synergies are built and finally into a maturity period where the idea becomes a conventional wisdom, and work done is around the efficiency.

Similarly, our golden age of technology will become a normal, UBER, AMAZON etc would be a new normal like cars and taking flights(industrial revolution?), work would be around efficiency and consolidation would happen. These models which have not earned profit, will start giving positive EBIDTA results as the stabilisation and monopolisation will be the new normal. 

There would be a period of lull as it would take time to develop next set of raw technologies on which the work is already going on - it may be robotics, AI, autonomous transport, biotechnological leaps, advanced medicines, 3D printing etc etc. 

It has been decades since a new antibiotic has been invented, so who knows next revolution can be in terms of medicines. We could have a machine, a robot, who will diagnose the illness with a scan and injects medicine concoctions or put you inside a chamber and operate upon you. Artificial intelligence can be another leap which can be taken, where the solutions are provided by numerous algorithms and artificial neurons. It could be a computer who would make a budget for the country, it drives economy based on real time happenings. You might not need to order anything from amazon, but you need to go into a suite where you 3D print your things. Autonomous transport seems to be just around the corner, and we are already seeing huge development with involvement from Google to Musk. 

But again, I am talking about these raw technologies which would again transform into enablers and models which would redefine the conventional processes. There might be a bubble in between as investors will try to find opportunities to invest and there might be a frenzy also. 

But watch out for another decade and we would see Platinum age of technology, if the Golden age has made life easier for us - the Platinum age will redefine it. It would be a similar jump as from Stone Age to Industrial revolution, and who knows if Einstein was true and there is really a TIME TRAVEL.

In this new age the companies will need to generate disruptive innovation and that would require a huge reinvention of a company’s core business model. The Golden age came from bunch of start-ups but this Platinum age will be driven by already existing behemoths in technology. And this is because, this would require huge investments and R & D capabilities. That is why, we are seeing Google investing in autonomous vehicles or SpaceX investing in new technology developments. It will challenge the existing setup where the disruption was a saga to be driven by newer companies or Start-ups as the costs required would be huge and the start-ups which have become behemoths will be the drivers to take us into Platinum age.

There would be radical innovations which will be disruptive to consumers because they will introduce products and value propositions that will disturb prevailing consumer habits and behaviors in a major way. 

2030…………