I believe that the next technological black swan the next Google will come not from the developed markets but from the emerging markets. This is not the same as seeing the next big ideas will only emerge in the emerging markets. What I mean is that the next company which will thrive and become as successful at the time of its public offering will come from the emerging markets.
Before we go ahead, it is good to get an understanding of what made Google thrive to get to the point where it has reached now. One, it had only one round of venture capital investment, giving the founders sufficient management control on the future direction of the company including the right to refuse takeover offers. Second, they focused on an area which others had given up on search. When Google started up, search was a forgotten area in the Internet backwaters. They not only made search work well, but also created a business model around it via the text ads. Third, they built up scale rapidly over the years. Their use of commoditised hardware and open-source software at the backend gave them the platform to keep costs low even as they layered their proprietary algorithms on top of the GoogleOS.
In 1999, it would have been hard to imagine that a search company would be doing an IPO at a market capitalisation of $25 billion. What is interesting in this is what the likes of Yahoo and Microsoft did not do to prevent Google from getting where it is now. That is the incredulity of it all. That is what makes Google a black swan.
Now, let us imagine a technology start-up call it NewCo. There are many reasons which lead me to believe that a NewCo will not survive for long in the developed markets. For one, others are probably less likely to make the errors of judgment that Yahoo and Microsoft did even accounting for the innovators dilemma. Second, in todays challenging times, companies are more likely to sell out because investors want to cash out. Third, the developed markets are where most of the worlds largest technology companies are located it is harder to sneak past them now.
In contrast, the emerging markets are the outliers. They have people, but for the most part, little playing capacity especially in the dollars the companies in the developed markets love. They speak different languages, are separated by distances, have limited infrastructure. Except for the people and possible future opportunities, they are all that the developed countries are not.
How will a lotus thrive in this environment? Many factors are combining to make the emerging markets the new hotbeds of opportunity and new technology. Look at the buzz around parts of China and India. There is also limited legacy which hobbles some of the existing giants.
Where does the opportunity for the next black swan lie? According to me, the opportunity lies in making computing available as a utility across these markets. What is needed is a reinvention of the entire computing ecosystem to make hardware, software, content, connectivity and support available for $15 per user per month. This is an entity which must have the innovativeness of a Google, the aggressiveness of a Microsoft, the growth potential of an eBay, and the endurance of an IBM. Will it happen?
Nassim Taleb quotes Scottish philiospher David Hume in the Gladwell interview: “No amount of observations of white swans can allow the inference that all swans are white, but the observation of a single black swan is sufficient to refute that conclusion.” Just because something has not happened before does not mean it is never going to happen in the future. It is for entrepreneurs in the emerging markets to prove Hume and Taleb right by envision a future very different from today and building it out. Ill be watching for a black swan in 2010.