I found Fred Wilson’s talk at LeWeb extremely interesting, so I wanted to share my notes and takeaways.
Fred described three macro trends that he and his firm, Union Square Ventures, see coming and use to evaluate investment opportunities. He gave examples of how each trend is manifesting itself, and then described four sectors he sees as being particularly ripe for opportunity.
1. Transition from bureaucratic hierarchies to technology driven networks (3:00)
To date, organizations and industries have been structured like pyramids where one leader funneled down to workers, and back up again. It’s a highly inefficient system, that has been used because transaction and communication costs had been so high. However, technology has changed all that.
Examples of technology driven networks replacing pyramid structured hierarchies:
a. Twitter vs newspaper (4:30) – All of us are reporters, and the crowd determines which content/news is most valuable.
b. SoundCloud vs music industry (6:15) – Anyone create and publish music. You don’t have to go through a record label and you get found by the crowd.
2. Unbundling (8:15)
The way products and services are packaged and taken to market is changing. Fred believes everything will eventually get unbundled.
It used to be very expensive to package and bring a product to market, so products were bundled. To buy one product or service you usually had to buy it with several others. However, technology has made it more efficient to package and deliver products. In addition, the offerings can be improved because producers are completely focused on that specific offering.
Examples of industries that are unbundling or are ripe for unbundling (9:15):
a. Newspaper – We used to buy one newspaper and get world, local, sports, etc. Now it’s all from different sources.
b. Banking – Entrepreneurs are picking off offerings of large institutions and offering them as network based business models. For example, Lending Club for peer-to-peer consumer lending.
c. Education – Large institutions have been bundling things like physical location, professor, library, research, etc.
3. We are all nodes on the network (14:15)
Smartphones have become nearly as powerful as desktops or laptops. In addition, there are many things we can do on our phone that we can’t do on our desktop/laptop. For example, smartphones have sensors, are location aware, are with us at all times. In emerging markets, they’ve leapfrogged the desktop and gone straight to mobile because they could never afford it.
The result: we are all connected to each other all the time. Examples:
a. Transportation (16:15) – Uber and Halo – Making limo and taxi travel more efficient by leveraging mobile and the network it creates.
b. Payments (17:00) – Venmo, Dwolla, Square – services that allow us to have a wallet on our phone and send money to anyone with the app (on the network)
c. Dating (17:30) – Tinder – location aware matching
Four Sectors to watch:
1. Money (18:30) – Bitcoin – not the currency, the protocol
Fred described Bitcoin as “the financial and transactional protocol for the internet that we have not had until now.” It’s a layer of internet infrastructure that’s global, distributed, and not owned or operated by anyone. Payment can now flow on the internet the same way content does, and it’s not controlled by paypal or credit card companies. Fred believes this presents huge opportunities.
2. Health and wellness (20:15) – not healthcare
Health and wellness it what keeps you out of the healthcare system. Fred believes the three trends will play a big role in this space. For example, we now have devices that can report our vital signs to ourselves and others. This could have a huge effect on the insurance industry.
3. Data leakage (22:45) – not big data
When the industrial revolution came on, we started polluting, but didn’t do anything about it for a century. In the information revolution, the pollution is data. The data is letting the government and big companies like Facebook and Google spy on us when we don’t them to (in many cases). Fred believes getting control of data leakage at individual and societal level may be valuable.
4. Trust and identity (24:00)
We’ve allowed Twitter and Facebook to be our identity. We’re giving them access to everything we do. Fred predicted a protocol (bitcoin like service) that will emerge to allow us to have control over our identify trust and data.
To watch his talk in full, which I highly recommend you do, check it out here.