Outsiders versus Insiders Drive the Cycle of Innovation
As a History major & business practitioner over the last 2 decades, I needed to look at technology trends and innovation to better understand how things work in the world.
Outsiders innovate, they win, become incumbents and the new establishment.Then they become insiders, get fat and lazy. New hungry outsiders come in and wreck them. The insiders wake up or get scared and try to compete. They usually lose in the end. Change is just plain hard. Even if the incumbents are not fat and lazy (usually not the case), it’s very challenging to keep up in our present ultra competitive environment full of change.
You saw this in many different instances. Roman empire versus the Germanic barbarians. Spanish empire versus the Dutch, French & British. Old Europe versus the rising USA at the turn of century circa 1900 through to 1945. In the business world, Hedge Funds and PE firms versus the Fortune 500. East Coast versus West coast. Mainframe versus Microcomputer versus PC versus Mobile. Countless examples.
We’re seeing this in the Venture capital industry and ironically it’s the hedge funds like Tiger Global, Two Sigma, Coatue & D2 doing that from the top. And solo capitalists and new emerging fund managers coming in from the bottom. The only firm that seems to be staying on top is Sequoia Capital and it’s because they have fully embraced Andy Grove’s “Only the Paranoid Survive” mindset. Can’t say the same for many of the old guard in VC who have made too much money and are not willing to hustle anymore.
The exact same phenomenon is happening in the larger financial services space. Crypto versus the incumbents of the old financial world of Central Banks, big Retail banks, Visa and Mastercard. The crypto industry are the new barbarians at the old Finance gates. There is going to be a massive fight but the trends in the long run are in favor of a decentralized world. It might take 10 years, maybe even 20 but I am certain it will happen as this present young digitally savvy millennial generation comes into positions of power and influence.
This cycle is well described by one of my favorite Medium writers, Daniel Jeffries:
“Crypto will be the establishment. And then somewhere, someone much younger, who’s left out of the system will dream of bringing it all crashing down, and they’ll come up with an idea and a brand new technology that scares the hell out of us and threatens to topple everything we worked so hard to build with crypto.
We’ll be the ones trying to suppress the revolution.
The wheel of time spins forever and ever. And the eternal cycle will roll back to the beginning once more.”