A Brief History of Innovation & What Might Come Next
Hey Everyone, Dez here from All Things Venture. Today’s article is going to be about one thing, and one thing only:
A brief history of innovation (i.e what technological improvements have occurred in the past ~40 years) and what might come next
(S/O to my Kanye and Blades of Glory fans who got that reference)
Let’s dive right in.
So I’m new to VC, and I’m learning the ropes. The central aspect of our job is to find exceptional founders (like many of you in this newsletter), partner with them to grow their business, empower them with the tools to succeed, and then get the hell out of the way. We do this at the earliest stages when there are little to no customers, data, or employees. It’s a wild business, but so far I’m loving the experience. So, with that in mind, it’s important, actually no it is critical, for me to be able to identify the companies today that will become the Stripes, the Ubers, the Coinbases, of tomorrow. Each of these companies was founded in the past fifteen years and each of these companies are now worth $50B+. So how the hell am I going to do that? How am I going to find these companies when they are little more than just an idea? Great question. I’m not 100% sure, but what I do feel is important, is to ground myself in a historical context on the environments that enabled those outcomes to occur. Technology innovation happens in cycles, and technology innovation is compounding. The computer needed to be built before the internet could be created. The internet needed to exist before a social network could be born. Social networks needed mobile computing in order to become ubiquitous. With that in mind, I wanted to explore the four core technology innovations that I believe have led us to where we are today:
Technology Innovation #1 - The Modern Computer
This one feels like a no brainer (because it is), but the history behind computers is fascinating. The fundamental concepts for the modern computer, and the reason why you and I, and society writ large operate the way we do today, were established way back in 1936 by this guy Alan Turing. Long story short Alan Turing is the OG of computing and his theories gave us the earliest frameworks on how to think about, build, and use modern computers. The modern computer, at its core - was designed and intended to compute/solve information in a manner that was faster than humanly possible. So long as the program a computer is executing is designed correctly, a computer will always be right, and a computer will never get tired. The modern computer created a step function in efficiency for solving large and complex problems. Between 1936 and the mid/late 1970s, computers were really only used by governments and higher education. As I was doing research for this post I came across a blog that described computers during this period of invention and tinkering as, “almost impossible to use except by very patient geniuses.” Lucky for us, those patient geniuses kept at it, and by 1974 the personal computer began to be marketed to the general public. From 1974 to today, the PC market has continuously innovated to do two things 1) lower prices for consumers 2) add features to retain existing consumers and attract new ones. We’ve gone from personal computers that look like this
An Apple 1 computer released by Apple in 1976
To this
A Macbook Pro released by Apple in 2020
The level of progress is undoubtedly remarkable, but what’s more important than just the advances that the computing industry made, are the platforms that the computing industry enabled to come next, which brings us to technology innovation #2.
Technology Innovation #2 - The Internet
The internet!! The province of the Millennial experience. Everyone reading this newsletter knows how important and how valuable the internet is. Hell we practically built the modern internet (you’re welcome Gen Z). Whether it was playing neopets and runescape or hopping on AOL chat or OG youtube, we know how the internet works. That being said, we may not know how the internet started. Lo and behold, the internet began as a government funded research program called ARPANET in the 1960s (Advanced Research Projects Agency Network). ARPANET was funded by the Advanced Research Projects Agency, which is an arm of the U.S. Defense Department and now known as DARPA. ARPANET was initially built to, “link computers at Pentagon-funded research institutions over telephone lines.” The development of the internet, at its core - was designed to be a more efficient form of communication. Similar to the step function in efficiency computers provided in the form of solving complex, programmable problems, the internet provided a step function in efficiency in communicating information. Just as the personal computer was becoming more and more available to the average consumer, the internet was starting to take shape in a similar fashion. In 1983 ARPANET adopted the Transfer Control Protocol/Internetwork Protocol (TCP/IP). TCP and IP are two separate, but important computer protocols. They are effectively the guidelines that allow for different networks to communicate with one another. This is an extremely important moment in the history of the internet because it created the ability for network effects to occur. In the beginning, the only way for a computer to communicate with another computer, or any subsequent computers, was if it had a point to point connection. You could have multiple computers in a network, but if that direct point to point connection is broken so is the stream of data. With TCP/IP in place, different networks could now be interconnected so one node to node connection could be connected to another node to node connection, which could be connected to another node to node connection. This is so fundamental to understanding the internet because it meant that information could be distributed all over the world, which is something us millennials have always had access to and understood, but it must have been absolutely mind blowing for our Gen X and Baby Boomer friends and family. So coming back to our timeline of development, it’s 1983 and it is now technically possible for you to be connected to anyone in the world, and with that technical possibility comes an unprecedented amount of demand. Demand that required a technical possibility to become a functional reality. That functional reality was realized in 1989 by another innovation OG, Tim Berners-Lee.
In 1989 Tim Berners-Lee invented the World Wide Web to meet the demand for automated information sharing between scientists in universities and institutes around the world. Tim worked at CERN, which is the European Council for Nuclear Research which was/is a centralized institution for European scientists/physicists to, “unite people from all over the world to push the frontiers of science and technology, for the benefit of all.” Following the creation of the World Wide Web in 1989, a Cambrian Explosion of technology innovation and company formation occurred. Here’s just some of what happened:
Wild.
So what came next?
Glad you asked. This brings us to technology innovation #3.
Technology Innovation #3 - The Mobile Computer
If I had to summarize the mobile computing era, it would be this: take computers, make them smaller, and put them EVERYWHERE. You want a computer in your hand? Done. You want a computer as your doorbell? Done. You want a computer on your wrist? Done. But when did the mobile computing era really begin? Let’s take it back to 2007. I was in 7th grade, absolutely cranking Party Like a Rockstar on my ipod shuffle, and probably wearing some horrible combination of American Eagle/Hollister and those incredibly baggy nike basketball shorts. What a time to be alive. Anyways, Steve Jobs dropped the first iPhone in 2007 and the rest is history. A similar Cambrian explosion of innovation happened:
Let’s pause here for a second. Remember those step functions in efficiency that the internet and the modern computer created? Well the introduction of mobile computing takes both of those efficiencies in communication and computation and combines them into one. More or less any computational problem, and more or less any form of communication can be achieved by anyone, from anywhere provided they have access to the new tool (a mobile computer) to do so. It is fascinating to look back on how these new technologies became ubiquitous and layered on top of one another, and it’s equally fascinating to look back and observe the historical patterns within each technology innovation cycle.
A new technological innovation is released that is novel, but it is either too expensive or too complex for the general public
Commercial enterprises compete to lower the costs and/or improve the functionality of the technological innovation in order to sell it to consumers
A core platform is released that drives wider adoption for consumers by abstracting the underlying complexity of the initial innovation
Commercial enterprises begin to develop products/services on top of the new platform that has aggregated a whole bunch of new users
For the mobile computing era, the release of the app store in my mind is that core platform that drives wider adoption for consumers. Case in point, here’s what happened after 2008.
I started undergrad in 2013 and graduated in 2017, and it’s honestly unbelievable to think about how, in some of the most formative periods of my life, technology was influencing and introducing new cultural and business norms into society. At any point in time in undergrad, I had a supercomputer sitting right next to me that could access any piece of information in the world. If I look back at it, my world was routed through my phone. My friends and I planned parties through texts, I shared my favorite memories and experiences on Instagram, I sent money for food, and flights and the myriad of other random expenses a college student has through Venmo, it was at once utterly benign, and unknowingly novel. It still feels like we are living in the mobile computing era, but overall less innovation is happening in the space. There is undoubtedly a lot of opportunity and value yet to be derived from the innovations of the computer, the internet, and the mobile computing era, but in my opinion those innovations are getting pushed further and further into vertically specific platforms. In general, it feels like these vertically specific platforms are winning because the industries they are serving have been slow to adopt these tools, or have never had the same level of attention, focus, and investment that they are receiving now. All in all, this brings us to technology innovation #4, the blockchain.
Technology Innovation #4 - The Blockchain
Here’s an analogy to think about (and a quick shameless self plug):
Without the internet becoming the worldwide phenomena that it is today, the blockchain era, which we are still in the early innings of, would have never begun. This entire article has been about a brief history of innovation, and I would be remiss if I didn’t reference blockchain. The blockchain era, to me, really kicks off in 2008 when Satoshi Nakamota (which is a pseudonym, and could be one person, or a group of people) published the bitcoin whitepaper. The whitepaper is highly technical, but it lays out a framework for establishing a decentralized currency that solves the double spending problem of digital cash and allows for the peer to peer transmission of “electronic cash” without the need for a centralized intermediary. I am not a historian, but in my mind the release of the bitcoin whitepaper is on par with Alan Turing’s findings in 1936, the establishment of ARPANET in the 1960s, and the release of the iPhone in 2007. One quick note, I believe that blockchain as a technology innovation is extremely important and I believe that some of the early use cases that have stemmed from the innovation of blockchain (i.e cryptocurrencies, decentralized finance, NFTs, etc) are also important, but they are the branches of the technological innovation that is the blockchain. I make this distinction to say that even though a lot of time spent on the internet is on social media, the entirety of the internet is not social media. The same thing applies to blockchain and crypto, or blockchain and defi, or blockchain and NFTs. That being said, let’s look and see what happened in the ecosystem following the launch of bitcoin in 2008
In a little less than 13 years, the blockchain era has come a looooooooong way. At the time of writing this article. Bitcoin and Ethereum, the two largest cryptocurrencies by market cap, were worth ~$1T. I’ll state the obvious here. THAT’S A LOTTA DOUGH. That being said, the rate at which these blockchain applications and their perceived value has grown isn’t that important to me. What’s more important to me, is the trend that has occurred across all 4 technological innovations we’ve discussed today. New technology gets released (bitcoin), commercial enterprises compete to lower costs/improve functionality (bitcoin/ethereum + a bunch of other chains I haven’t mentioned), a core platform is released that drives wider adoption for consumers (ethereum), and commercial enterprises begin to develop products/services on top of the new platform (NFTs, DeFi, OpenSea, etc.). While I know that my framework is far from perfect, it’s been useful for me to return to as I think through and review potential opportunities early on in my career in VC.
What Comes Next
I think I entered venture at a pretty unique time where we’re caught between two innovation cycles. On one hand we’re still in the middle of the internet and mobile computing era cycles, and on the opposite side we’re only in the very early innings of the blockchain era innovation cycle. Within the internet and mobile computing domains value is being unlocked by applying these technology innovations to very specific markets that have been historically overlooked (i.e restaurant industry) or historically entrenched (i.e real estate), and just now starting to see purpose built solutions emerging. On the other end of the spectrum, within blockchain and it’s adjacencies like crypto and Web 3.0, which I write about here - the early products being built are primarily consumer oriented financial tools, which makes sense when you think about the origins of the blockchain era being rooted in a desire to create, “electronic cash.” In any event I think solutions in both areas will be more oriented toward solving our wants, rather than our needs, and I think that specifically for the blockchain era innovations, we’re going to see a lot of focus and intensity around building the Shopify or Squarespace equivalents for creating and managing online incentive systems. For the internet and mobile computing era innovations, I think that solutions that build around, or service the atomic unit of transactions/payments, as well as solutions that create vertical specific software are the ones to pay attention to in the near term. That being said, if there’s anything I’ve learned so far in my entrepreneurial/venture capital journey, it’s this - the future may be uncertain but it’s being built as we speak. I’m looking forward to playing my very small part in helping build that future.
That’s all for this week everyone. I know this was a bit of a longer one, so thank you if you’ve made it this far. Let me know what you think in the comments. Also, if you’re a founder, or know a founder who is building in the above categories, or broadly in real estate, fintech, or Web 3 shoot me a note at dez@firstmarkcap.com.