hyper-exceptionalism versus “blockchain for x”.

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A few years ago, Mike Maples, a guy who I respect a lot, made the comment that:

“The tech startup business is all about hyper-exceptionalism. Out of tens of thousands of companies started a year, 97 percent of the exit profits will likely come from less than ten….the point one percent” (goo.gl/SPGugd)

I think this is an incredibly profound statement, and one that is consistently and repeatedly overlooked. In 1999, the Industry standard was full of companies that were “putting x on the internet” where x was pet food, government services, cd record sales, etc..”. Of those, 99.9% failed, or failed to have meaningful exits, but of course Amazon and Google ended up with all the returns.

Today, we are seeing the exact same (flawed) macro thinking with blockchain. Investors like to think “macro”, because it tends to work with all other industries (resources, financial services, etc..) but it DOES NOT WORK WITH TECH.

The reason for this is, I believe high margins and network effects. In steel or banking, costs are high and network effects are very low. There is no “winner take all”; location and razor thin margins create mini-geographical winners, many kingdoms as opposed to one empire. In tech the opposite is true. Once a great search engine solution is found it wipes out its entire competition and grows in power as it scales.

I believe this will play out again with Blockchain. Many “semi-plausible” ideas will be tested (Blockchain for supply chain, real estate, loyalty programs etc..) but most will fail. But some will take root and grow like crazy. In Internet 1, the two key ideas that one were “finding stuff” and “buying stuff”. Pretty obvious, in retrospect.

I think the killer app of blockchain could be as simple as “paying for stuff”. It’s not clear, at this point, what exactly that means; but I suspect that it will be painfully obvious 10 years from now, when “blockchain for x” has long been discredited…

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