The Next Big Thing Is Not Innovative
I recently saw an article about yet another mobile social platform that raised a boatload of money. I guess it is okay though since it allows teens to express themselves by creating their own memes with cool stickers and sharing them with all their friends. That is obviously worth $13 million because it is the next big viral thing or something to that effect.
While everyone is hip to the current enterprise tech hotness, a post the other day dispelled some of the myths about how “easy” the enterprise space is. I cannot dispute the conclusions and it certainly does take significant time and resources to reach the holy IPO stage. It is by no means easy to build a new solution that the enterprise market would willingly buy and to suffer through painfully long sales cycles. Then you have to scale that business. But then the author ends by saying “sure you don’t want to build a dating app?”
A few weeks ago, I saw yet another in a long line of “stupid idea that became big” articles. I get what Dustin is saying, but it irked me nonetheless. There is no doubt that things like Pinterest or Vine are popular and fill their core users with some modicum of joy, but then again so did Farmville. While he did not use the word innovative, he did say the founders “saw the future”. What future was that exactly, the future of occupying people’s time with yet more dipshit apps?
Now before you excoriate me for bashing Pinterest, Vine, and other mobile, social consumer apps, ask yourself if they are truly innovative? Have they brought new technology to the table? Has the human condition been improved? If you take a long, hard look, calling these apps innovative, next-generation, game-changing, industry-creating technologies would be a stretch. They have the potential to be useful distribution channels that compliment existing social media channels. But ultimately they are still “stupid ideas” if you simply look at what they are. It is just that no one wants to say that because of how many users they have and what all the tech press is saying and how much money is circling around them.
What we have become in this cycle of tech innovation is a culture of chasing easy money. Whenever something becomes about the money, all other considerations get swept under the rug such as innovation and societal good and transparency. While this might initially sound strange coming from someone that is on the investment side of the tech ecosystem, it actually makes perfect sense. As an investor in early stage technology, one would want to look for the biggest game changing opportunities to maximize one’s return in exchange for accepting a high level of investment risk. That is because the game changers are the ones that create the biggest long-term upside by becoming something of a value multiplier. In other words, these are technologies that extend their value by evolving into platforms for other technologies and business models. Think Google and the search market, Facebook and open API’s, or smartphones and app stores.
Instead the game for investors has become the quick flips and sure bets. Thus the institutions that purport to support innovation would rather put money into coffee shops. You can’t blame them for trying to lock in returns given their miserable performance over the past decade as an asset class. This is one key reason for the exodus from early stage to late stage capital by many VC firms. It is a race to reduce risk and snag those easy, near-term (albeit smaller) returns. I am not saying that is wrong, but that is not venture investing and it certainly has nothing to do with supporting the innovation economy. If anything, it looks more about justifying one’s existence and exorbitant management fees to LP’s.
While I may sound pessimistic, I do not believe for a second that we are bereft of big ideas. It is just that the incentives to take on truly big risks on crazy ideas and mad founders are simply not as appealing. When VC’s and the tech media hype machine proclaim the next big thing, what they really mean is the next viral hit that can be cashed out for a quick buck. The ideas that are truly innovative are too raw or too bizarre or too challenging or too counter-intuitive. On the surface, they look ugly and unimpressive and down right idiotic. They do not conform to our perceptions of innovative and cool. They are pitched by quacks and weirdos and freaks. They are developed in nondescript labs out of the spotlight and beyond the mainstream. And they are certainly not on TechCrunch and other supposed forums of “disruptive technology”.
The “Next Big Thing” is not the “Next Big Innovation”. Maybe we need a new phrase, but at the very least we should stop conflating the two and be more honest then when we talk about what is innovative and disruptive versus viral and money making. While the two can go hand-in-hand, the reality is that what is innovative usually has to go through several rounds of humiliating false starts before it can be commercialized and monetized. It simply takes way more money, time, and risk than investors can stomach. Consider the path that innovations such as at-home genetic testing or commercial space travel have had to take and it is still early days. Those are ideas that truly take guts to start and to fund, but the impact on lives and the economic upside is immeasurable.
There are big ideas being worked on right now. We do not have to wonder if they exist, you just have to look a bit harder beyond the obvious places. You see, the future is here and it is a lot more interesting than an app.
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Wise words, to shine a light on our civilization’s innovation and invention in relation with our risk values.
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