I found myself, once again, in a debate with my friends on whether the Silicon Valley real estate market is currently in a bubble. Could the prices keep going up? And that’s when it dawned on me. They will. No doubt. Why? Because from here on out, all new companies are going to be tech companies. Full stop.
Oh, but you say, what if I went and created a car company? You mean Tesla? That’s a tech company. Or what if I were to start a grilled cheese restaurant chain? Yep – that one’s a tech company too. Or how about a chocolate factory? Todd and Cam are literally writing their own software to operate and measure their chocolate factory because they’re so displeased with the off-the-shelf options at their disposal!
In today’s world, if you’re starting a NewCo and it’s not, at a foundational level, a tech company, then it’s unlikely to succeed. Yes, you can operate a small business any way you’d like, but I’m talking about companies of scale. You’ll be out-maneuvered by a competitor who figures out how to leverage technology to make their operations more efficient. Or you’ll be outgunned by a competitor who’s able to craft a better product for market – more adept at using data and customer metrics to iterate and refine their offerings. The reasons are numerous, but if you are not a tech company, you are at a severe disadvantage.
If you believe this, there are a whole mess of implications – many more than I’ve thought through. A few:
1. To my opening story, Silicon Valley real estate will continue to explode. The network effects within the SF Bay Area around technology make this the easiest place to start a new tech company. Just look at where Tesla, The Melt and Dandelion were founded. That’s not to say that other areas don’t have great technology communities. But the SF Bay Area will continue to have the disproportionate share. The new car companies and chocolate factories will be founded here, and that will bring with it the good and bad of a rapidly expanding local economy.
2. Our education system needs to adapt, now. I look at my alma mater, Yale, and I worry. They don’t attract the best and brightest *technology* minds – those folks go to schools with better CS programs where they will find more like-minded professors and peers. For a school to remain an absolutely top institution, it needs to turn out individuals who are completely comfortable in a technology company, even if their first stop along the way is an investment bank or consulting firm (which are, largely, run on technology in their own right). This is not just about higher education. This is also about molding students from early on – about teaching them to imagine and then make. Two of the most vital skills in a technology driven company.
3. There will be an ever stronger polarization between the haves and have nots in the economy at large. Technology companies are, almost by definition, labor efficient. Those able to work and be productive in technology companies (engineers, product managers, designers, etc) will thrive. Those who are not will find themselves in increasingly commoditized (and therefore lower wage) positions.
4. Non-technology oriented industries will continue to be disrupted by those approaching the same problem with a healthy dose of technology. Just as books, music, and even taxis have now been disrupted, so too will be mining operations, construction, labor, and the like. It’s just a matter of time before a tech-oriented entrepreneur (or two, or three) put their minds to figuring out how to solve the inefficiencies in these spaces.
If every new company of scale is indeed a tech company, what are other societal implications? Comments welcome.