The Firm


Trillion dollar babies

The outcry against the recent wave of mergers and the fear of what they will bring seems reasonable on the surface. Consolidation and monopoly is bad for the public, bad for competition, bad for super heroes, just plain bad.

I propose that as opposed to something fearful, that this is a natural part of the cultural cycle, it is an indicator of where certain industries are up to and that we are on the frothy edge of a new wave.

Industry consolidation is nothing new. Computers did it, resources did it, cars did it, banking has played with it, retail has done it, print did it, screen did it, manufacturing did it, even nations do it.

Without going into great detail, partly because I would have to research to get exact numbers. As the car industry boomed in the USA so did the diversity of companies making cars, there are interesting documentaries on the subject. Quite rapidly though diversity shifted to closure and consolidation. Today this is on a global scale, with China and Asia leading the way in the consolidation of brand ownership.

Computers, does anyone remember the 80s and 90s, there were a vast array of computer companies, which also led to closure and consolidation. Are we really worse off without Sun, DEC, Acorn, Commodore, Gateway, Compaq, Sperry, SGI, Apollo, Sinclair, Tandy and more? It was not the dark powers at work, it was the process of innovation, that leads to standardisation, scales of economy and ultimately commodity. At the inflection point of this came a whole new wave of computing, the smart phone. It also in a compressed timeline led to a surge in companies followed by closure, consolidation and what now? A new wave of smart speakers, wearables and friends.

if we believe in capital and our economic principles then what do why do we expect that companies will simply stop growing. Are the resulting financial numbers too big and scary? AT&T is making a behemoth, and yet, what else do we expect of it, when it is playing in a world of behemoths, Apple, Microsoft and Google are pressing forward rapidly. Can an AT&T with half the worth of Apple really play at the table?

The technologies that we, that this site and others have lauded, have also been a force that have driven telcos to reconsider themselves as media distribution companies. There is no value left in phone calls, texts, data; The money made from SMS was crazy, now it is effectively a free service fighting for relevance against IP based messaging services. International calls, a last bastion cash cow are doomed, with innumerable VOIP offerings. They probably once imagined that video calls would be the next cow, but our IT friends rustled that beast away before the Telcos even had a chance.

The response makes sense, and seems fair. You need the content, more than the pipe and unless AT&T and friends are going to let themselves vanish, this is the logical path forward.

We are quickly approaching the headlines that will read "Company X is now worth over a trillion dollars" and the resulting shift in what is perceived as a strong company will lead us to a rush of mergers to try and stay relevant.

Letting go of our fears around this, opens up another way of looking at the current trend.

Telcos are done, passive media is done, ad companies are done. There is no room now for diversity and security is only possible by closure and consolidation. Games are coming in hard against passive media and on the near horizon are new classes of media that will disrupt everything we now have.

It is fair to expect that AT&T's clever people have concluded that the entire catalog of passive media they are purchasing will quickly devolve to being of no more value than a monthly sub or a syndication fee. It will though, be an enduring extra sub on top of existing monthly plans. Even more important to them than the walled gardens we may fear, will be bargaining power, the ability to sit at the table with Disney, Apple, Google, Amazon and say "we are not your dumb pipe, we have value".

Perhaps we should look upon all this as evidence of great things. That we have a future of trillion dollar conversations and of a new frothy wave of disruption that the trillion dollar babies now being born will have to try and stand against.

I am not concerned about the risk of damaging innovation. Even the last 10 years has shown incredible innovation, yes these things might get bought up by Facebook, Apple, Google, AT&T, Microsoft etc, but they pay big.

And without getting into the debate around Musk being a salesman or not. All this came from PayPal. Perhaps it is a really good thing that the trillion dollar babies will buy away the ideas from the innovators. Because, for one, they will pay billions to do so, and for two, the innovators will be then cashed up AND not lost in the grind of daily corporate mundane.

The trillion dollar babies, lumbering along, wearing the big pants and seeming to own all the thing are going to be engine to allow for billion dollar visions. Innovators that can afford to be innovators.

I think it is exciting and can't wait to see what comes of it.