The End Shape of Things

S. Schuchart

Summary Bullets:

• Evolutionary predictions are relatively easy; revolutionary predictions for cataclysmic, market-changing events are nearly impossible to predict.

• Skepticism, value-focus, and clear identification of what is evolutionary, even when it’s dressed up as revolutionary, is key to effective technology decision-making.

Historically, humanity’s ability to see the end shape of things is spectacularly bad. Smart, monied people such as Thomas Watson, the storied CEO of IBM, in 1943 said there would be a world market for maybe five computers. The inventor of Ethernet, Robert Metcalfe, predicted that the internet itself would “supernova” and collapse in 1996. Those are egregious examples of being spectacularly wrong, but it makes sense to look at the perspective of those predictions in the light of the conditions and observations they could make at the time.

Watson knew the market for his IBM mechanical card tabulation machines and how they sold. Moreover, he knew how many of them sold and thought that electronic computers, with their positively embryonic state and enormous cost in 1943, would be supplemental to mechanical tabulation. His inability to predict the beginning of the information age wasn’t a failure of imagination or foresight on Watson’s part – it was solid and conservative business rational based on what trends he was seeing in the marketplace, which of course was massively disrupted by the Second World War.

Metcalfe was, and is, an expert in networking. His prediction, which he famously (and literally) ate on stage after blending it, was based on his understanding of primal market forces at the time. His concerns about bandwidth, investment, business models (flat vs. metered at the telco level), and security were all well-founded. Yet advances as well as relentless and reckless investment prior to the dot-com bubble bursting proved that Metcalfe was ultimately wrong. This was also not a real failure on Metcalfe’s part. Everything around him pointed to an unsustainable growth curve and that financial prudence would severely curtail or cause the internet to reach capacity. It was sound business-thinking based on reasonable assumptions.

Its easy to laugh at those who get it wrong. Of course, big examples are out there everywhere and are concentrated around fundamental shifts in technology markets that, quite frankly, were not easily foreseen. The switch from keyboarded function phones was not predicted… really anywhere but at Apple. Predictions on huge changes are essentially leaps of intuitive faith. Drawing a line backwards from now to the market-changing event is easy, with hindsight being what it is.

One of the lessons that can be drawn out of an examination of the conditions right before spectacular events (like the rise of electronic computing, the internet, or smartphones) is that getting these things right is incredibly rare. Steve Jobs is revered because he and his team made one of those changes happen. To a lesser extent, so is Bill Gates, with the rise of WYSIWYG graphical interfaces; although its clear he did not invent those.

When someone walks through a door claiming they have studied the market, done all of their research, homework, and trend forecasts, and they predict a cataclysmic change to the technology market, remember: sound business reasoning, research, deep understanding of today’s technology, and sound logic almost never predict these events. It doesn’t keep entrepreneurs, investors, and startups from claiming the next world-changing thing all the time. Its practically a staple of marketing.

This doesn’t mean nobody should make predictions – predictions flow from imagination, and predictions (on a small scale) do work out a fair amount of the time as they predict evolutionary change, not revolutionary change. So, when someone tries to use fear of missing out or hype to get you to make a huge investment sit back and think – is this evolutionary or revolutionary (i.e., a natural outgrowth of the current market), or is it a cataclysmic change? Let skepticism and value-oriented thinking guide decision-making.

What do you think?

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