The death of a unicorn

Over the years, I have come across quite a lot of interesting attitudes in regards to the idea of, too big to fail, where people seem to consistently believe that once something is large enough, its future is pretty much guaranteed. However, there is one problem with the position and that is - everything fails.

Part of the problem is that we have limited lives as individuals, so we don't necessarily see the final failure of most things, although we do occasionally witness the fall of very large companies, where once upon a time, they held the market comfortably.

One of my brothers is like an oracle on the future - well, an anti-oracle - since so far, he has a 100% track-record for getting big calls wrong. The three that come to mind are

1. The internet is a fad
2. Digital camera will never replace film
3. Electric cars will never be mainstream

Now, with each of these areas, there are companies and entire industries that have been both generated and disrupted, with the electric car one only just starting to hit its world-changing strides. The internet however has pervaded all parts of life globally, and Kodak is no longer the powerhouse in the camera sector it once was.

Things change and eventually, everything fails, whether it be company, country or the conditions of the environment we need in order to survive. Yet, because of our short lifespan, we feel that what we have known is all that can be, even though we understand that before what we have today, there were other things that got displaced.

I guess it is a type of hubris, where because we are at a point in time that is "the best it has been" and we "know the most we have ever known" - we think that there can't be too much more change possible in the future, as we have already come so far. if there was a lot more potential, we would know, as we are the smartest we have ever been.

The other day, I wrote a post on low-imagination thinkers and this is part of that, where people can't imagine the trillion dollar unicorn companies that control the planet today, failing. But, fail they will, in a large part because they are so large.

Whilst in the dystopic movies there are always these mega corporation like the future Google, it doesn't mean that this is going to be the future. Google has done a brilliant job of making itself feel indispensable to our lives and because it is so pervading and controlling, it seems destined to keep growing, its size makes it unwieldy and heavy-handed. What this means is that while it expands, it starts to treat all regions the same, all people the same and, this will eventually be met with pushback.

In the case of Google and Facebook, this is already starting to happen, where countries are looking to make it pay for services it has been using for free and anti-competition allegations and investigations are starting up around the world. While at this point, they seem like the behemoth that can't be beaten, they will be chipped away at piece by piece, their walls undermined, their profit streams compromised and pretty soon, investors start to look for yield elsewhere and their top-heavy organization falters.

Without intervening protection, big animals get hunted into extinction.

In Australia for example, where Google has threatened to take away Google services if forced to pay for news content it leverages, Australia hasn't backed down - and why should it. After all, Alphabet has only paid about 1% of its tax obligations on the earnings it has made in Australia. What this threat has clearly shown is that Google does not care about the conditions locally, as long as they can make profits. However, there are plenty of other search engines out there that can fill the vacuum left. While they might not be "as good" in some regards, the tradeoff would be beneficial enough to make the move and then, innovation would ramp up, likely distributing the whole left by one, with many.

This is similar to what happened with Nokia Phones in Finland, where as its market share tumbled and jobs were lost, hundreds of startup companies came in to fill the void and build a far more diversified and stable range of businesses that as a group, are largely antifragile. Some of them are always failing, more are always being created carrying past learnings and fresh eyes into new conditions.

Do you remember Barings Bank, the second oldest merchant bank in the world that collapsed due to large losses incurred (supposedly) by one trader in Singapore - It worked out okay for ING Group, who bought the bank for £1. It doesn't really matter matter how large you are, Black Swan events can happen at any time.

Just imagine if today, someone invented clean and free energy, then opensourced the technology with the backing to put it in large scale production to get the ball rolling. What would be affected?

When it comes to the unicorn companies we have come to know, love and finally despise, their position is not impenetrable - as no position is. While it is unimaginable for some to visualize a world without Google, Apple, Facebook, Microsoft and Amazon in it, none of these things are required for our survival. But, when they start to threaten our survival, at least some of us will respond.

They are largely faceless, they do not live and breath, they are structures and algorithms that operate lifelessly for profit - so that becomes their weakness. As profit is moved out of their hands, they start to increasingly lose control of their market and they become increasingly instable themselves. Once that happens, they are far less attractive to growth investors and they are more attractive to the shorters looking to capitalize on their demise.

While everything eventually fails, longevity is found in the antifragile. For example, a country by name is fragile and these can change many times over the course of centuries - but many of the cities within will survive all kinds of disruption, including large changes in citizen culture. A network like the internet itself is almost failproof bar catastrophic energy failures, but no business upon that internet is protected by it, unless it is able to meld to become part of the internet itself, something that is able to change form and transmit without caring what it is transmitting. As long as it is used, it lives.

And this is where it is interesting, as while so many people see these companies as too big to fail, they are actually in quite a vulnerable position because they rely exclusively on us believing that there is no other option than them. However, once people are hurting enough, they will look elsewhere and discover a host of alternatives that they never knew existed. The only thing that ultimately keeps any company alive is consumer demand for what they offer, but if the terms and conditions get too hard to bear, alternatives will not only get attention, they will multiply rapidly in an attempt to capture and absorb some of the escaping value.

What this means is that the unicorns may be wealthy, they may have control over much of what we use - but they are reliant exclusively on their consumers - us. Mistreating the user base will eventually lead to rebellion and their most vulnerable area to hit, is in their profits.

Everything has its time and no matter how successful something is, it doesn't mean it can adapt to the conditions of what is coming. For many of these companies - their days are numbered.

Oh, my brother's latest anti-oracle prediction...

4. Bitcoin is a scam

No unicorns were harmed in the making of this post.

Taraz [ Gen1: Hive ]