Ten Predictions for the 2020s: Part One

Two Truths and a Take, Season 1 Episode 36

For our last two newsletter issues of the year: ten predictions for the 2020s. First five out today, six through ten out next week. Enjoy, and please email me with takes of your own: if I gather enough good ones, I’ll publish a bonus episode with reader takes.

#1: Enterprise software in the 2020s will replay Softbank’s Capital-as-a-Moat disaster of the late 2010s. 

Here’s a thesis I’ve been chewing on for a little while: The 2020s might become a real slog of a Red Queen’s Race that could mess up the model for funding and selling enterprise software. There are two problematic trends here; each of which on their own would be fine but the combination is dangerous. 

The first is increasing vertical specialization. The previous/current generation of enterprise software is pretty good for a broad swath of things, so in order to be meaningfully better, the next generation of SaaS businesses will probably have no choice but to go industry vertical-specific. Expect a lot of “Linkedin for X, Bank for X, ERP System for X” type pitches for a while, where the core value proposition is “Software that’s actually built for your industry as opposed to being one-size-fits-all.

The second trend is AI as the next big technological wave for business services. Martin Casado of a16z and Gavin Baker had good tweetstorms on how AI will change the business model and funding implications for enterprise software the other day. The issue is that AI is really expensive. It’s more compute intensive, more data-intensive, more resource-intensive in general. The rewards will be immense, but AI businesses will face heavy fixed and variable costs. So there’ll be a huge advantage to being the market leader; more so than in the previous generation of SaaS businesses. 

These “structurally lower enterprise software margins as the world moves to AI”, as Gavin put it, take us towards a more winner-take-all dynamic in enterprise software VC. The scale advantages in AI businesses may simply become a new frontier for capital-as-a-moat funding strategies, and there’s a real danger that enterprise software could turn into Softbank 2019 v2.0. That’s life if you’re going horizontal, but it’s dangerous if you’re going vertical.

Stuffing more and more capital into industry-specific, vertical businesses, i.e. the foie-gras funding model, could be a disaster. It’ll force early stage VCs to demand more deal structure, as they preemptively defend against mega-rounds down the road. It’ll force products to de-specialize, in order to preemptively accommodate the massive TAM that their funding requires. And it’s all but a guarantee that the winner in each vertical will be some overcapitalized monster. This stinks, honestly. In a Red Queen’s Race, no one wins. 

#2: There will be no major form-factor that supersedes the smartphone. The phone is it. 

If you went forward in time to 2029, you’d be surprised that the phones are more or less the same. The 2×5 inch glowing glass rectangle will remain more or less similar as our common interface with the internet and with the world. Nicer in some ways, and they’ll have some genuinely cool AR features, but other than that? We figured out the phone. It’s gonna stay put now. 

What’s inside the phone will be radically different, for sure – the “re-nationalization” of technology into Western and Eastern tech stacks will place some really interesting pressures on the hardware under the hood. It’ll be especially interesting to see what happens to the Android ecosystem as these pressures intensify.

But the average user won’t notice much of a physical or UX difference between today’s physical iPhone X and 2029’s iPhone XXII LX Turbo Limited or whatever it’s called. I think AirPods will be an incredible accessory for Apple over the next decade, and they’ll sell a ton of em, but I don’t really buy the “they’re the new computing platform” story. Same with the watch. I’m pretty bearish on headsets, glasses, or anything that obscures or layers over your vision any time soon.

The place where phones will evolve the most in the 2020s will continue to be the camera. Apple will probably acquire some fancy DSLR manufacturer and have a big event about it. Meanwhile, machine vision will continue to improve, and the scope of things we’ll able to do with it will accelerate at an astounding rate. There’ll be some creative use of the non-visual spectrum that unlock some cool features. In not too long, there will be an iPhone app called “find my keys” where you can wave the phone around the room and it’ll lead you to your keys even if they’re buried under the couch. 

Under the hood, I expect that well over half of the computing horsepower in a smartphone will be dedicated to vision within a few years. AR will arrive in a hundred different little ways, including some unexpected monster hits in the vein of Pokemon Go. But you know what’ll be surprisingly the same in 10 years? The standard way we’ll interact with these games and with our world will be familiar: through our phone screens, almost identically to today. 

#3: A tale of two cities: the looming feud between the SF and NYC tech scenes 

I hinted at this a couple months ago in The Founding Murder and the Final Boss, and the response was pretty telling: a bunch of SF people saying “What? There’s no rivalry. That’s silly.” While the NYC people, as if through gritted teeth, more or less responded “mmmmm”. 

For a long time, the Bay Area has been peerless as a destination for building, funding and scaling startups. Nowhere else compares. Nowhere else has the talent network. Nowhere else has the critical density of young angels and the social status subsidy it creates. Nowhere else has the ease, fluidity, and excessive credibility in the system that you need in order to build first and ask questions later. But that won’t be true forever. 

The New York City tech scene has gone through its ups and downs, but it’s finally starting to accumulate a critical mass of success. Real Deal exits like Datadog, Flatiron, Jet and Peloton are starting to occur regularly. The angel scene is strong, and the product community is great. Most importantly, NYC is such an incredible place to live – especially compared to San Francisco – and has so many other advantages as a financial and media capital that in the long run its advantages for acquiring and accommodating tech talent at scale are undeniable.

Up until this point, the relationship between the NYC and SF tech scenes has been friendly and productive. But that dynamic is changing: SF and NYC Tech used to be a fundamentally unequal relationship, and that kept it cordial. There was no rivalry because they weren’t peers. But now little brother is all grown up. As the relationship turns into a peer relationship, admiration is turning into resentment: slowly, for now, but inevitably. 

The inflection point, of course, was this:

The WeWork saga did a lot of damage to the NYC – SF Tech relationship. WeWork in its rise was a genuine startup miracle. Adam Neumann took every lesson to be learned on reflexivity, every conjuring trick that the Bay Area had figured out, and put on a master class with it. On the way up, SF made it one of their own: look at this great thing we, the tech community, built. 

And then what happens when it all fell apart? The Bay Area talking heads fall into lockstepimmediately, to deny that WeWork was a tech company, that it was symptomatic of anything systemic, or that it had anything to do with the reflexive conjuring formula that they had invented. San Francisco collectively scoffed, sorry to this man. This man is from New York. We don’t know him. 

In the next decade, watch for this rivalry to take shape. San Francisco’s pole position as the leader of the tech world will remain intact. But as the city increasingly turns into a developing country, with a gated class of tech power guarded by protection rackets and surrounded by an increasingly failed state, their loss will be NYC’s gain. 

Each city’s tech scene will come to resent the other’s more and more, and allegiances will be hard to shake: NYC will resent SF for its endless reservoir of technological and tech-cultural capital; SF will resent NYC for being a place people actually want to live. But most importantly, both tech scenes will come to resent each other for being more alike than different with each passing year. 

Watch this story. It’s going to be really fun to spectate. 

#4: At some point in the 2020s, the following headline will get printed: “Crypto Finds its Killer App: Guns”

Crypto is a dumpster fire right now. Narrative after narrative has fallen apart under external attack, or been memed to death through internal sabotage. The worst may be yet to come, if the Tether story lives up to even half of its potential. 

But Bitcoin is holding up. The price may not be, for the time being, but the core network is proving to be annoyingly resilient. The awful years are a much better test of crypto’s real potential than the good years are. It’s not going to go away, even if the current crypto scene largely does. 

The crypto scene we’ve come to know over the last few years has been a bit all over the place, but the theme in common to most of it has been “new finance” / “stack sats, get rich”. Over the next ten years, after our current hangover gets truly washed out, a new one is going to emerge that’s a lot stronger, a lot darker, and a lot more true to the original vision than many people would like to admit: crypto as a part of “Dissident Tech”.

Expect the crypto community to retrench and double down on a core value proposition: crypto as a tool for political and societal dissenters. This means people who don’t really care what the price of Bitcoin is; they actually care about it being uncensorable. That means people who are doing illegal things, it means people on the wrong side of governments, or it could simply mean freedom-oriented people. But the narrative will turn really sharply once the core value proposition embraced genuinely becomes “be un-censorable”, as opposed to “get rich”. 

Expect to see Bitcoin, and cryptocurrency generally, start to show up in a lot of thematically adjacent products, businesses and brands. Guns are going to be one of them. As more countries crack down on gun ownership, and as flashpoints like Hong Kong become internet-fluent conflicts, guns and crypto will get a lot closer together, as will efforts to crack down on both. 

#5: Higher ed: undergrad will stay the same, but grad school will get blown up

Two parts to this prediction: the first I don’t want to go too much into, but I think that the narrative that American higher education is going to collapse in a matter of years is just totally false. There are so many structural forces holding the system in place, and (for most middle or higher income families) so much professional and reputational risk associated with not going to college, that the undergraduate experience isn’t going anywhere. I’m happy that we’re having a conversation around alternatives, but don’t count on any dramatic change any time soon. 

Grad school, on the other hand, is a totally different story. I’m going to write a whole newsletter about this in the new year but for the time being, I think both “classes” of grad school – professional degrees and research degrees – are going to be disrupted pretty dramatically, and pretty soon.

Unlike a typical undergraduate education, the value of a professional graduate degree can be squarely articulated in terms of career mobility. Many of these degrees are where ISAs will really shine as a business model. But who will run them? Perhaps organizations cut in the same vein as Lambda school, but more likely it’ll be employers themselves. 

It’s already standard practice in some white collar businesses for your employer to pay for you to go get an MBA. Expect a lot more of it this coming decade, as tuition sticker prices continue to soar, and larger employers can more effectively “negotiate” on behalf of students, like a health insurer would. It’s only a matter of time before these large employers say enough is enough, we can do this ourselves, and do a better job at it, too.

There’s a really great business to be started here – be the white label platform that lets large employers become professional educators, both for their own cohorts of junior people and also anyone else who makes admissions grade. Professional graduate degrees feel like a good target here because their output ought to be both the most measurable and the highest leverage.

Research graduate degrees, on the other hand, are under less of a direct threat but are arguably in bigger trouble. PhD students pursuing academic research are feeling a more desperate squeeze every year, as they’re smushed through a funnel that keeps them in an overworked, underpaid apprenticeship for the most productive years of their lives. But there’s no way around: the point of a PhD is to establish yourself as a brand in your field, and the only way for a young scientist to do that is through their supervisor’s lab, and through their university department. The grad school model is incredibly leveraged on this constraint. 

But you know what’s blown the whole thing open? Twitter. Twitter is genuinely revolutionizing graduate research, in a way that’s eye-opening for graduate students and quite threatening to their supervisors. Twitter gives students a path to establishing their own brands, both for the work they’re doing but also for their critical thought, their participation in the scientific community, and their individual strengths and personalities. 

This is really exciting for grad students who know how to use Twitter and the rest of the internet as a tool to build their academic careers. But it’s really dangerous for the model, which is leveraged on the fact that students do not have access to such tools, and can only acquire a brand and access through their supervisors.  I’ll write more about this in the new year, but the consequences could be bizarre, and pretty significant for the way that scientific research gets done.

Come back next week for predictions 6 through 10. 

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