Private startups or public markets?
, have left just about every investor discussing what to make of the incipient industry, and which firms it might upturn. Mr Son sees parallels with the early period of the internet. Generativecould provide a new pipeline of initial public offerings—and the foundation for the next generation of mega-cap tech firms.
Investors face two questions. The first is which frontier technologies will make market leaders a fortune. That is difficult enough. The second, establishing whether the value will accrue to upstarts backed by venture capital or existing technology giants, is at least as tricky. Nobody knows yet if it is better to have the best chatbot or plenty of customers; having a head start in a whizzy new tech is not the same as being able to make money from it.
Alphabet, Amazon and Meta are three of the seven largest listed companies in America, worth a combined $3.3trn. They were founded between 1994 and 2004, emerging at a time when internet technology was new and people were spending an increasing amount of time online. Alibaba, a Chinese e-commerce giant, is another similar example . Spotting tech trends, and developing the best platforms, generated a gargantuan amount of value for early and even not-so-early investors.
Will the story be the same this time around? The insights of Clayton Christensen, a management guru who pioneered a theory of innovation just as the internet giants were bursting onto the scene in the 1990s, can provide a useful guide. Christensen noted that smaller firms often gain traction in low-end markets and entirely new ones, which the largest incumbents eschew. The incumbents focus on deploying new technology for their existing customers and lines of business.
Christensen’s insights make clear that revolutionary innovation does not always end up being revolutionary in mere business terms. Yet existing tech companies are now, suggesting they should be well-placed if the tech does turn out to be revolutionary.
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