Adrià Hernández

@hc_adria

Startup Grind, Eric Schmidt & the next $100bn startups

Last week I was at London for the Startup Grind Europe conference, with my friends from the Barcelona Chapter and many entrepreneurs from the awesome global community of Startup Grind.

The main event was an interview between Startup Grind CEO Derek Andersen and Alphabet (formerly named Google) executive chairman Eric Schmidt.

The most interesting part of the interview came in the second half, when Eric Schmidt made a very interesting prediction about what the great companies will be like five years from now.

The prediction was that in addition to mobile platforms and cloud computing, the next $100bn companies will find a way to get millions of users to teach them, learn from that information using machine learning, and then sell a service that it’s better than the individual knowledge of the users.

This prediction makes a lot of sense from both an engineering & business perspective, as it leverages current technology to collect and process cheap information with minimal costs, that can easily be sold later thanks to the direct access to customers that mobile platforms provide.

But, in my opinion, this approach overlooks 2 critical points:

  • Quality. The old quality vs quantity dilemma. More information isn’t always directly correlated to better knowledge. Filter out bad information, making sure the knowledge you sell is of top quality, and that it stays up to date not only is complex, but its costs could easily eat the margins of the business.
  • Privacy. To verify the information, you have to sacrifice user’s anonymity and their privacy, as the only way to assess the quality of information is knowing the source. Depending on the type of information, and especially how its used, this could generate many ethical and legal issues.

And even more important, it misses a much bigger business opportunity:

  • Knowledge gap. What people know is just a very small part of all we can learn from them. If we focus only on making users teach us what they know, we’re completely missing what they don’t know, but actually they can teach us as well.

The perfect image to illustrate this is the iceberg. What we know is the tip (what we can see), and what we don’t know is the rest of iceberg hidden below water level.

Tracking data and aggregating information to accumulate knowledge, and building AI that do the jobs currently performed by humans isn’t revolutionary, it’s just an expected market evolution.

The companies that will generate huge businesses in the following 5 years will need to go several steps ahead, creating new ways to solve problems that will completely transform markets and industries, and doing things that aren’t expected to happen until 20 years or more from now.

Who thinks it’s possible to build an AI in a few months that not only understands human relationships and could accurately predict with whom you will connect and develop a meaningful relationship, but it will also be able to predict how you will evolve in the following years, knowing what most of your future needs will be?

This are the characteristics that will define the next tech titans:

  • Efficiency. This is very simple, there’s no place in the future for the thousands (or millions) of current inefficient companies, especially the bigger ones.
  • Trust. Build a business model that perfectly aligns the interest of the company with the customers, constant improvement of product/service, and a superb customer service.
  • Privacy & security. Collect sensible data in a way that even if a hacker steals it, the user/customer will be safe, as the data can only be interpreted by algorithms of the company and the handful of people that created them.
  • Knowledge generation. Only the companies that will constantly generate huge amounts of significant new knowledge will be able to evolve, adapt to changes and stay alive.
  • Diversity. This isn’t taken seriously now, but I have no doubt in my mind that the first companies that manage to grow a greatly diverse team at all levels, will quickly develop a decisive competitive edge to take over their markets.

In the next years we’ll see at least 3 completely new $500bn companies be born, probably 5. In case you’re wondering, these companies’ growth won’t be just the result of expanding markets, it will be also the result of wiping out the incumbents.

Thanks for reading and sharing.

Adrià Hernández

Founder Physem

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