The past can be a poor guide for the future if the future offering is materially different from the past.
Sleeping In A Strangers Bed
When Airbnb ($79B) started, many people said the potential market opportunity didn’t seem large enough. The team created a new market, and that’s what many missed. The market for paying to stay in a stranger’s house was $0 when Airbnb started, but that changed.
That was the point of Airbnb. They would take underutilized spaces (rooms) and put paying guests in them, and improve the travel experience. Staying in someone’s house was a tiny market, but staying in hotels wasn’t. People needed to look at an adjacent market, squint a little, and see the future.
Airbnb did not kill hotels, but it did make them more competitive. Competition led to more affordable hotels, better offerings and better outcomes.
When you materially improve an offering and create new features, functions, experiences, price points, and enable new use cases, you materially expand the market.
Too Slow Missed The Flight
The airline industry is traditionally a lumbering, slow, capital-intensive dumpster fire. Governments often have to bail out inefficient airline companies, and we all have to deal with the economic and social mess of airline travel. This includes captured travellers in glass boxes eating stale sandwiches and overpriced burgers and the indignity of wandering around in socks with a missing belt and an alarm going off in your ear.
One of the world’s top 20 busiest routes is Dublin - London. A short flight of ~1 hour takes ~4 hours with all the decoration of the travel industry. A one-way flight can be ~$20 (including tax). But it wasn’t always like this.
When most couldn’t see the future where airspace could be used more efficiently and couldn’t see how underutilized air rights (navigation easements) could be sweated, the same one-way flight was ~$300.
Conventional thinking saw prices only increasing. Reduced fares fly in the face of inflation, rising fuel prices, environmental taxes, analysts’ guesses, and levies to pay for shinier glass boxes to sling sandwiches, poor coffee and greasy burgers at us.
Ryanair sells $20 airline tickets, they have brought down the price of tickets across Europe, and they are worth $20 billion.
An optimistic look into the future, executed well, benefits consumers directly and has positive externalities for society.
Now, All Cars Are Taxis
When Uber ($155B) started, they focused on the higher-end limousine market, and things were slow. When the decision was made to open the market, all cars could become potential supply. With this, more demand was stoked and you could quickly and directly get a relatively cheap ride to your destination. Market density and liquidity grew fast. This market was created, and the growth was exponential.
“In 1980, McKinsey & Company was commissioned by AT&T (whose Bell Labs had invented cellular telephony) to forecast cell phone penetration in the U.S. by 2000. The consultant’s prediction, of 900,000 subscribers, was less than 1% of the actual figure, of 109 Million. Based on this legendary mistake, AT&T decided there was not much future to these toys. A decade later, to rejoin the cellular market, AT&T had to acquire McCaw Cellular for $12.6 Billion. By 2011, the number of subscribers worldwide had surpassed 5 Billion and cellular communication had become an unprecedented technological revolution.” - Tren Griffin
What Is The World Without eBay and Amazon
eBay ($32B) revolutionized how people buy and sell goods online. The platform enabled individuals to connect directly, creating a new marketplace for goods. As the internet became more widespread, more people started their businesses.
Critics believed that the internet was not mature enough to support a large-scale platform and that buying and selling goods online was too radical. Ted Turner, the founder of CNN, believed that the Internet would never be more than a niche medium for news and information. He tried to see the future by looking at the past and was boxed in by his previous success.
As Amazon ($1.75T) started, critics believed it was overvalued and its business model unsustainable. They argued that the company was too focused on selling books and couldn't scale to other markets. Some early detractors included Warren Buffet - there is no monopoly on being right.
Sizing the market or a disruptor based on an incumbent’s market is like sizing the car industry on how many horses there were in 1910 - Aaron Levie
Flying Cars And Drones
Drone and flying car companies have prostrated themselves in front of federal departments, hoping to get decades of private property law overturned. They want to use private air rights that hold significant value for owners and real estate traders without paying for it. This direct route has proven futile, and property (air) rights remain intact.
The individual land and real estate owner owns the airspace above their holdings and can transact it how they see fit. Assuming they have a market to transact efficiently.
Flying car companies or Electric Vertical Takeoff and Landing vehicles (eVTOLs) have tried to develop similarly to existing aircraft and helicopters to help regulators pattern match. While there is a natural drive to reach consensus, and make the majority happy, what is being proven is that this reverts to the mean.
Truly transformational businesses and industries do not transform by doing the same thing and painting it a slightly different color. The temptation by those in the drone and flying car business to show that it can do the same thing as a helicopter but slightly better is obvious. It would not shake too many trees and would not upset people who control the industry, many of whom are their investors and can sell the new thing.
This leads to poor outcomes. We have been flying for decades, but still, a commercial flying car that is useful to the public eludes us, and commercial delivery and cargo drones’ only route to the non-military market is to trespass if there is no efficient marketplace to access private airspace.
Future First
Without individual car ownership, there would be no Uber; without underutilized space in individuals' homes, there would be no Airbnb; and without using individuals' air rights, there will be no scaled delivery drones or meaningful upzoning.
What this tells us about future growth is clear: the future does not look like the past. The future can be created, and we can benefit significantly by letting go of the past that binds us.
To have new markets means creating them. Seeing that eBay needed a better payment solution to grow, that every spare room is a potential income source if tapped, and that underutilized cars can benefit more people in society than the driver.
“The reasonable man adapts himself to the world: the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.” - George Bernard Shaw
Seeing into the future does not mean being clairvoyant. It means seeing beyond the picture painted for us, looking behind the curtain, and squinting a little. It means seeing possibilities, being optimistic, and taking action.
Thank you for reading, and please share with your networks.
