Top Reads, Listens & Follows of the week

Protecting the Mountaintop

Takeaways:

Something overlooked as ChatGPT has surged in popularity this year is how its emergence highlights the innovator's dilemma, a phrase coined by Clayton Christensen. The dilemma Christensen notes is that the practices that solidify businesses as world class in a category are ultimately the same practices that result in their eventual decay and demise. 

The world class technology leaders of today were once small groups of rogue entrepreneurs that set out to change the world with nothing to lose. The few companies that survive the relentless assault of competition to scale their businesses and become household names face an entirely new challenge once atop the mountain, staying innovative. At a certain point in a businesses life cycle the focus shifts from becoming the best and defining a category to protecting their position, managing expectations and minimizing risk. Then, only when faced with a true enemy at the gates, does the former upstart get forced to reinvigorate the innovation cycle, but often it’s too late or insufficient. 

Examples like Tesla, SpaceX, and Anduril and the industries they’re disrupting - automobiles, space exploration, and defense technology - all come to mind when thinking of the innovator’s dilemma, but ChatGPT is the latest prominent example. Many question how our world class technology companies weren’t the first to market with a widely adopted AI technology considering their infinite resources and glut of talent, but then were able to quickly roll out a competitor mere months after the mountaintop was seriously challenged. But why would Google innovate in search and assume the attendant risks if they had a 85% global market share in it? Interestingly, though, last year Meta tried to innovate in their core business towards the Metaverse, and was met with a stock decline of 72% before rebounding after signaling a return to status quo.

Perhaps the innovator’s dilemma is the one rule of business that is inviolate. Category altering innovation won’t be led by the incumbents because they are focused on risk management and entrenched interests, and wouldn’t you be?

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Reads:

The N.B.A.’s Supernova Era by Louisa Thomas (here)

The Strategic Importance of the Russia-Controlled Land Bridge in Ukraine (here)

X will never be the “Everything App” but Uber might by Josh Brown (here)

Trading For a Living by Jared Dillian (here)

Listens: 

Brent Beshore on Permanent Equity not Private Equity (here)

Evan Tindell on professional poker and value investing (here)

Steve Jurvetson on disruptive tech (here)

Follow, Watch & Other great content:

Quarterback on Netflix (trailer here)