This time is different. It really is. As software keeps on eating of the world, the new strategic and valuation analysis is rooted in network science. The following is a short read — unless you click through the assorted links — in keeping with the subject.
The categories on which we continue to insist make little sense and getting littler with time. We still insist on calling them consumer, industrial, financial, telecom and so on. We also call one isolated category tech, as though the notion can be isolated still, like it was (arguably) before becoming universally adopted.
We need such guideposts to stay organized and clear in our perspective(s). But there comes a point where the method turns against us on account of unreality. Because, when everything is tech, and when so-called Big Tech is by extension into everything, the lines of demarcation get all blurry and confused, the reference points to which we are accustomed become faded, the competitive landscape turns into a tangled web… gradually, gradually, and then of a sudden.
It’s gotten to the point, perhaps, where rather than evaluating stocks and assets on a standard model that narrowly compares each to others in its increasingly artificial category, we recognize now that Big Tech (a misnomer, really, these are the Big Platforms) is now the standard by which others can be universally assessed.
The exercise may not be formulaically financial, necessarily, as much as strategically diagnostic, though these things tend to be connected. The Big Platforms, to begin with, are made of multiple dimensions, network entanglements, and effects. These, once a certain depth is reached, become too deep to fail, (unless by legislated disentangling, as is now apparently considered with much effort and confusion).
Secondly — a broader, more impactful aspect of all this from an economic vantage point — is the theme of industry convergence that these platform companies represent. Media, finance, healthcare, commerce, transportation, even manufacture, are all represented here, and other categories also, transformationally underway (e.g., robotics, virtual reality, symbiotics).
We once went through a major phase, some decades back, of big conglomeration. It was the time when synergy became a common term and when some big conglomerates became the standard-bearers. After a while the trend reversed and there were spinoffs and divestments and restructurings, and the word synergy went out of style as much of its luster faded.
This time is different. It really is. The fundamentals are inherently created now and the strategic expansions referenced are following their natural progression. As much as software is eating the world, the new analysis and study is network science.
Update — June 24
A new Stratechery essay on the evolution of Apple computing is a great history lesson in the evolution of digital networks. The same principles and patterns that we associate with other network systems — the forms and value of engagement, the clusters that grow or sometimes dissolve, the community behavior that shapes the network system overall and leads to outcomes that lead to other outcomes as the network profile and its set of links and possibilities perpetually change their shape — are seen in the evolving architecture and resulting marketplace of Apple’s ecosystem.