The purpose of this weekly is to sharpen my thinking by sharing thoughts about industries and companies that fit into powerful long-term investment themes. It is also a place to share insights into decision making, takeaways from the past week, and random thoughts that arise. Thank you for reading this piece! Feedback is welcomed. 

This week: 

How did the Big Tech companies get so big? 

➢ Using the internet as a magical distribution system 

➢ Visionary Mindset: Experiment and Innovate 

I wrote last time about the challenges and opportunities that the size of Big Tech presents. I wanted to dive into the question: How did these Big Tech companies get so darn big? I wanted to not only have an explanation, I wanted to also make the point relative to Tech Ubiquity, namely what isn’t going to change…? 

The Unprecedented Power of the Internet for Distribution and Scaling 

In the annals of business history, few things have reshaped the landscape of corporate growth quite like the internet. As we reflect on the massive size and influence of Big Tech, it becomes clear that they owe their unprecedented growth to this amazing distribution system. 

Prior to the internet era, scaling a business was hard, fraught with logistical hurdles and regional limitations. The advent of the internet, however, opened a realm of possibilities that were difficult to envision. It’s not just a network; it’s the most powerful distribution system ever conceived, turning local ventures into globally scaled companies almost overnight. 

The largest technology companies leveraged this platform with extraordinary acumen. They understood early on that the internet was more than a tool; it was a paradigm shift in how products and services could be delivered and scaled.

Think about how this digital superhighway has allowed for instantaneous global reach. Companies that were once confined by physical borders can now operate and influence markets thousands of miles away with a mere click. This instant access to a global audience enabled tech giants to scale at a pace that was inconceivable in the pre-internet era. 

Moreover, the internet democratized information and access, breaking down the barriers of entry into various markets. Big Tech capitalized on this by offering innovative solutions, services, and products that appealed to a broad, diverse audience. They harnessed the power of data and connectivity to understand consumer needs, personalize experiences, and foster loyalty – all on a scale that traditional brick-and-mortar businesses could hardly match. 

But it’s not just about reach and data; it’s also about the speed of innovation. The internet’s rapid information exchange has accelerated product development cycles. Tech companies can iterate, adapt, and evolve at breakneck speeds, staying ahead of competitors and continuously aligning with consumer demands. 

As we gaze at the sprawling empires of these tech giants, it’s crucial to acknowledge the role of the internet – the most potent distribution system in history. It has not only been a catalyst for their growth but also a testament to the boundless potential of human ingenuity when coupled with transformative technology. 

When I speak about Tech Ubiquity, the internet as a distribution system is one key element to better appreciate and understand as we move forward. Many companies will not only utilize the internet to scale, but they are also likely to take the power of this resource to all new levels. 

The Visionary Mindset of Modern Tech Titans: A Lesson in Adaptation and Expansion 

I was discussing the impact of Big Tech with another investor recently and we marveled at how these companies have defied our prior understanding of “The Law of Large Numbers.” As I outlined above, the internet has certainly played a big role in these companies’ ability to scale and extract economic value. But there is another element that deserves attention, and that is how the leaders of Big Tech have a totally different mindset from prior eras.

These leaders were disruptors at their core, so it makes sense that they view the world differently. They not only saw a different way to distribute and scale, but they also continued to innovate and experiment, which didn’t allow their companies to get complacent. Microsoft under the leadership of Satya Nardella has famously moved from a “know it all” organization to a “learn it all” organization. The market value under his watch has been more than 10x. Perhaps their collective leadership was at least partially influenced by the pivotal insights from Clayton Christensen’s “The Innovator’s Dilemma.” 

These leaders understand that to stay ahead, they must continually experiment and innovate, preemptively embracing new technologies before they have the chance to disrupt their established business models. It’s a lesson drawn from the annals of business history, where many once-dominant companies found themselves sidelined by emerging technologies they failed to acknowledge. 

The approach is not merely about safeguarding their existing markets but about a relentless pursuit of what lies beyond the horizon. They’ve built companies that are, at their core, innovation incubators – entities designed to foster experimentation and to pivot rapidly in response to the winds of technological change. 

A prime example of this approach is Amazon. What began as an online bookstore has morphed into a multifaceted titan, largely due to its leaders’ ability to see beyond the narrow confines of their original business. The advent of Amazon Web Services (AWS) exemplifies this. Recognizing the potential in cloud computing, a field far removed from its e-commerce roots, Amazon invested early and heavily. Today, AWS stands as a juggernaut in cloud services, a testament to Amazon’s expansive vision and its appetite for venturing into uncharted territories. 

This broad-minded approach is emblematic of today’s tech leaders. They are not just running companies; they are steering ships that are constantly charting new courses. Their leadership style embodies a mix of relentless curiosity, an unshakable belief in the potential of technology, and a keen understanding of the broader market landscape. They recognize that their company’s survival hinges not just on adapting to change but on being the catalyst for it. 

The powerful combination of the use of the internet for unprecedented scaling and a mindset that resists inertia and embraces innovation and experimentation have been what I believe to be the most important factors in explaining how these companies got so damn big. This makes any prediction about the future growth and

influence of these companies much more difficult than in prior periods. It is more likely that as Big Tech continues to grow, the question will be at what rate and in what markets? 

Tech Ubiquity 

Given the success of these Mega Cap Big Tech companies, many companies have embraced a lot of the most important parts of their new paradigm. Those built with both the power of the internet reach and scale plus the “experiment and innovate”  mindset must be at an advantage.  

This is here to stay: the model built to scale using technology plus the mindset to grow beyond prior peak levels. This combination has led to a new paradigm of size for the largest companies and will enable well positioned companies to reach heights that were not available 30 years ago. 

Disclosure to readers: Arrowside Capital maintains a position in Microsoft. My story 

I am an investor and entrepreneur, having started two investment companies. I am the Founder and CIO of Arrowside Capital (http://www.arrowside.com), based in Boston, MA. I have more than 30 years of experience in the investment business, investing in companies geared toward innovation and growth. The blog is named 

The Zen Innovation Investor because I believe it is so important to remain calm and focused during the rapid pace of change in the world today. I am keeping a  view of the long term while also keeping abreast of developments in the world of innovative companies. I view this as a place to sharpen my thinking and provide some insights that are thought provoking. 

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