Software is eating the world.
The world’s largest taxi company owns no cars.
The largest provider of overnight accommodation owns no hotels.
In 2017, two companies took a whopping $120 billion in advertising spend, despite not owning a printing press or TV network between them.
All these companies were founded as modest startups in the last 20 years.
Many of the business’s they’re displacing have been around for over a century.
10-year-old Uber has the same $60 billion valuation as 100-year-old General Motors.
How did this happen?
It seems counter intuitive that a company like Uber, which only owns software, is worth as much as GM, which owns hundreds of huge factories and plants.
How do small software startups founded with less than five employees ‘steal’ the markets from billion dollar incumbents?
Like all counter intuitive truths, the answer lies in what we think we know… and what’s actually going on.
Humanity is still 95% disorganized
We forget that the world is mostly disorganized and random.
For 500 years, every generation in the Western world has seen an increase in knowledge and learning during their lifetime.
Every generation has used the knowledge and learning of the previous one to create technology that brings order to our lives.
And every generation thinks their innovations are the final few.
The job is done; now we have order.
With even a little effort we can see this is not true.
Yet our immediate thoughts in most industry is ‘job almost done, pending some small tweaks’.
Yet, we think this way because of a psychological concept called availability bias.
We are drawn to trust information that’s easily recalled (i.e. available) over better information that is harder to recall.
So, when we consider “How well does the traditional taxi service work”, it’s easier to recall what did occur in the last few taxi rides rather than what didn’t.
It’s difficult to imagine tracking a taxi coming to pick you up if you’ve never done that.
That is, until you take your first Uber and that becomes the new norm of organized travel.
We are way more disorganized than we can imagine. Huge gains are available when software is created to bring order to even the smallest elements of our lives. Uber is a $60-billion-dollar proof of that.