The Immutable Laws of the Tech Industry
Over time, the tech industry follows predictable cycles of competition, growth, and destruction that very closely resemble the laws governing our universe. Understanding the laws can help us identify these patterns as they unfold.
Over the past several decades of the tech industry, it seems that the same cyclical patterns continue emerging. From the 90s dot-com boom to the 90s dot-com crash; from the many crypto summers to the just as many crypto winters; plus the ebbing and flowing of interest in social consumer apps. No matter the vertical, there is a consistency in the stories of how interest tends to flow to certain new fields, how talent and venture money fuel the growth of those fields, and how they occasionally grow too big and fizzle out, or worse yet, explode.
Taking a step back, one realizes that this recurrence is hardly a coincidence. In fact, there are several phenomena that tend to happen in succession in each one of these cases. And, remarkably, they seem to mirror exactly what happens in the formation of stars and galaxies in our universe. And, just as in cosmology, while rapid growth can often lead to rapid destruction, it’s the destructive force that often serves as the foundation for the next iteration of the cycle.
Let’s take a look at the seven laws that seem to drive the cyclical tech world. These rules are seemingly immutable, just like those that govern our cosmos. And if one can see the patterns as they’re happening, they may just be able to thoughtfully avoid getting caught in the decay.
Law #1: Valuable objects attract one another
Just as gravity attracts any two objects in the universe that have mass, another attractive force is always at play in the tech industry. Specifically, valuable objects are drawn to each other. These include money, talent (as in people), ideas, etc.
It should come as no surprise then that companies that raise venture funding tend to attract more venture funding. Companies that hire impressive and successful employees tend to more easily bring on more of the same. The press often writes about those the press is already writing about.
And, just as with gravity, the more these objects come together, the faster and stronger becomes the acceleration to pull in even others. This is why it often seems as if people won’t stop discussing the same companies or ideas or spaces, be it Tesla or web3 or TikTok. As Ray Charles sang, “Them that’s got are them that gets.”
This is also why it is ruthlessly hard to be a startup. If you don’t yet have anything of value, how do you attract anything of value? If no one strong is working for you, why would anyone strong come work for you? If no one is talking about you, why would anyone start talking about you?
Law #2: More massive objects attract smaller ones
Over time, the same gravitational pull that draws objects together also makes certain ones substantially heavier and shinier than whatever is around them. These are the breakout stars: the companies that everyone seems to be talking about, the people suddenly trending, the ideas investors keep asking about.
Not surprisingly, with their even heavier attractive force, these objects become what smaller ones are drawn to. Money starts flowing towards these centers of mass. More and more people seek to work there. New startups are created and existing ones pivot in this direction. Overall, industry trends show a movement towards the heavier, shinier objects. And that, in turn, makes them even heavier and shinier, a reinforcing cycle that strengthens the center of mass.
Law #3: Similarly charged objects repel (until they’re sufficiently different)
However, amongst the many objects (be them startups, investors, employees), there is also a fear of being too similar to the rest of the pack. It’s impossible to stand out in a crowded field without differentiation. That’s why, just like objects in physics with the same electrical charges or magnetic polarities, objects in the realm of tech repel each other so they don’t become too similar. Therefore, not every new company is an exact replica of the center of mass. Gravity may drawn them all to the same space and the same ideas. But once they’re too close, they also start to focus on the small ways they might differentiate themselves.
In this phase, companies struggle to pave their own unique path, without sufficient predictive power to assure them that they are making the right decisions. I’ve written before about this Startup Uncertainty Principle concept—the impossible task of choosing when to continue iterating and when to double down.
Law #4: Over time, objects cluster into galaxies
Before we know it, a galaxy has emerged. There is now a cluster in the tech world that never existed before, characterized by self-perpetuating desires to dominate a whole new space. And it is through this phenomenon, which emerges via the first four laws, that many of the tech trends we’ve seen in recent years can be understood. Web3, algorithmic social platforms, autonomous vehicles, Internet of Things, low-code/no-code, augmented reality, virtual reality… The list goes on.
Isn’t it amusing to note that, in the image above, these stars look like another set of objects we’re all familiar with: bubbles (as in “market bubbles”)?
Law #5: Eventually, most (but not all) objects run out of fuel, just like stars
Just like stars in any galaxy out in space, there is a finite amount of fuel to go around. Although the ideas burn bright, the money burns faster. In predictable cycles, the highly competitive sector causes many of the stars in the galaxy to run out of the resources they need to sustain them, be that capital, people, consumer interest, or media attention.
One of the most fascinating parallels between actual cosmology and the tech world comes into play here. As it turns out, more massive stars often die faster than smaller ones. That’s because they burn their fuel supply more quickly. (Fortunately for us, our sun is very small relative to other “supergiant” stars in the universe, so we have quite a while before this happens). The same can be said of many (but certainly not all) tech supergiants. The old adage should be seen as a word of caution: the candle that burns twice as bright burns half as long.
So who’s left with a little bit more fuel? Often times, it’s the companies that were thoughtful, methodical, scrappy, even frugal. Typically, it’s the ones that focused on building a sustainable business. And what’s left as a result of this period of decay is a healthier ecosystem, particularly because of the next two laws.
Law #6: The most massive dying objects explode as supernovas
And so, just as there are parallels to how the stars are born, there are parallels to how they die. Just as the most massive stars collapse under their own weight and explode as supernovas, so too do the failed superstars in tech. (I say the failed superstars, because of course, not every superstar fails; some of the great success stories of tech occur because companies are able to withstand the tremendous counter-forces working against them and ultimately prevail).
Law #7: Objects from the debris of the supernova begin attracting each other again (after a bit of a cooling off period)
Yet from the destruction arising out of the sixth law come the building blocks to bring us back to the start. Much of what is ejected from these large attractive massive superstars as they collapse is exactly what started accumulating in the first place: money, talent, ideas, etc.
So we return to the very first law. The cycle begins again, when a handful of isolated objects floating in tech space pass near each other in the night sky and, ever so slightly, begin pulling closer once more.
Summary
Just as markets and nations and dynasties rise and fall, so do trends in tech. I believe there is a lot to learn in framing these dramatic rises and falls of new sectors through the lens of what we know about stars and galaxies. It turns out, some of the greatest innovations we’ve seen, just like some of the brightest objects in space, came out of the basic mechanics of fairly predictable phenomena simply happening over and over again.
P.S. Hubble’s Law shows that the universe is expanding, with galaxies moving ever farther away from each other. Who knows what tech galaxies will emerge a few decades from now, and how strange and distant they might seem through the eyes of people today?
