Onward to book number 2 for the year! Just on track to meeting my goal for 12 books for the year. If you haven’t seen my takeaways from the first book, The Psychology of Money by Morgan Housel, you can check it out here!
The second book for this year is none other than Unscaled is written by Hemant Taneja with Kevin Maney. This book was recommended to me by another investor on the grounds that it would allow me to better understand the trends coming our way and what we can expect in the future as we seek companies to invest in.
Hemant Taneja is the Managing Director at General Catalyst, a venture capital firm founded in Cambridge, Massachusetts, in 2000. General Catalyst primarily invests in high growth, early stage companies with some of its notable investments including: ClassPass, Airbnb, Snapchat and Deliveroo.
The Overarching Theme
Taneja believes in what he terms as the unscaled economy. This is the opposite of a scaled economy, where corporations are powered by economies of scale, making it hard for new entrants to enter. Think of companies McDonald’s, Amazon, Nike and Starbucks. Names that we see on every street corner and whose products we use or consume regularly.
However, Unscaled details the future that Taneja sees as we continue to grow into an age powered by data and artificial intelligence (AI). He writes about the disruptions in various sectors of the economy as small startups running on AI and data are able to chip away market share from larger corporations who have grown so large from their economies of scale.
This shift in power is being driven by the large amount of Internet of Things (IoT) devices that have proliferated our daily lives. These devices allow for large scale data collection from our shopping habits to our health and our behaviours. Such data allows small and nimble startups to cater to very specific and niche markets, providing a one of a kind experience to them, unlike the mass-market approach that many large corporations adopt.
The first industry Taneja discusses is Energy, specifically renewable energy. In this field, certain possible developments that Taneja expects in the future include:
- Microgrids: Microgrids are smaller power grids that serve a small area. Taneja sees a future where the power grid is made up of millions of microgrids that are connected via 5G network and software. Many of the companies in this sector are not yet listed, but some that are, include Cleanspark and Stem which will be going public via SPAC in the near future with Star Peak Transition Energy Corp.
- Two-Way Electricity Delivery: Microgrids will also facilitate trades or sales of electricity back into the grid. This will result in more efficient usage of electricity and delivery of electricity to those who need it. Moreover, customers will know how their electricity is being generated and can be more discerning in the power sources they choose from.
Along with Energy, Taneja links it to transportation as he feels that the two are inextricably linked with each other. He foresees a potential for:
- Robo-taxi Services: With the race to achieve autonomous driving, there will come a day where cars no longer need drivers. Tesla and Waymo (by Google) are some of the big names in the field. Taneja takes this one step further and suggests that our own personal vehicles can be rented out when they’re not in use to serve as Robo-taxis as a form of side income for ourselves.
- Robot Services: We already have robots for services such as tray clearing in food courts and cleaning robots that we have in shopping malls. However, this concept can be taken further to delivery drones, which Amazon is experimenting with now, as well as robots for other specialised services such as window cleaning.
Some developments which Unscaled describes for the future are:
- Increased Usage of Genomic Data: Genomics technology allows us to understand whether we are more or less predisposed to certain diseases in the future. Drugs may eventually be personalised to each patient as well. What may not work for everyone else may work for a specific patient due to their genetic makeup and vice versa. Some of the leading companies in this area include Editas, for gene editing, and Invitae, for gene testing.
- Digitisation of Health Records and IoT Data: The increasing digitisation of medical records allows AI to better identify trends between diseases and hence allows preemptive action to be taken to reduce the risk of said diseases.
- Increased Use of Telehealth: Telehealth providers, such as Teladoc, already allow consultations via virtual meetings, reducing waiting times for patients and reducing the strain on the healthcare system.
Taneja believes that in the age where work styles are changing, schools must change as well to suit these workplaces. But they have not.
As such, he foresees the rise of:
- Education on Demand: Services such as Khan Academy have pushed for this, allowing students to learn at their own pace. It also allows specific skills to be learnt which may be useful for employees looking to upskill.
- AR & VR: Developments in AR and VR technology can also improve learning experience and can allow opportunities that could not have previously been executed such as speaking directly with a person in another part of the world to learn about their language.
The future of Finance, in Taneja’s view, is focus on:
- Unscaled Banking Apps: These apps layer themselves on the bank’s infrastructure to facilitate services required by the end user. One example is Paypal, which facilitates payments all over the internet.
- Consolidation of Banks: With apps layering over banks, eventually which bank you choose may not matter much anymore, causing consolidation of large banks. It may not seem likely now, but in the US, firms like Square are already providing micro-loans to small businesses and even brokerage services to individuals as well.
- Crowdfunding: Crowdfunding will also allow small startups to seek capital from the public, especially if they’re not big enough for venture capital firms to look into them yet.
- Blockchain and Crypto: Perhaps one of the hottest topics of this year, crypto may also disrupt traditional currencies in the future.
Media has been one of the industries to have unscaled significantly with streaming services that we are all familiar with, such as Netflix and Hulu for visual media and Spotify for music. With the increased implementation of AI, we can continue to see:
- More AI Driven Media Platforms: These platforms will cater to our needs in the fields of music, movies, games, books, the list goes on.
- AR & VR: Just like in education, AR & VR are just beginning to merge into media and entertainment and will continue to grow in popularity. Facebook’s Oculus is one such example of this.
With the power of cloud services, commerce is much more accessible to small entrepreneurs. Distribution services, hosting, manufacturing can all be rented and scaled without the vertical integration of many entrenched companies.
Moreover, these e-commerce businesses can collect much more data from their customers from what they buy as well as what they don’t buy. Taneja sees the future development of trends such as:
- Demand for Individualised Goods: Consumers desire for more individualised goods or experiences. This has led to the rise of companies such as Etsy, which is a marketplace for handmade products, and even Airbnb, which caters to a unique accommodation experience.
- Decline in Offline Retail: A general decline of shopping malls and physical shops will follow as well. This has already significantly impacted the US already.
- Omni channels: This means that many physical stores will only supplement the online sales for the shop to allow customers to, say, try on new spectacles in the shop or flip through books in a bookstore, while most of their sales continue to be online.
In the ending chapters, Taneja further discusses the importance of policy makers as the push to AI and automation will result in massive job losses all around the world. In addition, he highlights the risks of monopolies forming as well as the ability to hold algorithms accountable for their actions as AI begins to make more and more decisions for businesses.
In addition, he notes that corporations who wish to survive this unscaling, will have to change the way they do business and focus on more individualised experiences for their customers.
Regardless, he still highlights that he is optimistic about the future for the AI driven economy and that it would be a truly amazing time to live through.
Personally, I feel that AI is definitely one of the biggest forces of our time. After all, we are already seeing some of these changes play out in our daily lives. AI is here to stay and will continue to disrupt every industry out there.
Amidst all of these changes and wonders, there are many new and emerging startups that will show promising growth and will be worthy of our investment. I’ve already given out some names to watch (that I’m also watching) in this article. Keep your eyes peeled and you might just find some yourself too!
Interested in getting a copy? Check it out on Amazon here!