Imagine the year is 2060
There are 12 companies that represent 70% of GDP, and the other 30% of GDP is 20 million “small companies”. 12 winners.
Instead of wondering “how could that happen?” instead try to think…
Q: What do those 12 companies do?
Is it the Mag7 5, or does something else happen? 34 years is a long time!
It’s the Mag7 who have double digit growth above $20bn revenue scale, this is what it takes to win.
Another way to think about this is to think about what the big economic sectors will be?
Travel?
Media?
Energy?
Food & Beverages?
Insurance?
But who knows? Recently the global economy is 60% services and 40% manufacturing. But that is probably not going to stay the same either.
Another way to think about it, is that governments are going to collect and spend 25-40% of GDP, what will governments want? Will that change? Probably but maybe not, human nature doesn’t change, but maybe human nature has to compete for government attention with something else?
… Another useful model that we have today is Jensen’s 5 layer cake.
Applications and models are ‘services’ and energy, chips and infrastructure are all ‘manufacturing’.
The top is “fast”, fast capital cycles, easy to disruption, fleeting advantages.
The bottom is “slow”, slower capital cycles, harder to disrupt, lasting advantages.
I would suggest that the top will be the highly democratised 20 million small companies, and as you go closer to the bottom, you now get to these huge opportunities to build an enduring industrial titan.
You probably end up with…
1-2 energy companies
2-3 chip companies
3-4 infrastructure companies
4-5 model companies
20 million application companies
This is clearly a grotesque oversimplification and is over prescriptive futurecasting, but this is the structure of the AI industrial revolution.
If you want to build a company that could be 1 of the 12 titans, where in the 5 layer stack would you build it?
Once you see this, you start to understand Meta’s capex (they need a model, or to commoditise the layer below them) and Apple’s quiet focus on edge inference (on device chips).
It’s hard to see far and strategically if you live in the fast capital cycle zone, likewise it’s hard to see inside the applications tempest if you live in the strategic capital intensive zone.
It’s a bit of a consensus that software / apps are cooked, but it’s not yet a consensus to see that the power law means all the titans are in the bottom 4 layers, and all big M&A exit opportunities will be in those bottom 4 layers.
Nvidia was the only major cashflow in this stack below the app layer, Anthropic is rapidly taking their place there too.
Everyone else has to R&D their way in, M&A their way in, or startup and win their category.
If you’re doing anything outside of the bottom 4 that’s great, but you are not going to be 1 of the 12 Titans in 20 years or so time.
You should invest all your time and effort accordingly.