The Age of Disaggregation
So I’m crossing 5th Ave listening to Pandora, rehearsing my pitch to an investment sponsor why he should hire me instead of a big firm to raise money for him, and it hits me: we’re living in the Age of Disaggregation. After all, I’m not listening to the same radio station as everyone else, and I’ve been invited to pitch precisely because I’m an alternative to the industrialized global mega-firms, and by the way, did I mention that my prospective client is an independent spin-out from a big firm? (Have you detected a pattern?)
What is the Age of Disaggregation? It may be Moore’s Law for the rest of the Twenty-First Century: better, faster, more effective results from increasingly smaller, scattered, and more temporary teams.
ULI ran an article titled “Moving to Where the Price is Right”. Millennials moving out of pricey cities like NY, DC, and SF to relatively densely developed spots like Denver, San Antonio, Pittsburgh, and Nashville, which also have jobs in growth industries, plus culture and a decent walkability score. Very different dynamic than just moving to the ‘burbs of the dominant coastal cities. So less Big Apple, and more Johnny Appleseed?
Here is the new formula for urban success: F+M+L >1,2,3,4,5,6. What the heck is that? These are New York City subway lines. The formula says that east-west transport (To/from Brooklyn, Queens, even Jersey City) is starting to be more important than just north-south trapped inside Manhattan. Disaggregation.
Vox had a great interview with Reid Hoffman, LinkedIn Founder., who thinks hire for life is a lie, so much so that one of his interviewers asks hiring prospects: “What’s the next job that you would like to have post-LinkedIn?” This is not a start-up – this is a $29 billion market cap public company embracing the idea that even their stars may be effectively temps.
I was talking to online marketplace guru, investor, and serial entrepreneur Jeffrey Leventhal, cofounder of Work Market, which matches freelancers and employers online. He sent me a brief but thoughtful piece on marketplace disaggregation written by Bessemer Ventures VC Jeremy Levine. Here’s the part that got my attention:
The problem with investing in new horizontal marketplaces to compete with the likes of eBay, Craigslist and Alibaba is that the winners have already been declared, and their strong network effects make it impossible to disrupt them head on. Because there isn’t room for many (if any) more horizontal Goliaths, we have shifted most of our focus to vertical marketplaces. Much like AirBnB built a business focused solely on the “sublets/temporary housing” category on Craigslist, vertical marketplaces businesses cherry-pick a single category from a broader horizontal leader. With intense, narrow focus, these companies can deliver a vastly improved customer experience, presenting an opportunity to bleed liquidity from a dominant incumbent.
Frankly, it sounds just like specialty retailers spinning out of department stores and abandoning malls in favor of power centers in the 80’s and 90’s. What are power centers but “vertical marketplace businesses who cherry pick a single category from a broader horizontal leader”? So Staples is to Macy’s as AirBnB is to Craigslist.
I spend a fair amount of time thinking about better, faster, more effective results from increasingly smaller, scattered, and more temporary teams, and about on-line marketplaces, too, because I’m helping to launch a company called RealConnex — an on-line marketplace for capital, investments, and services, that will accelerate disaggregation in real estate by making it easier for employees at big firms to grab resources and market intel, or to start small firms, and for small firms to challenge incumbents who are slow to adapt. (and we’re #8 on Duke Long’s list of the top 75 CRE Tech sites – 67 down, 7 to go).
And disaggregation is happening in places that really matter.
Our awful national politics is all about Disaggregation.
How do we account for Donald Trump? With direct action fundraising and disaggregated social media making political parties powerless, and no party or powerful media to filter the candidates, we may find out that, indeed, in America anyone can be President, even a serial bankrupt.
Simply put: improved technology, increased access to capital, and changing expectations of the attainable add up to tiny teams achieving outcomes once reserved to big institutions and even countries. And this Age of Disaggregation is just getting started.
Is Disaggregation the theme of our time? At the very least, it should be a factor in how you invest, the lease terms you write, your definition of a credit tenant, where you live, what your kids (and you) study, what kind of company you join, back or start. Each of us now has the tools to build his/her own radio station (for free!). What will you build? Thoughts?