Last week, a Forbes article made the news covering Ericsson’s prediction that within five years, there will be 5.9 billion smartphones. That is a truly incredible number, considering there were zero smartphones, to speak of, 8 years ago. But it got me thinking that there is an extraordinary opportunity for the next six billion, and the more I start to think about it, the more excited I am to be an investor. The information economy — and its application and services layer — is part of a tightening feedback loop, and the adoption curve starts to change. Imagine the yellow line to be smartphone adoption in the graph below.
When an exponential growth like this one curve covers only 15 years, less than a generation, as is the case with smartphones, there are some odd dynamics that come out of it. Mainly, the leapfrog effect is real, and playing out in a couple of industries, as a result.
Over the weekend I thought that this taxonomy would be helpful in understanding the pathway by which the poor and the world’s very poor get access to the world’s resources through the internet.
First and foremost, access to electricity is the key to the information economy extending to the rest of the world. d.light design has done a wonderful job telling a story about low-cost solar, and angaza design is an exciting new organization that creates financing solutions for solar access. Innovative solutions for access to power will continue to involve solar, but also wind, geothermal, and frankly continuing to mine the oil and gas in the parts of the world where many of the world’s poor are concentrated.
The cellular and internet service providers currently don’t reach the world’s rural and very rural populations, representing 35-50% of the world population (depending on whether you believe the World Bank or Facebook). The economics aren’t there for them, under their current models. Tazca* and a small handful of others like them have taken incredible Skype-like innovations and created last mile networking solutions that will extend the “edge of the network” to every rural cell phone in the world. Drones, low-altitude satellites, and balloons will make up whatever is left over. Facebook has done an incredible job of encouraging big and small companies alike to support this innovative pathway (for obvious reasons). Signals from Djibouti, the National Geographic photo of the year, tells this story.
Access to capital is one of the greatest challenges of a capitalist system, where the poor are systematically disadvantaged. You need access to information (about how to manage credit) to get access to capital, and you need access to capital to get access to information. Inventure* is breaking the cycle, and creating loan pathways through the mobile device that will allow people to finance cellphones, transportation, and myriad other basic services that give them access to the information economy.
Applications and Services
This is the layer everybody thinks about, but remember that any service can be global from the day it launches, and so thinking about how to attract micro-communities in east Africa, Patagonia, and India all at once represents a fresh set of challenges and opportunities that level the playing field. Fred Wilson’s app constellation idea requires an understanding of youth culture and internet communities that is frankly democratic. There is plenty of reason to think a startup can build an app constellation with as much success as Google, or Facebook.
If you’re a technology investor, you’re crazy not to be paying close attention to this. Peter Thiel said, in his class at Stanford, that there are two forms of progress: zero to 1, and 1 to n. “zero to 1” is vertical/intensive progress: it invents a technology that pushes “man” forward, like a moon landing algorithm, or synthetic biology innovation, et cetera. “1 to n” is horizontal/extensive progress, like putting a laptop in each child’s hand, or extending search technology around the world.
In each of these categories, the technology innovation (zero-to-1) is truly unique and exciting. The future of accounting and credit, adjusting for the explosion of data sets we have access to, the future of energy and power with advances in silicon-based photovoltaics, for low cost distribution, and the “edge of the network” questions, with point-to-point networking hardware and software are all tech. They are intensive and vertical, without a doubt. And with the growth rates that we are seeing with smartphone adoption, and the resulting taxonomy of growth opportunities for the bottom of the pyramid, it’s worth thinking about the fact that you can have “zero and 1” and your “1 to n” at once: you can have your cake and eat it, too!