The Next Computing Epoch
JUNE 10TH, 2021
New technologies can create whole new industries. New technologies can, and often do, successfully disrupt and eventually overwhelm prominent firms, which have built their positions based on prior technologies. Technology cycles (or epochs) are often described as following a pre-determined or predictable trajectory. Progress is seen to involve a succession of epochs, each ending in a discontinuity as a new trajectory is established and a new epoch begins. Understanding technology epochs may lead to better defining promising investment opportunities and the results of potential competitive outcomes. It is now more vital than ever for investors to understand the changing texture of technology, and how historical technology epochs can help inform the question of ‘what comes next?’.
Looking specifically at computing epochs, each epoch can be divided into two phases: 1) the installation phase, when the new platform is first introduced but is expensive, incomplete, and/or difficult to use, 2) the growth phase, when those problems are largely solved and the app-platform positive feedback loop takes hold, kicking off a period of exponential growth.
Computing epochs are mutually reinforcing interactions between platforms and applications. New platforms enable new applications, which in turn make the new platforms more valuable, creating a positive feedback loop. Historically, we’ve seen a new epoch emerge about every 15 years. This is when the installation phase of a new platform was witnessed, that ultimately results in an app-platform positive feedback loop, ushering in the epoch’s growth phase, and completely reshaped the computing landscape.
The PC Epoch’s installation phase was kicked off when the Apple II was released in 1977 (and the Altair in 1975), and it was solidified with the release of the IBM PC in 1981. The early 80s saw the emergence of the first popular PC applications (spreadsheets, etc.) that drove PC demand, kicking off the app-platform positive feedback loop and the epoch’s growth phase. The PC Epoch, from its installation phase to the peak of its growth phase, lasted approximately 15 years from 1977 until the early 1990s. This is when we witnessed the installation phase of the next computing epoch, the Internet Epoch.
The installation phase of the Internet Epoch (the fist ‘networked computing’ epoch) took place in the early 90s, when it was mostly a text-based system used by academia and government. It was during this period when we saw the foundational protocols (TCP/IP, SMTP, POP and IMAP) put into place, which allowed for the emergence of the Internet Epoch’s growth phase (commonly referred to as Web 1.0), which started in the mid-90s with the emergence of the first popular internet applications, such as web browsers, search engines, e-commerce, e-mail, messaging, social networking and SaaS apps. The Internet Epoch (or Web 1.0 epoch), from its installation phase to the peak of its growth phase, lasted approximately 15 years from 1990 until approximately 2005. This is when we witnessed the installation phase of the next computing epoch, the Mobile Epoch.
The emergence of the Mobile Epoch installation phase began with the first mobile computing handsets built by Palm and Blackberry in the early ‘00s, but the Mobile Epoch installation phase really started in 2007 with the release of the iPhone. Following the release of the iPhone and its Android competitors, we saw the emergence of the first popular mobile applications (mobile messaging, mobile social networking, and on-demand services like ride-sharing), kicking off the app-platform positive feedback loop and the growth phase of the Mobile Epoch. These applications are commonly referred to as Web 2.0 applications. Smartphone adoption has since exploded: about 4B people have smartphones today, equating to approximately 50% of the global population. It has been approximately 15 years since the Mobile Epoch began.
If the 15-year pattern repeats itself, the next computing epoch should enter its growth phase in the next few years. In that scenario, we should already be in the installation phase of the next epoch. There are a number of important trends in both hardware and software that give us a glimpse into what the next epoch of computing might be. Here I talk about those trends and then make some suggestions about what the future might look like.
Enter the Web 3.0 Epoch. The foundational technology enabling the emergence of the Web 3.0 Epoch is distributed ledger technoloy (i.e. Crypto). However, the Web 3.0 epoch will be realized through the growth and convergence of several ancillary enabling technologies, including augmented and virtual reality (AR/VR), advanced networking (5G, 6G), IoT devices/sensors, and artificial intelligence/machine learning (AI/ML). This is similar to how iPhone and Android mobile handsets were the foundational technology that enabled the emergence of the Mobile Epoch, but we also saw a convergence of several ancillary enabling technologies such as cloud compute, cloud storage and the entire AWS suite of services.
In the Web 3.0 Epoch, humans, machines and businesses will be able to trade value, information and work with global counterparties they don’t know or explicitly trust, without an intermediary. The most important evolution enabled by Web 3.0 is the minimization of the trust required for coordination on a global scale. This marks a move towards trusting all constituents of a network implicitly rather than needing to trust each individual explicitly and/or seeking to achieve trust extrinsically.
The Web 3.0 Epoch will fundamentally expand the scale and scope of both human and machine interactions far beyond what we can imagine today. These interactions, ranging from seamless payments to richer information flows, to trusted data transfers, will become possible with a vastly increased range of potential counterparties. Web 3.0 will enable us to interact with any individual or machine in the world, without having to pass through fee-charging middlemen. This shift will enable a whole new wave of previously unimaginable businesses and business models: from global co-operatives to decentralized autonomous organizations (DAOs) and sovereign data marketplaces.
This matters because:
Societies can become more efficient by disintermediating industries, reducing rent-seeking third parties and returning this value directly back to the users and suppliers in a network.
Organizations can be intrinsically more resilient to change through their new mesh of more adaptable peer-to-peer communication and governance ties between participants.
Humans, enterprises and machines can share more data with more privacy and security assurances
We can future-proof entrepreneurial and investment activities by virtually eradicating the platform dependency risks we observe today
We can own our own data and digital footprints by using provable digital scarcity of data and tokenized assets
Through ‘modern mutual’ ownership and governance of these new decentralized systems of intelligence and sophisticated/dynamic economic incentives, network participants can collaborate to solve previously intractable or ‘thinly spread’ problems
As I mentioned, I believe we are late in the installation phase of the Web 3.0 Epoch. Much of the foundational infrastructure, primarily in the form of crypto protocols has been laid down. Computing platform infrastructure is composed primarily of three components, 1.) compute, 2.) storage and 3.) communications. These are the primitives that allowed for popular applications to be built in the PC Epoch, Internet Epoch and Mobile Epoch, kicking off the app-platform positive feedback loops in each Epoch. All three primitives have been built, and are being refined, in Web 3.0 right now. Compute happens on protocols like Ethereum, Solana, Stacks and others. Storage happens on projects like FileCoin, Storj, Ceramic and others. Communication happens on protocols like REN, that bridge together a web of compute and storage protocols, essentially making it the TCP/IP of Web 3.0. The epoch’s infrastructure primitives are in place. Looking at Web 3.0 in terms of number of users, Web 3.0 is currently at approximately the same place that Web 1.0 was at in 1997.
This syncs with the observation that we’re at the tail end of the Installation Phase of the Web 3.0 Epoch, as 1997 is when we saw the emergence of the first popular applications during the Internet Epoch. Given their user growth, perhaps we are seeing the emergence of the Web 3.0 Epoch app-platform positive feedback loops with apps like Uniswap today. As an investor, it is important to recognize where we’re at relative to the installation versus growth phase of the Web 3.0 Epoch, because that distinction is crucial relative to informing investment decisions. I believe that, because we’re at the tail end of the Installation Phase, there are a few exciting infrastructure opportunities that haven’t been built out yet, and we are about to witness the first popular applications that will kick off the app-platform positive feedback loop, ushering in the growth phase of the Web 3.0 Epoch.
As an investor, this is exciting because historically each evolution of the Web (and, more broadly, each evolution of computing) has created more value than its preceding iteration. I believe that the Web 3.0 Epoch will continue this trend and, historically speaking, the growth phase of each epoch has produced the best environment for investing in ‘return the fund’ type opportunities.
It’s an exciting time to be alive, and it’s an exciting time to be a technology investor.
