A new perspective on unicorns

As a follow-up to my tech post, I recommend this excellent blog entry by Scott Fearon. He points out that most of what is sold as high-tech to investors nowadays seems oddly low-tech,

But what seems different to me about the current tech boom is just how un-technological most of the players are. Uber lets you hail someone else’s car, AirBnB lets you sleep in someone else’s bed, and Snapchat lets teenagers erase naughty messages before their parents see them. It’s hard to see any significant technological moats around those ideas.


Seattle-based Zillow (Z) might be the perfect example of how “untech” today’s tech sector is. I have visited its headquarters several times. The place is straight out of movies like Boiler Room and Glengarry Glen Ross. Most of Zillow’s employees are not coders or developers. They’re commissioned salespeople. They sit in cubicles adorned with Seahawks posters and cold call real estate agents all day, aggressively promoting “leads” in assigned zip codes. All those flesh-and-blood employees and their intensive sales efforts have generated impressive revenue growth for Zillow. But they also bring relatively large operating expenses.

Investors in those ventures would probably reply it’s the network effect that constitutes the moat once you have enough people on. To me this line of reasoning seems faulty: how valuable is the network effect if you offer an unnecessary service like snapchat, or twitter? How, exactly, do they improve the world? They seem more like fads than anything else. Similar to Crocs a few years back. Will the network still be valuable once your product/service is not fashionable anymore?


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