What a 19th Century Art Movement Tells Us About the Future of Technology
A classic manoeuvre in business strategy, exalted by the famed investor Warren Buffett, is building a moat.
The premise is that the value of a business can be determined by the barriers to entry it creates – a metaphorical moat deterring potential competitors. Examples of moats include razor-thin margins that ensure competitors cannot compete on price, high costs of entry such as expensive infrastructure that is onerous to replicate and of course the brand value that allows a company to escape the commodification trap. These can be so effective that Warren Buffett says one of the reasons he remains heavily invested in Coca Cola is because, ‘Even if you gave me $50 Billion, I couldn’t replace them’.
Moats however often lead to a fallacious belief that such companies will continue to dominate an industry for decades to come. This is not because the moats themselves are ineffective, rather the castle behind them either moves or ultimately becomes irrelevant. With the emergence of each tech cycle (a hardware paradigm or a technology shift), companies often find ways to build a moat and create a monopoly, causing people to take the moat at face value and believe it is invulnerable. Of course, no piece of conventional wisdom lacks an element of truth. Despite the shifts in computing since the 1970s, Microsoft still dominates PC operating systems and enterprise software, Oracle remains a key player in relational databases and IBM have continued their stronghold on mainframes. Yet what has changed is that each of these technologies stopped being the way to dominate tech, allowing new entrants such as Amazon, Google and Facebook to become multi-billion entities and to now possess the same halo-effect.
A parable can be found in the story of the rise of The Impressionists in 19th Century France. Monet, Cezanne and Renoir were not the mainstays of French culture they are perceived as today. The now famed artists spent much of their life in a bohemian existence in Paris, painting and discussing art in cafés. They struggled to promote and sell their work because the market for painting in Paris was highly regulated, where the standards of aesthetics were set by the Académie des Beaux-Arts and their annual exhibition known as the Salon. The Salon had very rigorous standards for what it considered to be good art. Malcolm Gladwell, discussing the institution in his podcast, outlined how, ‘Works were expected to be microscopically accurate, properly ‘finished’ and formally framed, with proper perspective and all the familiar artistic conventions.’
The Impressionists were vehemently opposed to this idea of art. They wanted to paint differently, and of different types of scenes. Their brushstrokes were short and broken; they used unblended colour and emphasised painting scenarios in everyday life. The Salon did not accept this and unfortunately for the group, the whole world paid attention to the painters who were selected to exhibit at the Salon. Those who were selected saw their reputations and the value of their paintings soar. As for the rest, their works and themselves were routinely ignored.
The Impressionists could not get their paintings into the Salon, a predicament that meant that they could not sell their paintings. Monet was so broke that Renoir once had to bring him bread so that he would not starve. Destitute, something had to give. After years of trying and trying to get placed into the Salon, the group changed tack. Instead of trying so hard to get into the Salon, they held their own exhibition in a few small rooms of the top floor of an office building. The show was an instant hit. The public flocked to The Impressionists show and with the group no longer stultified by bureaucratic tastes, each artist achieved renown. The going price for one of the paintings in that exhibition today would cost more than a billion dollars.
The lesson is that the Impressionists succeeded not by forcing their way into The Salon, rather they created their own institution on the periphery that built its own esteem and diminished the relevance of The Salon. So much in the same way that PCs made IBM just another big tech company, Mobile and the Web made Microsoft just another big tech company, The Impressionists made The Salon another exhibit. As new hardware paradigms (Augmented Reality, Self-Driving Cars) emerge along with technology shifts (Blockchain), it is not only possible but even probable that the giants of this era are disposed to a similar fate.