| The Emergence of the Large Cap Paradigm [Part 2]  Dear Daily Prophecy Reader,
As I stated yesterday, my analysts Richard Vigilante and Steve Waite have written this four-part series for readers of Gilder’s Daily Prophecy. If you missed the intro I gave on my stellar team, go here to catch up. You can go here to read part 1 if you missed it.
Yesterday we spoke of an emerging “large cap paradigm.” This paradigm entails fundamental, physical realities that now confine innovation in core technologies — optical communications, wireless communications, and semi-conductor fabrication — to a shrinking number of already dominant firms, most about 20-30 years old. Over the next 10 years, we believe these firms will become more dominant and more profitable to investors than ever before. Crucial to understanding why are the insights of our old friend and colleague the late Clayton Christensen. These include both his famous disruptive innovation paradigm and his far less well understood “sustaining innovation” paradigm. To see how, let’s think about golf carts and the Daytona 500. "The Coming 'Reboot' is Great News," says #1 Futurist Need for Speed Once Clay had empirically demonstrated “disruptive innovation” — an inferior technology suddenly and unexpectedly displacing an entrenched superior one — he began to speculate on potential future disruptions. One question Clay asked himself was “what is the disruptive pathway, if any, to the electric car?” Back in those more innocent days, before the auto industry discovered the obvious pathway was billions in government subsidies, Clay asked himself: “what about golf carts?” He’d noticed an uptick in sales, and that at “adult leisure communities” in the sunbelt some residents were surrendering their cars for carts. Golf carts are inferior to cars in numerous ways — as disrupting technologies always start out to be — but also a lot cheaper, another disruptive characteristic. Most importantly, they give “good enough” performance for a certain market segment. Benefiting from the learning curve, might the performance of golf carts improve and their market until — suddenly — they were good enough to displace cars for large parts of the market, in, say, urban Florida, or Arizona? Maybe. But here is what never would happen. Golf carts would never win the Daytona 500. Disruptive technologies win by becoming “good enough.” Top of the line technologies get disrupted when they supply more performance than necessary — and customers don’t want to pay for it. At Daytona, “good enough” is good for nothing. Prized on the champion track is not average performance per dollar, but the absolute limit of performance. And the higher that limit rises, the fewer can meet the call. Today, the most important customers — in semiconductors, in wireless, in optics — are all competing at the Daytona 500. All need more performance than even their best vendors can provide. Apple’s new A14 “bionic” processor for the iPhone 12 enables astounding improvements in user experience including in still photography, video, and AR. Its machine learning models enhance photos with faster than ever image stacking. The A14 enables real time Dolby Vision encoding of 4K resolution — 60 frames per second video. A process used in Hollywood in post-production. The A-14 enables LiDAR based Augmented Reality (AR) to instantaneously map the phone to three-dimensional reality. Both CPU and GPU are faster and more powerful in a phone that is lighter and smaller, and yet has slightly better battery life. And, and… OK, we will stop now. The point is, to create an iPhone that maybe further ahead of its rivals than any generation since the first few Apple needed a chip that could not have been manufactured anywhere on earth 24 months ago. | 
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