EV3 x Franklin Templeton x HBS

Check out the piece by Mahesh Ramakrishnan, Prof. Jorge Tamayo, and Chris Jensen here.

The story of David vs. Goliath resonates deeply, epitomizing a recurring motif in human history: the unexpected triumph of smaller, innovative forces over formidable giants. This narrative is strikingly relevant in the history of corporate strategy, where the winds of creative economic disruption have consistently overturned established regimes and reshaped the competitive terrain.

In cloud services, we are potentially witnessing the emergence of another pivotal confrontation.

The cloud services industry boasts a small number of extremely powerful scale econo­mies, as Telecom Giants (AT&T, T-Mobile) and Web2 incumbents (Amazon, Microsoft) have created infrastructure monopolies, taking advantage of a historically low cost of capital and robust government subsidies. These oligopolies can use their infrastructure advantages to king-make companies in areas of emerging technology, the strength of which was exemplified by Microsoft’s investment in OpenAI, a generational technological asset. In a break from traditional investments and mergers, OpenAI accepted $10 billion of compute credits and infrastructure support from Microsoft in return for 49% of the company, an unprecedented deal both in terms of size and structure.¹

How does one even begin to compete?

Network economies offer a potential solution, as they derive a strategic advantage from decentralized collaboration as opposed to centralized scale. Crypto-powered infrastructure is exemplified by projects such as Filecoin that can generate the necessary network effects to credibly compete with incumbents by turning people and small businesses into infrastructure suppliers.

Should Filecoin’s model scale to provide useful storage coverage, it may represent a capitalist example of how returning the means of production to workers can create massive economic value.

Read the full paper, to learn more.