New Tech Unlocks Larger Markets

Markets are larger than we expect. New technology changes what appear to be small markets into larger markets.

For example, was the market for Uber or Lyft limited to the market for taxi cabs? No. Places that didn't even have taxi cabs now use Uber. In fact, there are five times as many taxi rides taken globally per year because of ride-hailing apps. These apps increased demand for taxis.

This demand-increase phenomenon is known as Jevons paradox. It states that as a technology becomes more efficient, the total consumption of that resource often increases rather than decreases.

We see this in other areas as well.

Let's take the market for compute, for example. Compute infrastructure wasn't limited to the market for on-premises infrastructure like we thought in the early 2000s. Once cloud computing became easier to spin up with AWS, Azure, and GCP, essentially all companies started utilizing some form of cloud infrastructure.

Also, was the market for GPUs limited to people who play games? It seemed to be at first, but nope. GPUs became critical for training AI models once tech advancements in deep learning and LLMs became mainstream. Now NVIDIA is the most valuable company in the world. GPUs had a larger, unforeseen market.

I digress. If you are an investor or builder, this pattern may be something to look out for. It just might be that some new, even tiny, piece of tech unlocks a larger unrealized market.