Jill Gunter

Trends and Timescales

Jill Gunter -

The Importance of Industry

There are three core elements that determine your career success: how you perform, how your company performs within its industry, and how the industry itself performs.

These three trajectories (you, your company, and your industry) interact heavily with each other. How you perform, naturally, will affect how well your company does, especially if your company is small or you hold a key position within it. Your performance and to a larger extent your company’s performance will also affect the industry you work in. The level of impact again depends on many variables like size and positioning.

Your performance and your company’s performance matter but, of the three, industry matters most. This is akin to Marc Andreessen’s assertion that the only thing that matters for a startup is the market. To adapt his phrasing:

  • When a great individual/company meets a shrinking industry, the industry wins
  • When a mediocre individual/company meets a growing industry, the industry wins
  • When a great individual/company meets a growing industry, something special happens

Even if you are succeeding by your own local metrics, if your industry is contracting you will only get so far. Conversely, if you are at a company or in an industry that is exploding you can go far even on mediocre performance.

You see this all the time with startups and emerging industries. We mostly notice the upside that comes with riding the upward trajectory of an emerging space. It’s even reflected in some of the adages that echo through the all-hands meetings and recruiting calls of Silicon Valley. “If you are offered a seat on a rocket ship, you don’t ask what seat. You just get on.” The idea is that it doesn’t matter how mid-tier you are. If the industry grows 100x you are destined to gain.

This, of course, cuts both ways when something goes awry on the rocket ride you were promised. It’s a situation many (though not all!) in my own industry (cryptocurrency) are experiencing at the moment. The deluge of funding into the space has slowed. Companies are making cuts. Mainstream media hype has turned into pronouncements that bitcoin is dead. Even for the people who are outperforming their own standards and for companies that are shipping products as promised the turn in the trajectory of the industry has had an undeniable effect.

The Secular and the Cyclical

This whole narrative sounds pretty bleak but here’s the problem with it: this narrative assumes that these trajectories are secular in nature rather than cyclical. A secular trend is one that persists over the long term regardless of shorter term phenomena. The digitization (and monetization) of information that happened with the advent of the internet was a secular trend. A cyclical change, meanwhile, plays out over a shorter time frame and will not materially alter the longer term secular trend. The macroeconomy operates cyclically, going through periods of expansion and contraction usually lasting 5–10 years.

Psychologically, we don’t tend to think in terms of cyclical trends. Whatever we are experiencing in a given moment feels like it’s going to last forever. Besides, differentiating secular and cyclical trends is a tricky business. Take the example of the financial crisis. The 2008 downturn was preceded by a period of massive growth in the financial services industry. It might have seemed reasonable upon superficial glance to think the downturn might be temporary and that Wall Street would again have its day in the sun. However, a spate of regulation, a shift in culture around risk on Wall Street, and the increased role of quantitative strategies make it look increasingly likely (to me) that the change is secular.

Contrast this to the dot-com bubble of the early 2000s. In 2001, given the experimental nature of both the technology and business models being created, it may have felt safe to assume that the decline and fall of this new sector would persist. In reality, the bubble popping was merely a negative cycle within a secular uptrend.

I have experienced a few small, cyclical waves over the last 5 years in the cryptocurrency industry. Every time the tide of interest and funding has gone out, I have heard the cries of the papers proclaiming that the trend is secular this time around (“bitcoin is dead”, remember?). But each time another wave of enthusiasm has come around, carrying the longer term trend to greater heights. If you can ride down-cycles within a trend of secular growth in an industry, you are generally positioned to succeed.

I can’t say with any certainty whether the trends we are experiencing in my industry (or in markets as a whole) are here to stay or should be viewed on a smaller timeframe (and I’ll leave my thoughts for another post). However, I do know that it is a mistake to overlook the importance of broader industry trends or to ignore the significance of timescale in making predictions.