There Are Only Two Ways To Make Money In Business

I love the story about the famous line credited to then-Netscape-COO Jim Barksdale in London in the summer of 1995 while on the last leg of the European investor roadshow for Netscape’s IPO. Mindful of the need to get to Heathrow for their flight home and packing up and walking out of the room at the Savoy Hotel while still talking, Barksdale took one last investment analyst question (which, unfortunately for Netscape, turned out to be quite prescient) about whether Microsoft might opt to bundle their new Internet Explorer browser with Windows.

The time pressure of not wishing to miss their flight forced Barksdale to compress into a single, beautiful sentence, a line that may well encapsulate the meaning of life, the universe, and everything in business.

“There are only two ways to make money in business: One is to bundle; the other is unbundle.”

As a line, it has a kind of throwaway triviality and lightness that defies its sheer semantic density and elemental mass.

Because I reckon if you look at pretty much any market, product category, and industry at any time, I suspect that it’s likely to be in the process of either being bundled or unbundled. And in the internet era, sometimes both.

There are obvious consumer examples: satellite TV and content streaming services, telephony and internet (and streaming), energy utilities and home maintenance services, but I’m sure countless others in both B2B and B2C spheres.

One day, a product emerges, a market forms around it, momentum grows, and eventually, the winner-takes-all law of value distribution sees a small group of businesses attain the market power to acquire, partner and bundle their product offerings into positions of almost monopolistic dominance.

Then, one day, someone says — Hold on. I’m all for convenience, but what happened to choice, best-of-breed, innovation and value for money?

It’s at this point when the trajectory of the great bundling pendulum has reached the fullest extent of its swing, and overnight, unbundling and disaggregation become the order of the day.

And so the direction of the value delivery swings back into a period where challenging and dismantling monopolies becomes the norm, and disruptive and innovative new single-threaded products and services come to the fore. Until one day, everything becomes so disaggregated and fragmented that choice and complexity become unwieldy and burdensome, and the market suddenly wishes it had bundled solutions again. And so the pendulum swings.

It’s clear that the internet era supercharged the bundling/unbundling paradigm and the aggregation and disaggregation of value; Uber, Airbnb, Netflix, etc. but I also wonder if the recent pull-back in tech valuations is as much to do with predictable and ordinary cyclical macro-economic factors as much as the fact that the last 10 or 15 years of disaggregation and unbundling has also reached the natural extent of that particular pendulum swing. And whether we’ll see a mopping up, consolidation and more value bundling over the next decade.

Having been in tech for as long as I have and having seen this movie before, I suspect we might.