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Hello From Silicon Valley,
As we start 2021, as I do every year, I want to reflect on the past year. Where have we been? What has the technology industry accomplished? We are very aware of all the challenges, loss of life and suffering that we faced in 2020. Despite this, there were some positive aspects of 2020.
First, the entire world realized something we already knew – that technology works and can make our lives better. When we couldn't go out to a store to buy something, we could easily order it on Amazon. When we couldn't go to a restaurant, we could order it on DoorDash or UberEats. When we couldn't go to the movie theater anymore, we could watch Netflix or HBO Max. When kids couldn’t go to school or we couldn’t go into the office, people jumped to Zoom and did distance learning or virtual meetings. And for the most part it was not as good as learning in person, but it definitely was an acceptable substitute. Imagine if we had gone through 2020 in the year 2000. We would be in a lot different shape. And so all of these companies leaped to try to take advantage of the opportunity to help the world, and I think that's what they did.
Airbnb Stands Out
If I were to think of maybe the most amazing story for 2020 on an individual company level, it would be Airbnb. Imagine sitting as an executive at Airbnb, seeing yourself in Q2, revenue down 67% year over year, travel ground to a halt, you're burning money, and you have to make some really tough decisions. You have to slash marketing budgets nearly 80%. You have to lay off nearly 2000 people globally. A lot of people had written them off. It was expected they would become a casualty of this unfortunate situation in terms of the tech industry.
But something really amazing happened, and it’s credit to the leadership at Airbnb. They made the tough decisions, then they simply listened to their customers. What they realized is their customers didn't want to go to big cities like New York or San Francisco anymore, they wanted something different— to go to rural areas. They were nervous about staying in hotels where they’d stand in a cramped elevator to get to their room. They wanted to be on a single level with easy, non-congregate access. They wanted to be in a place where there were backyards to be able to social distance outside.
Airbnb, because of their business model, and because of the flexibility of not owning any real estate, they saw supply on their platform, that was outside of major metropolitan areas, start to take off. This was to the point where if you skip just three months to Q3, their business was down 18% year over year, really up from a 70% decline in Q2. It’s incredible especially compared to all the traditional travel companies like Hilton, who was still down 60% year over year; Marriott, who was down 57% year over year; Hyatt, that was down 67% year over year. It's amazing how quickly Airbnb was able to jump back – with a lot of hard decisions, and then quick and decisive action with the focus on figuring out how they can serve their customer best.
The rapid development of the Covid-19 vaccine exemplifies what can be achieved when technology, science, and government work together. Moderna highlights this best, their team developed a vaccine in 48 hours after getting a sample. Which itself is quite amazing, but when you realize that the sample they received wasn't a physical sample of COVID, but a digital one that was emailed to them, it becomes that much more astounding. What made this all possible is that the technology that developed this vaccine already existed. It's been available, but never got any use because government regulations, particularly the FDA, make it challenging to bring new drugs to market. That completely changed when much of the red tape was cut, and there was a focus on working collaboratively and moving quickly— safely of course.
The pandemic brought a level of collaboration between the medical community, the tech community, and the government that enabled everyone to work together on a common interest. It’s truly remarkable what can happen when everyone's working together. This is a total revolution in vaccine development. I don't think it's ever going to revert back to what we saw pre Covid-19, and that's a great thing for humanity.
Digital Transformation Is Imperative
Finally the world realized that digital transformation is an absolute necessity. Surprisingly, in the global 2000, there was still tremendous hesitation to adopt Cloud, new infrastructure, or use new applications. 2020 is the year that ignited that transition for many, as they were forced to adopt new technologies and infrastructure to allow for remote work and meet demand of changing societal needs. The world really accelerated. In January 2021, the predictions for 2025 just moved up to this year. We're truly living in the future.
But it's more profound than that. There's going to be hundreds of millions, billions, or even trillions of dollars spent that need to happen to modernize legacy industries and enterprises; and that shift is going to be huge. So while a lot of people see what's happening in technology now, see the stock market, and say, "We're in a bubble, valuations are high", I have the contrarian view that that might not be the case. There's so much more to still be done for technology to modernize, likely we're just at the beginning, and while multiples may go up and down, the trajectory of the technology industry indicates we may still have another 10 or 20 years in front of us of solid growth.
So as we enter 2021, I feel the technology industry has an incredibly bright future. Companies were able to step up in the crisis and provide real assistance to customers through their technology. Companies, such as Airbnb, were able to pivot and provide what their customers wanted, and thereby succeed. Groundbreaking vaccines were developed through a collaboration of science, technology, and government. 2020 was challenging in many ways— but it also is uplifting as to what technology can accomplish.
All our best,
Ashvin and the Geodesic Team
P.S. Marcus Otsuji and I recently connected over Zoom to reflect back on 2020 and look ahead to technology predictions for 2021 and we recorded our session. If you’d like to watch, you can do so here.
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