Without even counting massive potential sea changes like artificial intelligence or “flying cars,” as DST founder Yuri Milner says, the consumer internet is still on track to grow in value by another ten times in the next 20 years — just like it did in the past ten years.
That’s Milner’s “conservative” prediction that doesn’t account for those massive revolutionary changes, which he gave on stage at TechCrunch Disrupt SF 2017 today. Working backward, Milner suggests that the consumer Internet — originally valued at around $350 billion concentrated with the top 5 consumer companies about 10 years ago — will make another massive leap in the next 20 years from where it is today. Consumer Internet companies today comprise around $3.5 trillion in value, Milner said, again largely consolidated among five companies: Facebook, Google, Amazon, Alibaba, and Tencent.
So, that’s not even counting Apple. Milner hopes to evolve a thesis that’s based on a heavily quantitative approach, looking to map out where the consumer internet sector is headed. Of that huge amount of value, around $1 trillion will go to early-stage investors, $5 trillion will go to founders, and the rest will go to LPs, public investors, and employees of those tech companies.
“The incredible thing is that, in the last 10 years, the pattern did not really change,” Milner said on stage. “Ten years ago, five companies occupied about 70% of the value of this $350 billion. Roll the clock 10 years forward, then also five companies occupy roughly 70% of the value. Those are not the same companies, but also five companies.”
Here’s the basis for his the theory: right now, the penetration of consumer spending is around 6%, Milner said. In 20 years, that will be around 20%, Milner says, as some industries will continue to expand radically in the next 20 years. Again, that’s a “conservative” investment, he said.
Compared to that cluster of five companies that currently comprise most of the value in the consumer Internet right now, the number of companies that occupy that top tier — which accounts for around 70% of the value — will probably double, and the second cluster of companies that make up about 20% of the value will consist of around 50 companies, and the tail end will be around 500 companies. That means that a few hundred companies will be multi-billion dollar companies (or so-called unicorns).
“If you try to break down the 6% today it will turn out to be 10% in goods and only 2.5% in services,” Milner said. “Our prediction is the goods part will go from 10% to 35% and services will go from 2.5% to 10%. The average will be this 20%, and 20 years is a long time… It’s relatively conservative based on what we have already seen in some parts of the world. We’re assuming the rest of the world will simply catch up where the developed countries are already today.”
Here are a few of the big movers, according to Milner: healthcare, which represents a fraction of a percentage point in that services component, will probably go to around 2.5% in the next 20 years. Transportation will go from around 5% to 20%, he said.
But with a sea change like AI, Milner — who invests in efforts to listen for intelligent life beyond earth — still tries to take the optimistic view. Instead of consuming jobs and leaving people behind, artificial intelligence will end up shifting the working population to jobs that are more suited to humans, while the things that robots do better “will go straight to them.”
“I share a fundamentally optimistic view on this,” Milner said. “I represent a minority of all experts on this, but I think that… there are a lot of fears that a lot of jobs will get eliminated by technology. That creates a lot of uncertainty. If we look in the last few hundred years. There was a lot of technology developed. They were as disruptive as we are seeing now… What I believe will happen is that many people will just be doing different things. For example, education, we now have one teacher per maybe 30 kids, or maybe 50 in other countries, where ethe ratio is even more dramatic. Why wouldn’t we assume the ratio would be 1 to 10 in 20, 30, or 40 years? The same applies to taking care of old people.”