Value Investing with Legends

James Bessen - Understanding the Tech Paradigm

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May 31, 2024
James Bessen, Executive Director of the Technology and Policy Research Initiative at Boston University, discusses the impact of proprietary software on industry disruption and the shift from mass production to mass customization. The conversation delves into the challenges and opportunities in the digital age, reflecting on the future of value investing in a tech-dominated world.
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INSIGHT

Disruption Declines Despite Tech Growth

  • Industry disruption peaked in the 1990s and has declined since, despite visible technological changes.
  • Proprietary software investment correlates with increased industry concentration and less disruption among top firms.
INSIGHT

Proprietary Software Creates Complex Moats

  • Proprietary software grants large firms a complex competitive advantage by enabling them to manage massive product variety.
  • This complexity undercuts smaller rivals and reduces industry disruption.
INSIGHT

Slow Tech Diffusion Due To Licensing Reluctance

  • Firms today have less incentive to license innovations, slowing diffusion of technological advances.
  • Opening proprietary technologies like Amazon Web Services expands markets and can be highly profitable.
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