Disruptive Technology as a term has never sat comfortably for me. The best examples of technology for me are those that seamlessly blend in, and not to confuse or to impede progress. Yet when you look at the state of the world economy perhaps we need to go through the pain of seeing old ways being put to the sword and challenged by new ways of raising and distributing capital.
The internet has allowed for new models and models for lending to be devised and shared more rapidly and broadly then ever before. It would be easy to focus on crowdfunding as an example of disruptive technology, but there are also other less prominent examples of markets being turned upside down.
At the time of writing, KickstarterÂ has successfully funded 25,000 projects with a success rate of 44%. The total dollar amount pledged stands at a respectable $261m. In the last 12 months Kickstarter has broken into mainstream media, through a number of projects that have smashed their funding goals. There is a human quality to Kickstarter’s model that is lacking in traditional lending. It appeals to a lot of people who aren’t looking to make a personal gain but want the satisfaction of a reward
Contrast that to equity crowdfunding – enshrined in the JOB act of 2012 Â as a means of harnessing crowds to invest financially in ventures. As Daniel Isenberg explained, the trouble with this approach is that:
- It assumes that what works for Kickstarter can be packaged and applied to investing.
- That early stage investing can be simplified and standardised
- The cost of due diligence will make crowdfunding expensive
- Crowds can be irrational
It is dangerous to assume that a ‘Kickstarter for Investing’ can be created because I see part of the success of Kickstarter, as Â a reaction to the financial crisis. People’s emphasis has shifted from owning intangible stocks and shares to the tangible.
The question becomes how do you address the fundamental problems affecting financial services and the lack of trust in those institutions? Earlier in 2012 Seedcamp launched Seedhack Fin Tech – a hack weekend with the aim to redefine banking going forward. Michael Rolph, Director of Anthemis Group, put forward the idea that
“Examples like Square and Paypal have started to innovate in this market. They work because they don’t just enable people to be paid”
Clearly there are opportunities for disruptive technology startups to upset the applecart of a highly regulated industry and innovate.
Mobile Disruptive Technology
Another example of disruptive technology impacting the economy, albeit on a local level, was the introduction of a mobile phone network in the Indian region of Kerela in the mid 90s. Up until that point, Kerelan fishermen would have to guess which beach market would offer the best return for their catch. Without having the latest price information, the fishermen were having to guess which markets were going to offer the best price. Inevitably this guesswork meant some beach markets were oversupplied, while others were undersupplied.
With the introduction of mobile phones, the fishermen out to sea could check with each market and get the latest and best price for their fish. The beach markets also benefited from having a steady supply of fish to meet the demand. Everyone was able to benefit from a more efficient market.
A similar platform for providing information to smallholder farmers via SMS and online was launched in 2007 in Kenya – Drum.Net. Being armed with the latest financial and market news meant the farmers were able to make informed decisions to get a better return on their produce, as well as raise their productivity yields through having access to the latest farming techniques.
The more technology changes, the more things stay the same – because you simply cannot stay still. Disruptive technology should be reframed to so as to not point to a single revolutionary event. Rather it should demonstrate how technology combines with people and existing paradigms that spin everything into a new and interesting direction.