Is 2025 The Year of the Niche Down?
2025, you are shaping up to be a crazy year.
It's never been cheaper to start your own business.
However, it's never been harder to look for a job.
It's never been easier to build a technology company.
However, the cost of entry to build your own custom AI silicon to compete as a true "AI Platform" includes nuclear reactors and north of $25B/year. In 2025 we could have as many as 5 companies attempt this (not counting Nvidia): Microsoft, Google, Amazon, OpenAI, and.. Elon.
SaaS valuations seem to have stabilized.
Yet, big exits are almost all in the private markets, not the public ones.
A new administration always makes consumers a bit more hopeful.
Yet true relief needs to come in housing, groceries, daycare and education which seem notoriously sticky. Did I mention many prices could go up due to tariffs?
We may record 2024 as peak "World is Flat". When I read this book by Thomas Friedman in 2005, it was a watershed. Due to digital technology, work could be conducted by anywhere to anyone. The flattening of the world has had an effect on it. In 2005, the top 3 manufacturers used to be: 1 - US, 2 - Japan, 3 - China. Now, it's 1 - China, 2 - US, 3 - Japan.
The difference is that Japan was a close ally of the US, and China is not. As a result, global trade has become a national security concern. The implications of which we are barely beginning to uncover, and the results could play out for the next decade. Call it "de-Chinafication".
In short, Thomas Friedman couldn't have been more right, and in some sense many of the trends above are part of this.
As a result:
1 - To find your margin, niching down to the right consumer is essential. Consumers will pay more for brands that speak directly to their needs. Generic messaging is dead.
2 - Supply chain diversification which entered the lexicon during COVID is due to experience some continued shocks. Where you manufacture and land products needs to consider not just the consumer, speed, and efficiency, but global trade risk.
