Back in 2017 I wrote the draft for a book built on an observation we had been making for years (and talking about for as long): Markets are bifurcating into what we dubbed the “Hourglass Economy” (sometimes also referred to as a barbell economy). We could see it everywhere – fashion being one of the canaries in the coal mine. Luxury and niche brands were booming, the Zaras and Uniqlos of the world were doing a roaring trade, and the middle (The Gap) was struggling. In our research, we found a couple of factors that were driving this. For a long list of reasons, we never got around to finishing and publishing the book – and moved on to write Disrupt Disruption. Now the Hourglass Economy is making its comeback – driven by AI:
AI will strengthen the biggest platforms and make the smallest specialists more formidable. The businesses caught between them will face the hardest strategic choice.
And the reason is simple: cost.
This is what a technology barbell looks like. The largest platforms spread their data, expertise and infrastructure across more volume. Small specialists rent capabilities they could never afford to build. Firms in the middle carry enough overhead to need scale but lack enough scale to fund a differentiated platform.
I believe this to be fundamentally true – and we see it happen all the time. If your company is big (and resourced) enough to deploy AI in truly interesting and unique ways, you are, likely, putting yourself into a winning position in your market. If you are small and nimble enough, you can and will use AI in very creative ways (the prime example for me is the amount of value an individual can get out of a $100/$200 monthly subscription versus a corporation which has to pay for individual tokens on their enterprise plans). And if you are in the middle, you find yourself more often than not having to use the same commercial tools as everyone else, can’t afford to build your own stuff, don’t have the benefit of being nimble anymore, and have to compete with the giants in your space who are building their customized AI workflows.
