Yesterday I talked about the Innovation Equation, an outgrowth of something I’ve been thinking about since I took a great econ class in undergrad. Today I’ll talk about the other econ class I took that I really loved, that I’ve been thinking about for the last 10+ years.
It was a required small-group senior seminar. I chose the topic of business strategy, which was taught by someone named Hamilton Helmer who ran a strategy consulting shop.
The question at hand was how businesses developed “differential” returns and outperformed their competitors over extended periods of time. Hamilton (as we called him) led us through a number of leading theories, in turn debunking each for fuzzy thinking and confused logic. He then led us through the thinking he’d developed on the topic.
Hamilton kept iterating on the ideas, publishing them in 2016 as the book 7 Powers. The has gotten wide traction among founders, VCs, and product leaders as a canonical list of moats: scale economies, network economies, switching costs, counter-positioning, branding, cornered resources, and process power.
The applications to Gatsby have been quite interesting.
In the first couple years of Gatsby’s life, like many open-source projects, progress was completely depending on my co-founder Kyle, who was an incredibly talented developer working on it full-time (cornered resource).
As part of Gatsby v1, launched in 2017, Gatsby included a plugin ecosystem, where Gatsby users could write code that other Gatsby users could install and add functionality to their site. In the months following, Gatsby’s surface area expanded quite broadly, helping prompt usage to take off.
Soon after, we raised venture funding, allowing us to bring a core group of contributors onboard as full-time employees. Most other popular frameworks were unwilling to do this (scale economies), and a gap quickly emerged between the three venture-funded Jamstack frameworks (Gatsby, Next, Nuxt), and everyone else — first in features and then in usage.
Around 2019, the overall Jamstack approach started taking off, growing from a quarter of a percent of the web in early 2019 to about 1.5% of the web today, and on a trajectory to take several percent of the web over the next few years.
One of the key things facilitating that growth is that over the last few years, almost all existing CMSs have added an API to expose their data. Indeed, many CMSs and CMS vendors (WPEngine, Drupal, Shopify) have pushed headless among their community, helping persuade community plugins to add a headless mode. This lets them better compete against Contentful and other headless CMSs. It also lets us deeply integrate with them! (counter-positioning)
But perhaps the largest driver of the shift to Gatsby and Jamstack are the network effects of modular, open-source developer ecosystems. There are millions of JavaScript developers, hundreds of thousands of WordPress and Drupal developers, and tens of thousands of developers for Sitecore and other enterprise CMSs.
And the scale of these larger numbers matter.
Who makes the libraries and pushes through centralized changes that improve the quality of a language ecosystem? Ecosystem developers. And with JavaScript having 10x more developers than WordPress or Drupal (which themselves had 10x than eg Sitecore), changes are just more rapid.
That’s meant that over time, the center of gravity in webite development has increasingly shifted to the JavaScript world and to frameworks like Gatsby that facilitate access to this world.
In (the last post)[./the-innovation-equation], I talked about an 1850 technology expo in London my professor studied. People from across the world came to exhibit tools they had built and collaborate with others. Today, we do that every day on Github.
The 2010s theme of how to develop, ship, and grow faster was “Cloud / SaaS”. Perhaps the 2020s will be “open source”. If so, expect “tooling” to take on renewed importance in the innovation equation, and hopefully to drive outsized returns at scale.