Tailwinds
And trade winds.
Management consultants, businesses and people in the venture system—myself included—like to fantasize about tailwinds and the business models they supposedly enable. There is some truth to this.
In still air, a modern commercial jet aircraft will cover 11 to 13 kilometres per minute. If the same aircraft happens to be flying in the same direction an air current is flowing, then it could go much faster! In January 2024, a China Airlines flight from Taipei to Los Angeles landed more than an hour early after one of those air currents—with a speed of more than 400 km/h—helped the commercial flight top 1,329 km/h over the Pacific Ocean.
Except for having to deal with a tailwind during takeoff and landing, pilots love these air currents. It’s probably because of aviation’s mostly love affair with these narrow fast-flowing rivers of air that the phenomenon is also called jet streams. There are two kinds. When you’re headed in the same direction as the jet stream, it is favourable and a tailwind. The opposite effect is not viewed kindly, so it’s a headwind.
Demographic expansion, the unbanked, the underbanked, social commerce, ephemeral microeconomic interventions, mathematical middle-class expansion, climate finance (a.k.a solar-powered light bulbs) etc. are some of the different flavours we’ve sold and bought as tailwinds, and occasionally used as excuses a.k.a headwinds.
But because we have been so (short-term) trends-focused, we may have just been missing another type of “wind”. One that has actually determined commercial routes, climate and migration and the civilisational development of entire tribes for hundreds of years. But first, back to tailwinds…
A useful illusion
In a sense, tailwinds are a bit of a practical and useful illusion. To the passengers in a jetstream-borne aircraft, nothing really changes because the aircraft remains at the same speed relative to the air that surrounds it. But to an observer who is looking up from above, or to be more technically faithful, measuring the groundspeed of the same aircraft, the speed is often significantly different.
This illusion is important because it is why we easily misinterpret short-term trends. At ground level, the trend looks overwhelming, but the market reality is that not enough has changed structurally.
Tailwinds can extend for up to 3000 miles, but they do not always, nor are they reliably and contiguous present along any direct points of travel. These fast-moving rivers of air occur in narrow bands, at high altitudes, usually alternating in length and of varying strength. Consequently, no airline designs routes, purchases aircraft or builds a business strategy solely on this helpful but unreliable natural event.
If we tease out our tailwind analogy for technology businesses and the venture system a bit more it becomes immediately apparent that business tailwinds behave like natural tailwinds. Think of the tailwinds that helped propel software to the top of the business pecking order. The path was highly discontiguous and now always predictable. Whether you look at the GSM era of scratch cards and table stands, to the shortlived ringtones and caller tunes period, or where we are today. Then, as now, tailwinds have not been reliable makers of enduring weather patterns in the world of business.
And indeed, in nature, jetstreams or tailwinds do not usually “cause” weather patterns. Instead, they are formed as a response to weather patterns, even though they occasionally exert an influence on local weather conditions.
The point is that regardless of how strong a jet stream is, the physics of air travel does not change because of it. And when the tailwind stops, the aircraft (or business) must be built in such a way that it continues to fly. Except it’s a glider.
Trade winds
On the other hand, you have a set of planetary wind systems that humans have relied on for years to trade, migrate and colonise foreign lands. In the late fifteenth century (or the Age of Discovery for Europeans), Portuguese sailors who mastered these wind systems used them to reliably navigate early Atlantic voyages.
In particular, Christopher Colombus may have never made it back to Spain had he not relied on the effect produced by the North Atlantic Gyre, a combination of Trade Winds which blow towards the west and Westerlies Winds which blow east and cause the North Atlantic to rotate clockwise. Trade winds and other more permanent wind (and ocean currents) systems played a significant role in the course of human social and economic history. But more than that they also cause lasting climatic conditions. North of the equator, the trade winds that blow west cause desertification by continuously removing humidity from the areas around the tropics. South of the equator the effect is reversed and causes an abundance of rain forests.
If you’ve stayed with me this far, you must be wondering why this geography lesson is relevant.
Because in 2024 a lot that was built on tailwind-life effects is finally beginning to show signs of strain and we’re collectively at a loss on how to move forward. Venture capital, e-commerce, financial technology, ed-tech, and almost any strain of software businesses have not escaped the touch of Fear, Uncertainty and Doubt as initial assumptions appear to fade. It is normal.
In 2020, John Luttig, a partner at Founders Fund wrote When Tailwinds Vanish, a predominantly American take on the tapering of some of the drivers of the internet economy. I found the piece interesting when I first read it, and again yesterday after putting off this post for several days, Substack suggested I read the post. So I did—again.
Unlike tailwinds which are fast and shortlived. Trade winds are underlying structural systems that do more than make a long-haul flight one hour shorter. They enable longer business and industry transformation and over the long run, significantly impact the economies they operate over.
Throughout history, natural trade winds have almost always been discovered through lived experience or chance. So, unfortunately, they can be imperceptible to the hasty eye and even the the well-versed can misread the signs at least initially.
Even when one detects a trade wind, leveraging the effect to design a model and successfully translating that model into a viable business or investing model is occasionally counterintuitive, and one experience does not necessarily scale into another environment, especially as technology and distribution evolve.
Telecom companies in Africa did not all anticipate the flood of demand they would unlock as political reforms and the adoption of GSM technology launched a mobile phone revolution. But they (and a lot of enterprising people) also overestimated the long-term demand for “value-added services” like ringtones and caller tunes and eventually recharge card pins (in parts of Africa). I still remember the cheap books that were sold on roadsides on how to make money from caller tunes etc. Those were tailwinds, but the trade winds endured and have become the modern telecom institutions we depend on today.
Is it easy to find previously undiscovered trade winds or even harness them? Unfortunately no. Not all telecom companies survive to this day. Social media websites were once a dime a dozen, and search engines were once intensively competitive. Still catching a trade wind can lead to the formation of institutional systems in business, in much the same way that European sailors helped build the maritime and eventually colonial empires of the past.
PS: As a reporter, Listen-Talk is a big part of how you become a good journalist. But I frequently left interviews with more understanding of (how much I didn’t know) my subject matter than answers to a predefined list of questions. While it forced me to learn, allowed a story to develop in my mind and helped me find intellectual depth of the subject matter, it was a frustrating and meandering style to do news journalism.
But people often learn best when they do. I am no different.
So Learn-Do is what I call this stage. It still involves listen-talk, but serves a different purpose. After more than two years of reading, listening and thinking, this is one of them. There is a trade wind (I hope) and a faint tailwind around it.