The Smiling Curve - The most important concept in business and investing

What is the most important concept in business and investing today?

The Smiling Curve!

Ever wondered why tech giants dominate and niche creators thrive while mid-sized businesses struggle?

The Smiling Curve explains this phenomenon. Let’s dive in.

Image

Originating from Acer’s founder, Stan Shih, in the 1990s, the Smiling Curve illustrates value distribution across an industry.

In his example, high value is found in R&D and marketing, with manufacturing in the middle adding the least value.

Image

In the digital age, this curve extends beyond manufacturing. It now represents how scale and specialization impact value creation.

On the left of the curve are niche creators and specialists.

They offer unique value without needing massive scale. Think indie newsletters, boutique consultancies, or specialized artisans.

Image

On the right: are large platforms and aggregators.

Companies like $Alphabet(GOOG)$ $Alphabet(GOOGL)$ $Amazon.com(AMZN)$ $Netflix(NFLX)$ leverage massive scale to dominate markets.

They benefit from network effects and vast user bases.

The middle? Generalists and mid-sized firms lacking unique value or scale. They often struggle to compete, squeezed by both ends of the curve.

Image

This dynamic explains trends across industries:

TV and streaming is dominated by YouTube (aggregating individual creators) and Netflix (the most subs).

Paramount, Max, and even $Walt Disney(DIS)$ are struggling being in the middle.

Image

Social Media

Facebook prints money while $Snap Inc(SNAP)$ $Reddit(RDDT)$, and others struggle.

Image

Music

Streaming has been won by $Spotify Technology S.A.(SPOT)$ on the scale side with $Apple(AAPL)$ , Amazon, and even YouTube as music afterthoughts.

Some artists are struggling, but the successful individuals -- like Taylor Swift -- are bigger than ever.

Image

For investors and entrepreneurs, the takeaway is clear: 

•Aim for the edges of the curve.

•Differentiate through specialization or scale.

•Avoid the undifferentiated middle ground.

Understanding the Smiling Curve helps navigate the modern economy.

For whom haven't open CBA can know more from below:

🏦 Open a CBA today and enjoy privileges of up to SGD 20,000 in trading limit with 0 commission. Trade SG, HK, US stocks as well as ETFs unlimitedly!

Find out more here：

• Trade on a Cash Boost Account and enjoy up to 6 months of Commission-Free trading.

• 💰Join the TB Contra Telegram Group to Get $10 Trading Vouchers Now🎉

• 💰CBA Mini Course 1: What is Cash Boost Account(CBA)?