READING PASSAGE 1
You should spend about 20 minutes on Questions 1–13, which are based on Reading Passage 1 below.
Big Pharma Is So 2015. Welcome to the Era of Big Software
KELLOGG’S USES A cartoon tiger and elves to sell $14 billion dollars worth of refined carbohydrates each year. But this calorie-laden corporation was once an idealistic startup. Created by the eccentric Dr. John Harvey Kellogg, Corn Flakes were intended as a health food that made it easier for the masses to adopt a vegetarian lifestyle. Kellogg’s was the Soylent of its day.
Today, Pfizer is a $188 billion dollar drug conglomerate. But there was a time when the biggest of “Big Pharma” companies was a lot like today’s Young Turks. At the time of its founding in 1849, when it produced small batch citric acid, the company was based in Williamsburg, Brooklyn, and its founder favored funky facial hair.
These companies that we now think of as the epitomes of “Big Food” and “Big Pharma” were once humble startups. But as success beget success, they managed to dominate their markets for over a century. Over the next hundred years, we could see the same thing happen with the most high-minded tech of tech companies. Google, Amazon, Apple, and Facebook could grow to dominate the market in the same way Pfizer and Kellogg’s have dominated theirs. We could be witnessing the dawn of a new era: “Big Software.”
The Future of Apps
Pfizer and the majority of the top 25 global pharma companies were founded in the period between 1849 and 1901. Notable companies sprung up in the 20th century, but to put it in perspective, as many top pharma companies were formed prior to 1781 as after 1981.
First mover advantage is debatable, but it is clear there is value to being early to an emerging industry. These companies built solid products, established distribution channels, and value accrued to their businesses as a result. Regulation also played a role. In 1906, the US Government established the Food and Drug Administration, and the increased regulatory scrutiny to ensure safer medicines made it to market, but this oversight also made it harder for upstart companies to enter the market.
This pattern is seen in most industries as they develop—food, automobiles, banks, TV network—all followed a similar pattern. A new technology, distribution channel, or demographic trend created a boom of startups. In relatively short order, a small group of companies enjoyed outsize success and bought their former competitors, or otherwise went on to dominate their industries. Market dynamics and regulations helped to cement the winners.
This could happen with tech as well. Intel was founded in 1968, Snapchat in 2011—roughly 50 years apart. Don’t be surprised if our great grandchildren still use Google products 100 years from now.
We’ve seen so much upheaval in tech over the last few decades that there’s always an assumption that past is prologue. Apple is doomed to lose to Android because it failed to embrace “openness.” Friendster and Myspace became uncool, making it a fait accompli that Facebook is doomed to do so once the patina of popularity wears off.
Plenty of big tech companies have failed, but many of those examples can be chalked up to the immaturity of the tech stack, a lack of infrastructure to support a web-based business model, e.g. AdTech, or even just poor management.
Digital Durability
Paul Graham’s essay, “The Refragmentation,” makes a case that the era of big companies is coming to a close. Don’t be so sure. Craig Newmark and a team of hippies in the Haight upended print journalism across the country by decoupling classifieds from reporting. For the last decade, hundreds of millions of dollars have been invested in companies chipping away at Craigslist’s services.
Airbnb alone is worth tens of billions of dollars. Yet Craigslist, with its laissez-faire approach to product improvement, remains the number 11 site in the United States. The value of liquidity in a marketplace, often earned by solving a problem early on, shouldn’t be underestimated. Can you imagine the longevity that Google, Apple, Facebook, and Amazon will have?
How certain are you that a company will be able to upend Apple’s manufacturing prowess? Who will be able to outthink Google’s massive machine learning engine? Amazon has spent 20 years building the foundation of a retail empire that could last a century. These are not inconsequential advantages.
Yahoo would seem to be a counterexample, but looked at another way, it’s amazing that a company whose entire raison d’être disappeared in 2007 has been able to survive for 20 years without a clear direction and saddled with a series of CEOs who were ill suited to the business.
Instead of assuming these companies will fail, entertain the alternate position. Imagine we’ve just seen the establishment of companies that will dominate their industries for the next century, in much the way that General Electric, Ford, and Disney have only become more powerful and influential in the absence of their iconic founders. Some might view the age of “Big Software” as a bad development. In fact, this could be an amazing development for entrepreneurs and investors alike.
Accelerating Innovation
Conglomeration hasn’t hurt entrepreneurship in pharma or food. In fact, it has accelerated it. In the biotech world, it’s not uncommon for a startup to go from drawing board to multi-billion dollar IPO in a few short years. Editas was founded in 2013, IPO’d in 2015, and currently has a market cap in excess of $1B. In the first half of 2015, there were six biotech IPOs in Boston, and the average employee count was just 17.5. This analogy isn’t perfect—bits and biologics have big differences—but the general trend is instructive. Mature industries tamp down outlier exits, but make entrepreneurship more efficient.
Questions 1-11
Do the following statements agree with the information given in Reading Passage 1?
In boxes 1–7 on your answer sheet, write
TRUE if the statement agrees with the information
FALSE if the statement contradicts the information
NOT GIVEN if there is no information on this
- The reason behind creating Corn Flakes was to drift the masses towards a vegetarian lifestyle.
- In the founding year of Pfizer i.e. 1850, Pfizer produced critic acid.
- Majority of the global pharma companies were built in the late 1800.
- The increased regulatory pressure on pharma companies led to the fall of Pfizer.
- The failure of apple can be devoted to the success of Android.
- It was in the year 1968 that Intel was found and then Snapchat in 2012.
- The only reason behind the failure of companies is AdTech.
Questions 8–13
Choose the correct letter, A, B, C or D.
Write the correct letter in boxes 8–13 on your answer sheet.
8. Who has acknowledged that the era of big companies will be soon overlaped by something else?
A. Paul Graham
B.Paul Grahem
C.Craig Newmark
D.Dr. John Harvey Kellogg
9. What is the ranking of Craglist in United States?
A. 10
B.112
C.11
D. 42
10. In which year was Editas founded?
A. 2010
B.2011
C.1932
D.2013
11. What different dating sites are owned by Match Group?
A.Tinder
B. OkCupid
C.Plenty Of Fish
D.All of the above
ANSWERS
1. True
2. False
3. True
4. Not given
5. False
6. False
7. False
8. A
9. C
10.D
11.D
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