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Tech Barbell: Big Firms Grow, Small Firms Rent
15 Aug
Summary
- Investment firm started with eight people in 1988.
- Small investment advisers number a record high.
- AI technology is accelerating industry consolidation.
In 1988, BlackRock began with eight employees in a single room, a stark contrast to the current landscape of investment firms. Today, the average SEC-registered investment adviser still employs eight people, yet manages significantly less, with most managing under $1 billion. This highlights a growing polarization in the industry.
This 'tech barbell' effect sees large platforms expanding their reach through data and infrastructure, while small specialists rent essential capabilities. Mid-sized firms face intense pressure, burdened by overhead without sufficient scale to fund differentiated technology. This dynamic is amplified by artificial intelligence.
AI is poised to accelerate this consolidation across the service economy. It reduces coordination burdens for large firms and makes advanced capabilities accessible to smaller ones. However, advantages of size like purchasing power and credibility remain, leaving firms in the middle to adapt by building scale, joining larger entities, or specializing significantly.
