When you look at the history of technology and innovation, you’ll notice a pattern—a rhythm, a wave. It’s not just random chaos. Startup ecosystems oscillate in cycles. These cycles are often triggered by a breakthrough in a fundamental technology, and as the innovation matures, it spawns new waves of builders: some creating the tools (the shovels), others digging for gold (the application layer).
This post is an attempt to demystify that cycle—to understand how new waves form, how value is created and captured, and where you might be in the grand scheme of things.
The Hardware Era: The Foundation of Computing
The first real wave of modern technology began with breakthroughs in hardware. The invention of the silicon chip laid the foundation for computing as we know it. With the rise of semiconductors, companies like Intel, Texas Instruments, and Fairchild Semiconductor led the charge. These companies didn’t just build chips—they built the groundwork for an entirely new industry.
The 1970s and 1980s saw an explosion of hardware innovation. Companies like Apple, IBM, and HP started building personal computers. These were the gold miners of their era—using the silicon chip to create products that could change the world.
But the real power? It came from building shovels. Intel, AMD, and the like became giants not because they made flashy products, but because they supplied the essential tools everyone else needed.
Lesson: The earliest wave in any major innovation cycle often begins at the infrastructure level—laying bricks for others to build on.
The Operating System and Software Era: The First Application Layer
Once the hardware stabilized, the next logical layer emerged: software. More specifically, the Operating System (OS).
Enter Microsoft with Windows, Apple with Mac OS, and Unix/Linux in enterprise environments. These platforms created a standard interface between users and machines. Suddenly, you didn’t need to build your own drivers or manually type in binary commands.
This wave birthed the first golden era of desktop applications: word processors, spreadsheets, accounting software. The OS was the shovel. The apps were the gold.
Companies like Adobe, Intuit, and AutoDesk became household names. They weren’t building new hardware, but rather taking advantage of the platforms laid out beneath them.
Lesson: Once a stable foundation is in place, it unlocks massive opportunities for those who understand what problems can be solved more efficiently.
The Internet & Cloud Era: Infrastructure Goes Global
The next massive shift came in the late 1990s and early 2000s with the mainstreaming of the Internet. And then, another wave hit: the cloud.
Companies like Amazon, which started as an e-commerce company, built infrastructure that would go on to power thousands of startups. AWS (Amazon Web Services) became a shovel that changed everything.
Before cloud computing, you needed to buy physical servers to run a website or app. Now, you could spin up a virtual server in seconds.
This led to the explosion of SaaS (Software as a Service) platforms—like Salesforce, Shopify, Dropbox, Slack, and Zoom. These companies are the gold miners of the cloud era.
Lesson: When the cost of distribution or infrastructure drops, it opens the floodgates for application-layer innovation.
Blockchain: Decentralized Infrastructure and Ownership
Then came the blockchain revolution.
The early players—Bitcoin, Ethereum, and others—focused on building decentralized networks. These were the foundational protocols (again, the shovels). In the early days, people didn’t know exactly what applications would stick, but the underlying tech held promise.
Eventually, decentralized finance (DeFi), NFTs, DAOs, and smart contracts emerged as the first set of gold miners. Projects like Uniswap, OpenSea, and Aave thrived on the infrastructure others had built.
However, this wave has been volatile. The market is still figuring out where the real value lies. But make no mistake—there is a shovel-and-gold dynamic here too. Platforms like Infura, Alchemy, and Chainlink enable others to build, becoming the picks and axes in this modern gold rush.
Lesson: Even in uncertain, emerging markets, those who build tools often have the steadiest path to value.
AI: The Current Tsunami
We’re now firmly in the midst of the AI wave. With breakthroughs in large language models (LLMs), computer vision, and machine learning infrastructure, a new era has begun.
Foundation models like GPT (OpenAI), Claude (Anthropic), Gemini (Google), and Mistral are the silicon chips of this wave.
The new infrastructure players? Think HuggingFace, Pinecone, LangChain, Replicate, and RunPod—they’re building the new rails. These are the shovels.
The applications are coming in hot: AI assistants, AI video editors, voice generators, tutoring agents, legal bots, and more.
But beware: in AI, the line between shovel and gold is blurry. Even the miners depend heavily on the infrastructure players, and often pay high costs to access these models.
Lesson: We’re still early. The infrastructure is maturing, and the best applications are yet to be discovered. Timing is everything.
So, What Wave Are You On?
Now that you understand the oscillation, ask yourself:
- Are you riding a fresh wave, or clinging to an old one?
- Are you building shovels—tools and platforms that empower others?
- Or are you going after gold—apps that serve a specific niche or solve a direct pain point?
Neither path is better. But knowing which one you’re on determines how you execute:
- Shovel builders focus on developer experience, reliability, and scalability.
- Gold miners obsess over use cases, user acquisition, and speed to market.
Your strategy should reflect your position in the wave.
Final Thoughts: Recognize the Pattern, Then Act
Every new technological revolution follows this sequence:
- A breakthrough in infrastructure or theory.
- A rush to build platforms and tooling.
- A boom in application-layer startups.
- A refinement phase, where winners consolidate and standards emerge.
We are in the golden era of AI and still in the early innings of decentralization. And if history has taught us anything—it’s this:
“The people who sold shovels during the gold rush often made more money than those mining for gold.“
So what are you building?
Are you arming the revolution, or chasing the treasure?
Either way—know your wave. And surf it with intention.
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