A child's developing brain creates a huge number of synaptic connections, reinforces the ones that are used, and prunes the ones that are not used.
This process appears wasteful, but scientists have shown that it creates a network of neurons that functions well in a wide range of potential environments.
Burgeoning industries commonly follow the same pattern as they develop, with new companies representing the synaptic connections, the marketplace the environment, and the exit of companies the decrease in connections.
New companies enter the industry with a novel approach or technology to address the business challenge, and the marketplace "selects" the products or services that best fit the industry's needs.
We discuss this pattern for companies, describe why investors should care, and offer some current examples of where this pattern of entry and exit is playing out.
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