When competition is constrained and highly regulated, prices tend to remain high, and consumers face limited options. These industries are often vulnerable to disruption when regulations change or technology expands.
For decades, this was precisely the case for NYC taxi medallions. They commanded high prices because access was scarce and owning one guaranteed strong income from cab fares. Revenue was steady, competition was limited, and there was no motivation to innovate. Medallions were selling for $325k in 2005 and rose to a peak of over $1M per medallion in 2013. Then, ride-sharing services including Uber and Lyft abruptly entered the picture, dramatically expanding the number of cars offering on-demand rides.[1] Expanded supply and competition caused the value of a NYC taxi medallion to decline precipitously, eventually stabilizing near $150k by 2019.
This new competitive landscape created value for rideshare companies, led to losses for taxi operators, and, perhaps most importantly, benefited customers by improving ride availability and prices. While the NYC taxi medallions are a dramatic example, the stock market is grappling with a similar dynamic as AI innovation threatens various industries and incumbent businesses. Even when innovation generates positive outcomes, it still causes disruptive repricing for incumbents.
New Competition and Shifting Expectations
The U.S. stock market declined this past week following the recent release of Claude Cowork, built by Anthropic, which sparked investor concerns that AI tools will replace established software businesses.
In particular, one open-source plugin targeting legal workflows is seen as a direct threat to the heavyweights in that niche industry. Impacted companies, including Thomson Reuters, RELX (owner of LexisNexis), and LegalZoom, have all declined more than 20% over the past month. The sharp market reaction suggests investors are worried about future competition from large AI providers arriving sooner than previously anticipated. When expectations of future revenues shift, markets can adjust quickly, often jumping ahead of current fundamentals.
For investors, it can be uncomfortable to witness disruption and market decline in the short term, but we’ve seen similar cycles throughout market history. In 2025, the market temporarily panicked about AI spending following the DeepSeek model developed in China at a fraction of the cost. When investors stepped back from the immediate reaction and evaluated the reality of the competitive landscape, prices rebounded and ultimately finished the year higher.
For customers of these legal software services, we’ll note two important truths. First, in large corporations, software change does not happen quickly and new AI upstarts will have to establish trustworthiness before they are adopted. Second, if the price of these software services is ultimately reduced by AI, those savings can be redeployed to create economic benefit or increased profitability elsewhere. As we mentioned earlier, disruption often benefits consumers over time, even though history reminds us that these transitions can be messy.
The Rise of the Private Disruptor
In the past, broad public markets usually included tomorrow’s winners as small-cap companies grew into large-cap brands. However, several recent high-profile AI and frontier-tech disruptors are remaining private longer (OpenAI, Anthropic, Waymo, SpaceX). This can make the public-market experience feel lopsided since the incumbents reprice immediately, while these private companies are harder to access for most investors.
This phenomenon is primarily a vestige of the 2008–2022 era of near-zero rates. During that period, emerging companies could access abundant private capital at low rates, allowing them to delay IPOs and retain control longer. While markets are still dealing with the aftermath, interest rates have normalized, and companies have renewed interest in “going public” to raise additional capital. IPO activity, which benefits diversified portfolios over the long-term, has increased in each of the past three years.[2] Additionally, some of the disruptive companies above – particularly OpenAI, Anthropic, and SpaceX – have discussed IPO plans and could enter public markets as soon as later this year.[3]
Skepticism is Normal
Innovation is disruptive, and markets are grappling with that reality right now. As new AI applications and technologies move through the adoption cycle, skepticism is a normal and healthy perspective for consumers and investors alike. The future rarely arrives in a straight line, which is precisely why we diversify client portfolios across industries and regions.
AI is an accelerant. It increases productivity and research, accelerates market rallies and declines, and speeds up various parts of daily life. While many of these developments may be positive, we recognize that in a world that celebrates disruptive companies and rapid change, our work emphasizes the value of thoughtful pacing, financial security, and human connection.
Resources
[1] The Impact of Uber Technologies on the New York City Transportation Industry. University of Arkansas
[2] 2025 US IPO activity fuels confidence for 2026. EY
[3] OpenAI Plans Fourth-Quarter IPO in Race to Beat Anthropic to Market. WSJ
