Our understanding of the rises of animal and cancer multicellularity face the same conceptual hurdles: what makes the clade originate and what makes it diversify. Between the events of origination and diversification lies complex tissue organization that gave rise to novel functionality for organisms and, unfortunately, for malignant transformation in cells. Tissue specialization with distinctly separated cell fates allowed novel functionality at organism level, such as for vertebrate animals, but also involved trade-offs at the cellular level that are potentially disruptive. These trade-offs are under-appreciated and here we discuss how the wide separation of cell phenotypes may contribute to cancer evolution by (a) how factors can reverse differentiated cells into a window of phenotypic plasticity, (b) the reversal to phenotypic plasticity coupled with asexual reproduction occurs in a way that the host cannot adapt, and (c) the power of the transformation factor correlates to the power needed to reverse tissue specialization. The role of reversed cell fate separation for cancer evolution is strengthened by how some tissues and organisms maintain high cell proliferation and plasticity without developing tumours at a corresponding rate. This demonstrates a potential proliferation paradox that requires further explanation. These insights from the cancer field, which observes tissue evolution in real time and closer than any other field, allow inferences to be made on evolutionary events in animal history. If a sweet spot of phenotypic and reproductive versatility is key to transformation, factors stimulating cell fate separation may have promoted also animal diversification on Earth.