When Software Is Not Enough – And Not Eating The World

Marc Andreessen is the father of the techie philosophy – Software is eating the world – and has cleverly posited that everything would fall to software, from agriculture to logistics, healthcare to education, and beyond. Some of us trained in electrical engineering would laugh; I always tell people that before you can run any software, someone has to build a microprocessor. Of course, we get the big picture of Marc’s point – and it remains valid that software creates leverageable positioning which cannot be found in any other sector, enabling scalable advantages which are unbounded and unconstrained across many metrics.

My own theory is that we are in the middle of a dramatic and broad technological and economic shift in which software companies are poised to take over large swathes of the economy. More and more major businesses and industries are being run on software and delivered as online services — from movies to agriculture to national defense. Many of the winners are Silicon Valley-style entrepreneurial technology companies that are invading and overturning established industry structures. Over the next 10 years, I expect many more industries to be disrupted by software, with new world-beating Silicon Valley companies doing the disruption in more cases than not.

Why is this happening now?

Six decades into the computer revolution, four decades since the invention of the microprocessor, and two decades into the rise of the modern Internet, all of the technology required to transform industries through software finally works and can be widely delivered at global scale. Over two billion people now use the broadband Internet, up from perhaps 50 million a decade ago, when I was at Netscape, the company I co-founded. In the next 10 years, I expect at least five billion people worldwide to own smartphones, giving every individual with such a phone instant access to the full power of the Internet, every moment of every day.

On the back end, software programming tools and Internet-based services make it easy to launch new global software-powered start-ups in many industries—without the need to invest in new infrastructure and train new employees. In 2000, when my partner Ben Horowitz was CEO of the first cloud computing company, Loudcloud, the cost of a customer running a basic Internet application was approximately $150,000 a month. Running that same application today in Amazon’s cloud costs about $1,500 a month.

With lower start-up costs and a vastly expanded market for online services, the result is a global economy that for the first time will be fully digitally wired — the dream of every cyber-visionary of the early 1990s, finally delivered, a full generation later.

But his new piece – It’s Time to Build –  makes the  investing philosophical “movement” even more fascinating. Yes, Marc now thinks that we need to build – houses, roads, factories, etc. These are things software has struggled to eat! And I can give a cheat sheet here: software has a marginal chance because you actually have to build roads, houses, factories, etc.

You see it in housing and the physical footprint of our cities. We can’t build nearly enough housing in our cities with surging economic potential — which results in crazily skyrocketing housing prices in places like San Francisco, making it nearly impossible for regular people to move in and take the jobs of the future. We also can’t build the cities themselves anymore. When the producers of HBO’s “Westworld” wanted to portray the American city of the future, they didn’t film in Seattle or Los Angeles or Austin — they went to Singapore. We should have gleaming skyscrapers and spectacular living environments in all our best cities at levels way beyond what we have now; where are they?

You see it in education. We have top-end universities, yes, but with the capacity to teach only a microscopic percentage of the 4 million new 18 year olds in the U.S. each year, or the 120 million new 18 year olds in the world each year. Why not educate every 18 year old? Isn’t that the most important thing we can possibly do? Why not build a far larger number of universities, or scale the ones we have way up? The last major innovation in K-12 education was Montessori, which traces back to the 1960s; we’ve been doing education research that’s never reached practical deployment for 50 years since; why not build a lot more great K-12 schools using everything we now know? We know one-to-one tutoring can reliably increase education outcomes by two standard deviations (the Bloom two-sigma effect); we have the internet; why haven’t we built systems to match every young learner with an older tutor to dramatically improve student success?

Of course, I understand his pains: how can we have Silicon Valley  and American cities begging for masks, gloves, etc? How can we have Silicon Valley and doctors and nurses are dying because of protective gowns?  And how can small Chinese firms be serving the world with masks, gloves, etc during this Covid-19 pandemic? Yes, doctors have refused to fight even when equipped with gadgets running software unless they have a mask!

There is no confusion – Marc’s big picture is clear and his message applies to all of us: unless you build, your position is nothing by transient, software or no software. Nations that build win – and lead. It applies to America, Nigeria and everyone!

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