Most businesses today believe that technology can dramatically improve the way they operate. But they embrace technology with varying levels of enthusiasm.
The lowest level of enthusiasm is to adopt technologies made by other companies – email, customer services software, etc – and perhaps create an “IT department” to manage those technologies but nothing more. The next level of enthusiasm is to create an internal technology organization – a senior executive position like a CTO, a technology department, etc – and develop proprietary software. The highest level of enthusiasm is to have top management with technology backgrounds who see technology as core to every organizational function. For them, having a technology department would be like having a business department – redundant and strange.
A lot of recent Silicon Valley startups look at first glance like non-technology companies, doing things like food delivery, home services, transportation, etc. The difference is that the founders often grew up with technology, have backgrounds developing software, and can’t imagine anything other then a technology-centric worldview. They’re betting that by putting technology at the core, they’ll be able to create dramatically better products and services.
The beauty of software platforms is that you can solve almost any problem by writing more software.
For example, one of the most common criticisms of Bitcoin is that it is too volatile and speculative to be used as a payment system. Merchants want the stability of government-backed currencies. Buyers don’t want their Bitcoin exposure to fluctuate whenever they transact in Bitcoin.
Coinbase has solved this problem. Merchants can instantly convert any Bitcoin they receive into dollars. Buyers can automatically replenish any Bitcoin they spend. Transactions that use Coinbase this way create zero net Bitcoin exposure for either party. Volatility is no longer an issue.
When I talk to most companies, I do think their leaders are pretty short-term focused. Imagine you’re running Exxon, what do you do? Say you want to do something good with the most valuable company on earth. A lot of people think probably, it’s not doing good things – worried about the environment and so on. But if the company has a lot of capabilities–worldwide operations and manufacturing, government relations, probably could do a lot different things, if you took a 20-year view.
If you took a four-year view, that’s a pretty hard question to answer. What are you doing in the next four years, which I think is about the average tenure of a Fortune 500 CEO. So if you’re being measured quarterly– obviously, it’s good to have some pressure so you actually do things, make money and improve things. But I think the four-year horizon for leaders is pretty difficult.
It’s pretty difficult to solve big problems in four years. I think it’s probably pretty easy to do it in 20 years. I think our whole system is setup in a way that makes it difficult for leaders of really big companies. Eventually, what you’re doing doesn’t makes sense over time, for whatever reasons – environmental or social or whatever it is. I think companies have a big problem making a big transition, so leaders get replaced.
A huge advantage of companies like Google, Facebook, and Amazon is that they have CEOs with the gravitas (and, sometimes, control provisions) to operate on a very long-time horizon.
If we were sent back with a time machine, even 20 years, and reported to people what we have right now and describe what we were going to get in this device in our pocket—we’d have this free encyclopedia, and we’d have street maps to most of the cities of the world, and we’d have box scores in real time and stock quotes and weather reports, PDFs for every manual in the world—we’d make this very, very, very long list of things that we would say we would have and we get on this device in our pocket, and then we would tell them that most of this content was free. You would simply be declared insane. They would say there is no economic model to make this. What is the economics of this? It doesn’t make any sense, and it seems far-fetched and nearly impossible.
But the next twenty years are going to make this last twenty years just pale. We’re just at the beginning of the beginning of all these kind of changes. There’s a sense that all the big things have happened, but relatively speaking, nothing big has happened yet.
-The Technium: An Interview with Kevin Kelly
Software is eating the world, and doing so using smaller and smaller teams. WhatsApp was able to disrupt the global SMS industry with only a few dozen engineers. Small teams can have a big impact because software development (and deployment) has improved dramatically over the past decade. Some improvements include:
- Infrastructure. Deploying a commercial website ten years ago required significant upfront capital. Now you can spin up virtual servers in minutes. Upfront costs are close to zero and ongoing costs are orders of magnitude lower than before.
- Services. Startups created simple APIs that abstract away complex back ends. Examples: Stripe (payments), Twilio (communications), Firebase (databases), Sift Science (fraud).
- Open Source. Open source dominates every level of the software stack, including operating systems (Linux), databases (MySql), web servers (Apache), and programming languages (Python, Ruby). These are not only free but generally also far higher quality than their commercial counterparts.
- Programming languages. Developers have steadily marched upwards from Assembly to C to Java to, today, scripting languages like Ruby and Python. Moore’s Law gave us excess computing resources. We spent it making developers more effective.
- Special-purpose tools for non-programmers. These tools let non-programmers create software in certain pre-defined categories, thereby lowering costs and reducing the demand for developers. Examples: Shopify (e-commerce), WordPress (blogging), and Weebly (small business websites).
- General-purpose tools for non-programmers. In the pre-Internet era, tools like Hypercard and Visual Basic allowed hundreds of millions of semi-technical people to become software developers. Since then, there hasn’t been much work in these areas, but from what I’ve seen that might change soon. By allowing more people to program, these tools act as a force multiplier for the software industry.
In all likelihood, the demand for software development will continue to dramatically outpace the supply. If so, “software eats software development” will be an exciting area going forward, with lots of valuable startups created in the process.