Oh, I bet you can.
Everyone sees a chance to make some money and convinces themselves that they will get out before the crash so that they won't be the last one holding the bag.
The smart ones realize that it's a bubble, and the dumb ones don't. It's just that the people that know it's a bubble convince themselves that that knowledge shields them from getting burned because they know more than the other guy.
some of the big fund managers who made big at the time were embarrassed to tell their peers that they were short CDO's.
David Einhom was probably the only one who came out and said it - the rest, like Poulson and co. were quiet.
It's no coincidence that Andreessen speaks of oil and gas exploration, defense, logistics, the auto industry, etc, but most of his investments seem to be in the entertainment/leasure and advertising space.
The value assigned to gold is clearly not due to its industrial applications. Gold for jewelry is also clearly not driving up the price as uncertainty rises.
What is a bar of gold good for and why does it represent a more secure asset than a bar of platinum, or silver, or anything else. Why is gold the commodity to go to for "security".
They're in an absurdly low-tech niche. I'm going to call it gardening. Their business model since the dawn of time has been "You call us up, we send a van of guys to your house, they uses scissors to trim your bushes."
Five years ago they got a brochureware website, but they were still doing everything the same way: phone, van, guys, scissors.
Then came Groupon, of all things. See, their number one problem was getting more bushes to trim. Groupon solved that very efficiently, but now they had a different problem: paper no longer scaled sufficiently to schedule everybody. So they started tracking their phoned-in appointments in (I think) Google Calendar.
This pretty much opened the floodgates. They now use one of the help desk SaaSes because the email volume was getting too big and the business owner and office manager were having communication issues. Both of them bought iPhones so that they could run the business from the road, because the owner of a small gardening firm still needs to use scissors on occasion. They bought Appointment Reminder to free the office manager from X00 phone calls per month, so she can spend the time taking bookings and managing their (packed-to-capacity-and-beyond) schedule again. Things are booming.
They're now a software, van, guys, scissors business... and the owner is a wee bit weirded out by it.
It is the earliest source, that I know of, of the theory that software and the web will destroy every other industry - and it was from the mid-90s (the HBR article was).
[1] http://www.amazon.com/Blown-Bits-Economics-Information-Trans...
That said, much of what he says is spot on. Software is creeping into everything. Education seems obvious. Health Care will be more difficult. A lot of the change will happen in the US.
If we can't invest money, we still can invest our careers.
When you look at someone like Groupon their competitive advantages are "brand", "voice" and "scale", none of which are technological. Facebook, Twitter and Zynga might depend on really impressive development work to widen their moat; but again their potential for profitability is down to a business development team's ability to sell ads and sew up strategic partnerships. They're selling eyeballs, not tech, and the people shouting Bubble are pointing out that eyeballs are fickle, possibly even more so when placed in front of a computer. Advertisers can find other channels too, especially if they're not getting the ROI they want (given the conservatism of media buyers it might even be a disadvantage that unlike display advertising, Groupon, Facebook and Foursquare campaigns can conclusively be proven not to have worked).
You can't really compare FedEx's business model being dependent on software-driven superior logistics management with the public current preferring Facebook to other distractions.
To implement Health Care is an immense systems integration problem.
Having done some system integration work on a much smaller scale, it seems to me that in the US, more universal health care is an effective subsidy of IT for years. I think we can't really expect a working universal health care system for years.
Using Britain as a possible analogy, building the actual master universal health care system to handle billing and invoices and patient care will be a technical and political challenge that will suck resources from patient care to IT [1].
Integration is a difficult problem and with 452 HMOs in the US - even though some will be inevitably consolidated - there will be plenty of IT work [2].
[1] http://en.wikipedia.org/wiki/National_Health_Service_(Englan...
http://en.wikipedia.org/wiki/NHS_Connecting_for_Health
http://www.dh.gov.uk/en/Publicationsandstatistics/Publicatio...
[2] http://www.statehealthfacts.org/profileind.jsp?ind=347&c...
The problem of health care integration is not just solvable, it is already being solved (we are playing our part) but many in the mainstream are still expecting a big system approach and thus missing the small pieces, loosely joined approach that allowed the internet to scale.
A few years ago I visited Phillips. They are the biggest makers of MRIs in the world. As it turns out their software department is bigger then their hardware department.
The patent system is horribly broken, no doubt. But now that everything -- and I mean everything -- is turning into software, what does that mean for patents?
The capitalist answer is that we should let ideas freely grow and fight each other in the marketplace, but having an idea and selling an idea are two completely different skills. We will reward the salespeople, marketers, and business creators at the expense of the ideas people.
Perhaps that is what we want. Perhaps all ideas, not just startup business ideas, will become worthless. Execution will be the only thing that matters. If so, that's going to have some major impacts in the rest of society. It'll be interesting to watch this play out.
I think there is a good chance that this is not true at all.
Some possibilities:
Maybe the system rewards people with the best lawyers? Perhaps the system rewards people who are more worried at shooting the other runners instead of running as fast as he possibly can? It could also be that it rewards large companies (since worrying about patents is mostly outside the radar of small companies), making good people want to join them?
Ideas will not ever become worthless, if only because often it takes a certain mindset to extract value out of them.
Sorry, I should have been clearer: I am describing the purpose of the patent system, not the current application of the patent system. As I said, the actual application of the patent system is horribly broken. My question was whether or not the underlying assumptions that created the patent system in the first place will still be valid or not once everything becomes bits.
Close, but I think that the correct answer is that the system rewards the lawyers themselves.
Would be to ditch patents completely. Rent-seeking and government protectionism are specifically anti-capitalist.
> Perhaps all ideas, not just startup business ideas, will become worthless.
If by worthless, you mean impossible to shackle for money, then yes.
But then, we normally call that 'common knowledge' and it's a good thing.
It's this language we share.
Consider the following:
- In this decade and the last, software engineer consistently ranks in the top ten best jobs
- During the financial crash, software engineers enjoyed the least turmoil and the quickest recovery compared to almost all other sectors
- Software is mission critical to almost every business in the world now, regardless of sector
- Our jobs tend to have the highest pay among the majority of jobs (again, top ten)
I'm with Marc. I'll double down on software right now...it's not going away.
It was clear that the technology itself would succeed. This was the "core of truth" at the heart of each bubble.
The mistake was taking this to mean that one should invest in businesses pursuing those technologies.
In fact, the thing to do would have been to supply those industries, see general stores and the gold rush.
What's not easy, and perhaps harder now than for other industries (with less spotlight on them), is to predict who the winners will be, and when they will win.
Some of this is due in part to the fact that software development as a profession was nearly decimated after the .com bust. Developers in many areas where at near depression like conditions when it came to there career. It shook a lot of people out of the industry as well as out of the IT programs at schools. The result was that eventually the jobs outpaced the few who remained in the industry.
Having said that, I noticed that in almost all Hollywood futuristic-theme movies, software (or any ground-breaking inventions that usually found with the help more advanced software/hardware) tend to cause problems that forces humans to destroy them and put humans back to the world pre-software.
I hope that would never happen but looking at the trend that whatever Hollywood producers imagine usually come true (even though it may take 5-10 years since the movie is out) in real life makes me scared sometime when I read news like this.
1) Where is my flying car? Where is my personal jet pack? Where is my faster than light travel? Where is my single world government? What about space elevators? Why are we still eating food and not geometric shapes in primary/secondary colors (ala Star Trek's 'food cubes')?
2) People try to emulate the cool things that they see movies and read in books. Creating software that takes us to a post-apocalyptic world isn't 'cool.' People want to create light sabers, phasers, and/or transporters. People don't want to create master control programs that will manage the population.
3) There are many more things to be afraid of. We have nuclear arsenals that can wipe all of humanity off the face of the planet. We are so dependent on industrialized agriculture and mechanized supply lines, that we would be totally and royally screwed were they to be disrupted for a significant amount of time (e.g. a super-volcano goes off and we can no longer use most of a continent for farming).
Personal jet pack is here albeit still in its infancy. I'm quite sure people are researching into ways to make car flies. I don't think you can have time-travel (hence no faster-than-light-travel either). Of course there are "impossible" Hollywood tricks and of course some of the things would take longer to be created.
Sometime people invent something for a specific goal but ended up as something else. Nobody plans to create post-apocalyptic world. But if the invention evolves or ended up as a base to create something else, who knows what it'll turn out to be?
Take plastic as an example of that.
Yes, I do aware of the other things to be afraid of.
It will be interesting to see if today's 'software' disruptors will themselves disrupted by software. Today's revolution seems to me, a changing of the guard from the massive inefficient people-driven gatekeeper to the massive and lean software-driven gatekeeper. I wonder if the evolution of this will lead to decentralization and eventual diminution of today's usurpers?
My only fear is that this will flood the market with crapy developers. That is how this change WILL be like the DOT COM boom.
I can't wait for the revolution to come to the control and automation industry. I can see the heritage and legacy of the (software) tools I have to use, and unfortunately they aren't so old as to have a unix heritage but to have been born in the windows 95 era.
Probably I just need to pony up and get the real good high end shit, but the automation industry is ripe for disruption like health care too. the problem is the market is small and the stakes are high, so we end with old, expensive, tried, true, ancient solutions.
/rant
Not true. People were conscious, as early as 1997 that the dot-com bubble was just that. It didn't stop an unsustainable rise in valuations.
Sure, the speed and the impact of the bubble bursting was a bit of a shock, but the bubble itself was pretty obvious.
Wait... others don't?
> Likewise for FedEx, which is best thought of as a software network that happens to have trucks, planes and distribution hubs attached.
Again... do their competitors really not? How can they get anything done?
25 years ago i.e. a quarter century similar points could have been made-- writers/authors/journalists are now using word processors instead of typewriters, accountants are now using spreadsheets instead of written ledgers, grocery stores now have automated UPC scanners instead of relying on cashiers to read price stickers, etc.
Software's biggest difference from everything else is its being fully meta. It keeps growing. Abstractions keeps being added. Compare software in the 60s and today - some of us earn our bread by writing code for tools that other people use to create other tools, that IT companies use to provide computing to traditional businesses. And another level of abstraction isn't far away - when it's needed, it can be added.
I don't know of any field of human knowledge similar to this aspect, which is why software is here to stay.
Asimov had this story about all jobs being pre-assigned according to genetic abilities. Just one job wasn't pre-assigned, and that was allocating and assigning jobs (I may be badly mis-remembering... sorry...). Software is this job.
What about profit? Doesn't ignoring profit (the article only mentions it in the context of Apple despite name dropping some other wildly unprofitable businesses) sort of suggest that maybe we are in fact making at least some of the same mistakes as the last bubble?
"Today's largest video service by number of subscribers is a software company: Netflix"
Netflix certainly uses a lot of software, but I think it is slightly disingenuous to paint them as a software company.
Is there a reason?
There is a major crisis coming in this country if the gap in skills and quality education continues to widen. Too many manufacturing jobs are moving overseas while high-tech jobs are expanding at unforeseen rates. I worry a lot about what's going to happen, and as controversial as it may sound, I think we may see a day in the not-too-distant future where the minimum wage is done away with.
As for Marc's commentary, it seems to me that every significant example he cited was related to content disruption (communications, entertainment, etc.). So I think a more accurate theme would have been "Why Software is Eating the Entertainment Industry."
Even already-connected markets, like the USA and Europe, will mature impressively as more people get better at using an improving internet. And by the time the entire living world is connected, birth rates alone will sustain satisfiable market growth.
How's that for a pitch?
The way I see it, we're on the edge of going post-material. The trend is that the proportion of the population involved in the manufacture and distribution of physical goods is dropping. Follow that trend for a century, and you get a society where most people's jobs involve only virtual goods (although many of those goods will be turned physical by 3d printers or large bespoke manufacturing companies). Apple and google are the vanguard of the all-digital companies (apple isn't in the business of making stuff, only designing it). This means the majority of people will be making their money producing digital content, and spending it purchasing digital content. Already a sizeable portion of our income is spent on content (tv, dvd, games, books, magazines, ...). I see no reason why that trend shouldn't continue until we have a digital post-material economy.
And if we will have a digital economy, that means most people will be software users, producing content for others to buy. We're not just going to have to train the people that will make the software, but also the people that will use the software. I think the actual production of software will remain a small share of the economy.
A few centuries ago, someone may well have remarked that many of the best businesses in many industries, were moving into office buildings, an invention that was only a few decades old at the time, and that office buildings were eating the world.
1. They would have been right.
2. Moving into an office building would mean that a business was keeping up, not that it was necessarily a good business with respect to other businesses.
3. It would have been a good time to be building office buildings.
More likely, it's because all said software is proprietary. If people got the source code to their cars' computers, you'd see a lot more people repairing their cars (and a lot more interest in automobiles in the current generation, leading to real, open innovation in the space).
It's interesting to consider how cars went from being something anybody could hack on, to something that only a few "qualified" people are now able to service. I don't expect the same thing will happen with software (in other words, I don't think "trusted computing" will ever become the norm), but we must be sure that it never does if we want innovation to continue in the software space.
Take a moment to brag and enjoy the glory. Marc is a hero and this is an inspiring piece. Now back to work...
The main drive in the economy is more productivity; the main approach there is more automation; the main approach there is computer hardware driven by software.
Next, the main point about software is that it be 'smart' enough to give especially valuable output. For that the main tool is math.
