Why Software is Eating the World

Understanding Technology's Explosive Growth

All around us, software is eating the world. You see it in the street lights you wait at, the restaurants you frequent, the shoes you wear. The goal of the tech industry for a few decades now has been to shift everything up to the internet. Ancient corporate beasts, like the insurance and shipping industries, have been transformed (in part) from storage houses for paperwork with backed up information to finely tuned data-warehouses. The software of early adopters, which was created before you knew what a computer was (or were born), is being recycled into newer, better software. The market is adapting rapidly and lines of code never shipped as quickly as today. The mentality has changed to “If you run a business, put it on the internet”. Marc Andreesen, who created Netscape, among other accomplishments, points out that “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.” You don't have to be in the loop to see it; what Andreesen points out is something that everyone has observed and experienced in his or her own lifestyle's change over the last ten years. Don't believe me? Think about this: ”The Chevy Volt...has 10 million lines of code, 2 million more than the code in the F-35 fighter jet”. This represents the transfer of technology to the masses. Also, when was the last time you used a map? Or a phone that had a cord? Or didn't use your email for two days?

Different historical events have made people skeptical of technology's ability to solve all of our problems and meet every need. For example, stock market glitches, such as the initial error on Facebook's IPO or the “Flash Crash of 2010”, where an error in an algorithm used by a major firm dropped the share price of the DOW by 1,010.14 points in an instant, have caused skepticism towards technology. Furthermore, pop culture has pretty much accepted that at some point robots will destroy humanity, and everyone is aware that they are spending far too much time on social media and their phones, to the point that posture has become increasingly bad and “iPhone Neck” is a commonly used term.

For all of those reasons, there is a great deal of debate over whether technology is making our lives better. Some think that it is just making us lazier. Probably true. But who wouldn't want to make a robot do the hard work for them, adding up thousands of brain-numbingly easy math equations, or copying and pasting text from one file to another? Unless you're some sort of masochist, technology can and already has made your life easier.

For that very reason “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.” The potential is huge, and the industry to be in right now is tech. There's no way around it. As I write, Internet behemoth Alibaba, which is the world's largest online commerce company, is going public. Right now its share price is 90.79, with a market cap of $230 billion. One of Alibaba's main services is connecting the export industry, typically an outdated and bureaucratic business, with companies from all over the world. It represents yet another industry being transformed by technology.

The entrepreneurial community has noticed too. Since tech became a thing, one of the largest setbacks to starting a tech company has been cost. An early entrant into the technology market comments that tech was, at the time, “kind of a niche” and that “software engineers had to work in big companies who could invest in mainframe computers.” Things couldn't be more different now. TechCrunch notes that, “after 2001...the cost of bandwidth, processing power and storage dropped dramatically, and reliable open source computing stacks began to emerge, making it increasingly cheap and easy to launch web services. As broadband penetration increased, the Internet became a much more powerful communication and distribution network. With the advent of paid search and social networking, it became easier than ever for web services companies to find new users and customers. What followed was a period of explosive growth for a new generation of web services — both consumer and enterprise — that took advantage of these new technologies.” The ease of entrepreneurial creation has become absurd. If you have an idea, you can hack on it and ship it in a weekend (a.k.a. “hackathon”). Also, the costs are continually decreasing from their already dirt-cheap levels. It is not uncommon for techies today to bootstrap their own business, because it can be done with even a moderate salary.

One Silicon Valley entrepreneur, Christian Gheorghe, runs his 62 million dollar company on cheap and free services, taking advantage of free email, various open source database and word-processing systems (free), and extremely cheap cloud computing with Amazon Web Services (12 cents an hour for the whole company). Furthermore, cloud computing prices keep dropping “every ten weeks or so”, (Amazon claiming it has had 17 price drops in the past four years), as are other prices, such as the cost of marketing and market research. A recently launched startup spent about $300 in online advertising in order to understand what 50,000 people in its target market were most interested in. Instead of hiring an expensive PR firm, companies now focus on social media sites to get the word out at a much lower cost. Even logos and other branding can be designed at a fraction of the cost, since websites have emerged that allow designers to submit their business so that the buyer can choose from an array of designs.

As a result, massive tech hubs are starting in cities, people are moving in droves to strike it rich like they were during the gold rush, and new things are being created. The Startup Genome Report is in agreement when it states that the “last ten years has seen a near-total collapse of the innovation cost curve, thanks to the perfect storm of open-source, cloud infrastructure, and “free” global distribution via search, social and app stores. At the same time we have seen the start-up ecosystems in New York, London and Berlin emerge as meaningful competitors to Silicon Valley.” It has become almost a cliché for cities to say that they are trying to propel their tech community forward, because it can be such a stimulus for local economies.

Furthermore, technology is often paired with entrepreneurship. Running “entrepreneurship and technology” through your favorite search engine brings up various universities' websites, which are offering courses such as “Technology Entrepreneurship”, “Fundamentals of Technology Start-Up Ventures” and “Strategy for High-Tech Ventures”. Sageworks, which provides analysis for industries, found that “the industries where U.S. companies with $10 million or less in annual sales have shown the highest...percentage change” included building custom software, building servers for businesses and technical consulting services, while Inc. magazine reports that the current most promising industries for entrepreneurs include apps (currently over $25 Billion) and mobile health (expected to hit $49 Billion by 2020). Technology being paired with entrepreneurship is important, because people who create new businesses are building the future, and if the future is built with technology, then software will have powered it, and software will have eaten the world.