It’s said that “software is eating the world’“. We’re way past that - we’re probably somewhere in it’s digestive tract, waiting to see in what state we emerge

Intro

I wrote this back in 2020, probably in a lockdown haze. Have a read, and see how much you think was and is still true. Here’s the original Medium article. I’ll be posting an updated version soon.

Article

Technology — it’s everywhere. The transformational power of tech is obvious, anywhere we look. It has disrupted industries, changed behaviours, and transformed lives — the world as we know it is built on tech! And those who control tech, control the world! Some of those people were recently brought in front of Congress in the U.S to see if they have “harmful power”…

I’m going to (try to) write a series of blog posts discussing what that actually means, and hopefully uncovering some interesting points for debate. Here’s the first:

The Old Way — Workers

In general, the way businesses value workers stems from their output. And it is in these blocks of output that we can traditionally build a company. Let’s decide to set up a hat company, Hats Hats Hats. If a salesperson can sell 100 wooly hats a month (not sure why I’m using this example, but we will roll with it), and we want to sell 1000 wooly hats a month, then we need 10 sales people. If a hat maker can knit 10 wooly hats a month, then to make 100 wooly hats a month we need to hire 10 makers. Simple right. There are a lot of variables to consider when assigning value to each of these roles (job difficulty, rarity of the skills, and attractiveness of the role), but at a simple level we can see how Hats Hats Hats would build up and assign value to each worker. And we can see in order to scale up the company, we need to proportionally scale up our workforce.

Most companies see tech as enabling the digitisation of their processes — allowing them to automate and optimise. Maybe instead of 10 workers to make 100 hats, we can do the same with 5 workers and a hat machine. This gives us a huge competitive advantage, lower costs, higher profits, and therefore we can outshine the rest of our luddite competition. Hats Hats Hats is rolling forward!

The application of tech to digitising existing processes is important, but plays within the realms of stuff we know and understand well — linear, traditional company growth. As Hats Hats Hats grows, a lot of people will benefit — we need to hire people to grow, so they are along for the ride. And not just hat makers and hat sellers. We will need to invest in distribution, logistics, marketing, packaging, and more… so we’d build a factory, hire lorry drivers, logistics people, hat labellers, hat testers, and this for each territory we want to make and sell in. Money flows through the Hats Hats Hats company accounts, reaching many workers who then continue that money flow through their local economy by buying stuff, paying bills, and generally being alive (a costly business in itself).

The New Way — Software

Software breaks our model of thinking here. Instead of 1 person making 10 hats a month that can be enjoyed by 10 customers (a nice simple relationship), with software comes the ultimate scaling opportunity. We are not constrained by physical products anymore. 1 software engineer can contribute to a piece of software that can be used by 10, 100, 1000, 1 million, or even 1 billion people… what’s more, with software we no longer need to build up the same huge company structure. No factory, no logistics, no deliveries… just tech creators. This breaks how we value workers, companies, and breaks the old model of how business created and shared wealth. Examples, you say? Instagram selling for $1 billion with only 13 employees in 2012. WhatsApp $19 billion sale with only 55 employees. Scale of impact is what software gives us. We can solve a problem, and overnight we could provide that solution to millions of people around the globe. That is the true power of tech — scale.

Further to this, software doesn’t sleep. You can reap the benefits of a software developers work around the clock, 24/7. So not only do we have scale, we have non-stop value creation. This already causes us a problem as the world has been built on the assumption that companies grow linearly, with a wide base of workers… software companies don’t necessarily have to play within these rules.

The Only Way — Data

“Data is the new oil”

It isn’t. Don’t get me wrong, oil is incredibly valuable. Just look at the recent flotation of the Saudi Aramco company for $1.7 trillion. Look at the geo-political climate surrounding oil. Look at the wars that have been fought over the stuff… It gets us to and from work. Heats our homes. Takes us on holiday. It even helps us brush our teeth (seriously, eww). And what is more, it is finite… once we burn it up, it belches out some toxic stuff and then it’s used up. This finite nature makes it even more valuable — supply vs demand and all that. Ignoring the fact that it’s helping turn the planet into 1 giant science experiment gone wrong, we can appreciate why oil is so valuable. So how come data isn’t the new oil, you ask?

Data is way better!

Data, once you have it, has infinite value. Instead of mining for oil, when you collect and mine data you gain potentially incredible insight into things from how to optimise processes to what people are thinking! With enough data, you can learn to optimise for and provide personalisation and convenience. There’s a reason why, despite privacy worries, we all use Google… it’s because when we search for something, they know what we want and give it to us. From not just our personal data, but analysing patterns of behaviour from everyone’s data, you can have a pretty accurate guess at what is best to show someone when they search for “funny dog video”.

And this convenience and personalisation, combined with the scale that software gives us, means that companies that are centred on data can basically print money. People will keep flocking to their services, which means advertising. But not just a “guitar lessons” flyer in your local shop kind of advertising. Targeted, highly effective, data-driven advertising. With the scale and data insights software gives, you can learn what people are most likely to buy if you show it to them in pretty much every situation imaginable.

Now let’s say we wanted to start a Google competitor — let’s say we even had better servers, sales people, branding, and offices than them now (we definitely wouldn’t)! We could attract the best people. We could serve our website in the blink of an eye to users all over the world, giving them answers to their queries quicker than all our competitors. Did we beat Google? Probably not. In fact, highly unlikely. We’d still struggle to compete with them because we are missing the data to deliver those perfect results to our users. It would take a long, long, long time for us to build up enough data to have a competing service. We can use data from users and how they interact with software to yield intensive knowledge about the process you are creating. By gathering and mining that user data, you can iterate and optimise that process… forever. So we’d also have a good 20+ years of data-driven user experience improvements to compete with.

Is data the new oil? With oil, you can trade it for cash. With data, you can essentially print money.

Summary

I used that Hats Hats Hats as a poor attempt to show the difference in the tech company approach. It’s really not a good comparison. But the software approach will create opportunities across all industries… like when the steam mills outpaced the handwoven mills, there is obvious advantage in adopting tech for what we are doing now. However, like when steam power came in, the cascading effects of rapid technological advances went from steam mill to cars, planes, and rocket ships. There will be opportunities we can’t even fathom rising from the age of hyper-technological change we are in — but is everyone going to be able to play in that game?

The days of 2 people in a garage coming up with the software to take over the world are probably gone… unless somehow a new, novel algorithm is generated and phenomenally improves the world as we know it (or a small part of it, like more efficient search for example). But even then, they’d just get bought by one of the data giants before they could pose too much of a threat. That’s the benefit of printing money, you can acquire companies like they are Pokémon cards.

Maybe I’m being overly generalist here, there will be plenty of opinion and evidence counter to these ideas… stick them below, I’m interested to hear different points of view.