Marc Andreessen (who is both richer and smarter than I’ll ever be) recently caused a stir with his Wall Street Journal op ed, “Why Software Is Eating The World.”
Marc is a good writer, and it’s a good editorial that helps explain the increasing importance of software. But I can’t help but feel that he’s buried the most important point:
Software is eating the world because software is how we manage information. The real story is that bits are far more important than atoms in the modern world, and that gulf is only going to accelerate.
For most of human history, things have mattered more than ideas. We’re impressed by massive monuments like the pyramids of Egypt, or the Taj Mahal. And this bias made sense, because information started out way behind in the race for importance. After all, you can’t eat, wear, or live inside information. And as long as food, clothing, and shelter were uncertain resources for most humans, we didn’t have the luxury of worrying about information.
The Industrial Revolution did little to change this; we shifted from monuments to factories and skyscrapers, but the attention remained squarely on the physical world.
It’s only been with the rise of the Computer Age and the advent of Moore’s Law that information began to catch up with a vengeance. Take a gander at the companies Marc invested in: Facebook, Groupon, Skype, Twitter, Zynga, Foursquare, and LinkedIn. What do they all have in common? Not one of them makes or ships anything made out of atoms. All of their massive market value (well in excess of $100 billion) comes from pushing bits around.
In 1971, Intel’s 4004 chip had 2,300 transistors. 40 years later, a 10-core Xeon microprocessor has 2.6 BILLION transistors. That’s over a million-fold increase in that time period.
In 1971, a Chevy pickup cost about $2,300 and had a 155 horsepower engine. In 2011, a Chevy Silverado base model cost about $23,000 and had a 315 horsepower V8. True, there are a lot of invisible improvements (fuel efficiency, anti-lock brakes, etc.,) but that’s nowhere close to a million-fold increase in price/performance.
Bits probably overtook atoms somewhere in the past decade as we transitioned from the Computer Age to the Internet Age. But now that the crossover has happened, each succeeding year widens the gap, thanks to the inexorable advance of Moore’s Law.
In other words, if you think software is eating the world now, you ain’t seen nothing yet.