Software eats –> helps the world

Around the firm we use software eats the world” as a guide for how technology will impact every industry and every person — from education to healthcare and government.

Mr. Andreessen is co-founder and general partner of the venture capital firm Andreessen-Horowitz and more than 5 years ago he coined the term software eats the world”.

Today, the world’s largest bookseller, Amazon, is a software company—its core capability is its amazing software engine for selling virtually everything online, no retail stores necessary. …. Today’s largest video service by number of subscribers is a software company: Netflix. How Netflix eviscerated Blockbuster is an old story, but now other traditional entertainment providers are facing the same threat … Today’s dominant music companies are software companies, too: Apple’s iTunes, Spotify and Pandora … Today’s fastest growing entertainment companies are videogame makers—again, software—with the industry growing to $60 billion from $30 billion five years ago. … The best new movie production company in many decades, Pixar, was a software company. Disney—Disney!—had to buy Pixar, a software company, to remain relevant in animated movies. … Photography, of course, was eaten by software long ago. … Today’s largest direct marketing platform is a software company—Google. … Today’s fastest growing telecom company is Skype, a software company that was just bought by Microsoft for $8.5 billion. … LinkedIn is today’s fastest growing recruiting company. … Today’s leading real-world retailer, Wal-Mart, uses software to power its logistics and distribution capabilities, which it has used to crush its competition. … Oil and gas companies were early innovators in supercomputing and data visualization and analysis, which are crucial to today’s oil and gas exploration efforts. … Health care and education, in my view, are next up for fundamental software-based transformation. 

He cannot be more explicit and he said that in 2011. If we can’t think about how software/technology/digital is going to transform an industry then we have a challenging situation where our business is not going to be relevant anymore. [pullquote]“It’s basically prime-time now, and in the next five years, to think about every business, every industry and every field and say, how can we reinvent it?” — Marc Andreessen[/pullquote] Another big trend is smartphones.

And then starting in 2007, with the iPhone, the smartphone comes out. The smartphone finally packages computers in a form where everybody on the planet can have one. And this is the thing I’ve been talking a lot about that people occasionally get angry about, because they think it won’t possibly come true, but I’m convinced it’s going to come true, which is I think everybody on the planet by the end of the decade is going to have a smartphone. Effectively everybody. Almost everybody. Including in places where it’s still hard to get electricity or water, people are going to have smartphones. In fact, the big thing this year is the rise of the $35 smartphone in countries like India and Pakistan that are just exploding in just giant volume. So, I think we’re going to live in a world by the end of the decade in which there’s five, six, seven billion smartphones in people’s hands, which means five, six, seven billion people in the world connected to the Internet with what we would consider modern tools and technologies and access. And so, that’s a world we’ve never lived in, right? That’s a world where everybody’s connected. That’s a world where everybody has access to the technology that we take for granted today. So in that world, you can start to think… I think you can think very profound thoughts about… like what happens in many different fields and businesses and industries as a consequence of that?

So, what next? More from Marc Andreessen

I think the three big ones that we think of a lot about for the next five or 10 years are… and they’re really, really big domains. These are long-term projects, but healthcare, education and then ultimately government. […] Marc: Why now? Because you can. Because it’s possible. Because it can be done. Because everybody’s going to have a smartphone. Because everybody’s going to have to be online. These are very, very big fields. Very big entrenched interests. Lots of regulation. Like there’s nothing easy about it. But because they’re so big also makes them so important, right? So, I’ll just give you my perspective, which is healthcare and education, one of the things you always look at is you’re like, Well, healthcare and education is something that you want everybody on the planet to have access to.”

This is so true. The biggest discussions right now in Australia is around university costs increasing and how to fund medicare for future generations. Whether the budget will be enough to take care of baby boomers.

Marc: But at the same time, if you just try to do that with conventional ways of delivering those services, you’ll bankrupt everything, right? You look at the US fiscal situation over the next 50 years and you look at this massive debt. A very large amount of it is geared towards healthcare, paying for people’s healthcare. And a lot of it then is geared towards education and this huge crisis we have around things like student loan debt. And so, healthcare and education suffer from something that economists call Baumol’s cost disease” after an economist named Baumol. And the cost disease basically is technology steadily drives down prices in sectors like media and in financial services.But technology is not yet driving down costs in healthcare and education but it should.

Cost disease is the challenge. So how do we solve this?

And so, if you can bring revolutionary technology into those fields, you could basically break the back of the so-called cost disease.” And then you can bring the same cost reduction you see in other fields into those fields, which then means you can really open up access. And that’s the critical thing. We need to get every kid on the planet access to what we consider today to be a top-end Ivy League education. We need to get every person on the planet to have access to what we would consider to be a modern healthcare capability. The only way to do that is to apply technology. Otherwise, you’d bankrupt the planet trying to do it with the current techniques.

This is how software will go from eating the world and industries to eating the cost disease in two of the most important industries - education & healthcare and will help the world. This is the trend which will make the biggest difference to public services, to the challenges that we talk about and that means we need to invest in more innovation.


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