Beware the bubble. After the 1990’s dot-com bubble burst the bright hopes and dreams of investors everywhere, the scars are still there. Close to twenty years later, the stock market still views tech companies with squinty-eyed suspicion despite the advent of success stories like Facebook and Twitter. “What if it’s just another bubble?” they ask each other.
But Marc Andreessen, co-founder of venture capital company Andreessen-Horowitz, argues that yesterdays’ failures are tomorrow’s future. He points out that too much is being said about financial valuations and not enough about the significant role that software companies will play in the upcoming information economy.
“More and more business and industries are being run on software and delivered as online services – from movies to agriculture to national defense,” Andreessen said. “Many of the winners are Silicon Valley-style entrepreneurial technology companies that are invading and overturning established industry structures.”
Hardware and software advances made in the last seventy years can now combine with the connectivity of the modern-day internet to create transformative technology and reach global markets. In 2018, it was estimated that 55 percent of the world’s population has access to the internet and 36 percent used a smart phone.
Costs are also down as services like Amazon Web Services continue to roll out subscriber-based plans for cloud-based platforms. What was once only achievable with vast computing resources and a fleet of engineers is now available to anyone with the need for the services. The potential is endless.
“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,” Andreessen stated. “Comcast, Time Warner and other are responding by transforming themselves into software companies…. [to liberate] content from the physical cable and connects it to smartphones and tablets.”
The same holds true for music, Apple’s iTunes, Spotify, and Slacker Radio are all software companies that offer song-streaming services to subscribers. Almost every entertainment industry has followed suit, including movies, video games, and photography.
Walmart uses software to monitor supply chain management; oil and gas companies use software for data visualization and analysis; and agriculture uses it to analyze soil samples by satellite. Where there is a will, Andreessen says, there’s a software way.
“Instead of constantly questioning their valuations, let's seek to understand how the new generation of technology companies are doing what they do,” Andreessen said. “That’s the big opportunity. I know where I’m putting my money.”