[In the original 2011 essay] I made three claims, which I would say increase as you go in audacity or arrogance, depending on your point of view. Or just flat out hubris, which is another possibility.
The first claim is that any product or service in any field that can become a software product will become a software product.
So if you’re used to doing something on the phone, that’ll go to software, if you’re used to doing something on paper, that’ll go to software. If you’re used to doing something in person that can go to software, it will go to software. If you’ve had a physical product – think about things like… telephone answering machines, tape players, boom-boxes, all the things Radio Shack used to sell, now they’re all just apps on a phone… There used to be a physical product called a camera, you know, that got vaporised. And by the way, physical newspapers, physical magazines.
If it can become bits, it becomes bits. So why does it become bits? Well, if it’s bits it’s better in a lot of ways. Bits have zero marginal cost, so they’re easier to replicate at scale and become much more cost effective. A lot of bits just drop to free. And by the way they’re much more environmentally friendly, which is an increasing thing for a lot of people. You can change bits much more quickly, you can innovate much more quickly, add new features, add new capabilities. So there’s just lots and lots of reasons why it’s good to get things from physical form into software if you can. And so anything that can get into software will get into software.
The next claim… is that every company in the world that is in any of these markets in which this process is happening therefore has to become a software company.
So companies that historically either did not have a technology component to what they did – or maybe had the classic conception of technology in business which is sort of like, IT, we’ve got these gnomes in the back office and they’ve got their labcoats and they’ve got their mainframes and they kind of do their thing … – there’s that, but then there’s modern software development – especially things like customer experiences: what’s the actual interface with the customer? Any company that deals with customers, especially consumers, is going to have to radically up its game in terms of its ability to build the kind of user interfaces and experiences that people expect these days.
So every company becomes a software company.
And then the most audacious claim is that as a consequence of [claims] one and two, is that in the long run, in every market, the best software company will win.
That doesn’t mean necessarily that it will be a new company that starts as a software company that enters an existing market that wins, but it also doesn’t necessarily mean that an incumbent that adapts to being a software company will win… And you see this in many industries including healthcare and insurance where you see these new pure-play software companies entering these incumbent markets and – usually from a position of youthful naivety, or maybe they’re wrong and maybe the ideas stupid, or maybe it’s Uber and Lyft entering the taxi market and maybe they just have a fundamentally better software driven approach. – and then you’ve got incumbents scrambling to try to figure out how to become software companies.Marc Andreessen – a16z podcast
Andreesen goes on to outline some of the challenges to incumbents of adapting to the world of software – he argues that it’s a very different type of product and successful software companies usually have different types of workers…
The rest of the podcast is great too – highly recommend.