The phrase, “Software is eating the World” from Marc Andreessen, is well known throughout tech and the internet. And yes, it’s been analyzed to death for over a decade. But for late bloomers like myself, Marc provides some insight into the thinking behind it in a recent interview with Patrick O’Shaughnessy on Invest Like the Best.
The concept comes from Buckminster Fuller, going back over 100 years ago. Fuller’s term was ephemeralization, meaning when it comes to science and technology, we're getting better and better at doing more with less, until ultimately, one day, we'll be able to do everything with nothing.
During Fuller’s time, this concept gave rise to what economists began calling dematerialization; the idea that industrial development uses raw material in an ineffective way. Huge amounts of natural resources are mined, and you have an incredibly inefficient process for making steel; large amounts of ore and oil generate small amounts of power. As technology advances, you get more and more efficient. You use less natural resources, less energy, and get better and better results.
Fuller observed this happening long before we had computers. And, to the point of software eating the world, it's the alchemy that delivers on Fuller's vision of doing everything with nothing. Software is taking activities, productive processes, and entire categories of products and services that have a real world footprint made of atoms today, and ultimately turning them into bits.
Boiling it down further, Marc says, "Look, a physical product can be replaced by software. The example I always use for people who are trying to think about this from scratch is to get up in the morning. Most of us used to have an alarm clock. A little plastic box that sat on our bedside table. It plugged into the wall. It would yell at us to get up in the morning. There was this entire company, Radio Shack, that was in the business of selling us all these little plastic boxes that did all these things. Now that little plastic box, that alarm clock, it's an app for your phone. And so is the answering machine, CD player, and so is the DVD player; and so is literally dozens or hundreds of little things."
Critics will say what about houses, or cars? You can’t drive bits. Marc agrees. If we need to go from one place to another, you'll at some point need the metal, glass and rubber in the form of a car. There are things that will always have a real world footprint, but software is a lever which allows those systems become much more efficient and much more powerful in advance of them being eliminated as physical products.
And that's happening with automobiles in real time. The car is being transformed into a rolling supercomputer. More and more value is created, functionally and economically, as the car is turning into software. They're starting to drive themselves. The basis for competition in the auto industry is this transition to software; the basis for how people evaluate one car versus another is going to be on the basis of software. And all of this is very different from how people used to think about these things. Thus, software will eat the world.