Why Software Is Eating the World

Key ideas

Writing as an investor in several companies named, Andreessen argues software firms are poised to take over large parts of the economy, and valuation debates miss the shift.

1. 1

   Ask why the shift is happening now

   Andreessen argues the required technology has finally come together after decades: broadband reach, expected smartphone adoption and much cheaper infrastructure make it easy to launch a global software startup. The example given is a basic internet application whose monthly running cost fell about a hundredfold between 2000 and the time of writing.

2. 2

   Expect software firms to disrupt many industries

   Andreessen goes through books, video, music, games, film, photography, marketing, telecom and recruiting, arguing in most that a software company now leads or is growing fastest. Borders handing its online business to Amazon is offered as perhaps the most dramatic case.

3. 3

   Look for software inside physical industries

   Andreessen argues software is also taking over much of the value chain in cars, retail logistics, shipping, airlines, oil and gas, agriculture, finance and defense. In some industries, particularly those with a heavy real-world component, Andreessen sees this mainly as an opportunity for incumbents, while in many others new startups will invade. Health care and education are named as next, in Andreessen's view.

4. 4

   Judge the business, not the bubble debate

   Andreessen says too much of the argument concerns financial valuation rather than the underlying value of the new companies, many of which Andreessen believes are real, defensible businesses. The essay discloses investments by Andreessen and Andreessen's firm in several companies it discusses, and it ends by saying that Andreessen's money is going this way.

5. 5

   Expect it to be hard regardless

   Andreessen lists three challenges: building through economic headwinds, a shortage of skilled people alongside workers who may be stranded by disruption, and the need for new companies to prove their worth. Andreessen warns that building such a company in an established industry is very hard.

In Marc’s words

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