I generally agree with Gates on a lot of things, but there are some generalizations here that don't apply to a lot of software. 1. While the cost to produce N+

I generally agree with Gates on a lot of things, but there are some generalizations here that don't apply to a lot of software. 1. While the cost to produce N+1 and N+1000 version of the software is same in terms of producing the code, if you have a piece of software that functions more like a specialized tool, training user N+1 and N+1000 can be radically different and therefore more time consuming and costly. 2. Sunk cost of development: IP has a lot of value. If you work in producing custom solutions a lot of these solutions have components (code) that work across customer needs. Development may fail on one project, but helps in another. Overtime you have the components to sell a COTS 3. Goods actually aren't intangible, value is. Electricity costs money and it takes the infrastructure to support a small city to run a large-scale server farm. What's missing in the economic model are the costs we don't always factor in or more importantly that are publicly subsidized. Look at the breaks companies get at MSoft, Google, etc on utilities and land.