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I think the key of the essay is this definition: * Software creates ecosystems * Software has zero marginal costs * Software improves over time * Softw

by ahupp 7y ago

I think the key of the essay is this definition: * Software creates ecosystems * Software has zero marginal costs * Software improves over time * Software offers infinite leverage * Software enables zero transaction costs So to the extent a business meets those 5 points, it's a 'tech' company. He goes through a a few companies and sees how well they fit those points (netflix, airbnb, peloton, wework) to give an intuition for it.

trimbo 7y ago
I'm not sure how to reconcile the fact that Intel, nVidia, TSMC, AMD don't seem to fit these criteria but are undoubtedly "tech companies".
- hamilyon2 7y ago
  Definition of tech company is flawed. Especially it does not fit tomorrow's companies.
- TeMPOraL 7y ago
  The definition is apparently made from rubber. Let's talk, for example, "Software offers infinite leverage" (infinite apparently meaning "able to serve the whole world", but I guess "infinite" is just a synonym for "somewhat large-ish" here). The article says this about Uber: "Uber is able to serve the entire world, giving it maximum leverage". Followed by this about WeWork: "WeWork is limited by the number of locations it builds out". Uber didn't start with the ability to serve the entire world, and that ability was earned not through software, but through lots and lots of money and aggressive regulatory arbitrage (i.e. breaking laws faster than regulators could react to). What's to say that WeWork can't spend money to grow into a worldwide service? I see this article as a list of interesting market features, but I don't buy that you have to have all of them to be a tech company, or that only companies with all of them will succeed.
  - varjag 7y ago
    Tech there seems to be a stand in for 'software assisted middleman service'
- wongarsu 7y ago
  AWS has marginal costs, as does Slack. Under this definition nearly nobody is a tech company
  - ahupp 7y ago
    In the article, each of the examples typically only his 4 of the 5 or so points. e.g, Netflix doesn't create an ecosystem.
OJFord 7y ago
i.e. hardware companies are not tech companies (in this definition)
taneq 7y ago
The first word of each of those criteria is ‘software’. So when we say ‘tech’ here we mean ‘software’, I guess.
asah 7y ago
um, there are very real marginal costs in the primary revenue centers of Apple (hardware), Google (TAC: traffic acquisition cost), Netflix (bandwidth) and Amazon (logistics). "Infinite" leverage is also a misnomer: Ford and GE enjoyed terrific leverage when they optimized giant-scale industrial processes (the assembly line and six sigma, respectively). Politicians and lawyers enjoy much greater leverage than software engineers, whose code requires much more "maintenance" (in practice) than laws and legal contracts. Economically speaking, Wall Street traders enjoy fabulous leverage, though arguably they're getting replaced by algorithms.

by ahupp 7y ago

trimbo 7y ago

I'm not sure how to reconcile the fact that Intel, nVidia, TSMC, AMD don't seem to fit these criteria but are undoubtedly "tech companies".

hamilyon2 7y ago
Definition of tech company is flawed. Especially it does not fit tomorrow's companies.
TeMPOraL 7y ago
The definition is apparently made from rubber. Let's talk, for example, "Software offers infinite leverage" (infinite apparently meaning "able to serve the whole world", but I guess "infinite" is just a synonym for "somewhat large-ish" here). The article says this about Uber: "Uber is able to serve the entire world, giving it maximum leverage". Followed by this about WeWork: "WeWork is limited by the number of locations it builds out". Uber didn't start with the ability to serve the entire world, and that ability was earned not through software, but through lots and lots of money and aggressive regulatory arbitrage (i.e. breaking laws faster than regulators could react to). What's to say that WeWork can't spend money to grow into a worldwide service? I see this article as a list of interesting market features, but I don't buy that you have to have all of them to be a tech company, or that only companies with all of them will succeed.
- varjag 7y ago
  Tech there seems to be a stand in for 'software assisted middleman service'
wongarsu 7y ago
AWS has marginal costs, as does Slack. Under this definition nearly nobody is a tech company
- ahupp 7y ago
  In the article, each of the examples typically only his 4 of the 5 or so points. e.g, Netflix doesn't create an ecosystem.

OJFord 7y ago

i.e. hardware companies are not tech companies (in this definition)

taneq 7y ago

The first word of each of those criteria is ‘software’. So when we say ‘tech’ here we mean ‘software’, I guess.

asah 7y ago

um, there are very real marginal costs in the primary revenue centers of Apple (hardware), Google (TAC: traffic acquisition cost), Netflix (bandwidth) and Amazon (logistics). "Infinite" leverage is also a misnomer: Ford and GE enjoyed terrific leverage when they optimized giant-scale industrial processes (the assembly line and six sigma, respectively). Politicians and lawyers enjoy much greater leverage than software engineers, whose code requires much more "maintenance" (in practice) than laws and legal contracts. Economically speaking, Wall Street traders enjoy fabulous leverage, though arguably they're getting replaced by algorithms.