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This is an fun interesting article worth perusing, but I disagree with the analysis. It narrows the question of being a tech company to basically being a SaaS c

This is an fun interesting article worth perusing, but I disagree with the analysis. It narrows the question of being a tech company to basically being a SaaS company. Granted, that's a lot of the companies famously IPOing out of the silicon valley venture capital community right now, but it's very limiting and I'd argue it's wrong. Lets make a hypothetical counterexample according to their guidelines: - Software creates ecosystems. - Software has zero marginal costs. - Software improves over time. - Software offers infinite leverage. - Software enables zero transaction costs. Imagine that out of nowhere, we get a company making a JARVIS-like AI assistants like in iron man, complete with google glass-like HUD. Suppose, due to design/manufacturing restrictions or something, it can't update over time. You have to buy a new pair of the glasses to get the improvements. There are no third party apps, just what comes shipped with the product. If it was as useful as envisioned all over science fiction, it'll take the world by storm anyways. Now imagine it's just catching on with consumers and is about to IPO. Is this AI driven high-tech company a tech company? According to OP, this company may as well be selling sunglasses: - No apps or ecosystems by construction. - Every unit is a physical object, marginal costs are about like expensive sunglasses. - It doesn't improve over time by construction. - No more leverage than selling normal sunglasses. - No lower transaction costs than a company selling sunglasses. Yet clearly this is a tech company and will be evaluated accordingly for its IPO.

NickNaraghi 7y ago
> Peloton is also iffy as far these five factors go, but then again, so is Apple: software-differentiated hardware is in many respects its own category. Do you think your example fits into the author's definition of "software-differentiated hardware"?
- 6gvONxR4sf7o 7y ago
  So do wifi connected microwaves and refrigerators. But when you open the door to that, or more generally "technologically differentiated hardware," you're essentially talking about anybody. Fancy lightbulbs, for example. Or hook them up to wifi and now they're software differentiated, if 'technologically differentiated hardware' is a step too far. I read it as the author saying "oh by the way these other companies that don't fit are their own (massive) category, not counterexamples to the criteria I've laid out."
rm445 7y ago
Nicely put, but then why need your example even be a pair of fancy glasses? It could be an energy generating device, or a transportation method, or a cure-all pharmaceutical or something. I think the answer is partly that you're right and that technology in the more general broad sense has particular tendency to keep improving in value; partly that the OP is right and your example has some unstated implications (these non-upgradeable devices might well be prone to competition and hence generate surprisingly low shareholder returns); and partly that there are some other factors beyond OP's, to do with how the goods are produced.

NickNaraghi 7y ago

> Peloton is also iffy as far these five factors go, but then again, so is Apple: software-differentiated hardware is in many respects its own category. Do you think your example fits into the author's definition of "software-differentiated hardware"?

6gvONxR4sf7o 7y ago
So do wifi connected microwaves and refrigerators. But when you open the door to that, or more generally "technologically differentiated hardware," you're essentially talking about anybody. Fancy lightbulbs, for example. Or hook them up to wifi and now they're software differentiated, if 'technologically differentiated hardware' is a step too far. I read it as the author saying "oh by the way these other companies that don't fit are their own (massive) category, not counterexamples to the criteria I've laid out."

rm445 7y ago

Nicely put, but then why need your example even be a pair of fancy glasses? It could be an energy generating device, or a transportation method, or a cure-all pharmaceutical or something. I think the answer is partly that you're right and that technology in the more general broad sense has particular tendency to keep improving in value; partly that the OP is right and your example has some unstated implications (these non-upgradeable devices might well be prone to competition and hence generate surprisingly low shareholder returns); and partly that there are some other factors beyond OP's, to do with how the goods are produced.