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It's because software is primarily a means of rent-extraction on existing industries than providing massive amounts of new value, with the potential exception o

It's because software is primarily a means of rent-extraction on existing industries than providing massive amounts of new value, with the potential exception of cases where inferential computing is being used. The market thinks it needs more software when what it needs is good software in the right place. But then the belief that an industry needs more software creates a problem – a lack of software. This comes with the host of other software-specific intractables which spurs on the growth of software-focused labor. But in the process of converting an industry into one that is software dependent, you can capture massive market-share while gaining slightly greater efficiencies on the services provided by that industry but then introducing a whole new host of software-specific problems. Which grows software's demand. The thesis that payoffs for VCs are so substantial in software startups come specifically from the scaling of software across an industry capturing industry-specific assets rather than improving the productivity of that industry per se. If it were just about outsized productivity more specific bets that resulted in critical efficiency improvements would be more common. But instead we see broad-based bets that serve to get rid of minor consumer inconveniences, then adding more inconveniences to produce an incentive to raise consumer prices.

bpt3 7y ago
> It's because software is primarily a means of rent-extraction on existing industries than providing massive amounts of new value, with the potential exception of cases where inferential computing is being used. How is software rent-extraction, and why would inferential computing be an exception to this? Software generally reduces the cost of performing some task while increasing speed, accuracy, and efficiency. > The market thinks it needs more software when what it needs is good software in the right place. But then the belief that an industry needs more software creates a problem – a lack of software. This comes with the host of other software-specific intractables which spurs on the growth of software-focused labor. Successful companies are looking for ways to increase their margins, which software generally does for the reasons I listed above, not inventing ways to integrate software into their business that serves no purpose. > But in the process of converting an industry into one that is software dependent, you can capture massive market-share while gaining slightly greater efficiencies on the services provided by that industry but then introducing a whole new host of software-specific problems. Which grows software's demand. Software generally is able to produce massive efficiency gains, not minor ones. > The thesis that payoffs for VCs are so substantial in software startups come specifically from the scaling of software across an industry capturing industry-specific assets rather than improving the productivity of that industry per se. If it were just about outsized productivity more specific bets that resulted in critical efficiency improvements would be more common. But instead we see broad-based bets that serve to get rid of minor consumer inconveniences, then adding more inconveniences to produce an incentive to raise consumer prices. Again, I question why you're saying that software doesn't produce large productivity/efficiency gains, and would add that VCs are interested in software companies because of the high margins, short production cycles, and past successes with software companies (among other reasons). You seem to be focused on a few specific types of companies (I think social media apps would fit your description, though I'd be happy to get specific examples of what you have in mind) that are neither the norm for the software industry or VC ecosystem in my experience.

bpt3 7y ago

> It's because software is primarily a means of rent-extraction on existing industries than providing massive amounts of new value, with the potential exception of cases where inferential computing is being used. How is software rent-extraction, and why would inferential computing be an exception to this? Software generally reduces the cost of performing some task while increasing speed, accuracy, and efficiency. > The market thinks it needs more software when what it needs is good software in the right place. But then the belief that an industry needs more software creates a problem – a lack of software. This comes with the host of other software-specific intractables which spurs on the growth of software-focused labor. Successful companies are looking for ways to increase their margins, which software generally does for the reasons I listed above, not inventing ways to integrate software into their business that serves no purpose. > But in the process of converting an industry into one that is software dependent, you can capture massive market-share while gaining slightly greater efficiencies on the services provided by that industry but then introducing a whole new host of software-specific problems. Which grows software's demand. Software generally is able to produce massive efficiency gains, not minor ones. > The thesis that payoffs for VCs are so substantial in software startups come specifically from the scaling of software across an industry capturing industry-specific assets rather than improving the productivity of that industry per se. If it were just about outsized productivity more specific bets that resulted in critical efficiency improvements would be more common. But instead we see broad-based bets that serve to get rid of minor consumer inconveniences, then adding more inconveniences to produce an incentive to raise consumer prices. Again, I question why you're saying that software doesn't produce large productivity/efficiency gains, and would add that VCs are interested in software companies because of the high margins, short production cycles, and past successes with software companies (among other reasons). You seem to be focused on a few specific types of companies (I think social media apps would fit your description, though I'd be happy to get specific examples of what you have in mind) that are neither the norm for the software industry or VC ecosystem in my experience.