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It's striking how much modern software development can match this theoretical ideal business, even though SaaS hadn't really taken off when he wrote this. Real

It's striking how much modern software development can match this theoretical ideal business, even though SaaS hadn't really taken off when he wrote this. Really excellent read. Very amusing to see his analysis of Apple and Microsoft, which seemed basically accurate until the iPhone came out.

huijzer 3y ago
Agreed, but also don't underestimate Coca-Cola, McDonalds, or Starbucks. McDonalds for example, is mostly a real estate company which franchises the McDonalds brand, infrastructure, and IP. So, they (1) sell the world, (2) have relatively inelastic demand, (3) cannot be easily substituted due to their brand value, (4) requires minimal labor since you can ignore the employees at the franchises, (5) has low overhead, and (7) enjoys cash billings. For point (6) about the capital, an argument can be made that large amounts of capital aren't necessarily bad. They can also lead to massive moats. Many great companies boil down to being able to significantly reduce costs over time. For example, Carnegie and Frick invested heavily in capital expenditures so that they could reduce costs over time. Once this happened, they could outprice the competitors leading to more money for Carnegie and Frick which lead to them being able to reduce costs further. A similar example nowadays is TSMC. They spend 36B on CAPEX in 2022.
ttoinou 3y ago
SaaS were doing well already in 2014
- jamestimmins 3y ago
  He mentions that the original version is from the 1970s, and he added to it over time. So the original sensibility is pre-PC, but yeah SaaS would have been around by this last edit.
borzi 3y ago
True, it only misses to meet number 3 (it's easily copied and just getting cheaper to build software as technology advances). I think the document also misses to mention saturation of the market, which software is also very saturated and this makes it hard for new businesses to get going...
- SCUSKU 3y ago
  The only thing I can think of that would prevent easy copying in the SaaS world would be to have most or all of your data generated by users, and then doggedly protecting that data from scraping, and/or hiding it behind a login. Otherwise, if your business relies on scraping other peoples data and then presenting a nice UI around that, it could just as easily be replicated by others (no moat, as we're saying nowadays). Of course, much like the niche chemical salesman, maybe the ideal scraping business would be to find such a niche that is small enough that other people wouldn't find it worthwhile to replicate your SaaS.
  - fm2606 3y ago
    >> protecting that data from scraping, and/or hiding it behind a login And even behind a login can still be scraped. (The proverbial "If I can do it anyone can" applies here along with "where there is a will there's a way")

huijzer 3y ago

Agreed, but also don't underestimate Coca-Cola, McDonalds, or Starbucks. McDonalds for example, is mostly a real estate company which franchises the McDonalds brand, infrastructure, and IP. So, they (1) sell the world, (2) have relatively inelastic demand, (3) cannot be easily substituted due to their brand value, (4) requires minimal labor since you can ignore the employees at the franchises, (5) has low overhead, and (7) enjoys cash billings. For point (6) about the capital, an argument can be made that large amounts of capital aren't necessarily bad. They can also lead to massive moats. Many great companies boil down to being able to significantly reduce costs over time. For example, Carnegie and Frick invested heavily in capital expenditures so that they could reduce costs over time. Once this happened, they could outprice the competitors leading to more money for Carnegie and Frick which lead to them being able to reduce costs further. A similar example nowadays is TSMC. They spend 36B on CAPEX in 2022.

ttoinou 3y ago

SaaS were doing well already in 2014

jamestimmins 3y ago
He mentions that the original version is from the 1970s, and he added to it over time. So the original sensibility is pre-PC, but yeah SaaS would have been around by this last edit.

borzi 3y ago

True, it only misses to meet number 3 (it's easily copied and just getting cheaper to build software as technology advances). I think the document also misses to mention saturation of the market, which software is also very saturated and this makes it hard for new businesses to get going...

SCUSKU 3y ago
The only thing I can think of that would prevent easy copying in the SaaS world would be to have most or all of your data generated by users, and then doggedly protecting that data from scraping, and/or hiding it behind a login. Otherwise, if your business relies on scraping other peoples data and then presenting a nice UI around that, it could just as easily be replicated by others (no moat, as we're saying nowadays). Of course, much like the niche chemical salesman, maybe the ideal scraping business would be to find such a niche that is small enough that other people wouldn't find it worthwhile to replicate your SaaS.
- fm2606 3y ago
  >> protecting that data from scraping, and/or hiding it behind a login And even behind a login can still be scraped. (The proverbial "If I can do it anyone can" applies here along with "where there is a will there's a way")