Ironically, even though Warren Buffett has been a friend of Bill Gates for decades Buffett never understood how Gates got wealthy. That’s because Buffett invests in scarcity. Gates rode the notion of abundance, even before the Internet. A copy of MS-DOS was easy and cheap to duplicate and send to stores back in the day.
Nowadays, with the Web, Windows and all software proliferates at a cost factor even lower than that. Fractions of fractions of a penny to copy and send. I keynoted a company appraisal conference in Canada a few years ago and said Microsoft’s future was as a annuity business. And now it is. Office is sold by monthly subscription of $9.99.
If you tour Silicon Valley even now I don’t believe many grasp the traits of the digital universe. They may have made money off of aspects of it but the traits haven’t been fully cataloged yet. That’s because by default we use the past to define the future.
Example: people called the first car the “horseless carriage” since that was their context. There was even a holder for a horse whip on some of those early cars. We still use the term “horse power” to describe a car engine.
It was thought with the first trains that passengers may die if it went above a certain speed. Again, people using their present to define the new thing.
The fact that we don’t have more digital things being created that are useful lies in the lack of freedom from the formulas that Silicon Valley uses to create “companies”, “equity”, “exits” and other notions.
The box Silicon Valley (and all of tech) is in is of its own design. Now every company that’s formed wants to “change the world.” Uh huh. “Disrupt a market.” Yeah sure.
It’s like every movie writer watching Rocky and then making movies about a boxer in their own town. The “teams” that come together have all learned this “startup speak” and the result is a lack of innovation.
When you walk into any one of these tech companies they don’t really want to “change the world” they want to sell another software license, land another advertiser, make their earnings numbers better than the last quarter.
This is fine.
But the digital universe is bigger than these boxes and constraints. We need new models to explore beyond the constrictions held in place. More on this later…
p.s. Square (SQ) stock is up 34% since my June recommendation