Marc Andreessen had an interesting article discussing about how software has become a dominant factor in the world to the point where it’s the driving force behind almost all industries. Part of the article addresses concerns about the difference between the original Dot Com Bubble Burst and the current situation in terms of economics, using the high profits being made from software (-as-a-service), the burgeoning growth of the mobile device and dying older industries as examples to back up his beliefs.
As a tech worker who has emerged from the original Dot Com Bubble Burst, I wholeheartedly agree with Andreessen’s assessment. Software has, indeed, reached a point to defy the constant naysayers of tech that still are stung by the scars from the Dot Com Bubble Burst era. However, I can point to some huge differences from my own experience to demonstrate why the current state of technology is the Real Deal.
Back when I started out, the growth of companies was ridiculous. At one of my first start ups, the ambition was to reach 200 people when we were around 40-50. Although we were making a little over a $100k/month, the executives alone were making that per year. Taking into account other salaries, property lease and equipment, one had to wonder how the revenues could match our expenditure. Of course, the venture (vulture) capitalists wanted to expand to that level, but there was no plan to reach that point. Eventually, the company’s VC’s pulled out and left the company for dead.
These days it feels as though every person matters working in the start up world. Each person must pull his/her weight and companies seem to reach out for new employees only when necessary in order to grow. Even asking for new hires is a bit of a begrudging stretch as employers aren’t all that willing to sign new paychecks and provide benefits as each nickel is observed with hard scrutiny.
Another key factor is that the interview processes are far more difficult. Google and other companies have introduced incredibly tough interviews, which have (imo) resulted in better hiring. It feels as though before the Bubble Burst, anyone with some degree of technical knowledge could enter. These days, just possessing a degree isn’t enough. You need the experience, major companies and chops to back it up. As a result, in general companies are easily throwing money down the drain for employees. The employees have to prove themselves to be worth the high end salaries.
People Are Online Now
When I started on the internet, I was using a 2400k baud modem connecting to a crappy system called WWIV BBS. Certainly, it did not have all the user friendly features of contemporary browsers. More importantly though, barely anyone heard of the cyberworld except through fiction and the occasional bad Hollywood film (The Net anyone????).
When I joined the work force, people still were on dial up and slowly migrating to the web. However, we lacked a lot of the UI technology, speed and features that would become a dominant paradigm of the mid to late 2000’s of the web. Add the cost of owning a computer back then along with general ignorance since the only people that could afford the web were those that were working (and hence too busy to learn technologies), the scene was not pretty at all.
If anything, people were just starting to build the lowest foundations that would slowly evolve into the current state of the web. That includes just getting the average Joe Blow to sign up. I remember one time while at an English conversation cafe in Japan one Mr Average accused us web programmers that, “We did not deliver as promised.” It’s hard to fathom what exactly “we promised”. Was it one of these bad Hollywood films poorly instructing what the future would look like?
Despite the fact that the guy probably feels differently now, the statement does prove a point: something was amiss back in the late 90’s. That something was definitely people to help drive the vision of what the web ought to become.
12 years later from my own inception into the tech world, the people have finally come aboard. And I seriously doubt they’ll be going away anytime soon.
Building Technology, Not Just Ecommerce Sites
Although ecommerce will always evolve (as someone needs to pay for our high end salaries), one chief difference I do believe between the late 90’s and 2011 is that the focus of technology isn’t located into one paradigm. Instead, engineers are attempting to figure out how to solve all types of problems with the technologies we’ve been building up over the past decade. This is a key point in Andreessen’s article, but you have to compare what the perception was in the late 90’s and 2011.
In the late 90’s, the move was to become Amazon/Ebay Part 2. I think part of it was that the problem was fairly simple from a technical perspective (build a shopping cart, some nice product pages and the occasional affiliate program). However, there was a lot of psychological issues that prevented the success of online retailers back then. First was the perception of trust on the web. Putting one’s credit into a complete faceless stranger’s hands was something many people could not fathom doing.
Another major issue was distribution and logistics. Owning and maintaining warehouses for goods were huge headaches that were not well estimated. For instance, eToys was an infamous flame out that can be partly blamed on the huge investment into their distribution system. Another major example was WebVan. In WebVan’s case, you could order any sundry good like a stick of gum and have it delivered with free delivery. Imagine, if some Joe Blow orders a pack of 99 cent Wrigleys for his office. WebVan would spend more on gas, the delivery guy’s hourly wage and the server time for the order than the guy would just going across the street.
However, because these companies had imploded as a result of poor planning, newer companies have done an excellent job in their place. Take Netflix for instance, who practically have become responsible for the annihilation of Blockbuster. While their original core business would ship DVDs to people’s homes, their current model of streaming further removes the difficulty of even dealing with any hard goods just to watch films and tv shows on demand.
But it’s not just ecommerce models that have evolved. It’s the whole notion that the online/world of the Cloud has become a kind of service, or as some would say “Software-As-A-Service.” Take for instance, Twitter. To the average observer, Twitter is simply just a crappy messaging system. However, to a business involved in technology, Twitter has become one of the de facto social advertising platforms. And that’s the keyword:
The ecommerce systems that first began in the web 1.0 era were insulated, requiring people to build up their own databases of information, their own networks, their own methods for scaling their systems to meet high traffic demand. There was no cloud, no Google, no BigTable, etc. The systems solved an extremely limited set of problems, which was order fulfillment and maybe some marketing.
These days systems are far more complex as people now with web APIs, the Cloud, and interdependent components formulate this new era of computing. The most successful companies have evolved their technologies into platforms for which other companies can utilize. As a result, you create symbiotic relationships that form the ecosystem of the web.
To illustrate this point, let’s rhetorically ask if you can imagine Google one day vanishing. It’s impossible because the current implications in the way it functions as a heartbeat to so many different businesses would cripple not just the economy but a lot of the way things are done. Similarly, Twitter serves a similar function since many businesses utilize Twitter as a core part of their business model.
So to say that these businesses that lack a simple “Buy This” button have no foundation is ridiculous. They are the foundation. And we all depend on them more than ever, which is why they simply cannot go away.
More Players, More Competition, More Money
Because we have moved away from attempting to re-solve a single simple problem and trying to solve numerous small to large scale problems using technology, the competition in technology has become huge. The Me2’s will always exist, but that to a degree is good as it’ll continue to force everyone to be on their toes. And as long as major companies and investors feel that they can get a chunk of the pie, there will be more money to be made.
In the past 5-6 years, one of the more interesting areas of funding hasn’t been through VCs but from acquisitions. And there’s certainly a lot more companies out there with big pocketbooks ready to sign checks for the next big thing to help their revenues. I think in the 90’s, the big thing was simply IPO, so people seemed to rely more on VC money. Splitting up the investment sources simply gave more options for new (and even older – Hey Motorola!) companies. Also, because there aren’t as many fallacious IPOs as there were in the past, the ones that do go IPO are far more serious about long term growth, which is what investment really (ought to be) is about.
Will there be meltdowns? Of course. We’ll always have a graveyard of companies because either they couldn’t find the right niche, bad business plans or their competition was too overwhelming. Even large companies like HP with the inevitable doom of WebOS will succumb. That doesn’t mean people shouldn’t try. Allowing for a single dominant entity is something everyone who remembered emperor Bill are attempting to avoid again. So even if companies fail in succession, it won’t mean that the entire industry will shutdown. And that’s a huge point in all of this.
Not As Many Rockstar Parties
There was an infamous story of one company (can’t remember the name) who spent $10 million of their VC funds on a private Christmas party with The Who. That probably was one of the few extreme cases that left many VCs with a horrible taste in their mouths, but I’m dead certain that if such a party would come about again, it won’t be derived from the VC’s pocket. Still the whole wasteful spending was something I partly alluded to the cut down of stricter hiring.
Of course, benefits are always going to be a competitive edge that a company can offer to attract and retain top notch employees. But those are pretty well budgeted and partly related to fostering a positive culture that leads to productivity. Looking at the Google offices, you can see what might seem like a futuristic paradise which might bewilder people in terms of how Googlers get work done. But the office space and intent exist to help foster creativity; after all, if your office is more fun to be in than your home, why leave?
A Little Older, A Little Wiser And A Hell of A Lot More Cynical
I doubt any of us who lost their jobs at some point during the Bubble Crash will ever forget the lessons in those days. We’re all more cautious and weary of the different issues I outlined above and a result, we’ve managed to optimize what we’re doing. Because the Bubble Crash has been such a humbling experience to many of us, we’ll never stop looking over our shoulder and pointing to any company making money and not feel an ounce of doubt.
As a result, I think we will keep our own sense of vigilance to prevent an uncontrollable explosion from occurring. Take a look at Google. Despite being around since 1998, I’m certain many of us have been just waiting for the day they crash. Not because we want to (well, maybe Microsoft and Apple do) but because it’s a company that has been “too good to be true.”
When I walk into my office and hear that we’re helping our customers receive 100-300% conversions, I’m left in shock, disbelief and awe. Yet the numbers are there and these companies that I’ve managed to work for or know are proving themselves in their own ways.
The thing is that we’ve come a long way, have evolved and matured quite a bit. As technologists, we aren’t your average dummy but can adapt and improve. And as I do more at my current office, building some cutting edge UI stuff and look back to my days of WWIV BBS, Atari and Commodore, I realize that we’ve barely scratched the surface.
For the technologists out there, give yourself a pat on the back and relax a little.
For the naysayers who don’t have a true grasp of what’s going on, why don’t you do everyone a favor, shut up, sit back and enjoy the show a little. Instead, of spouting off constant negative rhetoric which has not helped the overall economic growth in the past 11 years (because 2000 was the pinnacle), start giving credit where credit is due and start looking investments as investments, not a craps table gamble that you’re seeing just from your ivory tower 10,000 feet in the sky. We’re here to stay and we’re proving it on a daily basis.