Joseph Cohen

The economics — and physics — of the digital world are an order of magnitude better than those of the analog world. As software expands its reach — with different outputs at higher fidelities — it will continue to subsume the analog world.

This idea has been explored most famously by Marc Andreessen. I want go a little deeper to understand software’s advantages, and thus how and when it will eat the rest of the world.

There are 5 key benefits of the digital world:

Cost of design How easy is it to dream up new artifacts? How tight is the feedback loop? How much of the creation process is redundant?

Cost of production How much does it cost to make a copy of that artifact?

Cost of transport How much does it cost to route the artifact to people?

Cost of processing Can we understand how people interact with the artifact? Can we make inferences based on the data? Can we generate personalized experiences based on it?

Cost of storage How much does it cost to store that incremental artifact? How easy is it to dispose?

In each of these cases, software wins by an order of magnitude. These factors compound to give software an unbelievable advantage. If something can be digital, it will be digital.

You can apply this framework to any vertical — newspapers, television, commerce, gaming — to see how it will stack up to new technology.

When will each vertical shift from analog to digital?

It depends on two factors: technology and sociology.

The technology needs to rival the fidelity of the analog version (and usually surpass it). This means that the output device — a screen, an autonomous car, a sound card — needs to output a resolution that’s at least as good as its predecessor. We can therefore understand a new technology’s trajectory based on its economic advantage and its fidelity.

How people adopt the new technology is the second, and often harder, component. Laws and consumer behavior determine how quickly the technology will take. Certain verticals are far more entrenched than others.

Both of these factors seem to be improving rapidly over time. The rate of new technologies is increasing, and consumers are more willing than ever to adopt new products. We’ll continue to see software eat everything in its path — and, more excitingly — open new, undiscovered doors.

My new thing. More at un1verse.co

Ten days ago, 70,000 people flocked deep into the barren Nevada desert, stocked with a week’s food, power, and water. They formed a temporary, magical metropolis called Black Rock City, an alternate world without the rules — social, legal, professional — of modern life. This is Burning Man, the annual festival, a celebration of life, a state of mind.

Describing Burning Man is often a futile effort. Our vocabulary from the “normal” world usually misses the essence of this alternate one. But the best I could do is to say that Burning Man let’s people be people — to be free, expressive, excited, and kind.

While Burning Man exists physically in Black Rock City, it’s not limited to it. The festival is the center of a larger culture with deep values. When successful, the culture permeates and inspires each participant. These people then think somewhat differently, empowered to change their surrounding world to be a little bit more like Black Rock City. To me, that’s the ultimate promise of Burning Man.

For that reason, it’s worth understanding what underpins this ecosystem and the results it yields.

John Gruber, remarking on Steven Levy’s 2011 profile of Nest:

Because Apple now dominates the tech world, its influence is beginning to spread. We’re going to see more products and companies that adhere to Apple-like ideals and priorities.

Nest was the latest micro-Apple: a startup entering an unsexy space with an obsessive focus on user experience and full-stack thoughtfulness.

The other high profile micro-Apple is Square.

While there is only so much you can glean from outside of a company, it’s interesting to contrast the two organizations and how they’ve developed.

They both have high profile founders. They both employ lots of Apple people. They both bring elegance and simplicity to neglected industries. They feel like they’re part of the same family.

They both started small. Nest, with a thermostat; Square, a card reader.

But Square wasn’t happy with being “just a payments company.” It expanded into Wallet, a product that serves another customer — not merchants, but consumers. They did a distracting deal with Starbucks that would eventually cost them $100mm. Today the company finds itself grappling for focus, trying to regain its footing. I believe they can do it with their amazing team, but the stakes are very high.

Nest, on the other hand, took a different approach. It was clear from the beginning that they had ambitions beyond thermostats. The name itself hinted at a company that will connect your whole home. But their expansion was slow and deliberate. They eventually released Protect, a smart smoke detector. It’s rollout certainly wasn’t seamless, but the product felt like a natural extension of the brand. It was a small step, but it set the stage for an ecosystem that would grow into a family of smart devices for your home. Of course, Nest sold to Google for $3.2B, giving the company the resources it needs to own this market.

While there are obviously many more differences in how the companies operate, and their markets, there’s a takeaway: focus obsessively and only expand your scope organically.

Thoughtful, patient growth is hard when you’re an ambitious team facing a blue ocean market. But extending into a market too quickly, unsure of how well the new opportunity fits into the larger company focus, can lead to slower growth in the long run.

We had a bit of this experience at Lore, my last company. Our core product was for instructors. And some point, we were fed up with the adoption rates of professors, so we launched Lore for Students, a way for students to use Lore without their professors.

This made sense in theory. In practice, there was an incongruence: students who already used Lore with their instructors were confused by the two very different product offerings, and new students didn’t understand why they’d want to use the service. We would have been better off incrementing our instructor product over time to be more and more student friendly.

Patience takes courage and discipline. It doesn’t imply a lack of ambition or intensity. Not letting an exciting opportunity force your hand requires real confidence.

We’ve seen this approach work time and time again with Apple. They took their time with iPod and iPhone, and now we’re seeing it with television and wearables. When they’re ready, they’ll go into the market with full force. Historically, they’ve wiped away early players who instinctively rushed into the opportunity.

Benedict Evans wrote an excellent post on how the internet market multiplies in its shift to mobile. He saved me the effort of writing a similar article:

There are around 1.6-1.7bn PCs in use today, and there are already perhaps 2bn iOS and Android devices. Over the next few years the great majority of the mobile base will convert to these devices: there will be 3-4bn smartphones in use and hundreds of millions more tablets. 

So, mobile means there will be two to three times more personal computing devices connected to the internet. But actually, that understates the change massively. The difference in how those smartphones are used is actually just as important as the raw numbers.

Evans then explains the difference between PC and mobile usage. Half of PCs are owned by companies, and the others are largely shared devices. Mobile devices bring the internet everywhere. And they’re more sophisticated—and far easier to use—than their predecessors. 

Mobile devices are the truly the first personal computers. Desktops were first designed for work and then hacked into general purpose computers. Phones, on the other hand, were designed for life. People love their phones. 

When you pull these strands together, smartphones don’t just increase the size of the internet by 2x or 3x, but more like 5x or 10x. It’s not just how many devices, but how different those devices are, that has the multiplier effect.

I agree with everything he’s written in this post. My bet, however, is that he’s underestimating the market’s growth. When I consider the increase in users plus all the additional ways we will use the internet, I expect to see the mobile market dwarf its predecessor by something like 100x or more.