Someone asked me a few weeks how long I've been in the web industry. Well, I have andreas.com, so I've been in it from the beginning. Over the years, I've learned a few things. Here are the basic laws of computering.
Law #1: #1 Isn't Always #1
- Many people think the #1 product is also the best product. But quality doesn't guarantee success.
- There are plenty of examples. Here are two. The Commodore Amiga, a computer in the late 80s, was the most advanced computer on the market at the time. But the company sold it as a games platform, so it never entered the business, industrial, or scientific market. Unix was a better solution as an operating system for computers, but Microsoft was better at licensing and marketing so they pushed it out of the market.
- Sometimes, the top product is the best solution. But generally, the top company has the best marketing, sales, or distribution. Just because it's #1 doesn't mean it's the best one.
- Which leads to Law #2.
Law #2: There Is No #2
- In "Talladega Nights," Reese Bobby said to his son Ricky Bobby "If you're not first, you're last." Ricky Bobby, a NASCAR race car driver, later realizes this doesn't make any sense. But it's true in computering. There is no #2 in computers.
- In any computer category, one product has such overwhelming market share that they are the category. The other companies get single-digit market share.
- Try this: For word processor software, there is Microsoft Word. What's the #2 word processor? Who cares? In spread sheets, there is Microsoft Excel. What spreadsheet is #2? In slide presentation software, there is Microsoft PowerPoint. What is #2? For graphics, there is Adobe Photoshop. For taxes, there is TurboTax. Quickbooks owns the accounting market. Oracle is databases. For enterprise resource management, there is SAP. Social is Facebook. The same with desktop operating systems: Microsoft Windows has 96% market share. The iPad owns the tablet category. The iPod owns the music category.
- This happens only in computering. In cars, refrigerators, cameras, airlines, soft drinks, tennis rackets, blue jeans, and everything else, dozens of competitors can co-exist. It's rare for a company to have more than 25% of a market. But in computers, it's normal for one company to have +90% market share.
- Why does this happen in computers? When a new category is created, perhaps 20-30 companies compete against each other for that space. But within months, the market consolidates around one of the companies and the others fall to the side. Why? Because users prefer standards. They want a software package that is easy to buy and easy to install. They want to easily share files. They want books and guides to learn the tool, and there are usually tutorials only for a few products. The top product also has lots of training, consultants, and additional services. New users go with the crowd. They don't even consider alternatives. Within a year, nobody will know there were alternatives.
- This also means you can't break into an established market. There is no way to sell a new word processor or spreadsheet: the market has settled on the standard and you can't displace it, even by offering your product for free.
- This isn't good because there is a loss of diversity. Competing ideas disappear. The market gets locked into one vision of doing things. And the creator of the software has no incentive or motivation to improve. The market space becomes stale. There haven't been significant improvements or changes in most of the major software packages in 15 years or more.
Law #3: The Product Isn't the Business
- Starting in the dotcom boom and ever since, web-based companies have presented a cloudy picture of the product and the business model. Often, users think a computer company's product is the business model.
- McDonalds' product is hamburgers. They sell a burger, they get $2. That's easy. In their case, their business is to sell their product.
- But in many web-based companies, the product has nothing to do with how the company makes money. For example, Facebook's product is their social network. But that's not how Facebook makes money. Facebook makes money by creating an audience and then renting that audience to advertisers and games companies. Users aren't aware of this. They think Facebook is the product. No, the user's information is sold to advertisers. The user is the product.
- Generally, customers accept this. Most media companies, such as radio, TV, newspapers, and magazines create audiences and sell access to that audience. People accept that in media.
- However, a company can become confused about this, which leads to problems. For example, Google thinks it is a search engine, but its business model is advertising. An astonishing 98% of Google's $110 billion (2018) in revenues come from advertising, yet the company refuses to acknowledge they are an ad agency. 10,000 computer scientists and computer engineers at Google would never dream of working in an ad agency. Because they don't work on the reality of adversiting, there has been no significant innovation in Google Adwords in more than 18 years.
Law #4: Web Companies Aren't High Tech
- Starting in the 30s and up to the mid-90s, Silicon Valley was based on innovation in technology and hardware. They built faster computers by researching and exploiting the physical properties of elements. This resulted in better chips, hard disks, and so on.
- Starting with the dotcom boom and the web in the mid-90s, Silicon Valley turned into media companies, which is to say, they are advertising platforms. This includes Yahoo, Google, Facebook, Twitter, Youtube, and so on. They create large blocks of audiences and then sell access to that audience. There is no essential difference between Google, a basketball game, or Britney Spears. All three are in the business of creating large audiences to make money.
- Technology has moved to biotech (personalized medicine, CRISPR genetic editing), nanotechnology, AI, and machine learning. None of these are based exclusively in Silicon Valley.
Law #5: Computers Don't Compute
- Law #4 brings us to #5: most of today's computers aren't used as computers.
- A computer computes. It calculates. It uses algorithms (rules) to process data and generate results. A computer is programmable. You can create complex rules that consider different conditions and generate results.
- But computer companies realized in the 90s that the public wouldn't learn to program. So they switched to computers as consumer entertainment devices, just like TVs and radios. Computers were dumbed down. The programming capability receded into the background and finally, disappeared. Microsoft DOS allowed people to write BATCH files for all sorts of tasks. These disappeared in Microsoft Windows. Apple has been the leader in turning computers into consumer devices by focusing on design instead of technology (and in many cases, making design decisions that resulted in poor technological results.) The final stage is the iPad which is a toy computer. You can't open the case, you can't see the code that creates web pages. Development for the iPad is done on computers, not iPads.