Why Software Is Eating The World

Mark Andreessen (you know, the Netscape nerd turned venture capitalist) explains for the Wall Street Journal:

This week, Hewlett-Packard (where I am on the board) announced that it is exploring jettisoning its struggling PC business in favor of investing more heavily in software, where it sees better potential for growth. Meanwhile, Google plans to buy up the cellphone handset maker Motorola Mobility. Both moves surprised the tech world. But both moves are also in line with a trend I’ve observed, one that makes me optimistic about the future growth of the American and world economies, despite the recent turmoil in the stock market.

In short, software is eating the world.

More than 10 years after the peak of the 1990s dot-com bubble, a dozen or so new Internet companies like Facebook and Twitter are sparking controversy in Silicon Valley, due to their rapidly growing private market valuations, and even the occasional successful IPO. With scars from the heyday of Webvan and Pets.com still fresh in the investor psyche, people are asking, “Isn’t this just a dangerous new bubble?”

I, along with others, have been arguing the other side of the case. (I am co-founder and general partner of venture capital firm Andreessen-Horowitz, which has invested in Facebook, Groupon, Skype, Twitter, Zynga, and Foursquare, among others. I am also personally an investor in LinkedIn.) We believe that many of the prominent new Internet companies are building real, high-growth, high-margin, highly defensible businesses.

QuickHoney
Today’s stock market actually hates technology, as shown by all-time low price/earnings ratios for major public technology companies. Apple, for example, has a P/E ratio of around 15.2—about the same as the broader stock market, despite Apple’s immense profitability and dominant market position (Apple in the last couple weeks became the biggest company in America, judged by market capitalization, surpassing Exxon Mobil). And, perhaps most telling, you can’t have a bubble when people are constantly screaming “Bubble!”

But too much of the debate is still around financial valuation, as opposed to the underlying intrinsic value of the best of Silicon Valley’s new companies. My own theory is that we are in the middle of a dramatic and broad technological and economic shift in which software companies are poised to take over large swathes of the economy…

[continues in the Wall Street Journal]

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  • ICE

    kill him with fire

  • ICE

    kill him with fire

  • Anarchy Pony

    Hooray for growth! The mindless paradigm of the cancer cell!

  • Wanooski

    Hooray for growth! The mindless paradigm of the cancer cell!

  • Wanooski

    Hooray for growth! The mindless paradigm of the cancer cell!

  • Wanooski

    Hooray for growth! The mindless paradigm of the cancer cell!

  • jchadbou

     How can you have growth when all your manufacturing is offshore?

  • jchadbou

     How can you have growth when all your manufacturing is offshore?

  • jchadbou

    How can you have growth when all your manufacturing is offshore?  People are smart, they’ll go to local factories to get manufactured goods.

  • jchadbou

    How can you have growth when all your manufacturing is offshore?  People are smart, they’ll go to local factories to get manufactured goods.

  • Siminatongue

    Random. Scrolling down the page and I see this guy on the page. It immediately occurs to me that he resembles some hokey alien from  DR Who. Or maybe a Vogon from Hitchhikers Guide to the Galaxy. I’m not usually that shallow as to be judgmental about someone based on appearances, but there it is nonetheless.

  • Siminatongue

    Random. Scrolling down the page and I see this guy on the page. It immediately occurs to me that he resembles some hokey alien from  DR Who. Or maybe a Vogon from Hitchhikers Guide to the Galaxy. I’m not usually that shallow as to be judgmental about someone based on appearances, but there it is nonetheless.

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