During the first half of the 20th century, the United States ruled the automotive industry — an industry we created from a machine we invented. For decades we built cars domestically and exported them throughout the world. Over time the auto manufacturing process was modernized and commoditized, which meant basically any company could make a product just as good, perhaps even better, but without needing uniquely skilled factory workers. The innovation in the manufacturing process opened the door to off-shoring to countries such as Japan and China to compete where a labor force was available and several times less expensive.
The trend is that we (in the U.S.) invent something new, create an industry around it, and manufacture it domestically for a while. Then someone really figures out how to make it efficiently, and the manufacturing jobs go overseas. This pattern has repeated itself many times in many industries. Electronics being another prime example. Unless a country has oodles of cheap labor, you must innovate or die — and survival is, of course, optional.
Here’s the thing, I don’t work in the automotive industry, nor electronics, or in anything having to do with physical goods for that matter. I’ve no idea where my toaster or microwave was built, though I doubt it was in the US. My business is software, software security if you want to be precise, and I’m wondering why, why after 50 years since the invention of software, is so much development, especially the high-end stuff, still performed in the United States?
This question was recently kindled after a ridiculously good article by, general partner of VC firm Andreessen-Horowitz and Netscape co-founder, Marc Andreessen. He called it, “Why Software Is Eating The World.” In his words…
“This is a tragedy since every company I work with is absolutely starved for talent. Qualified software engineers, managers, marketers and salespeople in Silicon Valley can rack up dozens of high-paying, high-upside job offers any time they want, while national unemployment and underemployment is sky high.”
If you in work in technology, are an entrepreneur or investor of any kind, or a student soon to be entering the labor force, this is a must read. Note the key words “talent,” “qualified,” and “high-paying.” These are not terms used to describing a commoditized industry, or a commoditized manufacturing process. We know our friends in asia are verifiable pros at tearing apart the inventions of others, breaking down its manufacturing process and streamlining the hell out of it. But for some reason not they, or anyone else for that matter, has the ability to stamp out quality software with the same ruthless proficiency as a car, computer, or lunch box. If they had, there would be a declining amount of programming jobs in the states, but that’s just not the case. Quite the opposite is true.
Software, the ability to automate intelligence, is one of mankind’s greatest inventions. The utility of software has already globally connected two billion people via the Internet, billions more if you count cell phones. Software is quickly becoming embedded in nearly everything, from power supplies to power grids, from medical devices to the management of all medical records. The power of software, and fact that it’s not a “solved” problem, signals amazing opportunity — world changing opportunities. Here are two more quotes from Mr. Andreessen’s article that speak to this.
“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.”
“More and more major businesses and industries are being run on software and delivered as online services—from movies to agriculture to national defense.”
All you have to do is look at the trends to see the truth of it, and perhaps one might even say, Marc is just predicting the present.
Today’s largest bookseller is a software company: Amazon
Today’s largest video service by subscribers is a software company: Netflix
Today’s dominant music companies are software companies: Apple’s iTunes, Pandora, and Spotify
Today’s fastest growing entertainment companies are video game makers (i.e. software companies): Zynga (maker of FarmVille) Rovio (maker of Angry Birds)
Today’s largest direct marketing platform is a software company: Google
Today’s fastest growing telecom company is a software company: Skype
Today’s fastest growing recruiting company: LinkedIn
The best new movie production company in decades was a software company: Pixar
Back to the original question. Do we, in a global sense, know how to make software? No, well yes, err sort of. At least not to the degree of efficiency and predictability of building cars, buildings, and anything with blinking lights. Today, software must be built by highly skilled people, whose skills are not trained up quickly or easily. Even those who profit by the billions from creating software, like Microsoft, Oracle, and Adobe seem unable to ship multi-million line software projects on a deadline. No one has yet discovered the secret formula to software development. Our modern day equivalent of the philosopher’s stone.
Perhaps the reason is as Wendy Nather, Research Director for The 451 Group, says, “the current approach to software development resembles more of a literary art rather than an engineering discipline.” Though no one is quite sure if the latter approach will lead to the promised land. What we do know is the future will be fueled by software.