Scarcity in the Software Century
As you may know, I am currently writing a book. The book will be called Scarcity in the Software Century, and if you’ve enjoyed subscribing to Snippets or reading alexdanco.com then I think you’re going to like it. It’s my attempt to articulate a complete thought about software, the internet, and the innovation economy. The book answers two questions:
Why does software create new abundance?
Why does software create new scarcity?
I will be publishing the first run-through of the book serially, week by week in email newsletter format to start out to paid subscribers. (This is in addition to my usual weekly newsletter, which is free.)
You can subscribe here:
In addition to getting this in your inbox every week, there’ll be a community discussion thread for each chapter where you can help me make it better – what are edits, changes, examples, or other helpful ideas to take it from good to great? If you think you can help, please subscribe.
Here is a summary of what the book will be about, along with an approximate week-by-week guide to what I’m writing, broken down by chapters.
Scarcity in the Software Century
Ever since Marc Andreessen wrote “Software is Eating the World” in 2011, each passing year confirms both the accuracy of his assertion and the ominousness of his word choice. For better or worse, our economic, political, and cultural world is getting remade. Software has turned out less like the steam engine or the printing press, and more like finance: a layer that wraps itself around everything in the world and rearranges it. The end result is a real Devil’s Bargain: so much new abundance, but also so much new scarcity. We don’t really understand either of them.
On the one hand, software and the internet are human superpowers. They empower billions of people to participate in the world’s economy and prosper like never before. The 21st century innovation economy is our best shot at conquering many problems in the world and creating abundance for people everywhere. These are great things.
Meanwhile, internet aggregators are transforming industry after industry into “pay-to-play” access economies where the terminal business model is extortion. Software platforms are taking over crucial functions in our daily life, and the mounting complexity leaves us vulnerable to malfunction, hacking, and other forms of digital catastrophe and servitude. The modern tech industry, headquartered in Silicon Valley, has become a massive land grab to create and capture as much of this emerging scarcity as possible. People are understandably pretty mad about it.
None of these problems are fundamentally new. Extortive aggregators and coercive platforms have populated the world’s innovation economy for centuries, and they’ve always made money by capturing emergent scarcity in ways we don’t like. It’s hard to criticize modern tech in any way that doesn’t rhyme with history. But that’s cold comfort for people struggling in today’s new battlegrounds:
–Pay-to-Play Consumerism: What happens when makers and vendors must forfeit every ounce of profit and autonomy they have to reach consumers where they are?
-The Gig Economy: If software gives you income-earning powers, is it your boss? What are your rights to employment and ownership of your work?
-Permissionless Use: Do we really own our property if we don’t own the software that powers it? Once software powers everything, then what?
-Privacy and security: Are digital leaks and catastrophes increasing in frequency and inevitability? Is anyone on the internet safe anymore?
This book tackles the complex answer to two simple questions: Why does software create abundance? and Why does software create new scarcity?
You’re warned in advance: everything is interconnected. You cannot understand the capability of today’s technology without appreciating the political environment that nurtured and tolerates it. Startup economics are intertwined with the status-seeking dance of the San Francisco social scene. Today’s Internet giants owe a great deal to the anarchist hacker societies that built their open source code base. Ask Why about modern tech enough times, and you get deep into explanations like, Because California passed a property tax bill in 1978 called Prop 13, or Because the drummer from Metallica got mad about Napster. There are no easy answers.
But we’d better start thinking about it. The future we’re building for ourselves will be filled with forms of abundance and scarcity that software is naturally creating. We need to understand them fluently. We can never get rid of scarcity, but we can hopefully channel it into forms and places that are less harmful and less unjust. We can never build enough abundance, but there are real reasons to be wildly optimistic about the future of software and the internet. This book will give you plenty to think about in the meantime.
I’ve parcelled out writing this book week by week over a year. I probably won’t stick to this schedule exactly; I may skip some weeks or double up on others to fit with reading, interview schedules, and life with a newborn. I may also write chapters slightly out of order depending on how outlining and prep work goes. But this should give you a general sense of how I’ve paced the topics in here.
Part 0. Software is Eating the World
Chapter 1. The Devil’s Bargain We’ve Made with Software: It creates so much abundance, but also so much new scarcity
Chapter 2. Depending on who you ask, tech is either saving the world or destroying it. Are any other opinions allowed?
Chapter 3. Systems Thinking: How to get the Software Century right.
Part 1. An Introduction to Scarcity and Abundance
Chapter 4. Scarcity: Demand for what we do not have. Scarcity and ownership, arbitrage, and the foundation of entrepreneurship
Chapter 5. Technology: More with Less. Overcoming scarcity and natural limitations with technology.
Chapter 6. Adoption: How does technology enter the world? The basics of S curves as technology progresses from novel to mainstream to utility
Chapter 7. Abundance: the mindset of frictionless consumption. Diversity of choice, the catalog, and browsing as hallmarks of abundance
Chapter 8. Integral Scarcity: Where the sausage gets made. Abundance creates complexity, creating problems that cannot be resolved without new scarcity.
Chapter 9. Positional Scarcity: It’s all relative. Abundance compels curation, gatekeeping, extortion, and other forms of new scarcity.
Part 2. Trial and Error: Inventing the Future
Chapter 10. Exploratory inefficiency: building the future by trial and error. How can we build the future if we don’t know what the future looks like?
Chapter 11. Universities, research, R&D, and historical innovation factories. Is deliberate innovation possible?
Chapter 12. Intellectual property: can ideas have value? Or is the value only in their expression? How do we reward innovators?
Chapter 13. Entrepreneurship: Schumpeter & the individual risk-taker as hero. The role of entrepreneurs in the creative destruction of the economy.
Part 3. Irrational Exuberance: Financing the Future
Chapter 14. Other People’s Money: How patrons, financiers and backers provide resources for those who build the future.
Chapter 15. Default Dead: the challenge of rationally financing entrepreneurial projects.
Chapter 16. On a Mission: Taking advantage of ulterior goals beyond the profit motive in order to create the foundation for abundance
Chapter 17. Irrational exuberance: The importance of storytelling in building the future
Chapter 18. Bubbles: When everyone losing their mind can be a good thing.
Chapter 19. The entrepreneurial state: the government as funder of first resort and lender of last resort
Part 4. The Innovation Economy as a Complex System
Chapter 20. The Innovation Economy as a System: Carlota Perez & cycles of innovation, finance, scarcity and abundance, and new scarcity.
Chapter 21. Scarcity is Conserved: Innovation as a series of arbitrage opportunities from speculation to application to technological repurpose
Part 5. The Beginning of Software
Chapter 22. Computers: From Claude Shannon to IBM. If machines can do math for us, what else can they do?
Chapter 23. Software: Abstractions as the fundamental innovation of computer science
Chapter 24. Digital Abundance: Moore’s Law and the virtuous cycle of abstractions creating abundance.
Chapter 25. Software’s Terroir: the DoD, Bell Labs, and how the government funded the digital era
Part 6. Hacker Culture: the norms and politics of digital abundance
Chapter 26. Who said abundance would be so easy? The early hacker and maker community comes together
Chapter 27. What should software cost? Property rights in a world of reproducible bits
Chapter 28. Libre vs. Gratis: “Selling wine without bottles” and the problem of free versus costly ideas.
Chapter 29. The Cathedral and the Bazaar: getting open source to actually work
Part 7. The Invention of Venture Capital
Chapter 30. Risk Capital: caravans, whales and oil patches as historical precedents for the birth of Venture Capital
Chapter 31. Venture Capital as arbitrage: the window of opportunity between yesterday’s scarcity and tomorrow’s.
Chapter 32. Learning the game: VCs in the 70s and 80s figure out how to finance the evolving IT and Biotech industries.
Part 8. California
Chapter 33. The roots of Silicon Valley: Orchards, the Defence Department, and actual Silicon wafers
Chapter 34. San Francisco: as far west as you can go. From Haight Ashbury to the Whole Earth Catalog and what came next
Chapter 35. Prop 13 and the American Dream. Twin decisions on property taxes and pension plans set us on a path that shapes the coming tech era.
Part 9. Online: The Internet Changes Everything
Chapter 36. From ARPANET to AOL: Getting everyone online, one campus and one CD at a time
Chapter 37. Dot Com: The internet goes commercial. Who was making money on the early internet?
Chapter 38. Napster: the enormous legacy of pirated music, from Metallica to the Digital Millennium Copyright Act
Chapter 39. 1999: the bubble that built the internet, and the crash that created the modern tech industry
Part 10. Startups
Chapter 40. Software is Power: how a few people with laptops can move mountains and threaten giants
Chapter 41. The Paradox of the Startup: a conspiracy to create abundance; a conspiracy to create scarcity.
Chapter 42. Build Stuff People Want: The Lean Startup versus the Obsessive Startup
Chapter 43. Recurring Revenue: how “As-A-Service” changed the game for startups
Chapter 44. Users: the new math of CAC / LTV and how it changed the way we build companies
Part 11. Founders
Chapter 45. The Invention of the Founder. 30 years ago, the word “founder” barely existed. What happened?
Chapter 46. Nerds, Sociopaths and Video Games: Why tech founders don’t look or sound like CEOs anywhere else
Chapter 47. Fake It Till You Make It: How founders can create something out of nothing
Chapter 48. Hoodies and Allbirds: Does Silicon Valley work because everyone’s so unique, or because everyone is all the same?
Chapter 49. Demo Day: How Y Combinator gave founders a union
Part 12. The modern tech scene
Chapter 50. Disruption: Modern tech’s Raison d’être
Chapter 51. Term Sheets: Valuations as a price versus as an accomplishment
Chapter 52. Credibility: VCs new role as talent agents, cheerleaders, and the new priesthood of Silicon Valley
Chapter 53. Status: the Silicon Valley Social Ladder, and what gets you higher
Chapter 54. “Mission-Driven”, and the manufacturing of purpose
Chapter 55. Stock Options: The paradoxical consequence of equity incentives, employee loyalty, and “skin in the game”.
Part 13. Growth at all costs
Chapter 56. No Down Rounds: Engineering the venture-backed startup as a binary option on growth or death
Chapter 57. The Red Queen’s Race: the accelerating treadmill of user acquisition and platform tax. The AWS bill is how big this quarter?
Chapter 58. Exits: Acquisitions, IPOs, who gets rich, and who gets left holding the bag
Chapter 59. Scorched Earth: Macro Interest rates, Softbank, mega-growth rounds, and winner-take-all
Part 14. Pay to Play: The New Access Economy
Chapter 60. Markets: The end of friction, the rise of functional consumption, and the myth of the Sharing Economy
Chapter 61. Aggregators: If you have the users, then you make the rules
Chapter 62. 1099: Either you’re telling computers what to do, or computers are telling you what to do
Chapter 63. Net Neutrality: the incredible power of internet gatekeepers
Chapter 64. Antitrust: A system built to contain monopolies finds itself ill-equipped to handle their mirror image
Part 15. Digital Coercion: When tech says jump, we ask how high
Chapter 65. Y2K: the disaster that didn’t happen
Chapter 66. Complexity and switching costs: ERPs, EMRs, and what happens when we’re enslaved by our own software
Chapter 67. The problem with Open: How the Pentagon got shut down by Microsoft Office Macros, and Facebook got blamed for Trump
Chapter 68. Viruses, ransomware, data breaches, and why nothing is safe anymore
Chapter 69. The Day 1984 went missing: The DMCA, right-to-repair, and why everyone misses the old headphone jack
Part 16: Crypto: Let’s recreate all our problems, but on the blockchain
Chapter 70. Bitcoin: revenge of the cypherpunks
Chapter 71. ICO summer: the perfect hallucination of a new way to pay for everything
Chapter 72. The Howey Test: Open versus closed versus the SEC
Chapter 17: Scarcity
Chapter 73. A bus. You’ve invented a bus. The startup ideas that fix the world – if you’re an eligible customer
Chapter 74. The robots are going to take all the jobs! The panic over automation that feels different this time
Chapter 75. They’re Selling Your Data! How we went from “Data is the new oil” to GDPR
Chapter 76. Surveillance Society: from targeted ads to ethnic cleansing and everything in between
Chapter 77. Unauthorized Bread: the actual dystopias that aren’t far off
Chapter 78. Assisted Living for the Young: How San Francisco became a warning glimpse of the future
Chapter 79. Scarcity is conserved: Scarcity in complex systems never goes away, it only moves around and changes form
Chapter 18: Abundance
Chapter 80. The Rise of the Rest: New cities and new founders mean new opportunities to solve important problems
Chapter 81. Yin and Yang: How platforms and aggregators neutralize each other’s worst effects
Chapter 82. Crypto means Cryptography: rebuilding the internet around safety and privacy
Chapter 83. Better than Antitrust: how adversarial compatibility, fixing the DMCA, and getting rid of lock-in will help fix software
Chapter 84. FOMO: How the right social conventions and legal templates turn our worst impulses into positive change
Chapter 85. Our future is abundant: The optimist’s take for why the future of software and internet technology will blossom with abundance, rather than be strangled by scarcity.