Thursday, August 25, 2011

Help! Marc Andreessen's Software is Eating our Future!

Help! Marc Andreessen has seen the future--and it frightens me.

Andreessen got the tech world talking last week with a stirring Wall Street Journal article entitled, "Why Software Is Eating The World." Andreessen, the visionary who co-developed the first widely used web browser and founded Netscape, has a strong vision for the future. "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," he writes, and that makes him "optimistic about the future growth of the American and world economies."

I fear Andreessen is right but also very, very wrong. It's not that I don't share Andreessen's vision of an interconnected world and the power of software; I do! But I fear he (as software gurus are wont to do) focused merely on the technical aspects and not the more vital underlying human, cultural and economic impacts.

I have concerns with Andreessen's analysis in ways both small and large. First, I think Andreessen gives short shrift to the importance of the hardware that stores, delivers, runs, displays and transacts his beloved software. After all, if hardware didn't matter, Google wouldn't have just dropped a third of its cash on Motorola, nor would Apple be so obsessed with controlling the entire front-to-end consumer experience.

I also believe it is highly debatable that Groupon, Skype and Twitter are, in his words, "high-growth, high-margin, highly defensible businesses." These companies may eventually earn those adjectives, but Groupon lost $103 million in the second quarter of 2011, Skype lost money five of the last six years and Twitter was profitable in 2009 but in the red in 2010. Plus, while Andreessen is quick to promote the success of specific software-driven companies that now are thriving, he seems to have forgotten the many that are gone or, Flooz, eToys, Geocities, Peregrine Systems, Commerce One, Corel, MySpace, AOL, Wesabe, Andreessen's own Netscape and Microsoft (which in the last decade is off 20% while the Arca Technology 100 Index is up 109%), for example.

But it is not Andreessen's views on hardware and current valuations that are my greatest concerns; rather, I fear he has not truly considered software's future impact on the economy at large. Nor do I believe he has adequately valued the importance of people, customer service, brands and social media.

Marc Andreessen's Future is Gloomy

Reading Andreessen's article, I recalled a vision from Fritz Lang's striking 1927 film, Metropolis, where the managers live luxuriously above ground while the workers toil in horrifying conditions beneath the surface of the planet. Andreessen waxes at length of the wonders of software before breezing past software's sobering implications in a single paragraph. "Many people in the U.S. and around the world lack the education and skills required to participate in the great new companies coming out of the software revolution... (They) will be stranded on the wrong side of software-based disruption and may never be able to work in their fields again." It's difficult for me to match Andreessen's optimism of future economic growth with his acknowledgment that so many will be left behind.

Andreessen seems to feel software is a zero sum game--people will lose their jobs, but that's okay (in the end) because "every company I work with is absolutely starved for talent." In Andreessen's vision, it will all balance once we can get a new generation of workers trained for high-tech jobs as "software engineers, managers, marketers and salespeople in Silicon Valley." However, technology isn't zero-sum--as software increases productivity, it replaces those messy, benefits-demanding, sick-day-taking, raise-expecting employees. It is certainly true that today we lack workers with the right skills, but even if every displaced worker had in-demand skills, there still would not (and will not) be enough high-paying jobs to go around.

Andreessen's examples demonstrate software's effect on employment. He notes "Amazon is a software company" that was promoting digital books over physical books "while Borders was thrashing in the throes of impending bankruptcy." Borders is going out of business, leaving the 20,000 people they employed at their peak without jobs. Meanwhile, book-printing employment is down from 38,000 to 31,000 over the past decade, and it isn't difficult to imagine most of those jobs disappearing before 2025. And let's not forget the troubles of the independent bookstore--more than 1,000 bookstores closed from 2000 through 2007, leaving about 10,600 unemployed.

Amazon has not hired a number of people equal to those who've lose their jobs to online book sales and eBooks. Amazon employs 33,700 people, but only a portion of those are in the book business, and what do you suppose will happen to Amazon's employment when a majority of books are zapped to Kindles rather than being physically warehoused, picked, packed and shipped? The impact of Amazon's technology on Amazon's stock has been quite positive, but its beneficial impact on the overall economy is debatable. (And don't ask state revenue departments about the benefits they reap from Amazon--the company is fighting a state-by-state battle to avoid collecting sales tax in order to duck what Credit Suisse estimates would be a $581 million annual hit to revenues.)

The problem doesn't stop with Amazon and books. Andreessen also cites Netflix, which employees 2,200 people but has almost single-handedly put 7,000 video rental stores out of business. And he praises Pixar, a company whose creative output I revere, but which has also replaced scores of animation workers with more powerful, flexible and efficient animation technology. And Andreessen's list goes on to include online photo distribution sites that replace photo process workers, digital music systems that replace those employed in CD production, distribution and retail, and LinkedIn, which Andreessen predicts will "eat the lucrative $400 billion recruiting industry." (Does Mark realize that $400 billion primarily consists of people's salaries?)

Where's the Human in Marc Andreessen's Future?

Andreessen is correct--software is transforming the world, and it's just getting started. Computers even may replace those jobs you might have thought safe in our digital world. Did you watch IBM's Watson beat Jeopardy's two biggest all-time winners? How might organizations put that same sort of artificial intelligence and computing power to work? Robot journalists? Robot SoldiersRobot investment managers?

What about the jobs of the 2.3 million people in the US employed as customer service representatives? Notes an IBM CTO, "Imagine if you had a system where you just called Watson, asked a question, and you get the answer in real time." Before you object and tell me you'll never have a conversation with a computerized service rep, take a moment to recall that 15 years ago many people mocked the idea that consumers would go online to make their own travel arrangements, apply for mortgages, access their credit card or bank account information, acquire news, watch TV or perform dozens of other online tasks that now are common.

If customer service can be automated, why not social media? Imagine tools that respond to customer tweets and posts with instantaneous emotionally and factually correct responses (with no risk of an accidental "F bomb" or sarcastic retort). Today we are waging a battle to make organizations more human, but might we be about to lose that battle to an army of bits and bots? Can interactions in social media be made more human than human?

I don't think so, because what Andreessen misses is that software isn't really the differentiating factor that separates the winners from the losers. Every company has adopted software, yet some fail while others succeed. Software may be integral to success nowadays, but no more than great leadership, smart and passionate people, differentiated strategies and brands, human interactions and great customer experiences.

What is eating the world isn't software; it's customer focus. The digital space has made comparison shopping, experience sharing and brand switching easier than ever, and that has forced companies to adopt new agile models centered on the needs of individuals rather than masses. That couldn't happen without software, but it still is just one piece of the puzzle. Andreessen is right--Amazon has mastered software--but the company's success isn't because of software. Just ask founder Jeff Bezos:
“If there’s one reason we have done better than of our peers in the Internet space over the last six years, it is because we have focused like a laser on customer experience, and that really does matter, I think, in any business. It certainly matters online, where word of mouth is so very, very powerful.”

Software can replace some human tasks; it can disintermediate distribution channels; and it may someday answer your questions when you call a customer service line. But software cannot compel you to care, make you root for it to succeed, encourage you to aspire to a higher calling, or convince you it has your best interest at heart. Humans, customer service, great experiences and the authenticity of social media are, to me, the antidote to the unfeeling efficiency of software.

Am I naive to think that software isn't eating the world and human empathy still matters? Perhaps, but I don't really like where Andreessen's path leads. I'm no Luddite, but I wonder who Marc thinks will pay for those Amazon eBooks, Skype services and ads that power Facebook if software progressively displaces millions out of the workforce.

The limits of software won't be reached because Moore's Law taps out or due to other technical roadblocks; instead, software can be put into its proper place with the words, "I care." I care... to conduct business with an enterprise that gives me better and more compassionate customer service. I care... to pay a little more for the company that treats its employees better. I care... more for a company of people than a collection of servers. I care... about a brand that stands for something. I care...

Everything marketers and communicators can do to make people care--about your brand, employees, service and story--helps to make the future a little brighter and a little more human.


jennifer said...

I think Andreesen gives importance to both hardware & software.

Ferguson_C said...

Thoughtful post. Well done.

Augie Ray said...

Jennifer, the word "hardware" does not appear a single time in Andreessen's article. "Software" appears over 50 times. And Marc gives a clear indication of his view on hardware vs. software several times; in fact, his opening sentance is "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." That's a pretty clear distinction between hardware and software!

Thanks for the comment!

Augie Ray said...

Chris, thanks for the comment. Sometimes I wrote blog posts I think are sorta uninteresting, and they get retweeted a hundred times. This one I thought was really thoughtful, and almost no one seems interested. Just goes to show--you never know!

chaznova said...

This is my first visit to your blog. And I'm pretty sure my first comment to any blog. (I've been one of those "invisible" readers on blogs, etc.) I love technology but am just starting to explore the social media landscape. I guess my next step is to sign up for Twitter and follow you!

This IS a really thoughtful post! And it's my guess as to why it didn't get retweeted a hundred times.

It seems these days no one wants to take the time to "think". In our current culture, people want everything fast and easy. Thought requires time and effort.

Concerning the software/employment tradeoff, it seems that there is a seismic shift in employment trends in the US, and technology as a whole is a huge factor - software is just one part of techonolgy.

For me, your post is most thought provoking in the social network area as it relates to marketing and customer service. Bits like "interactions more human than human" and "authenticity of social media" definitely strike a cord. At the end of the day, there will never be a substitute for human interaction. Biologically, we are programmed to be social, right?

How do we measure the success of our customer service efforts and social media efforts? Will digital relationships always be more shallow than in-person relationships? How do we find the balance between automated efficiency and authenticity?

I look forward to reading more of your posts!

Unknown said...

I almost never post comments on articles but I agree with "chasnova" that this one deserves highest praise. Augie, thanks for this exceptionally well done and courageous article! I believe it could have been done in this way only because it was written by a human with a heart, not by a software. Being an IT professional since the mainframe days I still struggle with finding yet another job after being laid off and after learning yet another business/IT skill. What I love about your thinking is that you CARE, and as long as we do not lose that aspect of our human thinking we can be sure that we will dominate (eat) our software or anything that comes out o fit, not the other way round. I am looking forward to reading more of your posts! @azra13

Sam Tester said...

Coming back to re-read this article almost 5 years after it was written and I'm impressed by how well both Marc and you anticipated the future we're now living in. Yes, software has continued to transform every industry on the planet, and yes, there are millions of people who have been disrupted by these changes, losing low-skill jobs to software and robots that never tire. And it will all just continue. The author's points about disruption and job loss are all valid - but our society is not going to slow the pace of innovation to figure out how to ensure everyone can catch up. The level of disruption is only going to get worse.