If software is the new oil, be prepared for a wild ride. The oil industry is notorious for decade-scale cycles of over-hiring and then layoffs and under-hiring, rinse-lather-repeat.<p>Regardless, it's a good analogy, but be careful how far you take it. There's a _very_ important difference between the energy and other major industries. It's a difference that the software industry shares, but in the opposite extreme: The amount of capital needed to do business.<p>The energy industry is notoriously capital intensive. For my employer, a project has to be over 250 million to be considered a significant project. We have a _lot_ of those, including multiple projects in the 10-50 billion range. Sure, I work for a very large company, but even a "mom and pop" oil company (there are a lot, actually) needs tens to hundreds of millions to get started.<p>By contrast, the software industry prides itself on being able to get an initial product out the door with essentially no other investment than time.<p>At any rate, it's a fine analogy, but keep in mind that the oil industry is _very_ focused on building _big_ infrastructure. In that sense, oil companies have more in common with independent nations than with other companies. It's something to think about, at any rate.
I'm not convinced by this blog post that "software" is the new oil.<p>To me, it's the top talent of "software PROGRAMMERS" that's the "oil".<p>Let's pretend that Google Inc opensourced their entire software stack. Now, anyone can just spend money on hardware and datacenters and "replicate" what Google does in a certain sense. But did you really duplicate their abilities? Would intelligent and visionary investors fund such copycat endeavors?<p>I say no because smart people would realize you didn't replicate Google Inc's "hiring pipeline" of the best minds from Stanford/MIT/etc. Yes, we may have gotten a snapshot of Google's source code but we didn't duplicate their ability to attract desirable workers who can build <i><<the next future thing that's NOT in that source code dump>></i>.<p>Even Bill Gates had noticed this point: Google's ability to poach top talent from Microsoft was better than Microsoft's ability to attract Google defectors.<p>Same analysis can be done for Amazon inc. A person could take all their source code for ecommerce and warehouse logistics and I'm not confident he could outcompete Jeff Bezos. First, you must prove that you're hiring a better pool of candidates than Amazon.<p>Lastly, the "software" advantage leaks outside of the organization because others copy it (open source) or ex-employees with knowledge leave and reimplement it (legally) at their next gig. On the other hand, it's not as simple to make top compsci graduates switch their career aspirations from Google/Facebook/Apple in SV to SmallPotatoesInc in Alabama.
I think it makes more sense to say that data is the new oil, and software is the machinery used to extract, refine, store, and convert it into energy. AWS, Azure, etc. will be the Shell and BP of the data world. But not all data is created equal, and we still haven't gotten the refining process down.<p>Hopefully we'll be able to use digital oil to fuel more than just the great engine of personalized advertising, which seems to be where most of the revenue is coming from right now.
One of these is a capital-intensive industry that extracts finite resources from the particular areas of the earth that happen to have them. The resource is consumed on a continuous basis.<p>The other is entirely dependent on skilled labour, and once deployed continues to deliver value.<p>Software is much more like real estate: the first entrants erect a patent barrier around the best bits and use it to charge rent to everyone that clusters around the core. It's subject to gearing-driven bubbles.
And yet when you look at it, the biggest opportunities to create immense value added are on the hardware side of things: self driving cars, pharma (aging, cancer, etc.), robotics, batteries, power generation, interstellar expeditions, bringing billions of people out of poverty, etc.<p>I don't want to be dismissive, but the software industry might very well go through and M&A and commodification phase once it matures. It looks like oil now because those companies are big monopolies, will it last? I don't know, I wouldn't put all my assets in software, that's a bad idea in general anyway,
I don't know nearly enough about macroeconomic trends or basics to have an informed opinion on this, but I do wonder how much of the software giant's cash-generating power is eventually still based on industries that 'extract stuff out of the planet'.
Even if that dependency were indirect - say by the amount of oil/minerals/diamonds needed to produce a chip that your software needs to run on - such a dependency would still mean that software can never be as much of a 'primal' industry as oil is/was.
Difference between oil and software is that you can easily quantify oil (1 barrel) whereas it is tremendously hard to quantify the value of software product.
<i>Amazon, the company that “will never make money” surprised Wall Street last week with strong profits and it seems to me that they are going to start producing cash like these other big tech companies now.</i><p>I missed this... any good articles about it?
It's a grabby headline, but after reading it, it came across as an attempt to create a new business meme, rather than compelling arguments. All these companies make money through very different means, not just software. Most of them are valuable because they've monopolized sizeable chunk of consumer space through combination of good planning, products, designs, marketing, and a little bit of luck.<p>Also, there are other wildly profitable companies in other sectors that have been around for decades.
More specifically, it seems that he's referring to software <i>as a service</i> (or service as a software substitute, depending on your POV) as the one netting the surplus value. Distributed server-side applications with intrinsically limited client-side interaction and no standard release model or auditability so to speak of. That's actually a rather different beast than just "software".
"Facebook could have $20bn of cash in the next year and could be producing $20bn of cash a year soon."<p>Came here hoping to find a "Facebook could..." line when talking about revenue. Was not disappointed. :)
I feel 'data' or rather big data is the new oil. There are big monopolies which control a lot of it and are trying to make sense out of it, the likes of Amazon, Google, Palantir et. al. and similarly there are companies like ExxonMobil in the energy sphere. We could in fact extend this analogy to smaller players in the renewable energy zone which are trying to make better qualitative use of their resources and similarly you will find small startups trying to make qualitative sense out of whatever lesser data they have but with niche applications.
Assumes that software is a tangible item, when a more suitable term for it is the <i>wetware</i> between the CPU and a user's screen? This connotation of software with some form of product is analogous to selling sand to The Arabs. There is more than enough to go around, and it is not scare. Soo leave it alone and create products <i>borne</i> from soft, not make the soft the <i>product</i>.
Very vague comparison. Software is a technology and oil is a commodity.<p>you can't copy oil,
you can't open source oil,
software isn't limited
Another interesting related perspective that we used to give our (business information systems) students to argue about is "IT doesn't matter" by Carr (2003)<i>.<p></i>Can be found online at:
<a href="https://hbr.org/2003/05/it-doesnt-matter" rel="nofollow">https://hbr.org/2003/05/it-doesnt-matter</a>
I've heard the exobyte data centers called the 21st century's "refineries" or industrial plants. They are physical plants consuming large amount of electricity (and nearly no labor). Although valiant attempts are made to minimize environment costs, the overall energy consumption increases and data creation rapidly grows.
Oil is fundamentally rent-seeking. You're pumping money out of the ground. Software platform companies are the real equivalents.<p>I think the difference is that the state of the art shifts so quickly, long term survival for platforms is questionable. There's always a new player.
Amazon made 17 cents per share and that was enough to convince you? "strong profits"? Drink the koolaid much?<p>I'll sell you some shares in my software company at the same multiple. We've even got better margins. It'll be great. I promise.
“<i>We are long software</i>”<p>Of all the suit babble I ever heard, this must be the most incomprehensible. Juggling stock options apparently wreaks havoc on the speech center of your brain.
Hydrocarbons are something companies buy in order to burn or use to make other molecules they can sell.<p>Explain to me again how this is an analog for software?
The physical analogy isn't even close. The volatility at the present time may be applicable. Software is a product of someone's imagination, while oil is pumped out of the ground. Without invention of the combustion engine (also a product of someones imagination), all the oil in the world would be nearly worthless.