Back in 2011, Marc Andreessen wrote a widely cited blog post where he argued that "software is eating the world." In some ways, it feels like just yesterday that I first read it. But it has been 15 years, and boy, has the world changed. Now, the worry is that AI is eating software.
It has become significantly easier to write code, to the point that in the span of only two years, Google has gone from 0% of its new code being written by AI to now over 75% of it! But it's not just big companies. I know lots of non-technical people who wanted software that could do "X," and so they just vibe coded a solution. Done.
In fact, I've been experimenting and doing the same for several months now. It has become so easy that I feel an obligation to do it. But as we know, if everyone can do it, then it means there is no longer any value. The value will necessarily need to be created in other ways.
Earlier this week, we spoke about Uber and how being asset light — previously a hallmark of the gig economy — is potentially now a liability. Well, this is a broader theme. Josh Brown, CEO of Ritholtz Wealth Management, even coined a term for this: HALO. This stands for Heavy Assets, Low Obsolescence.
The general idea is that you now want physical stuff with a big moat that is immune to being disrupted by someone in their parents' basement using Claude Code. Hard assets are, arguably, where you want to be today. I guess that means real estate is back, baby!
Cover photo by Tim Mossholder on Unsplash
Software businesses are generally high margin businesses. But along with this feature comes some risks. Here's an excerpt from a recent post by Scott Galloway (which is actually about FedEx):
With any software start-up, there is a non-zero probability that you wake up the next day and find that a better-resourced firm (Microsoft, Oracle, Salesforce, Adobe) has deployed 200 engineers to copy your product, bundle it with their stack for free, or near free, and … welcome to zero. I believe this is happening to Slack, but more slowly than Netscape, as Microsoft’s General Counsel has likely coached Satya to charge a nominal fee for Teams and let Slack bleed out, instead of putting a bullet in its head and stirring the DOJ from a 3-Ambien slumber.
Real estate, by comparison, doesn't get disrupted in quite the same way. A location/city can lose its economic purpose (Great Grimsby is just one example), but as long as there are growth tailwinds the real estate should do well.
Venture capitalist Fred Wilson has on many occasions written about how he (and his firm) made a fortune in the dot-com era, only to lose it all and have to remake it again over the subsequent decades.
One the lessons learned from that experience (according to his blog), was to take some of that second tech fortune and invest it into hard assets -- namely real estate. That feels right to me.
Uber is currently testing a feature in a few neighborhoods in Boston and San Francisco called Uber Express POOL.
Like the regular version of Uber POOL, this is a shared ride. But with Express POOL the app now automatically generates “smart spots” that are easy to drive to and close to the origin and destination of multiple passengers.
So instead of a direct pick-up and drop-off, you now need to walk a few blocks to one of these dynamically created “smart spots.” In exchange for the added inconvenience, you get 25% off your fare.
What’s immediately fascinating about this feature is that it further blurs the line between Uber and public transit. These “smart spots” are effectively low-volume and ephemeral transit stops that pop-up based on demand and then disappear.
It makes the notion of a fixed stop and transit schedule, particularly in low usage areas, seem inefficient. Now imagine if we created some sort of visual marker on the street every time a “smart spot” was emerging based on demand.
It is clear that Uber is trying to price these rides so that they are competitive with conventional public transit. And there’s no reason that this technology couldn’t also be applied to larger vehicles, such as buses.
I find this fascinating. And it’s a perfect example of what we talked about in yesterday’s post. This is software and networks being layered on top of the built environment.