Bill Gates Noticed a Economy Trend No One Is Paying Attention To

A word I don't see in the article or tweetstorm is commodity, which is the foundational unit of our economy. A commodity has the "old economy" property Gates is talking about where the 10th car costs the same to manufacture as the 1000th. A created thing where virtually all the expense is in the initial creation, after which duplication and distribution is virtually free, is no longer a commodity. As our entire economic system, and social system, is based in the end on the commodity as the base unit, this will have profound effects as time goes on.

In those days vertical scaling was a typical solution to the problem of too many users. But the cost of exotic hardware goes up with power, so the cost of a new batch of users is higher than the cost of previous batches. Even if you managed horizontal scalability you ended up paying a kings ransom for networking hardware to link them all together. And then there’s the databases.

These supposed economies of scale never really materialize. We spend a significant fraction of our development budget on improving performance and availability, learning or creating more sophisticated tools. None of that is necessary once your project stagnates, which is why maintenance software is attractive to enterprises.

These days we can get away with a lot more horizontal scalability, but most of our algorithms scale logarithmically. Many are nlogn, we strive for mlogm (where m is active users) but get stuck with mlogn often. But if you are dependent on ad revenue you want to increase m so you get paid, so the distinction matters less than it used to.

Each customer costs at least logarithmically more than the last. That means your operating costs double when you sell 4 times as many copies. That’s not nearly as expensive as running Tesla, but it’s not zero. If you’re in charge of those strategy decisions and you aren’t aware of this, then you probably won’t have that job for long.

“Not enough people are paying attention to this economic trend”