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New Economics, New Software
AI is revolutionizing the software industry by dramatically lowering development costs. This shift is empowering independent creators and small teams to rival tech giants with innovative, personalized software experiences.
Part two
By Ed Landon
10.15.2024
Summary:
The software industry is on the cusp of a transformation, mirroring the recent history of digital media. Just as digital platforms lowered barriers to content creation, unleashing a wave of independent creators once dismissed but now rivaling traditional media, AI is dramatically reducing the cost of software development. This shift is leading us to an era where millions of independent developers and small teams will create software experiences that will creep into the domain of established tech giants. Software is becoming like content.
01
From Izakayas to Software
Step into Japan's backstreets with me for a moment.
You're surrounded by cozy 8-seater izakayas and intimate ramen shops. These are places where genuine connections flourish, embodying hospitality at its finest. Now, contrast this with Applebees – a vastly different experience (no further description needed).
Where does your brand fall on this spectrum of hospitality?
The magic of these intimate Japanese experiences is that once encountered, they slowly become our expectation. They exist because Japan's environment and economics make them feasible. In pricier cities, such experiences are often absent for the same reason.
But let’s extend this analogy to software now. With the costs to produce software plummeting, it’s introducing new economics and a new environment that allows for personalized, cozy experiences to be created. Things are going to get wild…
02
The New Economics of Software
Most tech revolutions begin when costs drop by an order of magnitude
For the first time in history, anyone can build personalized digital experiences by simply describing their vision to AI. We’re not all the way there yet, but squint your eyes and you’ll see what the future might look like.
The recent history of digital media might give us a glimpse into the future of software. The internet transformed media by making it cheaper and easier to create and share content, leading to an explosion of indie media personalities & brands that thrived on serving niche communities with new content types. Today, it’s completely normal to see YouTubers and TikTok stars compete with ‘mainstream media’ giants for views and engagement – but this wasn’t always the case.
Software is following a similar route. Yesterday, the cost to produce software was (more or less) the same whether you built for 50 users, or 50,000 users, and that forced all brands to aim for the masses.
Today, as building quality software for 5 users becomes affordable, the standard will shift quickly to depth over breadth – resonance over reach. The internet is already blooming with announcements and launches of niche apps, each crafted for niche communities rather than for mass appeal. If you are a large market incumbent seeing these indie creators in your peripheral, keep an eye on them – what they build may look like toys today, but they’ll creep into your domain sooner than you think. If you are one of those indie creators yourself, congratulations– opportunity has never been greater.
The rising competition, the increased diversity in software, the heightened user expectations – it’s all leading brands to a critical juncture. You must go far beyond offering utility. As a brand, you must find your niche community, understand their specific needs, values, and goals and create communal experiences they can connect and resonate in.
This is the new moat. By resonating with niche communities, you crack distribution, you gain a vantage point into their lives that help push your tech further, and you create meaning through their identity that makes you irreplaceable relative to faceless AI tools.
read more in part III
