Stop calling them tech companies: GenAI and SaaS — are they really tech? It’s time to call a spade a spade.
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When I started angel investing in the late 1990s, a tech investment included a significant technology risk, with the potential upside being groundbreaking innovation. Being an investor at this time meant taking a considerable technology risk and betting on actual tech, such as nanotech, semiconductors or biotech.
E-commerce, albeit hyped and interesting, was not considered tech. It was “Business 2.0”, plain and straightforward, hype included.
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System shared this topic
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When I started angel investing in the late 1990s, a tech investment included a significant technology risk, with the potential upside being groundbreaking innovation. Being an investor at this time meant taking a considerable technology risk and betting on actual tech, such as nanotech, semiconductors or biotech.
E-commerce, albeit hyped and interesting, was not considered tech. It was “Business 2.0”, plain and straightforward, hype included.
I read four words then was hit with this.
You’ve just hit the article limit with your free Sifted account.
Ok, ok. If you insist. I won’t read your article.
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When I started angel investing in the late 1990s, a tech investment included a significant technology risk, with the potential upside being groundbreaking innovation. Being an investor at this time meant taking a considerable technology risk and betting on actual tech, such as nanotech, semiconductors or biotech.
E-commerce, albeit hyped and interesting, was not considered tech. It was “Business 2.0”, plain and straightforward, hype included.
This doesn't change the fact that SaaS is lucrative because unlike producing hardware, you can add users/subscribers without paying to produce additional units.
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This doesn't change the fact that SaaS is lucrative because unlike producing hardware, you can add users/subscribers without paying to produce additional units.
By that measure shouldn't Disney be considered a Tech company too? Or I guess banks and insurance companies.
I hadn't thought of it that way, but maybe the article (at least the small part I can read with no paywall) is on to something, Companies that sell access to technology or rely on technology to sell something else (he does give the example of e-commerce) should not be "Tech" companies.
The part I didn't get to is where the author draws the line to tell what companies ARE Tech.
I guess OpenAI or Google would qualify. They sell services but they are services they invented and made, with considerable researxh and investment. But what about Amazon or Netflix? -
I read four words then was hit with this.
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By that measure shouldn't Disney be considered a Tech company too? Or I guess banks and insurance companies.
I hadn't thought of it that way, but maybe the article (at least the small part I can read with no paywall) is on to something, Companies that sell access to technology or rely on technology to sell something else (he does give the example of e-commerce) should not be "Tech" companies.
The part I didn't get to is where the author draws the line to tell what companies ARE Tech.
I guess OpenAI or Google would qualify. They sell services but they are services they invented and made, with considerable researxh and investment. But what about Amazon or Netflix?I'm on board with it if people want to change the terminology around these things, but it seems like the core of what the author is discussing is the valuation of these companies and potential bubbles.
I think it makes sense that Disney and Amazon and Netflix who are able to make money through more of a SaaS-like model would have a higher valuation than a car company that has to produce a new car for every unit sold. Maybe there's a recent example of an over-valued car company we can think of?
Consider that an auto mechanic and a software engineer can have a similar problem-solving skill set, and could both be very intelligent. Why then does an auto mechanic make so much less money? It's partly because of the economies of scale involved with software. The owner of the software company can sell the software to thousands of clients without having to pay the software engineer to build the software thousands of times. The owner of the auto shop still has to pay the mechanic to perform every job every time and get paid for it.
So while I agree that Disney and Netflix maybe aren't "Tech" companies, it seems to me the real problem the author is grappling with is whether they should be valued similar to tech companies. So I guess the question becomes, are "tech" companies highly valued because they are expected to make some huge technological leap that shakes up industries, or is it because of the economies of scale inherent in the SaaS-like business model?
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I'm on board with it if people want to change the terminology around these things, but it seems like the core of what the author is discussing is the valuation of these companies and potential bubbles.
I think it makes sense that Disney and Amazon and Netflix who are able to make money through more of a SaaS-like model would have a higher valuation than a car company that has to produce a new car for every unit sold. Maybe there's a recent example of an over-valued car company we can think of?
Consider that an auto mechanic and a software engineer can have a similar problem-solving skill set, and could both be very intelligent. Why then does an auto mechanic make so much less money? It's partly because of the economies of scale involved with software. The owner of the software company can sell the software to thousands of clients without having to pay the software engineer to build the software thousands of times. The owner of the auto shop still has to pay the mechanic to perform every job every time and get paid for it.
So while I agree that Disney and Netflix maybe aren't "Tech" companies, it seems to me the real problem the author is grappling with is whether they should be valued similar to tech companies. So I guess the question becomes, are "tech" companies highly valued because they are expected to make some huge technological leap that shakes up industries, or is it because of the economies of scale inherent in the SaaS-like business model?
You make a great point.
But just to stay on the example of cars: besides the innovation on EVs, there's this horrible tendency to consider cars as tablets on wheels, both in the sense that you can forget about repairing them and in the sense that they are now increasingly considered low-margin hardware to run higher margin subscription services (or that the car itself becomes something you pay by use instead of owning).
If anything warrants high valuation for a car company it would arguably be the innovation on EVs, rather than the SaaS model.I hope the idea of Cars as a Service or Car Software As a Service dies before becoming too widespread. But if it doesn't, maybe car companies wouldn't become "Tech" companies, just more shitty subscription vendors.
And their stock should be valued as such, not for the largely unwanted "Tech innovation". -
You have JavaScript enabled by default ?
Doing so would break nearly all Internet access. Do you really run a whitelist rather than a blacklist? Is it not tedious to add hundreds of domains to one rather than a few to the other?
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It's crazy that you're being downvoted. I guess they avoid The Atlantic, etc. as well, despite the helpful info in such articles.
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You make a great point.
But just to stay on the example of cars: besides the innovation on EVs, there's this horrible tendency to consider cars as tablets on wheels, both in the sense that you can forget about repairing them and in the sense that they are now increasingly considered low-margin hardware to run higher margin subscription services (or that the car itself becomes something you pay by use instead of owning).
If anything warrants high valuation for a car company it would arguably be the innovation on EVs, rather than the SaaS model.I hope the idea of Cars as a Service or Car Software As a Service dies before becoming too widespread. But if it doesn't, maybe car companies wouldn't become "Tech" companies, just more shitty subscription vendors.
And their stock should be valued as such, not for the largely unwanted "Tech innovation".I agree. I'd like to see some separation between the car manufacturer and the software. Any computers in the car should support whatever operating system you want to put on it. Things like controlling the car's functions would just be device drivers. If the car company also wants to get into the SaaS business, fine, but you shouldn't be required to pay for that software to operate the vehicle.
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Doing so would break nearly all Internet access. Do you really run a whitelist rather than a blacklist? Is it not tedious to add hundreds of domains to one rather than a few to the other?
I run a whitelist. I'd rather be more private than know what to blacklist (and there's often a lot of extra JavaScript that gets called, mostly for tracking).
It's not that tedious. You just add as you use the internet. Refresh the page when you've whitelisted.
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Doing so would break nearly all Internet access. Do you really run a whitelist rather than a blacklist? Is it not tedious to add hundreds of domains to one rather than a few to the other?
I would feel like wading through sewer bare footed if I had all javascript enabled by default
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Doing so would break nearly all Internet access. Do you really run a whitelist rather than a blacklist? Is it not tedious to add hundreds of domains to one rather than a few to the other?
I actually do this. With uBlock Origin you can set to default block any JS (or just 3rd party JS) and then whitelist by domains. Then you can lock in per-site settings.
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When I started angel investing in the late 1990s, a tech investment included a significant technology risk, with the potential upside being groundbreaking innovation. Being an investor at this time meant taking a considerable technology risk and betting on actual tech, such as nanotech, semiconductors or biotech.
E-commerce, albeit hyped and interesting, was not considered tech. It was “Business 2.0”, plain and straightforward, hype included.
Remember WeWork? It’s the ultimate example of putting tech-coloured lipstick on a pig.
Daaaaaaamn
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I read four words then was hit with this.
You’ve just hit the article limit with your free Sifted account.
Ok, ok. If you insist. I won’t read your article.
-
When I started angel investing in the late 1990s, a tech investment included a significant technology risk, with the potential upside being groundbreaking innovation. Being an investor at this time meant taking a considerable technology risk and betting on actual tech, such as nanotech, semiconductors or biotech.
E-commerce, albeit hyped and interesting, was not considered tech. It was “Business 2.0”, plain and straightforward, hype included.
-
By that measure shouldn't Disney be considered a Tech company too? Or I guess banks and insurance companies.
I hadn't thought of it that way, but maybe the article (at least the small part I can read with no paywall) is on to something, Companies that sell access to technology or rely on technology to sell something else (he does give the example of e-commerce) should not be "Tech" companies.
The part I didn't get to is where the author draws the line to tell what companies ARE Tech.
I guess OpenAI or Google would qualify. They sell services but they are services they invented and made, with considerable researxh and investment. But what about Amazon or Netflix?By that measure shouldn’t Disney be considered a Tech company too? Or I guess banks and insurance companies.
Yeah, in the same way that every company that uses a phone is a phone company.
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I would feel like wading through sewer bare footed if I had all javascript enabled by default
Dang it... I'm starting to feel the appeal now, lol! Hmm.
