America’s Future Dominance in the Global Economy

Part 2: Software Replaces Manufacturing

As discussed in my last post, thanks in great part to the simplicity of the English language, the only truly successful software companies up to this point in the history of the world have been American companies, sans SAP which, one can argue, operates like an American company despite being based in Germany. American companies like Microsoft, Oracle, and Apple were at the forefront in the 1980s during the PC revolution and then the dot com boom gave way to more great American companies like Yahoo, Amazon, and Google.

Notwithstanding the success of these firms, we are going to look back at these companies’ influences in the 1980s and 1990s and judge them as miniscule compared to American software influence in the decade to come.

As mentioned in a previous post and to prove my point here, think about how and when you used the Internet in the 90s. You used it in an office, in a cubicle, 3 hours a day, 5 days a week. At its inception, the Internet only affected white-collar workers during the workweek. And even in the year 2000, 17 years after it’s beginning, only 360 million people worldwide had access to the Internet. That’s 360 million people out of the 6 billion on the planet, using the Web for 15 hours out of their workweek.

Of course, roughly 6 percent of the world’s population on the web for 10 percent of each week is no small accomplishment, but in relative terms it is no comparison to the mobile wave. I predict there will be 5 billion people with smartphones in 5 years. That’s 5 billion people with access to mobile technology 24 hours a day, 7 days a week, and probably using mobile during every waking hour of the day. That makes mobile technology roughly 90x more pervasive per week than the Internet on a PC.

Mobile technology will have that influence because software is infecting every industry. The mobile wave is about the impact of that software. About half of the economy is now going to dematerialize into software, and that software will be running on a handset.

Within 5 years, there will be 5 billion smart phones on the planet, and that means anything that can dematerialize to a smart phone will. But what will  that mean to you? First, the obvious stuff: you will start your car with a smartphone. You will open the door to your house or apartment with a smartphone. Your passport, your driver’s license, your credit card, your loyalty card, and cash all goes away. Just about everything in your wallet and most products in your purse become software on your phone.

So how does all this relate to my point about America’s future dominance in the global economy?  To make all of this happen, American companies have written and will continue to write all of these pieces of software. And, by the way, just to reinforce my point, the tape recorders, cameras, and other products in your purse that used to be made by the Japanese, the Koreans and the Chinese; now they’re icons on the screen, manufactured by English-speaking computer programmers.

Just as software has already and will continue to replace everyday products, so too will software programming begin to replace traditional manufacturing.

Traditional manufacturing requires local benefits. What local benefits do you need to write software? Does the fact that you lived in the country matter? How about the fact that the local union liked you, or the fact that you paid off the local police force?  Or the fact that the local politicians supported you, or that the local government regulation board mandated your product? Does any of that matter? Not really.  You’ve heard of disruption?  Well, obliteration tends to work wonders in creating change.

And part of that change, thanks to another important impact of software, is the formation of global software networks. I’ll explore this topic in my next blog post.