00:00hello this is Benedict Evans and this is
00:02the andreessen horowitz podcast i'm here
00:04with my colleague Steven Sinofsky I put
00:08a presentation online that I gave it a
00:09Wall Street Journal conference and that
00:11I wrote in tech summit conference this
00:13week where I talked about the way that
00:16mobile is changing the tech industry but
00:19also the way that it's changing the
00:20broader economy moving out into broader
00:22sets of industries you can see the
00:24presentation with the talk that I gave
00:26with it on a 16z comm and Steve and I
00:31are going to talk through some of the
00:33themes within that so Steven there were
00:36kind of three things that I wanted to
00:37capture in this presentation and they
00:40both kind of give rise to a bunch of
00:42interesting questions the first was just
00:44to point out how much bigger mobile is
00:46than PC industry and then consumer
00:48technology has been in the past
00:50but more importantly to kind of make the
00:53point that it's not so much that it's
00:54bigger as that this is the first time
00:56that tech actually sells to almost
00:58everybody that previously you sold
01:01mainframes to companies you sold pcs to
01:03upper middle-class households but mobile
01:04and therefore smartphones is a product
01:07that 70 80 90 percent of people on earth
01:09are going to have and that's kind of a
01:11profound change and it changes the tech
01:14industry and it changes how the internet
01:16functions but it also gives rise to
01:19scape for these kinds of products for
01:21the tech industry overall to change much
01:23broader parts of the economy for kind of
01:25software and mobile and mobile devices
01:26to push into changing areas that maybe
01:29haven't been affected as much by
01:30technology so far yeah what to me is so
01:34fascinating about this is how when
01:36something has such a huge exponential
01:39change it gets very very hard to predict
01:41and it does appear to that the closer
01:44you are to like actually helping make
01:46the change in a weird way it's almost
01:49harder for you as an individual to see
01:52the changes because you're mired in all
01:54the details you know you can just be a
01:55normal person who one day is hailing a
01:58cab in the rain and can't get it and
01:59then the next day you have this app on
02:01your phone and cars just show up to
02:02exactly where you are and that's a huge
02:04change but to those of us in the
02:06industry that have seen this gradual
02:08rise or even maybe the rise and then
02:10they just went away because they didn't
02:12work out in the bubble and they come
02:13back things never quite seem as big as
02:16they might actually be when they're when
02:18they're happening and so there's this
02:19push back to change when it's happening
02:22it feels and I think that's that's why
02:23it's also because you have these these
02:25step changes these generational changes
02:27and say you go from doing stuff with a
02:30mainframe and a terminal to doing stuff
02:32with a PC and you go from doing stuff
02:33with a keyboard to doing stuff with a
02:35graphical user interface and then you
02:37have to go from native applications to
02:39the web and then you go from the web to
02:41mobile and then you go from mobile web
02:44to mobile applications and at every
02:46change the people who were profoundly
02:50comfortable and know absolutely how to
02:51do everything that they wanted to do
02:53with the previous generation look at
02:54this and say well this is a toy right
02:56it's a toy or you know it's it's
02:58actually what happens is there's like
02:59basically you know innovators dilemma
03:01applied to a person so it was very deep
03:04personal thing where where your own
03:07skills like come in in a sense come into
03:09question and you know developers like to
03:12think in code and code is code is code
03:14but actually there been huge profound
03:16changes in the code that gets written
03:18and people do often resist that that
03:21those kind of changes and and what's
03:23amazing is that even as an engineer
03:26going through all of those changes that
03:27you mentioned I mean my freshman year of
03:29computer science was on a mainframe
03:31Mini's I went through all of them at
03:34it was amazing to me when I think back
03:36the people who just said that this new
03:39next step was never gonna be the next
03:41big thing and and it it's it's just
03:44unbelievable like it and it wasn't I
03:46mean like certainly you know everybody
03:47said the PC was a toy compared to the
03:50mainframe I mean like in fact it was a
03:52toy compared to many computers which
03:54were basically just larger proprietary
03:55pcs and then the PC you know everybody
03:59was just like you know cuz it looked
04:01just like a mainframe when you used it
04:03and then the graphical interface came
04:04out and everybody just said well the C
04:06this is just a toy I mean I you know I
04:09worked in the Mac lab when the Macs came
04:11out on college campus that in 1984 and
04:14people used to come in and literally
04:16treat them like they were toys like it
04:18was like I'm gonna go over here and do
04:20my punch cards with my statistics and
04:22over here I'm gonna just draw a picture
04:23for for a fraternity or sorority party
04:26and and yet that as as things become
04:29ubiquitous then all of a sudden the
04:31nature of what everybody uses them for
04:33completely changes and I think that's
04:34the essence of what's really going on
04:36with mobile it totally changes the the
04:39very nature of of activities and
04:41businesses well this is a thing that
04:43what happens when each wave of tools
04:44come into a business what we mean and
04:46it's not even just a technology thing
04:47you could apply it to you know
04:48automobiles or you know new types of
04:51things in retail the what first of all
04:54happens is that the new thing has to fit
04:56the existing way of doing it and you say
04:57you torture it and kind of it
04:59and you make it fit what you did before
05:00and then over time people come in and
05:03this is where the kind of the
05:04transformative change comes in people
05:05build an entirely new business around
05:07the stuff that is only possible because
05:08of this new technology so the example
05:10that I give in my presentation is if you
05:12think back to things like Walmart or
05:14McDonald's which are fundamentally
05:17enabled by things like trucking or
05:18interstate highways and you know
05:21department stores use trucks and
05:22interstate highways as well but it's
05:24intern department stores can't get
05:27destroyed by this is fundamentally new
05:29technology and it's the people who look
05:30at this and grasp ok you could build a
05:32big box store using this technology
05:35that's actually what redefines how that
05:38industry works and I think you see the
05:39same thing with computers so they first
05:41of all they come in and you'd write your
05:42memo and you print it out and you put it
05:44in the interoffice mail in order live on
05:45somebody else's desk two days later and
05:47then stuff would happen and you had a
05:49typewriter somewhere in the corner of
05:51the office even when I entered the
05:52workforce there was a typewriter
05:53somewhere in the corner of your office
05:54to fill in you know carbon paper forms
05:56and things but then over time what
05:59happens is you know the the value the
06:00work flows flows alter to fit the
06:03definition and to fit what becomes
06:04possible with these new tools and so
06:06people now look at a smartphone or a
06:09tablet and I think the sort of two
06:11mistakes that people make the first is
06:13to say well I enter high volumes of text
06:15or I do this precision work with a
06:17detail work with the mouse you can't do
06:18that on a smartphone or keyboard
06:19therefore it's useless and the answer is
06:21yes but most people don't actually do
06:23that that's a very narrow set of idea of
06:26what it is of all the work that is being
06:27done in the world today and the second
06:30answer is is you actually your job to
06:33make a 45 slide PowerPoint once a month
06:36or is it your job to run a sales team
06:39sure that everyone in the organization
06:41knows what's going on because you
06:43probably can't do a 45 page PowerPoint
06:45on a smartphone B probably can connect
06:47to Salesforce and understand what your
06:49team is doing right and what what
06:51happens is what when before you what
06:54people need to do before they get their
06:55head around those that sort of your
06:57accountability versus your work process
06:59is you always have to take a deep breath
07:01and realize whatever it is that we all
07:03use today there was a point in time when
07:07it was the disruptive thing yeah and we
07:10often seem to forget that well I
07:11remember when the internet with CB radio
07:13right and and so and now it's this
07:15ubiquitous thing that takes that takes
07:17over and has changed the way we view and
07:19do everything and it to me it's always
07:21those interesting moments when there was
07:23a before the mouse or there was a before
07:26you know a touchscreen phone or there
07:28was a before service oriented apps and
07:31just because they're ubiquitous now
07:33doesn't mean that they're the permanent
07:35thing yeah and so what I think is most
07:37important you know when I when I think
07:39about being an engineer or being part of
07:41running a business is is how you really
07:43embrace these insane changes like
07:46whatever lanes you think were carved out
07:48but by the time you got there our jobs
07:50are all to carve out new lanes and to
07:52you know in Steve Jobs who's you know
07:54destroy the business that you're
07:55currently in and in order to make a new
07:57one yeah I mean I think that's true I
07:59mean the other interesting strand here
08:00is you know right now there are as it
08:02might be three billion people online and
08:04there's probably about they'll by the
08:06end of this year there'll be two billion
08:07iOS and Android smartphones plus you
08:09know Windows Phone and maybe a few
08:10BlackBerry's left blink ring on and that
08:14will go to four billion in the next five
08:16years or so and so the number of people
08:18online will go to four billion give or
08:19take and there's a few like problems
08:21with that like you know cellular
08:22coverage and you know the price of data
08:23and so on so there's a bit of a gray
08:25area at the edges but that means that
08:28there's going to be a billion people
08:29whose first experience of the internet
08:31or the first experience of owning a
08:32device that can use the Internet is
08:34going to be a smartphone and quite a
08:37large proportion of the people who are
08:38currently going online in pcs are going
08:40to shift all of their usage to a
08:41smartphone because actually if you're
08:44not using a PC at your desk why would
08:47you buy it what would you use by to use
08:49the Internet at home would you buy a
08:51smartphone would you buy a new PC would
08:53you see you have for the last five years
08:55and turn it on less and less and less
08:56and so you got to move to a point where
08:58you know as it might be half of the
09:00people online only have a smartphone and
09:02I'm a joy the great majority probably
09:05all the time that spent online will be
09:07happening on smartphones and so that
09:11kind of changes all sorts of other stuff
09:13in yeah out of me because I mean one of
09:15the points I made in the presentation is
09:16this kind of leverage effect and again
09:19it's you know just as in the PC came in
09:20it wasn't just that you could do your
09:21memos that you didn't need to change the
09:23type of the ribbon you actually could do
09:25all this transformation on these stuff
09:26that you wouldn't been able to do brave
09:27and there same thing with a smartphone
09:29that use not just you've got three times
09:31more devices it's that the smartphone
09:32has applications and sensors and it's
09:34completely frictionless cuz it's in your
09:36pocket everywhere and it goes with you
09:37all the time and it has payment and will
09:39continue to gain all of these
09:40capabilities and so it's not just that
09:43the opportunity is three times more
09:44devices it's more like 10 times more
09:46actual real value and opportunity right
09:48and and from a from an entrepreneur
09:50point of view what's fascinating to me
09:51is is you know it is like it's sort of a
09:54cliche but it is like everything mobile
09:57is everything because that's where all
09:59the innovation is happening that's where
10:00all the the the field is being moved
10:02like it's you know in college courses
10:04you learn mobile application development
10:06now you're going to learn new languages
10:08that are really tuned towards the mobile
10:09world and so you have to really embrace
10:12the fact that even if you're comfortable
10:13with the technology and it has an
10:15ecosystem of people around that
10:17technology like the the innovation is
10:19gonna slowly decay and it particularly
10:22in a relative sense to what's going on I
10:24mean I remember the first conference I
10:26ever went to on our in our industry was
10:27the very last conference the digital
10:29equipment held as a really giant
10:32conference was that still on the Queen
10:33Mary yeah they rented the Queen Mary and
10:35and you know it's like on a cruise ship
10:37and it's this crazy thing and I remember
10:40you know just recently going to another
10:41conference here in the valley and and I
10:44even remembered at the Digital
10:45conference I was just out of grads or in
10:48and I was like the young person
10:49everybody there seemed like grown-ups
10:51and I know what it's like to go to
10:54conferences where we're all of the
10:56things being talked about or what it was
10:57like at the conference ten years ago and
10:59I was just a conference a couple months
11:01ago here where it was just the second
11:03one that was held and it was filling
11:05Moscone Center and everybody in it it
11:07graduated college and all of the work
11:09was new in ways that things hadn't been
11:11done before they weren't rewriting old
11:13things they weren't they didn't even
11:14know what the old things were to rewrite
11:16and I think for me the the when once
11:19there's a phone everywhere it doesn't
11:20just change that everybody's got a phone
11:22and always gonna buy stuff online but
11:24all of the energy about writing new code
11:27and how apps are built and the
11:28architecture and the tools all are
11:30moving to that but these also happen
11:33really slowly and what happens is people
11:35look for the fact that it's happening
11:37slowly as evidence of non change and and
11:40each one of these generations I mean
11:42when when pcs had to replace mainframes
11:44you were looking at thousands of
11:46mainframes around the world that needs
11:48to get replaced and so that was one
11:50speed and then when the graphical
11:52interface came along it had to replace a
11:54few million DOS machines and then when
11:57the internet came along it had to ride
11:59on top of tens of millions of computers
12:02and but and so now you have a billion
12:05pcs they don't just evaporate and all of
12:08that work doesn't change but it is
12:10actually changing and I think I look at
12:12what happened with with this the recent
12:14Adobe conference and they showed two
12:16forms of new kinds of work that I think
12:18really speak to the way that the
12:19ecosystems are changing first they
12:21showed a lot of work happening on
12:22tablets whether they were Windows
12:23tablets or iPads and then they showed a
12:25lot of work that used to happen in their
12:27full suite of applications happening in
12:30Adobe Creative Cloud using apps and this
12:33is like the hardest core most precise
12:36professional kind of work that they're
12:38talking about yeah it's kind of
12:40interesting like things reach that the
12:41kind of purest and best stage just
12:43before they over yeah so we have the you
12:46know this twenty seven seven 27-inch
12:47iMac with his incredibly fast chip and
12:49this incredibly high-definition screen
12:51and the thing I've said have said
12:52several times is my son will probably
12:54never see a pixel except kind of
12:56ironically but yeah that's like that
12:58will be you know if I buy that that will
13:01oh it will last me for ten years and why
13:03a boy will be there and I think but
13:06everything is like that if you I look at
13:08the automobiles today and I think that
13:10the ones that are being sold today are
13:12the very last cars that are gonna
13:14basically require a driver now though
13:16but for 25 more years you will be able
13:19to buy it it will be but it will be the
13:21you can't buy that requires a driver
13:22yeah yeah and in ten years time I'll buy
13:24a new car and well you know I might be
13:27able to drive if I want to but well and
13:29and also you know and when you speak
13:31about how software changes those things
13:32cars are a great example too because the
13:34the highways and the freeways and the
13:35roads and automobiles created
13:37suburbanization yes and then once you
13:41now have all sorts of ride-sharing
13:42telecommuting and Technology you can
13:44move back to the cities and so there's
13:45this mass global urbanization taking
13:48place where technology is sort of the
13:50core of what's enabling that and all of
13:52a sudden you can do that comfortably
13:54because the idea of using like a lift to
13:56go to and from the suburbs to your City
13:58job seems absurd but the idea of using
14:01lift to get around the city or indeed
14:03using a lift to go to infer your suburb
14:05and job from your home in the city right
14:08that's true yeah I mean you know right
14:12back that was what course that's what
14:13happened with railways as well it always
14:14created the suburbs in Europe because
14:16all of a sudden you would commute - what
14:18were they called the brick fields and
14:19all the farmland of Europe was built
14:20over in has it so yeah I mean this is
14:22this is and as you say it's hard to
14:24grasp the change because you're sitting
14:27right on top of it and it's happening
14:30slowly and every new thing that happens
14:33doesn't feel exciting to you because
14:35it's just one step forward
14:37I mean it's fascinating to me to watch
14:39the the video where Steve Jobs unveiled
14:42the iPhone and to watch what people
14:45cheer at because you know you look at it
14:47now and it's like so what it's an
14:49enormous high-definition color
14:50touchscreen yeah who cares you know
14:53what's exciting about that but back then
14:55nobody had ever seen anything like this
14:57and actually even more striking for me
14:58so I'm sort of that much younger is
15:00seeing the original video where he
15:01unveiled the original Mac yes and the
15:04thing comes up and it's got a color
15:06screen and people scream and then you
15:09get an actual font on the screen yes
15:12growling and it's like people are
15:14becoming delirious in the audience
15:16because nobody ever had done this before
15:17yeah and now you kind of look at that
15:19and you go well what's the big deal well
15:22I think I think that payments are like
15:24that right now and I think as we go
15:26forward and and you know I view this is
15:28just a chance to really try to encourage
15:30people to realize just the the scope of
15:33the change that's happening
15:34the entire computing stack and payments
15:36are a great example of that because the
15:37incremental view of what what Google did
15:40with wallet which Apple kind of did a
15:43little bit of stuff that's similar but
15:44in a much more refined and easy to go
15:47away with great partners and all that
15:48mostly great partners you know what what
15:51happens is is you look at it and you see
15:53the incremental nature of it but if you
15:55start to think about it under the hood
15:57and you realize wow it's it's kind of
15:58built on top of a bunch of 1950s
16:01technology whether you know with credit
16:03cards and service fees and a whole
16:05system based on fraud I mean like every
16:07all of those fees people love to talk
16:09about that they don't call it the
16:09incremental cost of a channel it's all
16:11to protect from fraud which was all
16:12because you just had a plastic card with
16:14numbers on it that was easy to steal and
16:16so once you imagine like a world where
16:19there's no fraud potential then the cost
16:22does drop and then you imagine a world
16:24where your bank is actually with you
16:27like you don't need your money recorded
16:29on a ledger in another institution
16:30because that ledger is the internet
16:32let's like the classic thing that lonely
16:33you know one of the big categories of
16:35crime in the past used to be payroll
16:36jobs because a factory would pay people
16:39in cash in an envelope every week and
16:41that would be delivered in an enormous
16:43truck and we can say there's a truck
16:45full of money so you go and rob the
16:46truck and there are no payroll jobs
16:47anymore because nobody gets paid in cash
16:49I mean your point about payments I mean
16:52I was thinking about the Apple the way
16:54that Apple kind of tends to build these
16:55things just ask actually kind of topic
16:57for another blog post but I thought the
16:58interesting thing here is on the one
17:00hand they look like a great partner
17:02because they not gone and built their
17:03own payment platform they're not
17:05surprised to compete with Visa or
17:06MasterCard they're not trying to compete
17:08with Chase or Wells Fargo or Lloyds or
17:10you know any of the retail banks they're
17:12just going out and providing a better
17:13endpoint but that's actually what they
17:15do and they did the same thing for the
17:17music business you know they didn't
17:18create a record label in by sign up
17:20artists they didn't have an a Oregon
17:21which a lot of people told them to do
17:22yeah yeah and they also in the mobile
17:23business they didn't create an MVNO they
17:25didn't buy a mobile operator which a lot
17:26of you know not very perceptive people
17:28saw would have been a good idea
17:29and they decided you know we don't know
17:31how to run a mobile network we don't
17:32know how to hire artists we don't know
17:33how to think about fort well let the
17:35people who do that run that business and
17:38so you've got this kind of split between
17:39this very very tightly integrated
17:41solution built on the back of lots of
17:43partners who actually do the thing the
17:44other thing that Apple doesn't know how
17:46to do and Google doesn't
17:47know how to do even though they're
17:48generally being grad students they
17:49generally think they do you know how to
17:50do um but the big difference here is if
17:53you look at what actually happened to
17:54the music industry Apple looked like a
17:57great partner but the mere act of
17:59applying software to music even in a
18:01kind of a quality it looked great
18:03because it was legitimate way that you
18:04could play music instead of piracy but
18:05actually applying software to music was
18:07profoundly destabilizing and you know
18:09the most obviously because people going
18:11out buying tracks instead of buying
18:12albums and in TV that hasn't happened
18:15because they're all these kind of tight
18:17interlocking meshes around rights and
18:19broadcast and cable companies inside
18:21Netflix is doing but on that fix is kind
18:23of chiseling away at that as well but
18:25then I look at Apple pay and I say okay
18:27on the one hand this sits entirely on
18:28top of the existing structure and it
18:29doesn't really change your market
18:31structure at all and that of course is
18:32why Apple was able to get all these
18:33deals done because they weren't and
18:35where Google Wallet was kind of really
18:37upsetting the existing value chain Apple
18:39just sits neatly on top of the value
18:40chain but then you think okay if I've
18:42got a payment card on my phone in
18:44software that can be provisioned in
18:45software immediately that changes almost
18:48everything about the kind of the whole
18:52go-to-market of how you do financial
18:53services and yes I can put my chase card
18:57or my Amex card into it but that still
19:00was kind of a profound change into how
19:02you might know him in the future and I
19:04think that like when people do the
19:05pictures of you know all of the devices
19:07a smartphone replaced yeah I think the
19:09next generation of pictures are gonna
19:11have your car keys they're gonna have
19:12your house keys they're gonna have your
19:14wallet yeah their ID for bad apple peels
19:16pieces plastic right and it's pieces of
19:18platinum pieces of metal and all of
19:20these tycoons all of these tokens are
19:22our software is gonna eat them and
19:26really build up you know I mean that
19:28sort of I space the final point that I
19:30was going to make here is the thing
19:32that's happened with each of these
19:33previous ways of tone ology is that once
19:35everyone had them they kind of disappear
19:37so you know we're sitting in an office
19:39here powered by electric light talking
19:41on microphone instead of run by
19:42electricity we wouldn't think they were
19:44having an electricity experience here
19:46electricity product and you know we
19:49drive in cars we take railways we fly
19:51these technologies have disappeared they
19:53just become an ordinary part of everyday
19:55life and you don't think about them
19:57and the interesting thing that is
19:59starting to happen with computing and
20:01with software now is it's pushing out of
20:02the technology industry and so when you
20:04have you know when you have mobile
20:06everywhere when you have payments being
20:08pulled in when you look at companies
20:10like Airbnb or uber or lyft where you're
20:14actually building companies using this
20:16stuff but they're not actually
20:18technology companies this is the thing
20:19that if you look at uber you could say
20:21it's a technology company but it's
20:22actually a transport company and Airbnb
20:24is actually a travel company and
20:27BuzzFeed is a media company that's the
20:30sense that you know the kind of you kind
20:31of reach his potential ton of escape
20:34velocity in a sense yeah the people are
20:36building stuff with software that's just
20:37kind of changing a whole other
20:39industries now right and what happened
20:40it just my my view of it just to wrap up
20:43was that what happened in all through
20:45the second half of the 20th century was
20:47companies made one thing and then as the
20:49century evolved they've realized that
20:51they made most of their profit from
20:52managing the money behind making those
20:54and so all of the biggest companies in
20:56the in the world basically became banks
20:59hmm and oversee GE GE and and all the
21:02car companies and everybody did kept
21:04Boeing everybody did these capital
21:05equipment like that and and slowly
21:07what's happening is now software is
21:09replacing money in that regard
21:11and so every company is just a at its
21:14core can end up being a software company
21:16what's really unique about what's
21:18happening with software is that it
21:19enables entirely new companies to get
21:21built let's a look at the problem in a
21:23different way as Chris Dixon calls it a
21:25full stack and it means you just you get
21:27to slice up the responsibilities of
21:29delivering transportation or delivering
21:31entertainment in a different way because
21:33software erases those physical
21:34boundaries between things absolutely
21:36great thank you very much thank you
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