It’s just so damn cheap

I think we sometimes forget just how sharply the cost curves have collapsed in software development. A couple days ago i was listening to Naval Ravikant*, and he really drove the point home. I’m paraphrasing, but here’s the gist:

“When i set up my first company [Epinions] in ’99, we had to buy our own servers from Sun Microsystems and host them in our office. Neither MySQL nor Linux were common, so we had to pay Oracle for database software so we could store things. And then we needed deployment scripts to actually ship our code, and of course there was no open source stack we could rely on, so we had to write them from scratch. Then we had to bring in a T1 line to the office to get the up/down capacity we needed for the servers not to crash. And remember — these were pre-CSS days, so everything was built with HTML tables and layouts … All in all, it cost us $8m to build and make live a website you’d sneeze at today.”

Doing this today costs you $10 — $8,000, not $8m. That’s three orders of magnitude cheaper in under 20 years.

But let’s keep going with this:

Not only did it cost a ton to get something out, the market was so much smaller. Back then, there were about 30m people using a PC outside of work. And they were doing it on a dialup connection for an hour a day. So the market size was maybe 2–3 orders of magnitude smaller than it is today.

Your leverage per dollar has gone up somewhere between 100,000x and 1,000,000x.

Combine all of that and your leverage per dollar has gone up somewhere between 100,000x and 1,000,000x inside of 17 years. When you think of it like that, it’s pretty damn cool.

  • Naval is an all round boss. Not only is he the founder of AngelList (which, if you dig is, has an awesome future), but his casual first ever angel investment was Twitter. Yeah, he’s that kind of guy. Also, he write some great stuff at venturehacks.

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