Thread by @nealkhosla

1/ Building on @pmarca’s “Software is eating the world” paradigm: It occurs to me that many early software co’s ate the world by virtualizing a formerly analog thing. Netflix w/ DVD's, Salesforce w/ rolodexes/CRM, other SaaS companies for things like billing, HR, collaboration.

2/ As the low hanging, fully digital fruit was picked, the next generation of companies took hybrid models: software eating industries that needed a physical components but not deep vertical integration or ownership. Uber, Airbnb, etc.

3/ The next version of companies are going to have deep vertical integrations. Low margin businesses (grocery, hospitals, etc.) have been incredibly resistant to tech. Much of our lives are at their core, unchanged from 20 yrs ago. Why not reinvent w/ tech (not just software)?

4/ Get ready, these businesses are going to be significantly capital intensive AND operationally complex. How do you replace the very fabric of day to day life w/ technology integrated versions? Will take some entrepreneurs w/ incredible imagination.

5/ Here’s the catch: these businesses aren’t going to look like their prior versions with software slapped on top. The advantage of deep integration allows for dramatically different and more efficient operations. It’s the difference between taxi drivers w/ smartphones and Uber.

6/ I should add, the other route here is to buy legacy businesses and repurpose and integrate technology into them like @flatironhealth did. Raise capital to buy an old EMR business and make it new.

@flatironhealth 7/ As this happens, businesses like @shopify will pop up to help the legacy businesses compete as they fight for their lives. This will happen everywhere once the existential threat is real. See @stratechery on Shopify’s platform to @amazon’s aggregator:
stratechery.com/2019/shopify-a…