The Potential Economic Value of a Computing Platform

In this essay, I posit that the importance of a computing platform is strongly correlated to its potential to generate economic value.

Why is this correlation key? I think it helps to predict the importance and future growth of a computing platform very early on.

Let’s start with some definitions and examples.

What is a computing platform? Here, we define computing platform narrowly, meaning not a specific hardware or software system, but the underlying technology in general. For instance, personal computers are a computing platform, not the subcategories of it (i.e. NOT hardware or opearting system makers such as Apple or iOS).

What do I mean by the potential to generate economic value? I mean the potential cash people and organizations can make by using this computing platform. This is cash they couldn’t otherwise make, so it’s to be understood as incremental cash. Therefore, this economic value for society is only generated because of this computing platform.

In the recent past and present, I would consider the following computing platforms: personal computers (PC), laptops, tablets, virtual reality, the internet, social media networks such as Facebook, Instagram and Snapchat, blockchain, PDAs like the Palm, smartwatches and wearables, gaming consoles.

Let’s group these computing technologies into categories to better analyze the economic value.

Internet, PCs, laptops and smartphones: Enormous economic value

Even before the internet came along, people created a lot of economic value through personal computers. I’m not talking about selling computers (although that also generates quite a bit of value), but I’m talking about the value generated through software that runs on those computers. As a tool, they are an incredible multiplier. Think of what multiples of value you can generate by buying a $1000 Macbook? You can make millions of dollars by writing software and selling it to people on CDs.

Now, the internet comes along and this multiple grows. There’s a whole new distribution system to reach billions of people instantly, at a fraction of the cost. There are new business models and products that were impossible before ubiquotous high-speed internet access. For example, what we call today “the cloud”, generated $220 billion of revenue in 2016, and is expected to almost double that to $411 in 2020.

The smartphone builds on all of this and unlocks even more cool products, and with that, economic value. Think of all the services and products that wouldn’t be possible without mobile, such as Uber, Lyft, Google Maps, Instagram, WhatsApp, and food delivery platforms. And think of all it radically improves, like Airbnb, Twitter, Slack, and Spotify.

Social Media: Moderate economic value

Social Media lead to the rise of atleast one new job: influencers. Hate them or love them, but there are a few who make tons of cash. Of course, there were influencers before (usually celebrities called brand ambassadors), but the amount and magnitude of influencing wasn’t possible before.

Furthermore, social media helped publishers reach more people and in turn make more profit (e.g. through ad revenues). Going viral wasn’t a thing before Facebook and co. From that vantage point, social media is a new marketing channel that allows companies and people to make more cash.

Compared to the previous category, however, the economic value created by social media is much smaller.

Tablets, smartwatches, wearables and gaming consoles: Small economic value

While a lot of money is spent on acquiring hardware and software for tablets, wearables and especially gaming consoles, little economic value is generated incrementally through them. Put differently, compared to e.g. SaaS, not a lot of cash is made just because there are iPads or Playstations. It’s true that gaming and revenues through DLCs (downloadable content in games) are growing and games might very well leave the niche market soon.

Virtual reality and blockchain: Potential economic value?

VR and blockchain are technologies that are becoming more common and mainstream just now. Based on this approach, how would we predict if they ever become mainstream?

VR is historically a niche technology used by gaming enthusiasts and specific professional applications (e.g. training for astronauts, military, construction). It used to be expensive and cumbersome to set up because you need to have a good PC and hook it up, set up sensors in the room etc. With the dawn of standalone VR (as opposed to PC VR) and devices like the Oculus Go and in a couple of months the Oculus Quest, all of this has changed. The Oculus Go is $200 and as simple to use as a smartphone. Just strap it on and you’re in VR. While the Go is geared toward media consumption (private theater, anyone?), the Quest will be marketed to gamers.

For VR to become mainstream, it needs to expand to include more use cases. The first step could be productivity apps. Wouldn’t it be great to be able to work on an unlimited number of huge screens? There are some challenges to tackle along the way, but I can totally see people ditching laptops and only using VR headsets to work. The office transitioned from bulky devices (tower PCs, printers, huges screens) to mostly tiny laptops - why not reduce the size of physical objects and at the same time increase the virtual space?

But it needs to go further than that. What might new use cases be that are just possible because of VR? In my mind, the fundamentally different thing about VR is that it’s social. Even with today’s early VR tech, being in a virtual space with someone and talking feels close to being in an actual physical space. Already now it’s much better than doing a video call. I’m convinced that this will enable a lot of new things and make existing stuff easier. It could be the medium that makes remote work actually work.

What about new ways of entertainment? For example an app where you can perform live in front of other users. You could be a DJ, a singer or a painter and others join in live to watch you do your thing. Musically on steroids.

And of course, I have to mention education. Why do schools need to be physical buildings if being in VR almost feels the same. Could we improve access and cost issues in education with VR? I think so.

And surely there are new possibilities for ecommerce. Not only DLCs but truly digital goods that feel like physical goods. A whole new economy could come to existence.

The truth is that I can’t even think of the new applications that will be enabled by VR. Who would have thought of Uber or Snpachat when the iPhone first launched?

I’m much more experienced and interested in VR than in blockchain, so I don’t think I’m qualified to make predictions about the future of blockchain. But the question is the same: How will blockchain allow people to make incremental money? And no, making money by betting on the market value of a cryptocurrency going up doesn’t count.