What It Means To Be a Tech Company

Also, what makes Jeff Bezos tick.

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What It Means to Be a Tech Company

WeWork’s rapid reversal in fortune in September caught some analysts by surprise. The high-flying office-sharing company, then favored by gig workers and the tech elite, was gearing up for an initial public offering that was widely expected to raise upwards of hundreds of millions of dollars. Instead, within a few days it became a poster child for investor herd mentality gone amok and was scrambling for cash.

WeWork’s free fall (the company’s valuation has dropped more than 80% since January 2019) has fed a spirited discussion over what it means to be a young “tech company.” Although WeWork’s core business model — renting empty offices in bulk and turning them into coworking spaces with amenities such as yoga classes and kombucha for companies and individuals — doesn’t seem especially technology-focused, the company’s prospectus used the word technology more than 100 times, notes reporter Marie C. Baca in The Washington Post.

Taiwan-based business analyst Ben Thompson writes in Stratechery that what separates tech companies from other types of businesses is “the centrality of software.” For instance, software creates ecosystems and enables companies to eliminate both marginal costs and transaction costs. By this definition, he says, WeWork falls short. Although it uses software, WeWork “pays a huge percentage of its revenue in rent.” Moreover, he says, “it is difficult to find evidence that [its ecosystem] is a driving factor for WeWork’s business.”

Notes Baca, “The issue goes beyond mere semantics. Some investors worry that the slipperiness around tech terminology and valuations could contribute to an economic bubble.”

Deconstructing Jeff Bezos

By many measures, Amazon’s Jeff Bezos holds greater sway over U.S. commerce and even society than almost any other individual in history. While John D. Rockefeller and Andrew Carnegie built massive fortunes during the late 19th century from oil and steel, Bezos’s empire is both wider and deeper. Amazon’s e-commerce site, with more than 600 million items for sale by more than 3 million vendors, draws most of the attention, accounting for almost 40% of U.S. online sales. But other Amazon ventures, notably its cloud computing and video streaming operations (and Bezos’s personal ownership of The Washington Post), are critical elements of the expanding Bezos empire.

In a recent story in The Atlantic, Franklin Foer examines what makes 55-year-old Bezos tick and what his plans are for the future, based on five months of conversations with current and former Amazon executives, company rivals, and others. With its database of customers’ past purchases and its unmatched knowledge of logistics and the global supply chain, Foer says, Amazon has “the capacity to build its own winning version of an astonishing array of businesses.” This has huge implications not just for the U.S. economy, but also for society at large. “In the end,” Foer writes, “all that is admirable and fearsome about Amazon converges.”

He adds, “Jeff Bezos has won capitalism. The question for the democracy is, are we OK with that?”

The Sharing Economy Rolls On

The sharing economy has been with us for more than a decade. Some early entrants, such as Airbnb, Uber, and Kickstarter, are now household names. Yet the basic business model shows no signs of fatigue. Writing in a recent issue of Wired, Arielle Pardes says, “When Airbnb started in 2008, the idea of turning your house into a crash pad, or paying a few hundred dollars to sleep in a stranger’s guest room, was still fringe.” Now, she says, “the rental economy is everywhere, and for everyone.”

Among the recent entrants she highlights are Boatsetter (for renting boats), Spacer (for garage space), and Hipcamp (for matching campers with empty campsites). With Boatsetter, for example, owners can list their boats on the site for would-be renters, with a daily or hourly rate. The company helps arrange for the insurance and provides names of qualified captains for hire.

The sharing economy is also making inroads in more mundane areas. According to an article in The Economist, Roadie, based in Atlanta, offers a service that helps companies save money on deliveries by tapping motorists who are already traveling in the desired direction.



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