A disturbing thought. A world where the marginal cost of software is free

3 points by toddh 19 days ago | 15 comments

With the advent of AI, the marginal cost of software is trending towards zero. Software is no longer a scarce resource.

Not a new idea at all, but the implications hit me hard as I was considering monetization models for my apps.

Unless you are lucky (network effects, timing), grandfathered in, or provide exceptional value, the natural cost of software is free.

Intuit is an example of a grandfathered-in, exceptionally high-value software approach.

And Intuit knows it. They leverage their advantage to a predatory extent.

My wife is an EA, and I know for a fact Intuit puts the screws to all its users. Switching costs are high, and since the sector is an oligopoly, there's really no one to switch to.

But that too shall pass. Hopefully we'll soon see people create bespoke solutions that cut Intuit out. Oh, how I look forward to that day (ironic, I know).

This implies, I think, that if you can't find 1,000 fans or got in under the old model, getting as many users as possible and then transitioning to an advertising model is The Way.

Or perhaps loot/gambling style addictive mechanics? Big data? Everyone an influencer? Regulatory niches?

Once you have scale, advertising works; then users can either pay to avoid it or endure it. We see Netflix and Amazon Prime already doing this.

Yuck. I'm already nostalgic. Or am I wrong?

dlcarrier 19 days ago |

This has happened in several fields, and will continue to happen for the foreseeable future. The cost of cloth is scarcely more than the cost of the yarn it's made from, because machine time on a loom is practically zero. That change happened much to the chagrin of the Luddites that lost their jobs over it, but in the end everyone is much better off because of it.

The marginal price for producing a video is practically nothing, with most of the world's population carrying around video equipment in a cell phone that outperforms what a video production company would have used decades ago, after spending the equivalent of several years wages to procure. The effect has been a rapidly rising video industry on the likes of YouTube and TikTok, majorly upsetting the entrenched video production houses from decades ago, and creating significant job losses for those companies, but growing the industry as a whole.

Having similarly marginal costs to software production will likely have a similar effect, where directing what to do with the software will become more important than the writing of the software itself, and individuals in their free time will be competitive against industry giants.

mikewarot 19 days ago |

The cost of software has always been trivial, relative to the value it delivers.

The real driving factor is support, and open source tends to be very extractive when it comes to support, leading to burn-out and dead projects.

The reason Intuit and others can maintain a monopoly on the particular software they've created (and not lose it to LLM generated or open source clones) is that they have support that won't disappear on a whim, probably.

mattm 19 days ago |

I know this isn't the point of your post, but as an aside, how come Intuit is an example of being grandfathered in? I wonder if we'll see the rise of plain text accounting[1] in an AI world as it can be easier for AI agents to deal with.

[1] https://plaintextaccounting.org/

toddh 19 days ago | |

Sorry if I wasn't clear. I'm talking about the practioner side rather than the consumer side where the capabilities and costs are high.

jumpalongjim 19 days ago |

There are no barriers to creating software. There are no barriers to copying software. But there are still moats around some software businesses: non-technical which AI does not directly impact. Nonetheless, advertising is not the only way to win and there's no need to be nostalgic. We will adapt to the new era.

sagunbuilds 19 days ago |

Niche domain expertise still matters. A person / team with little experience of banking workflows and requirements can't produce software to replace existing vendors. That offers a moat. Obviously, not true for every case.

toddh 18 days ago | |

Agreed. That's why this is different and so powerful. People will solve their own problems that they are experts in. The downside is that they don't know what they don't know. Real expertise helps. But I think that's solvable.

sagunbuilds 17 days ago | | |

Sure. For consumers, we will get there sooner. For enterprises, it is tough to see that happening any time soon. Even enterprises with fully staffed development teams will struggle to have the operational expertise required to replace legacy systems / providers. But you never really know.

bdangubic 19 days ago |

call me when the first one happens (hint I’ll be dead by then). the problem is that the world is coming to realization that everyone can write code. given that, no one is switching of intuit or whatever to some vibe coded nonsense. I think reddit is probably the best place to see this in action. hit any subreddit whose moderators are OK with posting “ads” and you’ll see post after post that looks like Show HN now, “I was tired of ____ so I built ____” and even funnier, just about every post will make a special note “I spent a year+ building it” - too funny.

this too shall absolutely not pass, in fact it will get worse

sdevonoes 19 days ago |

Everyone can write; that doesn’t mean everyone can produce an interesting novel. If everyone can produce software via llms, that doesn’t necessarily mean that software is useful or interesting.

toddh 19 days ago | |

Presumably, it would be useful and interesting to them? I'm not really talking about producing apps for an app store. In that case, I think you are right. More for individual or organizational needs.

marssaxman 19 days ago |

Open source software eats the world.

toddh 19 days ago | |

Or Any source software eats the world.

pq129 19 days ago |

To me, the things we need/want being free is a massive positive, not a negative at all. Wouldn't you rather all your expenses were reduced and your needs were met more precisely, than that you had persistent unnecessary expenses?

I understand how as someone wishing to make money this may be undesirable. But I think it is worth considering the bigger picture of what a high-cost life vs a low-cost life looks like for us as individuals, and as a society.

toddh 19 days ago | |

The sword has two edges for sure. And if you're not a programmer, only one edge matters. But if you are...