Executive Bot

by noospheer

If you wanted to get rich, how would you do it? I think your best bet would be to start or join a startup. That’s been a reliable way to get rich for hundreds of years. The word “startup” dates from the 1960s, but what happens in one is very similar to the venture-backed trading voyages of the Middle Ages.

Paul Graham, Hackers & Painters

Web software companies are interesting from an economics perspective because they maximize leverage. If a piece of software becomes popular, the company behind it often becomes enormously successful.

Like any business, web companies have expenses. The two cold goals of any corporation are to turn a profit and simultaneously reduce overhead. In the recent past, a web-based company would have to buy and operate pricey server hardware. New web companies don’t bother maintaining hardware, they pay other companies such as Amazon do that. A cluster of 4 GPUs (6144 total cores) running at 100% utilization, with 1tb of storage, 1tb of data transfer in and 1tb of data transfer out comes to well under $2000 for the month. A great example of a company that uses ‘the cloud’ to host its services is soundcloud.

Besides compute/bandwidth costs, a web company must also maintain a payroll. At last check, Google was paying 53,546 individuals. With an average starting salary of $82k, that’s roughly $366m in pay per month. Also, bigger companies tend to get involved in expensive lawsuits.

So, with hardware being cheap and easy to deploy, how can a web company reduce its employee and lawsuit overhead? Open source, of course! Open source companies generally avoid lawsuits because they are never accused of patent infringement. They also don’t need as many employees for two reasons: 1) the use of open code written by others and, 2) free development from the wider community. By using cloud hosting services and open source, a startup may keep its core team small, outsource hardware, and in theory remain nimble / efficient well into maturity.

With miniscule expenses and some sort of scaling model (catch 22?), the coins flow freely. Business can avoid the inevitable clinging and bloat that comes with success.

The next question is, “will the role of corporate Officer soon be non-human?”

Advertisements