Another earnings quarter is in the books, and it wasn’t great for the Cloud Czars.
Microsoft, Google, and Apple reported strong quarters. Facebook crashed. Amazon was saved by its investment in Rivian, which has been falling since the start of the year.
But there’s more to tech than the Cloud Czars. There’s even more to the cloud.
The Clouds are evolving into tech’s landlords. Amazon, Microsoft, and Google dominate in market share, other players are falling, but that masks another reality. The market is growing at 40%/year, at scale. Anyone can spin-up a set of cloud servers inside a data center REIT, then scale globally by running excess capacity with one of the Czars. If you need capacity near customers, just use a Content Delivery Network, a company like Akamai or a “cloudless cloud” like Cloudflare, which also provides security.
The Cloud Czar that’s falling out of bed, Facebook, refuses to be a landlord. If it wants to get back in the game, that’s how it can do it. Real estate is the model that works. Apple has its app store captives, Microsoft has its Windows ecosystem, Google is buying share and Amazon is just bigger than anyone.
But they’re not tech. Tech is software. Tech is client hardware. Tech is hundreds of different devices in specialized niches, from MRIs to 3D printed wind turbine blades. Tech is enabling advances in science and engineering at an unprecedented pace. The way we educate such people can’t keep up with it. The ETF covering all of technology is now growing faster than the one that focuses on the Czars, and that looks set to continue. It’s also a very good thing.
The problem is it’s hard to innovate at a big company. I got a taste of that in the 2000s, during an ill-fated detour as a market analyst. Every big company has committees for whom the word “no” is the easy answer. They all have bureaucracies that must be served, internal politics and policies that cramp any innovator’s style and crush the soul. Despite the best efforts of the Czars as they were in hyper-growth, this is inevitable. You can’t have scale without bureaucracy.
What it means is that this decade is wide open for entrepreneurs, of all types, from all backgrounds, and from everywhere. So long as immigrants are denied entry to this country, companies will be looking to hire, and build, outside it. They’ll be looking for deals outside it. Bad governance, like a bad router, is just something for the Internet to route around.
