Author Topic: The "tech industry" no longer exists  (Read 1092 times)

ChpBstrd

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The "tech industry" no longer exists
« on: January 18, 2019, 09:47:25 AM »
Here's an interesting read asking why we should consider companies that rely on software to be a "tech industry" worthy of paying higher multiples for, if their products have already saturated their markets? What is the future for Apple and Samsung when everyone already has a smartphone? How will Google and Facebook manage to get even more advertiding share than they already have? Why will Tesla take over the world when dozens of other companies are rolling out electric luxury cars? How fast can Netflix grow from here?

Why would an oil refinery or grocery chain developing new techniques in their fields not also be a "tech company"? How old does the tech need to be before it is not tech any more?

I suggest a smarter way to predict growth would be to simply look at R&D budgets rather than label some companies "tech" and other companies "non tech".

https://www.theatlantic.com/ideas/archive/2019/01/is-the-age-of-tech-over/580504/

appleshampooid

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Re: The "tech industry" no longer exists
« Reply #1 on: January 18, 2019, 10:00:21 AM »
Notably, Amazon makes most of its profit from AWS (cloud computing), and that market is nowhere close to being tapped out. Plenty of companies still own their own servers that shouldn't. Not everyone should be in the cloud...but it makes sense for a lot of small-to-medium shops. Once you get really big, depending on your workload, you can save a bunch by owning your own servers.

Among the companies on the list, I believe Amazon and Google will continue to innovate into new markets. The rest, eh not so much. In my humble opinion as a tech industry grunt who used to work at Amazon.

FIPurpose

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Re: The "tech industry" no longer exists
« Reply #2 on: January 18, 2019, 10:36:55 AM »
Interesting hypothesis, but I'm not sure I buy it. Saying every company that uses tech is now a tech company I think is just misunderstanding what 'tech' is. He's conflating companies that produce tech with companies that consume tech.

Now it's true that there is a lot of free tech out there now. Open source technology is allowing companies to automate more and more, but that doesn't change the underlying sector of a particular company. A company that is in agriculture has to invest in tech to stay competitive. (ie it has to buy tech/ hire the grunts to implement it), but these usually aren't the companies making this tech. Tech companies are in the business of producing and improving tech. And yes, large parts of the tech market are commoditized, but that's been true for many many years now. Laptops/Desktops haven't had good margins since probably 2005. Yet somehow, companies like HP continue to make billions off them. But this just means tech needs to revert back to a p/e of 16 not 30-40.

Are some tech companies overvalued? Absolutely. He's asking a good question in there. Why the inflated value of Amazon, Apple, etc. They cannot and won't maintain the growth they've had in the past couple decades. Apple's stock seems to have mean reverted with their p/e hanging at around 13. That seems like a reasonable price for a company that will continue to make a good profit. Amazon I believe is still overvalued. They have AWS, but wait until switching clouds becomes easy and commoditized. You also currently have MSFT, HPE, IBM, etc. all playing in the cloud services space with AAPL looking to join as well. That'll bring margins down, and tap out at some point. The cloud services space is still a bit wild west, but the industry will eventually consolidate on 1 or 2 unifying technologies that will make them all more or less the same.

Do you expect manufacturers to be buying robots? Yes. But that doesn't make them tech companies that makes them consumers of tech. We don't call Walmart a transportation company just because they move stuff around. They move stuff around because they sell consumer goods. The same goes for agriculture: do they invest in tech? Yes. Are they selling tech? No. Their tech is an end to a particular means. Namely cheaper production of agriculture.

Don't muddy the waters, this isn't difficult to keep separated.

ketchup

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Re: The "tech industry" no longer exists
« Reply #3 on: January 18, 2019, 10:59:46 AM »
Cloud To Butt Plus makes the previous two posts extremely entertaining.  That is all.

ChpBstrd

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Re: The "tech industry" no longer exists
« Reply #4 on: January 18, 2019, 03:15:03 PM »
Interesting hypothesis, but I'm not sure I buy it. Saying every company that uses tech is now a tech company I think is just misunderstanding what 'tech' is. He's conflating companies that produce tech with companies that consume tech.

Strictly speaking, fire, the wheel, and agriculture are all technologies. But when people say "tech industry" in our era, they generally mean "companies using software and electronics to deliver a product or service". (60 years ago, the word technology had a different meaning. ) So Facebook, Twitter, Netflix, and Amazon are considered tech companies even though they buy their servers or bandwidth from other companies. Their software is based on standards and languages created by others, sometimes decades ago. Those companies in turn buy their circuit boards and cable from suppliers and reconfigure those objects into sellable services. All the companies throughout this chain are working to improve their products and services.

However, the same could be said for the poultry, oil, or housing industries, which employ tons of scientists and engineers working to increase production or quality. If a new manufacturing process in the tire industry makes tires 10% cheaper, is that a technological change? Of course it is, IMO, just like development of a faster RAM chip or higher resolution touchscreen, a new hybrid tomato, or a more fuel efficient internal combustion engine. New "technology" appears in almost every industry almost every day.


FIPurpose

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Re: The "tech industry" no longer exists
« Reply #5 on: January 18, 2019, 04:46:25 PM »
Interesting hypothesis, but I'm not sure I buy it. Saying every company that uses tech is now a tech company I think is just misunderstanding what 'tech' is. He's conflating companies that produce tech with companies that consume tech.

Strictly speaking, fire, the wheel, and agriculture are all technologies. But when people say "tech industry" in our era, they generally mean "companies using software and electronics to deliver a product or service". (60 years ago, the word technology had a different meaning. ) So Facebook, Twitter, Netflix, and Amazon are considered tech companies even though they buy their servers or bandwidth from other companies. Their software is based on standards and languages created by others, sometimes decades ago. Those companies in turn buy their circuit boards and cable from suppliers and reconfigure those objects into sellable services. All the companies throughout this chain are working to improve their products and services.

However, the same could be said for the poultry, oil, or housing industries, which employ tons of scientists and engineers working to increase production or quality. If a new manufacturing process in the tire industry makes tires 10% cheaper, is that a technological change? Of course it is, IMO, just like development of a faster RAM chip or higher resolution touchscreen, a new hybrid tomato, or a more fuel efficient internal combustion engine. New "technology" appears in almost every industry almost every day.

Right and SAAS and computer hardware are their own rightful industry. I believe the author is trying to claim that since essentially every company uses and develops their own software that makes them a part of the tech sector. I would definitively say that's incorrect.

Like your example, the tire business. If business can build some software that makes tires cheaper, does that make them a tech company? I would say no. They are using tools that are available, but simply adding a software division to your company does not make you a tech company. If they start selling that software, I guess you could argue that they'd have a small tech division. But at the end of the day, their tech is made as a means to making tires. If the world stopped using tires, their specific software would be worthless. Where as the tech industry, the tech itself is the sole purpose. Tech creates the tools that allowed this tire company to even think about investing in the stuff.

When talking about Netflix eating cable companies, I don't think this is an example of everything becoming tech. And I think it's a mistake to label Netflix as a tech company. They essentially do the same thing that cable does: provide a method of entertainment. Instead of laying cable, they found a route through the internet. But no one seemed confused about DirectTV or Comcast. They're not tech companies because they're old? They're all still SAAS companies. just because one routes over the internet and the other over cable, doesn't make them fundamentally the same thing.