On August 20th, 2011 Marc Andreesen wrote something that profoundly changed the world economy. He said, “software is eating the world.” His point was simple. Everything would become software: books (Amazon), accounting (SAP), brand design and corporate art (Canva), movies (Netflix), cars (Tesla), healthcare (government healthcare apps), restaurant menus (QR codes), dating (Tinder), photo albums (Pinterest), Taxis (Uber), genetics (23 and Me), music (Spotify), photos (Flickr), phone calls (Skype), video calls (Zoom), government decisions (Palantir). Every single thing became software. So, naturally, Silicon Valley and sophisticated investors applied software revenue models (Software as a Service or SaaS) to absolutely everything. Software was golden and hardware was to be avoided at all costs. The expected return on software went up by multiples. Hardware had no multiples. Hardware is called hardware because it is so hard. Hardware was especially hard because China could make hardware so cheaply. So, hardware simply moved to China and Silicon Valley took over software. Software was sexy and hardware was ugly.
Now the two are marrying up after a long separation. There is a new category of company that can be called “shardware” which is when the value arises from the integration of hardware and software. Think of MRI scanners. Imagine all that hardware gathering incredible data but it is not Bluetooth, IOT, or connected in any way to the net. Nursing staff still carry the data by hand and send it by mail as CD Roms. That hardware would be a lot more valuable if it were part of a software infrastructure. A revolution is about to happen as medical devices become shardware. Theranos put a temporary dent in the medical hardware story. But, it’s clear that IOT/Bluetooth/software-enabled physical biosensors, and especially those that automatically link to blockchain infrastructure, are about to revolutionize healthcare.
Think of Peloton. Yes, it’s hardware but it’s the software that drives the experience and the value as people cycle together with, and race against, lots of other people at the same time. It’s so simple. Peloton without the software is just a stationary bike. With the software, Peloton is a cultural phenomenon.
Think of computer chips. Talk about hardware! Asia used to have a lock on the production of chips. Today we are seeing chip production move back to the West. Taiwan’s geopolitical vulnerability in conjunction with COVID and Trump’s trade war on China have together created a “chip crunch” of such severity that carmakers cannot fulfill orders. There just arent enough chips to go around. Advances in AI, machine learning and the shift to visual graphics are also demanding far more chips than ever before. The solution is to bring the production back to the West. The CEO of Intel recently more than hinted that more production needs to occur “internationally”, which means outside of Taiwan and Korea. He said, "We, the semiconductor industry, need to find a global solution that satisfies the incredible demand for our technology." "We must build factories faster, run them at higher yields, install more equipment, and do so in a way that balances the global supply chain for the future." Taiwan won’t be alone. The South Koreans have started in the US with the new $17b Samsung plant in Texas. This is just the start.
It’s not just the location of chip production, it is also the size. Chips have been miniaturizing since 1965 when Gordon Moore announced his now famous Moore’s Law. Cerebrus is a good example of a team that defied all odds and began making the hardest kind of hardware - computer chips. The founders correctly predicted that chips would need to have far greater computing power to contend with the volume of data the world is producing and the need for AI, machine learning, neural networks and metaverse applications. The Cerebrus chips are the size of a dinner plate and now contain 2.6 trillion transistors each, dwarfing the computational power of traditional computer chips. Cerebrus is accelerating Moore’s Law. Some call it AI Moore’s Law. Transistors per chip will now quadruple every two years, instead of doubling every two years. This will further accelerate the shardware trend. These megachips are shardware and facilitate shardware. They will become essential in a world where every piece of hardware will need to interface with software, cloud computing and the net. The metaverse will not be able to exist without them,
Now more than 200 startups have entered the chip manufacturing space. Most will fail but some will succeed. Soon the chip capability and production location issues will be sufficiently addressed for every bit of hardware to convert to shardware.
The end result is that Andrew Baumann’s prediction from 2017 is coming true. He said, “Hardware is the new software.” As a Principal Researcher in software at Microsoft, he realized, “It’s no longer the boundary between hardware and software, but rather just another translation layer in the stack.”
What’s coming in shardware? The new Apple glasses which will gather data on your reactions to what you see while it delivers the metaverse to you. The new VR chairs that we’ll soon be using at home and at work at shardware. The new generation of biocomputers are all shardware. Buildings, infrastructure, vehicles, devices, and more will all now involve this marriage of physicality and software skills.
Shardware is going to require a new generation of knowledge workers. Traditionally software people looked upon hardware people with extraordinary disdain. Now, software experts will no longer be able to blame the Chinese or anyone else for the fact that a physical product doesn’t work as it should. As hardware and software move back to the West and become fully integrated, the conversation between these two groups will become ever more integrated. This will only improve the quality of whatever they produce together. Apple was perhaps the first firm to take shardware seriously. Andreesen said software is eating the world. Maybe now the whole world is eating Apple. The world of things is Appleizing now.
Shardware is set to revolutionize labor relationships and education too. We will no longer be able to treat the creatives who make things or who know about physics and physical reality as second-class citizens. Those who play with motorcycle engines or sewing machines will be in demand. We will no longer assume that someone who can code is a genius and someone who can’t definitely isn’t a genius. Shop class is cool again. Code is starting to write itself. GPT-3 and Gopher are new programming languages that allow normal humans to code in plain English. These will vastly democratize humanity’s ability to design the future. The creator economy is not just a digital phenomenon. The maker movement is embedded in it. Now is the time to re-read Matthew Crawford’s prescient book from 2010, Shop Class as Soulcraft: An Inquiry into the Value of Work. We are returning to what he calls “manual competence”. If we want smart buildings we are going to need construction workers who get software and software engineers who get smart concrete and graphene. The construction workers of tomorrow will be shardware workers.
Shardware means new business models and new accounting structures. No doubt most shardware will be built on a blockchain going forward. This means greater awareness of when hardware needs maintenance, updating, and replacing. All this happens to coincide with the zeitgeist for shared ownership. We won’t own shardware. We will lease it.
Don’t be surprised to hear about an entirely new profession and new professional sector in the economy. Soon people will say, “I work in shardware.” Shardware is sexy. It’s not yet a word according to Google. But, it’s about to be.
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