Silicon Valley isn’t investing in science anymore. Instead, it backs companies that can scale up and become dominant and seizing the customers
All around, technology companies are no longer content to provide the machinery for consumer companies — they are serving the customers themselves.
Tesla, the Californian car company started with venture capital, last week gained the right to sell its electric cars directly to consumers in New Jersey after a battle in which Elon Musk, its founder, compared auto dealers to the Mafia. Spotify, the music streaming service, faces a protest from Universal Music for allowing 45m of its 60m customers to listen to music free.
Facebook is launching a peer-to-peer payments system on its Messenger application, while negotiating with news publishers to host their stories directly, rather than providing links through its news feed. The New York Times may become a supplier of news to a technology-led distributor.
The new companies, instead of building the plumbing for others, like Oracle and SAP in corporate software, they sell products and services directly, exploiting their efficiency and scale.
There is a historical symmetry in this. Microsoft’s oldest rival, the company that refused to confine itself to software, is Apple. Apple, now the world’s most valuable company, as “the canonical full-stack technology company”. It designs its own software and hardware, including computer chips, and operates its own network of retail stores.
Silicon Valley prefers “incrementalist investment” to solving hard scientific problems. But if it works, why fight it?