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Most businesses have only ok scale characteristics. If you make chocolate bars, you take in cacao (commodity), do a bunch of work to it, add some margin, and ultimately ship a product. Each product has marginal cost (the cacao). The only real advantage from scaling up is that fixed costs, like the cost of processing machines and distribution, can get amortized across more sales. But fundamentally, there is marginal cost to each sale, and the margins stay fairly low. Software pre-internet already started to break that model. Programs had to be put onto disks and shipped in boxes, so there was still some marginal cost, but mostly once you built it, it was “free” to sell it. It’s interesting to note that the costs of distribution led to a business marketplace where things like feature scale or channel ownership mattered the most. The internet broke that. Distribution is free (almost), so now it’s super easy to build once and ship as much as you want, and the market became global because t

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• Ally Nakamura