Sequoia Capital’s Michael Moritz: The Data Factory Changes Everything

Author

Geron, Tomio

September 9, 2013

Michael Moritz, the legendary venture capitalist at Sequoia Capital, says the “data factory” revolution is here. This massive change in computing and technology is global, not U.S.-centered, and not everyone will benefit the same.

Moritz, who famously invested in Google and Yahoo among others, spoke at the TechCrunch Disrupt conference Monday in San Francisco.

These tech changes will be on the scale of the industrial revolution, if not bigger. Moritz described the first phase of the industrial revolution and the move to factories. The centralization of tools such as the loom transformed the textile industry and people for first time organized in a factory had a set of suppliers. Then in the United States, a confined geography developed with the assembly line and the auto industry. Over time a lot of white collar jobs were created around that.

That has all been changed by what Moritz calls the “data factory” that has risen in the last ten years. The explosive growth of bandwidth, storage and computation and increasing cheaper prices has brought this about. Amazingly, about 14% of all stored information in 1986 existed on vinyl records. The explosion of applications has also had a major impact. Forty years ago there were barely 200 applications running on computers.

Tools used to be concentrated in a certain area (as in Detroit factories). Now these tools are distributed everywhere through mobile devices. In 1973, the Samsung Galaxy or Apple iPhone the equivalent cost of that computing power was $33 million via an IBM 3340 computer.

Meanwhile, tools for business have moved towards free, such as recruiting, sales, promotion marketing and fulfillment and customer service.

The real global companies are Amazon, Apple, Facebook and Google. They change our workplace environments, which now have far fewer employees than traditional workforces. These central data factories benefit from unpaid contributions on Yelp, YouTube, LinkedIn and the like. The data factory sells services such as Google Adwords, Amazon Web Services to these new workplaces.

For an example of free contributions, LinkedIn beefed up its content effort with people like Bill Gates and Barack Obama. They provide content for free. LinkedIn’s traffic has multiplied eight-fold.

What happens when tools are put in the hands of individuals? Uber, TaskRabbit and Instacart enable people to make $18 to $30 per hour. Meanwhile Google AdWords, eBay, Amazon Marketplace and Amazon Kindle Direct Publishers allow small businesses to grow.

Still, this hasn’t changed everyone’s life for the better. “Life is very tough if you’re poor. Life is very tough if you’re middle class.” Walmart has 2.2 million employees but Google has just 40,000 employees. Apple employees 80,000.

Also, despite the explosion of tools it hasn’t had an effect on GDP. About 30% of Americans work for themselves but it hasn’t affected GDP because of the decline in manufacturing and the difficulty in attracting talent to the U.S.

Unlike past revolutions, the tech revolution is happening at the same time around the world. Textiles mills were in a small part of England, automobiles were in Detroit, the tech revolution is happening around the world, most notably in China.

Great ! Thanks for your subscription !

You will soon receive the first Content Loop Newsletter