Marc Andreessen was on Charlie Rose this week, and he dropped this super smart nugget on the tech industry:The core idea we have, the core theory we have, is that the fundamental output of a technology company is innovation and that’s very different than a lot of businesses, right? The fundamental output of a car company is cars. Or the fundamental output of a bank is loans. The fundamental output of a tech company is innovation, so, the value of what you’ve actually built so far, and are shipping today is a small percentage of the value of what you’re going to ship in the future if you’re good at innovation. So the challenge tech companies have is they can never rest on their laurels with today’s product, they always have to be thinking in terms of the next five years of what comes next and if they’re good at running internally and are indeed a machine that produces innovation, they tend to do quite well over time. It’s when things go wrong internally and they stop innovating, which happens alot, that the wheels at some point tend to come off.
This quote is great insight to the difference between Silicon Valley and the rest of the world.
The reason Instagram was worth $1 billion without any revenue is because people in the Valley look at the company and think, “the value of what it’s going to ship in the future is huge.” People outside the Valley see a money-losing photo app and think it’s worthless.
As for the other part, it helps to explain why companies like AOL, Yahoo, and Microsoft have gone sideways for years now.
It also explains why Google is working on glasses and self-driving cars. It’s trying to produce the next generation of innovation. It might make its money from search, but as Andreessen points out, it’s really in the business of innovation.
Disclosure: Marc Andreessen is an investor in Business Insider.