With my increased time and shift in the economy, I’ve taken the time to talk to more people over the phone as my readers and clinicians who follow me are coming up with tech ideas to solve problems and make money. I’m all for this. If you’re not forcefully taking money off people and you’re making a profit, your solution is more valuable than the money you’re asking for. If this isn’t the case, then people wouldn’t part with their cash. The problem is, that a few people I’ve spoken to, don’t really think like this, they get hung up on the tech ensuring that their idea will just burn cash. Now, I love tech. I spend my free time coding in new languages, and trying out new deployment tools and frameworks, so take it from me, tech isn’t that valuable by itself.
Lots of people despite their education don’t read up on economics and this hurts them. I’ve explained earlier on this month how disgruntled NHS clinicians usually conflate their labor with the end value when in reality, their hourly labor is not worth that much when they take into account the systems that actually enable their labor to be valuable [link]. It’s the same with tech, you need to consider the wider context of value when coming up with a tech idea.
Let’s start with an extreme. I’m really getting into photography at the moment. I’ve splashed out roughly £1500 in total on a camera and some cool lenses. To me, that’s enough. I don’t see myself buying anymore soon because the equipment satisfies my needs. Sure, I’d like crisper photos. I can achieve them tomorrow if I really want. On Amazon, there’s a £6,807 Leica camera with faster shutter speed, higher quality sensors, a wider range of settings and better quality lenses than what I have. However, I haven’t brought it because in my circumstances, the extra specs is not worth me spending that much. My camera setup isn’t worth it for most people who just use their phones. Most people look at it along the lines of:
“what, you want me to pay £6k for better quality photos??!! Na, I’ll make do with my phone. That’s goo enough for me”
What this demonstrates is that there’s a tradeoff between cost and value of solution. This is the reason why virtual reality isn’t everywhere. People like the sound of looking around an apartment with a VR headset, but when they see the price tag, they’ll make do with looking at some photos for initial vetting and then looking at it in person. The same goes for AI. Just chucking AI into a solution is along the same lines as chucking VR into it. The problem you’re solving has to really justify the expensive tech that you’re throwing into the mix.
So, you’ve heard me go on about why tech isn’t that valuable by itself. So why the most valuable companies tech companies? This is because they’ve found a solution that is valuable, and they’ve scaled it with tech. Let’s look at a couple of the big players:
Google => Advertising and exposing companies to the public
Facebook => Advertising
Amazon => Selling and shipping products
AirBnB => Holding details of buyer and seller of a service to establish trust (broker)
Uber => Holding details of buyer and seller of a service to establish trust (broker)
Netflix => Watch movies
Logistics, selling, brokers, paying to watch movies, and advertisers were around and selling their services long before there was an internet. These tech companies didn’t have to convince businesses and customers that establishing trust between two parties, advertising, and exposure were valuable services. Yes these companies use cool tech like machine learning but these additions only optimise their business model which is already on a home run. Before the internet, brokers used to employ admin staff to update and look up records. Now with database lookups and inputs you can do this at lightening speed and you don’t have to hire more admin staff if your user base increases. Instead of shipping video tapes and DVDs, you stream them over the internet. Clearly streaming them over the internet is a lot cheaper than mechanically producing DVDs and transporting them everywhere. The business model was already established, people paid to watch movies. Netflix made it cheaper and scalable.
Now, tech is cheaper than human labor but it isn’t free. The key to a good tech idea is to solve the highest value solution with the least amount of tech possible. If your solution value is high, then you obviously can chuck more expensive tech at it. For instance, I’m currently working at Monolithai. We’re using a lot of cutting edge AI, but this is because our ai reduces the amount of lab runs the company has to do, enabling them to save millions of pounds [link]. The customer here is big companies running engineering projects. This special case doesn’t mean that adding AI will make your idea more valuable. Sadly, I’ve seen people use high-tech approaches like AI to try a provide a low value solution to end users. Their server costs end up burning holes in their pockets and getting customers to pay is like getting blood out of a stone. These people float around ideas like AI powered chatbots and streaming services to solve very low value look up problems. It’s the digital camera situation all over again:
“Wait how much do you want me to pay for the AI chatbot??!! Na, I’m good, I’ll just stick to manually Googling things and referencing my textbooks when I need to”
If you’re reading this and you have spoken to me about an AI chatbot do not take this personally. I’ve lost count of how many people have suggested an AI chatbot to solve low value lookup problems for events that only come around once in a while for the user. It’s a common trap that a lot of people fall into. For me, I love tech. I wouldn’t be a software engineer if I didn’t. However, what gets me juiced is a low tech solution and simple business model that can be scaled with simple tech, and then optimised with cutting edge features.