Tech is going to get much bigger

https://www.notboring.co/p/tech-is-going-to-get-much-bigger

At the end of all of the interviews we do for Age of Miracles, we ask each guest what the world will look like when we have abundant energy. Isaiah Taylor, the founder of Valar Atomics, gave an answer that frames the situation perfectly: There are only really three pillars to anything around us, as far as consumable goods. We’ve got energy, intelligence, and dexterity. Those are the three things that go into any physical good, any product. And we are like right on the cusp of getting all three for free, which is kind of unbelievable, right? Dexterity has been, you know, worked on for a while, but it was always bottlenecked by intelligence. What OpenAI is doing on the intelligence front is genuinely making intelligence free. And then I plan to make energy free. So we’ve got free energy, free intelligence, and we’ve got dexterity with projects like Figure and Optimus. Labor is becoming a scalable utility – plug in, power up, and produce.

Anduril is a spiritual descendent of SpaceX with a key evolution: it’s betting that by launching hardware products on top of its AI-powered software operating system, Lattice, it will be able to “deliver more capable hardware products for less money, and that its advantages will compound with each new product it plugs in.” The company is putting its money where its mouth is, funding its own R&D and acquisitions and bidding on fixed-price contracts instead of the Department of Defense’s traditional cost-plus contracts, where the winner gets paid for all of their costs, original budget be damned, plus a fixed margin. If it keeps costs low and product quality high enough to win contracts, it reaps the rewards in the form of higher margins. The mega bull case for Anduril is that it will be able to eat into the more than $100 billion the US DoD spends with the five Defense Primes each year, but at much higher margins, in the 50% range instead of the 10% range.

That’s one of the reasons tech companies will be bigger in the next decade: if the thesis that good software combined with cheaper hardware is better than more expensive hardware alone, the financial picture of companies in big spend categories begins to shift towards looking more like software companies. Not all the way there, but more like them.

Tech companies will both provide the infrastructure – intelligence and dexterity, and potentially energy – and build the products that serve end customers in massive markets that have been largely impervious to startups, like manufacturing and defense.