Economic power is returning to the physical realm

FOR more than a decade, the assertion by venture capitalist Marc Andreessen that “software is eating the world” captured the logic of economic power. Digital platforms reshaped industries, software firms eclipsed manufacturers, and competitive advantage appeared increasingly detached from physical constraints.

That world view influenced corporate strategy and public policy alike. It is now breaking down. Software remains essential, but it is no longer scarce.

Artificial intelligence (AI) has turned software into an abundant input. Code can be generated, tested and optimised at next to no marginal cost. In many applications AI does not merely improve software; it replaces it. As software becomes commoditised, it loses its power to differentiate.