Ep 003: Software vs Capitalism

What happens when infinitely replicable code collides with economic systems built for scarcity? Nick and Julian tackle the uncomfortable question: Is capitalism fundamentally incompatible with software?

Starting with a simple thought experiment about stealing cars versus copying code, the conversation unpacks how software's unique physics—zero marginal cost, infinite replicability, and decoupling from physical scarcity—breaks the mental models that underpin capitalist economics. From Netflix's DRM workarounds to Wikipedia's invisible contribution to GDP, they explore why our existing frameworks struggle to measure or incentivize the abundance that software creates.

The episode doesn't offer easy answers. Instead, it surfaces deeper questions about platform ownership, value measurement, and whether we're stuck in an unstable equilibrium between old and new economic realities.

Key Topics & Timestamps

Defining Capitalism (00:00-05:30)

Software's "Code Smell" Problem (05:30-12:00)

The Netflix Paradox (12:00-18:00)

Marginal Cost and Market Failure (18:00-25:00)

The Wikipedia Case Study (25:00-30:00)

Platform Power & Feudal Futures (30:00-35:00)

Beyond the Binary (35:00-38:00)

Hot Take: AI Isn't Software (38:00-End)

Concepts Explained

Code Smell: A heuristic in software engineering indicating structural problems. Examples include functions that are too long or logic that's copy-pasted across multiple locations. Suggests future maintainability issues even when code currently works.

Digital Rights Management (DRM): Technologies designed to control how digital content can be used after purchase. The hosts argue DRM represents an artificial constraint imposed to maintain scarcity-based business models despite software's natural abundance.

Marginal Cost: The cost of producing one additional unit. In traditional manufacturing, this includes materials and labor. For software, marginal cost approaches zero after initial development, creating fundamental problems for price-based markets.

Zero-Sum vs. Non-Zero-Sum: Traditional physical goods are zero-sum (if you have the bicycle, I don't). Software is non-zero-sum (we can both have copies of the same program without diminishing each other's copy).

Externalities: Economic side effects not captured in market prices. The hosts suggest software creates massive positive externalities (like Wikipedia) that are invisible to GDP measurements.

Related Concepts to Explore

Information wants to be free (Stewart Brand)

The abundance vs. scarcity dichotomy in digital goods

Open source economics and sustainability

Universal Basic Income as response to automation

Public goods and the free rider problem

The tragedy of the commons (and anti-commons)

Platform capitalism and network effects

Post-scarcity economics

The knowledge economy and intangible assets

Recommended Reading & References

Snow Crash by Neal Stephenson (mentioned: dystopian hyper-capitalist future)

Friedrich Hayek's work on price signals and information

Marc Andreessen's "Software is Eating the World"

Chris Anderson's "Free: The Future of a Radical Price"

For Next Episode

The hosts tease future discussions about AI as a fundamentally new category—neither pure software nor hardware, with economics tightly coupled to compute infrastructure in ways that traditional software isn't.

About Net Good

Startup life is messy. Founders Julian Vergel de Dios and Nick Dazé share candid stories about building technology. From emerging trends and tech predictions to personal failures and philosophy, Net Good explores how entrepreneurship works.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit netgood.fm