Why Are Companies So Bad At Deploying Capital For Software?

Think about it. Obviously, there are some companies that are great at trading cash for software—Facebook, Apple, Amazon, Google, etc. But, given the value that those companies are able to capture by doing so, it is extremely odd that more companies haven't figured out how to do it yet. Banks, big-box retailers, insurance companies, airlines: their software all sucks, more-or-less. (They are admittedly improving, but at a glacial pace.)

This is a point that Patrick Collison has previously mentioned (in podcasts such as this one) and possibly Paul Graham as well, so it's not a new idea, but I don't think it's very well understood.

The facile answer points to complexity as the main barrier, but I'm not sure I buy that. Manufacturing processes, construction projects, and accounting are also complex, and yet they are routinely and efficiently procured by companies all around the world, every day, in exchange for money.

Here are my best guesses as to why this is the case: