Introduction

Purpose

This book provides a rigorous, buildable roadmap for understanding how value is created, captured, and transformed across the modern software economy—especially under AI, agents, and automation—grounded in economic foundations and linked to actionable business implications.

Why This Matters Now

GenAI and agentic systems are altering how software is conceived, built, and operated. Intelligence as an input to production can augment or substitute human labor, pushing marginal costs downward and reshaping market structures. Understanding value creation and capture in this context requires combining platform economics, cost/pricing theory, and concrete evidence from the hardware and software stacks.

Who This Book Is For

• Builders and operators of software businesses (founders, product managers, engineering leaders) seeking to understand the economic forces shaping their industry
• Investors and policymakers who need frameworks for evaluating software companies and digital market dynamics
• Researchers examining digital capitalism and platform economies with a focus on practical applications

Our Operating Lens

We analyze the developer and software economy through several key perspectives:

• Platform economics: How multi-sided markets create and capture value
• Data as capital: The role of data in production processes and competitive advantage
• Cost structures with near-zero marginal cost: The economics of digital goods and services
• Network effects: How connections between users create compounding value
• AI agents and augmentations: The accelerating role of artificial intelligence in the means of production

Structure and Approach

This book is organized into four major parts:

Part I: Economic Foundations establishes the theoretical groundwork by exploring general economic principles as applied to software businesses. We examine foundational theory, the nature of digital commodities, the distinction between services and products in software, and the fundamental relationships between value, cost, and price.

Part II: Digital Economy Infrastructure dives into the structural elements of the modern software economy. We trace the evolution of the software economy from mainframes to modern platforms, examine the physical infrastructure that enables digital business, explore contemporary business models, and analyze who controls the means of production in software development.

Part III: Platform and Network Dynamics focuses on the unique characteristics of platform-mediated markets. We examine platform economics and governance, and explore how network effects create defensible competitive advantages.

Part IV: AI and the Means of Production addresses the transformative impact of artificial intelligence. We analyze how AI affects existing production processes and labor markets, and explore the spectrum from AI augmentation tools to autonomous agent systems.

What You'll Gain

By the end of this book, you'll have:

• A framework for analyzing software businesses through an economic lens
• Understanding of how AI is reshaping production processes and competitive dynamics
• Tools for evaluating platform strategies and network effects
• Insights into the infrastructure and costs that underpin digital services
• A foundation for making strategic decisions in the evolving software economy

A Note on Evidence and Cases

Throughout this analysis, we ground theoretical concepts in concrete examples from real software companies and platforms. Each chapter combines economic theory with evidence from current market dynamics, ensuring that our analysis remains relevant to practitioners working in today's software economy.

The pace of change in software is accelerating, but the underlying economic principles remain remarkably consistent. Our goal is to provide you with both the theoretical foundations and practical tools needed to navigate this dynamic landscape effectively.