Coming Soon: The Multi-Billion Company With One Employee
“Facebook Enters $16 Billion Deal for WhatsApp.”
—The New York Times (2/19/2014).
Just because there aren’t any more gold rushes — like the one set off by James Marshall’s discovery of gold at Sutter’s Mill in California in 1848 — doesn’t mean there aren’t any more rushes for gold.
It’s just that now, instead of chasing gold flakes, what’s being sought is software and natural gas.
In fact, there are now two gold rushes underway — one also occurring in Northern California — that individually dwarf California’s original gold rush more than 150 years ago.
“Go West Online, Young Man”
One. “Fracking” (hydraulic fracturing). With advanced drilling technology, suddenly thousands (millions?) of square miles of gas reserves globally can now be profitably drilled.
The race is on to cash in on fields like those in North Dakota — and identify and tap the next one(s).
Two. Mobile software applications (“app’s”). As Facebook’s breathtakingly expensive purchase of WhatsApp shows, the architecture of the mobile computing world is still being built out.
Companies that develop and control the key (software) building blocks can literally name their price.
WhatsApp, the latest start-up neophyte to literally go Ka-Boom! (in a good way), has negligible revenues and scarcely 50 employees.
How rich is a $16 billion price tag for such a company?
Put it this way: local manufacturer Toro, with a market cap less than one-quarter of that ($4 billion), has more than $2 billion in annual sales and over 5,000 employees.
Bidding Wars, Bubbles & Busts(?)
What happens next?
Every geek with programming skills who’s old enough to tie their shoes is now going to drop out of school (assuming they were enrolled), 
and spend full-time trying to identify the next indispensable lynchpin in the mobile software firmament.
Step #2: auction it off to Apple, Google, Microsoft, Facebook, Amazon et al.
Good news if you have a house to sell in Palo Alto (or any other upscale Silicon Valley suburb).
Bad news if you’re looking to buy one.
P.S.: don’t like the gold rush analogy?
Consider instead the race to build the country’s first trans-continental railroad — or, more than a century later, the battle to develop the dominant PC operating system, browser, and search engine.
Two-part memo to would-be investors (at least those who lack Mark Zuckerberg’s deep pockets): 1) for every triumphant Facebook or Google, there are lots of CompuServe’s, Alta Vistas, Inktomi’s, MySpace’s and Broadcast.com’s; and 2) many of these technologies and platforms are inherently winner-take-all.
That’s because of something called “network effects” (also known as natural monopolies).
