Marc Andreessen recently wrote a long article in the WSJ which he asserted that “Software Is Eating The World.” I enjoyed reading it, but I don’t think it goes far enough.

I believe the machines have already taken over and resistance is futile. Regardless of your view of the idea of the singularity, we are now in a new phase of what has been referred to in different ways, but most commonly as the “information revolution.” I’ve never liked that phrase, but I presume it’s widely used because of the parallels to the shift from an agriculture-based society to the industrial-based society commonly called the “industrial revolution.”

At the Defrag Conference I gave a keynote on this topic. For those of you who were there, please feel free to weigh in on whether the keynote was great, sucked, if you agreed, disagreed, were confused, mystified, offended, amused, or anything else that humans are capable of having as stimuli-response reactions.

I believe the phase we are currently in began in the early 1990′s with the invention of the World Wide Web and subsequent emergence of the commercial Internet. Those of us who were involved in creating and funding technology companies in the mid-to-late 1990′s had incredibly high hopes for where computers, the Web, and the Internet would lead. By 2002, we were wallowing around in the rubble of the dotcom bust, salvaging what we could while putting energy into new ideas and businesses that emerged with a vengence around 2005 and the idea of Web 2.0.

What we didn’t realize (or at least I didn’t realize) was that virtually all of the ideas from the late 1990′s about what would happen to traditional industries that the Internet would distrupt would actually happen, just a decade later. If you read Marc’s article carefully, you see the seeds of the current destruction of many traditional businesses in the pre-dotcom bubble efforts. It just took a while, and one more cycle for the traditional companies to relax and say “hah – once again we survived ‘technology’”, for them to be decimated.

Now, look forward twenty years. I believe that the notion of a biologically-enhanced computer, or a computer-enhanced human, will be commonplace. Today, it’s still an uncomfortable idea that lives mostly in university and government research labs and science fiction books and movies. But just let your brain take the leap that your iPhone is essentially making you a computer-enhanced human. Or even just a web browser and a Google search on your iPad. Sure – it’s not directly connected into your gray matter, but that’s just an issue of some work on the science side.

Extrapolating from how it’s working today and overlaying it with the innovation curve that we are on is mindblowing, if you let it be.

I expect this will be my intellectual obsession in 2012. I’m giving my Resistance is Futile talk at Fidelity in January to a bunch of execs. At some point I’ll record it and put it up on the web (assuming SOPA / PIPA doesn’t pass) but I’m happy to consider giving it to any group that is interested if it’s convenient for me – just email me.

Next week at Defrag I’ll be giving a talk titled “Resistance is Futile”. I’ll be talking about my premise that the machines have already taken over. A few days ago a friend of mine emailed me a perfect image to summarize where we are today. Ponder and enjoy.

I was reminded of the importance of starting with the customer experience while I was watching this brilliant video from WWDC 1997 of Steve Jobs. In the video, Jobs appears to be responding to attack by a troll, but is actually doing something much more interesting. Rather than take the bait and react, he thinks carefully in real time and makes a critical philosophical point about his – and Apple’s – approach to creating new products.

The punch line happens early when he says “you’ve got to start with the customer experience and work backwards for the technology.” It’s five minutes long and worth watching, if only to see how incredibly durable Jobs’ philosophy has been over the past 15 years.

When I think about the companies we’ve invested in, some of them embody this philosophy deeply in their culture. Oblong, MakerBot, Orbotix, Fitbit, and Cloud Engines immediately come to mind. The entrepreneurs running these companies are completely and totally obsessed with the consumer experience of their products, even though their products embody an incredible amount of technology (in each case, both hardware and software innovations.)

As an investor, I often lose sight of this, especially when I’m working on non-consumer facing companies (e.g. enterprise software companies). But I believe very strongly in the consumerization of IT – namely the notion that innovation in software is now being driven by consumer applications, and correspondingly by consumers, not by enterprise IT organizations and enterprise software vendors. If you accept this, it means that if you are working on enterprise applications, you also need to be obsessed with the customer experience.

When I think about this abstractly, especially in the context of “software eating the world” or my view that the machines have already taken over and resistance is futile, I completely buy the premise that the consumer experience trumps all technical decisions in any context. Apple has proven this throughout the entire customer experience, including being exposed to the product, buying the product, implementing the product, upgrading the product, and getting help with the product. And I think it’s going to get a lot more important going forward.

I’ve worn glasses since I was three years old. I was trying to look at something on my iPad yesterday without them on and I heard Amy burst out laughing with “you really can’t see a thing without your glasses.” True – my eyes are defective. I’ve contemplated getting LASIK’s a few times but chickened out each time – if 42 years of glasses have worked, I expect another 42 will be just fine.

For years I’ve fantasized about getting glasses that have a heads-up display (HUD) integrated into them. This HUD would be connected to a computer somehow, which would of course be connected to the Internet, which would then give me access to whatever I wanted through my glasses. I can’t remember a sci-fi movie over the past decade that didn’t have this technology available and since my jetpack now seems like it’s finally around the corner (I’m hoping to get one for my 46th birthday), I have hope for my HUDglasses.

The pieces finally exist since I’m carrying a computer in my pocket (my iPhone or my Android) that’s always connected to the Internet. My glasses just need bluetooth to pair with my phone, an appropriate display, a processor, a camera, and the right software. Optimally I could control it via a spatial operating environment like Oblong’s g-speak.

I’m interested in investing in a team going after this. The magic will be on the software side – I want to work with folks that believe the hardware will be available, can integrate existing products, are comfortable with consumer electronics products, but are obsessed with “assembling the hardware” and “hacking the software.”

If this is you, or someone you know, please aim them at me. In the mean time, I tried to hunt down Tony Stark but don’t have his email address.

I’m in my car on the way to Aspen for the weekend (Amy is driving – I’m in the passenger seat.). The top is down. It’s absolutely beautiful on I-70 as we travel at a high rate of speed. And I’m sitting here blogging on my iPad.

There is no way to describe this as anything other than magic. I’m in an extremely creative zone of my life and trying to spend as much time as I can working on stuff I really care about. I love the entrepreneurs I work with, my partners are extraordinary, the team that supports us is dynamite, and because of magic technology I have an enormous amount of time and space freedom.

I’m as busy as I’ve ever been, but I’m finding that I can be even more effective now that I’m detached from physically having to be places in order to interact and communicate. Sure – I still have lots of face to face activities and interactions, but I’m starting (finally) to be more focused with it, especially on things and with people I really want to be with.

As I sit here writing this, I realize that I couldn’t have worked this way a decade ago. When I think of what the next decade is going to be like, I get chills of excitement.

I love magic technology. Thank you to all the awesome people out there helping create it!

Once a quarter my partners (Seth, Ryan, Jason) and I spend 48 hours together. Unlike a typical offsite that ten zillion organizations have, we tend to spend less time on formalities and more time on wider ranging, forward looking discussions about what we are doing, both professionally and personally.

Last night, over an amazing meal, we ended up talking about what we’ve been investing in over the past four years. When we reflect on the 37 companies we’ve invested in since we raised our first Foundry Group fund in 2007, we’re delighted with the mix of companies and entrepreneurs we are working with. We have a very clear thematic strategy that we’ve discussed openly, along with a few other key principles such as being willing to invest anywhere in the US and being syndication agnostic.

At dinner we zoned in on all of the current activity in early stage tech. There’s an awesome amount of exciting stuff going on right now and a real entrepreneurial revival throughout the US. Sure, there’s all the inevitable bubble talk going on which I’ve encouraged entrepreneurs to simply ignore and play a long term game instead, and once again many VC firms are spreading themselves wide and chasing after whatever the latest interesting thing is. But entrepreneurship, especially throughout the US, is vigorous, exciting, and creating many really interesting companies, some of which will be important in the future.

When we think about what has driven the success of some of our investments, we realize that we’ve chose the macro environments to invest in really well. Our HCI, Adhesive, and Distribution themes are all great examples of this. With HCI, we are at the very beginning of a massive shift over the next 20 years around how humans and computers interact. Adhesive plays the macros of digital advertising – every year meaningful ad spend is shifting annually from offline to online and that will continue for quite some time. And with distribution we’ve benefitted from the application of the concept of social to extremely large existing online markets where innovation had stagnated.

Our conversation shifted to 2015. While we still believe there are many exciting opportunities within our existing themes, we think that given the velocity of technology innovation and the way we use technology, things will shift dramatically over the next four years. Completely new and unexpected innovations are emerging and entrepreneurs who are obsessed with transforming existing industries, creating radical new technologies, or dramatically changing the use case of existing technology are starting to work in 2011 on things that will matter immensely in 2015.

We have one new investment coming up that reflects this and, when we start talking about it, you’ll see the kind of entrepreneur and company we are searching for. We decided last night to look for a lot more of it. While our deeply held beliefs about what we invest in and how we invest are the same, we’ve decided to open up our intellectual aperture and make sure we’ve incorporated a stronger view of “what is 2015 going to be like” into our thinking.

“Double, double toil and trouble; Fire burn, and caldron bubble.” – Macbeth

Every time I hear the word “bubble” I think of that quote from Macbeth. I also think of Tulip Mania and the South Sea Company which purportedly was the source of the concept of an economic bubble. And then I remember Charles Mackay’s classic book “Extraordinary Popular Delusions & the Madness of Crowds.”

When I returned last weekend from a week off the grid I encountered the word “bubble” over and over again when referring to the tech industry. A variety of people were using it to describe the current situation. This has been going on for at least a quarter or two, but the velocity of it seems to have picked up with a wave of high priced financings along with large financings for nascent companies. While plenty of tech bloggers were tossing around the word “bubble”, I also noticed it among the mainstream media. But more interestingly I saw it in my twitter feed from some entrepreneurs and VCs who I respect a lot. So I spent some time on my run yesterday rolling the idea of a bubble around in my head.

In the tech industry, the great Internet bubble inflated between 1999 and 2000 and deflated (or popped) in 2001. I remember it well as 2001 was easily the most challenging year of my business life. I made a lot of mistakes in 1999 and 2000 that I’ve hopefully learned from (I believe I have) and took on a lot of challenging things between 2001 and 2005 which laid the groundwork for the business context that I find myself in today. So, in hindsight, the great Internet bubble of 2001 was very powerful and useful to me, even though it was very painful.

I refuse to make predictions as the only thing I know with certainty is that some day I will be dead. I view predictions as irrelevant in the context of what I am working on and trying to accomplish. Sure – I pay attention to what is going on around me, have hypotheses about what’s going to happen, and adjust my behavior accordingly. But I think making predictions with certainty such as “we are in a bubble” are useless, especially in the absence of recommendations about what to do to either defend against or take advantage of the situation.

I find this discussion about bubbles especially bizarre and entertaining against the backdrop of the downward economic cycle of the past few years. In 2008, everyone in business and politics was consumed with the “global economic crisis”. However, entrepreneurs just put their heads down and continued to accelerate the current web revolution which started around 2004 with “Web 2.0” being articulated by Tim O’Reilly. Today, there is once again enormous focus on entrepreneurship as the salvation for many things, with the naysayers starting to say “but it’s a bubble” or some variant.

If you recognize that we are in a strong, positive, upward segment of the current “tech company creation cycle”, that’s more than enough. You should accept that we’ll be back in a downward part of the cycle at some point, but that we don’t know if it’ll be in a week, month, year, or decade. We also won’t know the slope of the curve although if you are a hedge fund trader you probably think you can calculate the derivative of some equation about the future that will tell you what to buy and sell. Whatever – have fun and good luck.

If you are an entrepreneur, you can build a significant, powerful, sustainable business taking advantage of market expansion during the up cycle and consolidating your position during the down cycle. Don’t get distracted by speculating about “bubbles” other than the ones in your bathtub. Instead, spend your energy creating amazing products, thrilling your customers, building an awesome organization, and living your life. Always remember that one day you too will be dead.

We’ve decided to implement a new phone system in our office. When I posted about our search for our video conferencing system, we got a ton a great feedback so I’m once again looking for your help.

We’ve been using an older version of Cisco’s Call Manager (VoIP based) that we’ve had for the past decade. While it has worked flawlessly and has a ton of bells and whistles, we simply do not use them. Occasionally someone will transfer a call and that’s about it. Call Manager is currently fed by two T1′s that flex between voice and data. We have a total about about 20 phones in the office.

Our goal is to rip all of this out (including the T1s) and replace it with something much simpler that has low to no incremental cost beyond whatever hardware we buy up front. We’re currently considering two different possibilites, one were we have no phones at all and everyone uses cell phones and a second where we continue to have a physical phone (or just a headset) and use cell phones as a backup.

Scenario #2 is where we’re looking for input.  We are looking for a system that would involve no hardware at the office (save for possibly having phones/headsets on the desks) and that would not require dedicated T1′s as we want to use our existing Comcast line for this.

We’ve so far spent time exploring Google Voice but have had too many complaints of unacceptable voice quality for it to be a viable solution today.  While Skype is another possible solution we have existing numbers that would need to be ported (or at least forwarded in some way) so Skype doesn’t feel like a great option either.

Thoughts or suggestions?

A post in the New York Times this morning asserted that Software Progress Beats Moore’s Law. It’s a short post, but the money quote is from Ed Lazowska at the University of Washington:

“The rate of change in hardware captured by Moore’s Law, experts agree, is an extraordinary achievement. “But the ingenuity that computer scientists have put into algorithms have yielded performance improvements that make even the exponential gains of Moore’s Law look trivial,” said Edward Lazowska, a professor at the University of Washington.

The rapid pace of software progress, Mr. Lazowska added, is harder to measure in algorithms performing nonnumerical tasks. But he points to the progress of recent years in artificial intelligence fields like language understanding, speech recognition and computer vision as evidence that the story of the algorithm’s ascent holds true well beyond more easily quantified benchmark tests.”

If you agree with this, the implications are profound. Watching Watson kick Ken Jennings ass in Jeopardy a few weeks ago definitely felt like a win for software, but someone (I can’t remember who) had the fun line that “it still took a data center to beat Ken Jennings.”

While that doesn’t really matter because Moore’s Law will continue to apply to the data center, but my hypothesis is that there’s a much faster rate of advancement on the software layer. And if this is true it has broad impacts for computing, and computing enabled society, as a whole. It’s easy to forget about the software layer, but as an investor I live in it. As a result of several of our themes, namely HCI and Glue, we see first hand the dramatic pace at which software can improve.

I’ve been through my share of 100x to 1000x performance improvements because of a couple of lines of code or a change in the database structure in my life as a programmer 20+ years ago. At the time the hardware infrastructure was still the ultimate constraint – you could get linear progress by throwing more hardware at the problem. The initial software gains happened quickly but then you were stuck with the hardware improvements. If don’t believe me, go buy a 286 PC and a 386 PC on eBay, load up dBase 3 on each, and reindex some large database files. Now do the same with FoxPro on each. The numbers will startle you.

It feels very different today. The hardware is rapidly becoming an abstraction in a lot of cases. The web services dynamic – where we access things through a browser – built a UI layer in front of the hardware infrastructure. Our friend the cloud is making this an even more dramatic separation as hardware resources become elastic, dynamic, and much easier for the software layer folks to deploy and use. And, as a result, there’s a different type of activity on the software layer.

I don’t have a good answer as to whether it’s core algorithms, distributed processing across commodity hardware (instead of dedicated Connection Machines), new structural approaches (e.g. NoSql), or just the compounding of years of computer science and software engineering, but I think we are at the cusp of a profound shift in overall system performance and this article pokes us nicely in the eye to make sure we are aware of it.

The robots are coming. And they will be really smart. And fast. Let’s hope they want to be our friends.

At the end of each day, I encourage you to reflect on whether you spent your day on “signal” or “noise.” Let me explain.

Recently, I wrote a post titled Managing Priorities. In it I talked about the idea of P1′s. My weeks start on Monday morning so my P1 for the current week (which ends in about 20 hours since I usually get up at 5am on Monday morning) is to get a draft of the new book I’m writing with Jason Mendelson to our publisher (Wiley). That’s it – one P1 for the week. Of course I did a ton of other things last week, including spending two days at Blur doing an HCI brain soak, working on closing a new investment, working on two M&A deals, having a few board meetings, giving a few talks, meeting with a bunch of people, and having a few enjoyable dinners with friends. But every morning when I woke up I thought about my P1 (the book) and every night before I went to bed I thought about whether or not I had made progress on it.

I committed to myself to spend all day Saturday and Sunday on the final edit push. Now that I’m on my second book, I know my limits and know that six hours is the most I can work productively on the book in one day. So yesterday I slept in, did email and my normal Saturday morning info scan, and then settled in for six hours of editing. Every 30 minutes I took a short break – did email, had lunch, took a nap, talked to Amy, and did a 15 minute phone call with another VC who was struggling with an issue in real time. But I got my six hours in and then went out to dinner with Amy and a bunch of friends. Today I’m going to catch up on email until about 11, head to my condo in Boulder, and spend a good solid six hours on the final pass before hitting send on the draft. I’ll reward myself with dinner with some friends, although I have no idea with whom at this point.

So, while I let a little noise drift into my weekend, I’ll have spent the majority of it on signal (my P1).  This morning as I was doing my morning infoscan (Daily Web Sites, Twitter, RSS Feeds) I noticed a ton of stuff that I’d put in the noise category. There were apparently a few debates that blew up yesterday – I’ll use the one around Angellist as an example of noise.

I love Angellist and think it’s a remarkably interesting thing. However, it’s of relatively little direct utility to me – of our 35 investments made from Foundry Group, none have come from Angellist. Regardless, it has had an undeniably huge impact on angel and seed investing in the past few years. At the minimum, it’s interesting to watch the social dynamics of it. Will it impact a new generation of successful entrepreneurs and angel investors or will it result in a big money pit? Who knows – check back in ten years.

However, I saw a bunch of tweets about it (including some hostile ones followed by some conciliatory ones from the same people) linking to a handful of blog posts, comments, and more tweets. After reading a few of them, I’m not actually sure what the debate is actually about. I thought it was about “is Angellist helpful or not”, but it quickly evolved into something else.

As I was pondering this, I saw a tweet from Paul Kedrosky that said “I have had more than a few entrepreneurs complain lately about VCs/angels tweeting/blogging up storms, but ignoring emails.” While I’m not 100% sure Paul was building off of the Angellist noise, I know Paul pretty well and am going to guess that at the minimum it inspired his tweet. And his tweet is on the money – I know plenty of VCs who are making a ton of “content noise” these days but don’t seem to be able to respond to their signal-related emails. And if entrepreneurs think VC to VC email is somehow special, I’m included in that category (there are plenty of emails I’ve sent to my VC friends with specific stuff in them that are never responded to.)

Now, this is not criticism of the Angellist discussion or VCs not responding to emails. Rather, it’s an effort to give an example of noise overwhelming signal. In this case, Angellist is the signal. The discussion around it in the last 48 hours is mostly noise (I’m sure there’s some signal in there, but it’s a lot of work to pull it out, which results in a bad signal to noise ratio.)

In my little corner of the universe, signal matters a lot. I can’t consume signal 100% of the time (or my head would explode) so I let plenty of noise creep in, but I’ve got very effectively tunable noise filters. Anyone involved in the entrepreneurial ecosystem should ponder this – I encourage you to focus on amplifying signal, not noise.