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Why Big Companies Keep Failing

Stack fallacy has caused many companies to attempt to capture new markets and fail spectacularly. When you see a database company thinking apps are easy, or a VM company thinking big data is easy  — they are suffering from stack fallacy.

Stack fallacy is the mistaken belief that it is trivial to build the layer above yours.

Mathematicians often believe we can describe the entire natural world in mathematical terms. Hence, all of physics is just applied math. And so on and so forth.

Stack fallacy  — “just an app”

In the business world, we have a similar illusion. Database companies believe that SaaS apps are “just a database app” — this gives them false confidence that they can easily build, compete and win in this new market.

As history has shown, Amazon is dominating the cloud IaaS market, even as the technology vendors that build ingredient, lower-layer technologies struggle to compete  — VMware is nowhere close to winning against AWS, even though all of AWS runs on virtual machine technology, a core competency of VMware; Oracle has been unable to beat Salesforce in CRM SaaS, despite the fact that Oracle perceives Salesforce to be just a hosted database app. It even runs on their database!

Apple continues to successfully integrate vertically down  — building chips, programming languages, etc., but again has found it very hard to go up the stack and build those simple apps — things like photo sharing apps and maps.

History is full of such examples. IBM thought nothing much of...

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