Andreessen's 15-Year-Old Software Prediction Unfolds Unexpectedly Now

The Evolution of Software and the Rise of AI

In August 2011, Marc Andreessen, a renowned venture capitalist, published a blog post that would later be recognized as a cornerstone in the Silicon Valley movement. Titled “Why Software Is Eating the World,” the essay argued that the global economy was undergoing a significant technological and economic transformation, with software companies set to dominate various industries.

Fifteen years later, in February 2026, Andreessen’s prediction has proven remarkably accurate. Software has indeed transformed sectors such as retail (Amazon), video (Netflix), music (Spotify), and telecommunications (Skype). However, the market experienced a $1 trillion shock because something began to eat software itself—artificial intelligence (AI).

Morgan Stanley's software analysts, led by Keith Weiss, highlighted this shift in a recent research note. They suggested that while AI is essentially software, it is becoming so pervasive that it is starting to replace human work. Andreessen’s a16z has long focused on enterprise software, including cloud, security, and SaaS, but the “SaaSpocalypse” has challenged this model. Andreessen appears more correct than he could have anticipated about software consuming the world.

The Original Prophecy

To grasp the magnitude of the current changes, one must look back at the skepticism Andreessen faced in 2011. Following the dotcom crash, he claimed that the stock market "hated technology." Even as Apple was trading at a reasonable price-to-earnings ratio, investors were quick to label it as a bubble.

Andreessen argued that companies like Amazon and Netflix were not just speculative bets but were building robust businesses that were reshaping the global economy. He accurately predicted that traditional retailers like Borders were being overtaken by Amazon and that Netflix was challenging Blockbuster. He also noted that software was beginning to impact industries beyond the digital realm, such as automobiles and agriculture.

For over a decade, his predictions held true, driving a wave of creative destruction that eliminated legacy companies and created immense value for software startups. However, the AI revolution of 2022 and the SaaSpocalypse of 2026 indicate that the cycle of creative destruction has reached the software industry itself. Morgan Stanley's Weiss pointed out a "trinity of software fears" that have reduced stock multiples by 33%, questioning the sustainability of the software business model.

The Impact of AI on Work

While Andreessen saw software disrupting industries, Morgan Stanley sees AI disrupting labor itself. Analysts note that generative AI can now understand unstructured data, which constitutes over 80% of information in organizations today. Previously, software required human input to process this data. Now, there is fear that software can do it independently.

Weiss wrote that generative AI expands the range of tasks software can automate, potentially reducing the need for employees. If software allows a company to cut its staff by half, it may also reduce the number of software subscriptions needed by half. This suggests that after software consumed the world, it began to consume the revenue of its creators by eliminating jobs.

The 'Do It Yourself' Threat

Andreessen predicted in 2011 that software programming tools would make launching new startups easier, viewing this as a positive development for entrepreneurs. Today, however, investors are seeing this democratized creation as a threat to established software giants.

Morgan Stanley identified the rise of "do it yourself" software as a primary concern. This includes "vibe coding," where users ask AI to generate code based on their desired vibe. As AI code generation tools lower the cost and skill requirements for coding, there is growing fear that companies will develop more software internally rather than relying on expensive third-party vendors.

Another concern is the potential of "model providers"—the creators of advanced AI models—to render traditional applications obsolete. The fear is that an AI agent could act as an intelligent user interface, automating workflows without the need for distinct apps. In this scenario, a single, omniscient model could serve as the operating system for an entire enterprise.

Will Incumbents Strike Back?

Analysts like Morgan Stanley argue that the market's reaction is exaggerated, echoing Andreessen's 2011 sentiment that investors were ignoring intrinsic value. The bank suggested that the "bear case arguments around gen AI appear to give too little credence to the ability of incumbent software vendors to participate in this innovation cycle."

Andreessen once warned that companies like Oracle and Microsoft were at risk of irrelevance. In 2026, however, Morgan Stanley identified Microsoft, alongside Salesforce and ServiceNow, as the "best athletes" poised to succeed. While Salesforce faces disruption from gen AI, it is adapting by integrating AI to strengthen its competitive advantages. For example, Salesforce's AI-related annual recurring revenue has surged by 114% year over year.

Looking ahead, Morgan Stanley sees a familiar path of innovation: improving productivity, better use of tools to automate functions, and software value predicated on labor displacement. The difference now is the rapid pace of innovation compared to previous cycles and the availability of better tools.

The Future of Software

In a sequel to Andreessen’s famous essay, his firm has released new thought leadership. Steven Sinofsky of a16z dismissed the idea of the "death of software," arguing that AI changes what we build and who builds it, but not how much needs to be built. He predicts that more software will be created using new tools in a more sophisticated way, while acknowledging that some companies will not survive.

Andreessen concluded his 2011 essay with optimism, calling the software revolution a "profoundly positive story for the American economy." However, the current landscape may be different. Even if software recovers its multiple and continues to grow, analysts warn of a future with increased GDP and productivity but less human labor involved.

Michael Pearce of Oxford Economics, along with Bank of America Research and Goldman Sachs, warns that the U.S. economy may soon reach a point where it doesn’t need to create new jobs to increase output. Demis Hassabis, cofounder of Google DeepMind, envisions a future of "radical abundance" but acknowledges a 10- to 15-year shakeout before that happens.