🦄 vol. 63

senyo chats about cloud computing ☁️

senyo (our most featured guest) is back.

on cloud 9 ☁️

You open up your favourite app (yes, we know it’s Tinder 😉), your data is fetched from “the cloud” and your profile loads in about a second. You’re able to swipe left on an almost infinite supply of people who just aren’t quite “good enough for me”. This all works because, “the internet”. I’m sure you’ve asked yourself, “how does the internet actually work?” Better yet, “what is the internet?” 🤔

One big family 👪

The internet is just a bunch of computers that are all connected together. Data travels from computer to computer until it reaches the computer holding the information you requested. For example, Google owns a set of computers in America that run their software. When you Google, “how to impress my crush”, a bunch of data is shuttled across the world to those computers. It goes from your computer to your router (which is a computer), from your router to your internet provider’s (e.g Afrihost) computers and from there, all the way to America. There are underwater cables that connect the world together. That’s how your data travels from South Africa to America. Submarine Cable Map has a graphic showing the world’s fibre cabling -- it’s impressive.

Finally, Google’s computers receive that data, run some algorithms to determine the results and shuttle that data all the way back to your computer.

It’s “in the cloud” 🌩️

You may have heard companies say, “your data is stored in the cloud” or that Netflix “streams movies from the cloud”. For most people (like my mom), that just means the data is in the sky somewhere. As magical as it sounds, the cloud isn’t all that complicated to understand.

First, we need some context. In the ancient times of the world wide web (which is only ~30 years old), if a company wanted to create an internet-based product, they had to buy their own computers and connect them to the internet themselves. Fast forward ~20 odd years and the picture looks very different. Most companies don’t own the computers on which they run their software, they rent them from someone else. We call them “cloud providers”. They buy loads of computers, connect them to the internet and provide ways for companies to run their own software on those computers. That’s all the cloud is: a bunch of computers operated by one company for rental to other companies.

Why is it a big deal? 🤷

Computers that run company software have huge amounts of computing power. Most companies don’t run software that needs to use all that computing power, they can run their software on a portion of it. In tech we say, “it needs a portion of the computer’s resources”. That means we can run many different companies’ software on just one computer. It’s as if we’ve sliced the computer into parts and given each company a portion of the parts.

How much money do companies make renting “slices of computers”? A lot. Remember I said Amazon is a cloud provider? They have a cloud computing unit called Amazon Web Services (AWS). They are the largest cloud provider, owning ~33% of the market. This translates to $63 billion in total revenue and $18.5 billion in profit in 2021. For comparison, Amazon as a whole (including AWS) made ~$25 billion in profit meaning that AWS contributed 74% of their total profit. This is more impressive given that the rest of Amazon made ~$407 billion in revenue (about 6 times the amount AWS generates) yet only contributed 26% to the total profit. If there’s ever been a business that “prints money”, it's cloud computing.

Opening the floodgates 🌊

The true innovation of the cloud is not renting computers, it’s actually the consumption model. For the most part, you’re billed using a “pay as you go” model -- you only pay for the computing resources you use i.e the size of the slice of the computer you use and the duration you use it for. For example, to rent the cheapest “slice of a computer” from AWS costs $0.0042 (R0,072) per hour. If you only use it for 1 day in a month, you pay 0.0042 x 24 hours = ~$0.1 (R1.72) for the month. Ridiculous right? All of a sudden, starting a company that builds internet-based products became much more affordable. You don’t have to buy a couple of high-end computers (we’re talking hundreds of thousands to millions of rands), figure out how to connect them to the internet and maintain and replace them. Instead, you can just rent exactly what you need from a cloud provider and pay only for those resources. You can build a whole company off a few hundred dollars. We’ve opened the floodgates; there’s never been a better time to start a software company.

The future of the cloud 🔮

The cloud is still in its early days. AWS launched only 16 years ago in 2006. There’s still plenty of work to be done in improving the ease of use and functionality of the cloud. There are hundreds of products and platforms all aiming to improve the cloud. While this won’t directly affect us as consumers, it does mean more people will start software companies. Who doesn’t want more versions of Netflix and BeReal? You never know, maybe you’ll start the next Tinder, find love and stop having to swipe right 👩‍❤️‍👨.

senyo

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senyo has been reading a book called scarcity, which discusses how humans behave when they have reduced access to resources: time, money, food, etc.

matt loved this pod with roelof botha, a sequoia partner (and south african too) 

sash enjoyed this wsj pod on how crypto giant ftx suddenly imploded

karl enjoyed this bestie episode with the ceo of coinbase, they broke down the current ftx situation