The world could run on older hardware if software optimization was a priority

It's similar to the "Market for Lemons" story. In short, the market sells as if all goods were high-quality but underhandedly reduces the quality to reduce marginal costs. The buyer cannot differentiate between high and low-quality goods before buying, so the demand for high and low-quality goods is artificially even. The cause is asymmetric information.

This is already true and will become increasingly more true for AI. The user cannot differentiate between sophisticated machine learning applications and a washing machine spin cycle calling itself AI. The AI label itself commands a price premium. The user overpays significantly for a washing machine[0].

It's fundamentally the same thing when a buyer overpays for crap software, thinking it's designed and written by technologists and experts. But IC1-3s write 99% of software, and the 1 QA guy in 99% of tech companies is the sole measure to improve quality beyond "meets acceptance criteria". Occasionally, a flock of interns will perform an "LGTM" incantation in hopes of improving the software, but even that is rarely done.

[0] https://www.lg.com/uk/lg-experience/inspiration/lg-ai-wash-e...

What I realized is that lower costs, and therefore lower quality, are a competitive advantage in a competitive market. Duh. I’m sure I knew and said that in college and for years before my own startup attempt, but this time I really felt it in my bones. It suddenly made me realize exactly why everything in the market is mediocre, and why high quality things always get worse when they get more popular. Pressure to reduce costs grows with the scale of a product. Duh. People want cheap, so if you sell something people want, someone will make it for less by cutting “costs” (quality). Duh. What companies do is pay the minimum they need in order to stay alive & profitable. I don’t mean it never happens, sometimes people get excited and spend for short bursts, young companies often try to make high quality stuff, but eventually there will be an inevitable slide toward minimal spending.

There’s probably another name for this, it’s not quite the Market for Lemons idea. I don’t think this leads to market collapse, I think it just leads to stable mediocrity everywhere, and that’s what we have.

In most cases the company making the inferior product didn't spend less. But they did spend differently. As in, they spent a lot on marketing.

You were focused on quality, and hoped for viral word of mouth marketing. Your competitors spent the same as you, but half their budget went to marketing. Since people buy what they know, they won.

Back in the day MS made Windows 95. IBM made OS/2. MS spend a billion $ on marketing Windows 95. That's a billion back when a billion was a lot. Just for the launch.

Techies think that Quality leads to sales. If does not. Marketing leads to sales. There literally is no secret to business success other than internalizing that fact.

The key point to understand is the only effort that matters is that which makes the sale. Business is a series of transactions, and each individual transaction is binary: it either happens or it doesn't. Sometimes, you can make the sale by having a product which is so much better than alternatives that it's a complete no-brainer to use it, and then makes people so excited that they tell all their friends. Sometimes you make the sale by reaching out seven times to a prospect that's initially cold but warms up in the face of your persistence. Sometimes, you make the sale by associating your product with other experiences that your customers want to have, like showing a pretty woman drinking your beer on a beach. Sometimes, you make the sale by offering your product 80% off to people who will switch from competitors and then jacking up the price once they've become dependent on it.

You should know which category your product fits into, and how and why customers will buy it, because that's the only way you can make smart decisions about how to allocate your resources. Investing in engineering quality is pointless if there is no headroom to deliver experiences that will make a customer say "Wow, I need to have that." But if you are sitting on one of those gold mines, capitalizing on it effectively is orders of magnitude more efficient than trying to market a product that doesn't really work.

[1] https://www.youtube.com/watch?v=nnsSUqgkDwU

This. Per your example, this is exactly what it was like when most of us first used Google after having used AltaVista for a few years. Or Google Maps after having used MapQuest for a few years. Google invested their resources correctly in building a product that was head and shoulders above the competition.

And yes, if you are planning to sell beer, you are going to need the help of scantily clad women on the beach much more than anything else.

Except that they didn't: they bought a company that had been building a product that was head and shoulders above the competition (Where 2 Technologies), then they also bought Keyhole which became Google Earth.

Incidentally they also bought, not built, Youtube .. and Android.

So, yes, they had a good nose for "experiences that will make a customer say "Wow, I need to have that.""

They arguably did do a good job investing their resources but it was mostly in buying, not building.

.. and they are good at marketing :)