1/ Best thing I've read this week: Post by @packyM on how "API companies" are building out moats by providing critical functions that their customers can't (nor want to) replicate at the same level of cost or quality
h/t @thesovagroup https://notboring.substack.com/p/apis-all-the-way-down-audio

Key takeaway:
It makes more economic sense for most companies to just pay these API companies than to build their own solution in-house...

3/ One reason for this is scale. Just like Netflix built a big lead by spreading content costs across a larger and growing user base; API co's can spread R&D for a single use case over many more customers than a single company would if it developed its own solution for itself...

4/ e.g. it's more economic for Facebook to use Twilio; or Shopify to use Stripe for certain use cases, even though both FB and SHOP have the talent and resources to build their own solution in house. Stripe updates its core API 16 times per day...

5/ This also builds network effects for the API companies. The more customers an API company serves, the more data it gathers, which allows it to make further incremental improvements, which benefits all existing customers...

6/ So spreading costs for a single product over many customers allows API co's to justify small improvements that wouldn't be economical for one company, and growth allows it to further improve the product, which further extends their value prop, lowering the incentive to leave.

7/ These were my broad takeaways but his essay goes into much more detail on specific company examples and is also a great primer on API's generally. Highly recommend reading the whole thing.