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George Gilder’s Microcosm: Hardware as Ideas

by on September 13, 2009 · 6 comments

Gilder explains the true meaning of the microcosm with his uniquely poetic prose:

As Peter Drucker said. “What one man can do, another can do again.” Distilling discoveries of science, a set of technologies, and a Philosophy of enterprise, the microcosm is far too big for any one country. Even its products are mostly made of ideas—waves that suffuse the mindscape of the world. (p.127)

The vital importance of ideas in all aspects of the microcosm, including hardware, is a central theme of the book:

Computer hardware thus is another form of information technology like books, films, and disks. The value resides in the ideas rather than in their material embodiment. The chip design is itself a software program. Even the design of the computer’s plastic chassis and keyboard may well have begun as a software program. Like a book, a spreadsheet financial package, even a film on a videocassette, a microchip design is conceived and developed on a computer screen and takes form in a storage device that costs between 80 cents and $2 to manufacture. The current dominance of such products in the world economy signifies the end of the industrial era and the onset of the age of the microcosm. (p. 159)

Consider debate over handset exclusivity: Those who insist that AT&T be forced to relinquish its exclusive rights to the iPhone ignore the fact that the iPhone is not so much a device as a brilliant idea—actually, a cluster of innovations made possible because AT&T was willing to partner with Apple on the risky venture of developing the expensive device and bringing it to market. Speaking of ideas made reality, I can’t wait to get my hands on a Microsoft Surface!

http://www.youtube.com/v/rP5y7yp06n0

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Digital Economics is Transforming News Media; Are Universities Next?

by on September 3, 2009 · 16 comments

Yale Clock TowerThe Wall Street Journal reports today that student loan borrowing for college “in the 2008-09 academic year grew about 25% over the previous year, to $75.1 billion,” with the average student borrowing $13,172 to pay for college. So it should come as an enormous relief that one Internet start-up, StraighterLine, has essentially made the university fully virtual, offering classes for just $99/month.  While this may seem like a boon for students, especially the millions of Americans for whom even community college tuition seems an insurmountable obstacle to climbing up the economic ladder, such “e-Learning” offerings are already, predictably, coming under attack by entrenched interests in “Big Ed” (the professoriat!) as the “media-software–publishing–E-learning-complex.”

In Washington Monthly, Kevin Carey explains why “The next generation of online education could be great for students—and catastrophic for universities.” In a nutshell, the story is the same basic theme of Chris Anderson’s book Free!: digital distribution of information will ultimately drive costs down to zero. Carey shows how universities are essentially facing the same sorts of pressure from disruptive innovation as newspapers—except with more capital costs:

Colleges are caught in the same kind of debt-fueled price spiral that just blew up the real estate market. They’re also in the information business in a time when technology is driving down the cost of selling information to record, destabilizing lows. In combination, these two trends threaten to shake the foundation of the modern university, in much the same way that other seemingly impregnable institutions have been torn apart. In some ways, the upheaval will be a welcome one. Students will benefit enormously from radically lower prices—particularly people like Solvig who lack disposable income and need higher learning to compete in an ever-more treacherous economy. But these huge changes will also seriously threaten the ability of universities to provide all the things beyond teaching on which society depends: science, culture, the transmission of our civilization from one generation to the next. Whether this transformation is a good or a bad thing is something of a moot point—it’s coming, and sooner than you think.

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George Gilder’s Microcosm: How Entrepreneurial Capitalism Creates & Uplifts

by on September 2, 2009 · 16 comments

A few gems from George Gilder’s 1990 masterpiece Microcosm: the Quantum Revolution in Economics & Technology as I work my way through the book:

Predatory Pricing. Gilder details how early microchip manufacturers created wholly new markets put Say’s law into action: supply creating its own demand.  Not only did these companies introduce new technologies, but they created demand by slashing the prices of those technologies by multiple orders of magnitude (10-10,000x) even before they figured out how to lower production costs enough to make even a small profit. While such practices would later give rise to charges of “predatory pricing” and “dumping,” Gilder explains:

Selling below cost is the crux of all enterprise.  It regularly transforms expensive and cumbersome luxuries into elegant mass products.  It has been the genius of American industry since the era when Rockefeller and Carnegie radically reduced the prices of oil and steel. (122)

The Learning Curve: Gilder explains the dynamic by which prices drop so consistently in innovative new industries:

Early in the life of a product, uncertainty afflicts every part of the process. An unstable process means energy use per unit will be at its height. Both fuels and materials are wasted. High informational entropy in the process also produces high physical entropy. The benefits of the learning curve largely reflect the replacement of uncertainty with knowledge. The result can be a production process using less materials, less fuel, less reworks, narrower tolerances, and less supervision, overcoming entropy of all forms with information. This curve, in all its implications, is the fundamental law of economic growth and progress. (125)

The Curve of the Mind: Gilder explains the broader implications of the Learning Curve to the competitiveness of the market economy, and how easily yesterday’s giants can become tomorrow’s easy prey: Continue reading →

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Search: It’s Getting Better All the Time

by on August 4, 2009 · 7 comments

I’m listening to the audiobook of Telecosm, George Gilder’s prophetic book about how abundant broadband would revolutionize the planet—which I recommend to everyone. I came across this passage, which reminded me just how good we really have it:

Reported to catalog only 16 percent of web pages, the best Internet search engines are foundering under the load, taking as long as six months to add new content.

If that was Search 1.0, Search 2.0 is great! Today’s search engines will index this post in a matter of minutes and while there are still parts of the “Deep Web” that aren’t crawled, a number of Search 3.0 upstarts are working on solving that problem, too!

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Bandwidth, Storewidth, and Net Neutrality

by on December 16, 2008 · 14 comments

Very happy to see the discussion over The Wall Street Journal‘s Google/net neutrality story. Always good to see holes poked and the truth set free.

But let’s not allow the eruptions, backlashes, recriminations, and “debunkings” — This topic has been debunked. End of story. Over. Sit down! — obscure the still-fundamental issues. This is a terrific starting point for debate, not an end.

Content delivery networks (CDNs) and caching have always been a part of my analysis of the net neutrality debate. Here was testimony that George Gilder and I prepared for a Senate Commerce Committee hearing almost five years ago, in April 2004, where we predicted that a somewhat obscure new MCI “network layers” proposal, as it was then called, would be the next big communications policy issue. (At about the same time, my now-colleague Adam Thierer was also identifying this as an emerging issue/threat.)

Gilder and I tried to make the point that this “layers” — or network neutrality — proposal would, even if attractive in theory, be very difficult to define or implement. Networks are a dynamic realm of ever-shifting bottlenecks, where bandwidth, storage, caching, and peering, in the core, edge, and access, in the data center, on end-user devices, from the heavens and under the seas, constantly require new architectures, upgrades, and investments, thus triggering further cascades of hardware, software, and protocol changes elsewhere in this growing global web. It seemed to us at the time, ill-defined as it was, that this new policy proposal was probably a weapon for one group of Internet companies, with one type of business model, to bludgeon another set of Internet companies with a different business model. 

We wrote extensively about storage, caching, and content delivery networks in the pages of the Gilder Technology Report, first laying out the big conceptual issues in a 1999 article, “The Antediluvian Paradigm.” [Correction: “The Post-Diluvian Paradigm”] Gilder coined a word for this nexus of storage and bandwidth: Storewidth. Gilder and I even hosted a conference, also dubbed “Storewidth,” dedicated to these storage, memory, and content delivery network technologies. See, for instance, this press release for the 2001 conference with all the big players in the field, including Akamai, EMC, Network Appliance, Mirror Image, and one Eric Schmidt, chief executive officer of . . . Novell. In 2002, Google’s Larry Page spoke, as did Jay Adelson, founder of the big data-center-network-peering company Equinix, Yahoo!, and many of the big network and content companies. Continue reading →

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