Friday, December 01, 2006

Technology Laws: Abundance vs Scarcity

Renowned author and high technology futurist George Gilder has developed what he describes as Ten Rules for Tech Investors. Two of these, the Law of Abundance and the Law of Scarcity, are irrefutably correct. Basically, wise entrepreneurs waste what is abundant in order to save what is scarce.

Gilder is sometimes positively brilliant such as when he explains how dumb networks will always prevail over smart networks. With dumb networks, intelligence shifts to the edges of the network.

Other times Gilder's right-wing extremist views sound like the musings of a fanatic, such as his resolute support for "intelligent design" over Darwin's theory of natural selection, his quirky belief that government-run education is to blame for declining American literacy, or that broadcast TV is a failing model because it wastes the consumer's time. In 1974, the National Organization for Women even named Gilder its Male Chauvinist Pig of the Year for his book "Men and Marriage."

Politics aside, even though George Gilder has never managed a business and he's never written a line of computer code, he's obviously done an incredible amount of technical research. He's definitely neck deep in his understanding of science.

Back in 1981, George Gilder wrote a book about supply-side economics called "Wealth & Poverty" which made it to #4 on The New York Times Best Sellers list. Considered "the bible of the Reagan revolution," his book explained how cutting taxes would stimulate entrepreneurship, increasing the taxable base of the economy, thereby raising revenues by cutting taxes.

The classical definition of economics is the study of choice under scarcity. But in Gilder's world, scarcity is only a temporary problem. Through engineering ingenuity things considered to be scarce, such as transitors or bandwidth, unfailingly get "supplied" and become plentiful.

Wired Magazine recently published a fascinating article written by George Gilder called The Information Factories which suggests that the desktop is dead. Long live the Internet cloud! In the brave new world of 21st century computing, we approach a billionth of a cent per byte of storage, and pennies per gigabit per second of bandwidth.

Last century the PC was king. The mainframe was deposed and deceased. The desktop was the data center. Today Google rules a total database of hundreds of petabytes which gets swelled every 24 hours by additional terabytes of new data. As Gilder writes:
In the PC era, the winners were companies that dominated the microcosm of the silicon chip. The new age of petacomputing will be ruled by the masters of the remote data center –- those who optimally manage processing power, electricity, bandwidth, storage, and location. They will leverage the Net to provide not only search, but also the panoply of applications formerly housed on the desktop.
As George Gilder explains, "In every era, the winning companies are those that waste what is abundant -– as signalled by precipitously declining prices -– in order to save what is scarce. Google has been profligate with the surfeits of data storage and backbone bandwidth. Conversely, it has been parsimonious with that most precious of resources, users' patience." Wasting what is abundant to conserve what is scarce, Google has become the supreme entrepreneur of the new millennium.


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