Jim Morris's Thought of the Week (or month, or year, ...)
Friday, July 14, 2006
Can Computers Generate A Next Big Thing?
Today's opinion is that the next big thing will not be in computers. Yes, the Internet is still growing, but venture capitalists want to invest in things whose future growth has not already been recognized by the market. As a result, investment, excitement, and the people who follow it are migrating to biotech, alternative energy, and other things not computing.
However, we underestimate the potential of the computer business because of a blind spot about non-linear growth. We tend to predict the future using a linear model; e.g. if sales grew by x units this year it will grow by 2x in two years. Some markets have quadratic growth—if there are x Internet users today, there will be x2 next year. Exponential growth, represented by Moore's law, is more ferocious—chip performance of x going to 2x each year means that chips improve as much each year as in all previous years combined. Each year or two could bring a paradigm shift if other things did not dampen the effect.
What can dampen growth? There are fundamental limits like the total number of people in the world, so the number of human Internet users can't grow forever. Another dampener is human choice represented by investment and government policy. For example, in the 15th century, the Chinese had a flourishing oceanic exploration program, but the government decided to kill it, which created a lucrative opportunity for the Europeans.
"Do the math" often means deciding which of two large numbers is bigger. If investors did real math that analyzed non-linear growth, they might make different decisions.
posted by Jim Morris @ 10:34 AM