Tales of Technology
Sunday, September 7, 2003
The wild card in any prediction of the future is Moore's Law, which states that the cost of raw computing power will be halved every year or so. No other technology has experienced such an accelerating rate of improvement. On the one hand, all current products are bound to get much cheaper, shrinking the profits of suppliers. On the other hand, the dirt cheap technology opens new vistas for innovative products.
What you should do about all this depends upon who you are.
Consumers should buy when the price is right. Get a laptop with wireless communication, an iPod from Apple, a Blackberry cell phone and a TiVo.
Businesses have more complicated decisions to make. Computers and the Internet are truly disruptive technologies, and you have to use them creatively to compete. Simply computerizing your current operation is foolish; you have to re-think it. Look at such software products as Siebel, PeopleSoft and SAP that run your business the way smart business school guys think you should. They might not have it right, but they understand the transformative power of computers better than you.
Computer companies must innovate like crazy because their existing products are doomed to become cheap. They need great imagination, prescient marketing, and nimble execution. Even monopolistic Microsoft is suffering because people are declining to upgrade their software.
Investors have the hardest problem. Having been burned by tech stocks, many are staying entirely away from the sector and investing in things whose cost is insulated from computing, e.g., real estate. Companies that sell basic technology such as Intel and Microsoft might be overvalued. I would look for the next Wal-Marts, businesses that exploit computer technology cleverly. Amazon, FreeMarkets, eBay, Yahoo, and Google are exploiting the new technology in imaginative ways. Their 1990s-inspired names should not put you off.
Advertisers are going to suffer. Not only are such devices as TiVo allowing viewers to avoid ads, but also the ads people see might not be working. A frightening fact was discovered on the Internet: Ads might not deliver as many sales as we hope. Internet advertisers can closely track what an ad viewer does. Does she click the ad, learn about the product and ultimately buy it? They discovered that the ads were too expensive for the sales they generated. Maybe that was only true on the Internet, but some people think it shows that all advertising is over-valued.
Pittsburgh can benefit from these changing industry conditions by finding and applying computer technology to its traditional businesses. Factory automation, medical devices, medical processes and biotechnology are all ripe for re-thinking. People from our universities can help.
Many innovative computer applications are aimed at wringing the costs out of processes. Remember that Andrew Carnegie's real skill was cost cutting. Michael Dell is today's greatest cost cutter. He showed how much of the cost of delivering a computer could be eliminated, but that was just one product. Many other products in our complicated world cost too much. Defenders of the existing distribution systems, such as the Recording Industry Association of America, would like to kill the Internet, but it's too late.
Universities deliver knowledge and should re-evaluate what they teach. The just-in-time concept allowed manufacturers to eliminate inventory, and the same can be done with knowledge. Certain skills and knowledge can be acquired as needed rather than stored in a student's head. Other skills and knowledge must be built in. For example, my generation of engineers had to take four semesters of calculus so that we could apply it by hand; today's students take one semester to get the concepts and use computer tools to solve problems.
Computing and telecommunications technology will also allow universities to change how they teach, providing more direct tutoring and doing it from a distance. We are beginning to see global competition in university education.
Economists and politicians need to save us from deflation and unemployment. The combination of computing, telecommunications and free trade is such a brutal cost reducer and job eliminator that the price of everything we manufacture and deliver will crash.
So I agree that IT is becoming like electricity, essential and enabling.