by Dana Blankenhorn
  Volume VI, No. XXXV

This Week's Clue: Moore Ignores Recessions

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This Week's Clue: Moore Ignores Recessions
SSP (Shameless Self Promotion)
SP (Shameless Promotion)
The Fiber-Phone Strategy That Makes Sense
Yesterday's Business Model, Today's Thief?
Is the Internet Evil?
Clued-in, Clueless

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For the Week of September 2, 2002

When the going gets tough, the tough get going. The origin of this cliché is a mystery. I first heard it applied to Watergate, deliberately misread as Attorney General John Mitchell proclaiming rats would leave the sinking ship. The "brainyquote" site ascribes it to Joseph P. Kennedy , father of. Billy Ocean made it a song title .

Usually it's applied to situations like the one we're in right now. When things get hard, you get busy. But in general this doesn't work during a recession. Business ideas can't get off the ground, and all that activity is really spinning your wheels. (I've finished three books this recession, plus two business plans, and have received no contracts.)

But it does apply in relation to Moore's Law. Innovation doesn't stop during a recession. For the industry leaders, in fact, it accelerates. And that's very good news for all of us.

High tech businesses know this instinctively. That's why companies like Cisco don't pay dividends - it has nothing to do with the tax laws. Instead, tech companies retain earnings during good times so they can keep innovating (and survive) the bad times. Those who argue that ending "double taxation of dividends" will spur economic growth don't know Moore - and if you don't know Moore you don't know squat.

Certainly it applies to chips. Next year's Intel chips will, for the first time, take advantage of true nanotechnology, and will be built using "striated" silicon whose atoms are further apart than normal. The new chips will pack 330 million transistors on a single 100-millimeter platform. Intel is also working on chips that actually have multiple processors on them , spreading the heavy-lifting. IBM and Sun are already delivering these "dual core" chips. Essentially the new designs take "distributed computing" concepts from things like SETI@Home and apply them to single slabs of silicon.

New "cell" chips from IBM, Toshiba and Sony will be able to handle multiple jobs at once, combining computation and communications on a single piece of silicon. .

Virgin Radio, meanwhile, is using the peer-to-peer concept to create a new kind of radio. The company demonstrated this briefly on its main site a few weeks ago , then took the page down. The idea is that instead of getting your broadcast directly from a server, you'd get it repeated from a nearby client, allowing large audiences to be created efficiently.

There are a number of new experiments going on in the area of micropayments, from large companies and small . A small company called Island Labs says it can pack yet-more digital data into limited bandwidth . The search of money for markets may slow down in a recession, moving more toward large companies , but it doesn't end. And breakthroughs continue.

We also tend to forget, or ignore, the impact that past technology revolutions may have elsewhere. Cellular phones, even digital cellular, are old news in the West, but they're revolutionizing how business is done today in places like Nigeria . They're increasing executives' productivity and fueling economic growth.

It's important to remember all this while approaching the Interop trade show, which hits Atlanta in about a week. This show is where I was last September 11. It's where I mourned, along with thousands of others. The show looks like it will be much, much smaller this year. While I'm registered as a reporter there, I've gotten fewer than a dozen messages about it, fewer than half of them for booth visits. The telecomm sector, it seems, has totally collapsed.

Seventy years ago, in the last great Depression, that would have been true. Progress did slow down during the 1930s, considerably. The progress that did come was mainly the result of government demand. Roosevelt built dams and brought electricity to the South, while Hitler built his military and brought war to the world.

But that isn't what will save the economy this time around. The fact is that in a world dominated by Moore's Law all products depreciate as soon as they leave the factory. Recession actually speeds this deterioration of value. You have to innovate in order to survive. You have to actually increase the pace of change, delivering breakthroughs in price-performance, or in the application of technology to solve problems. (Again, that's why you need to build your cash position in the good times.)

The telecomm recovery won't be fueled by government demand. In fact, by making broadband content illegal, and throwing people in jail for it , government is making a bad situation worse. Profitable innovation will come from moving home-made content to where it's needed more quickly, or coming up with new types of content, or simply applying old technology in new ways. But it will come, from private hands.

The world that existed before the telecomm bust is gone, and the new market will be quite different in many ways. It will be faster, it will be more global, and more of it will be wireless. But it will come. We won't need demagogues to make it happen. You will make it happen.


SSP (Shameless Self-Promotion)

I've been named to the ValueTree "Transparency Roll of Honour"for the work done here in urging honesty and ethics on the part of business leaders. I'm honored.

GlobalPOV has taken a piece I wrote on identity cards and why Americans won't take 'em. (You can respond on their forum here Marketingprofs has taken an occasional column similar to work formerly done at ClickZ. I'm presently negotiating with Corante to do a blog based on my upcoming book about Moore's Law. But I'd love more work, and I'm waiting for your e-mail .

To join the review team of the "Moore's Law" book just ask . If you'd like to help market the book as an agent or publisher, the address is the same. My current books include "Boom, Bust & Beyond: The Best of Dana Blankenhorn," , "The Time Mirror," and "Living on the Internet".

I still write for Boardwatch, Boardroom and BtoB. I still produce I-Strategy for Adventive

I'd like more readers, so tell your friends, clients, partners, and Congressperson about You have my permission to forward this newsletter widely. And if you have trouble subscribing let me know .

Remember: it's journalism that keeps the Clues coming...


Shameless Promotion

Rob Frankel is the best branding expert on the planet. He doesn't waste your money on fancy offices or sycophantic underlings - he just gets the j-o-b done.

And you don't have the buy his whole package. You'll find much of his "secret sauce" in his books and tapes . Try before you buy. And if you've got a list that isn't pulling its weight, check out I-Legions .

Oh, and when you sign your name on the line which is dotted, tell Rob it's because you've got A-Clue.


Takes on the News

The Fiber-Phone Strategy That Makes Sense

These are tough times in the fiber business. The networks that bought the most fiber a few years ago - like Qwest, Global Crossing, and Williams - are all going toes-up.

Savvy readers know the reason why. Once Moore's Law began applying to fiber, and capacity on each line could quickly grow exponentially, the value of long-distance fiber had to quickly fall toward zero. If any single route could handle all the traffic (and use a minimal portion of its own capacity), yet there were a half-dozen different routes available, Adam Smith would have to lead to Joseph Schumpeter's "creative destruction" .

Yet fiber is the only hope phone and cable companies have. Because of its immense capacity, fiber will always be cheaper, on a bit-per-bit basis, than wireless. A 55 mbps line sounds nice until someone offers something even-faster, and for less money. That's the direction fiber companies, and phone outfits, must go in if they're to survive the decade. They have to give us something better, then convince us to use it (by making broadband content legal again). In other words they must boost demand for speedy lines, not fight it as they're doing now. But how do they put that into their cost structures?

For outfits like JDS Uniphase the answer is "fiber to the customer" systems . Phone and cable operators need to buy such systems, while at the same time doing everything possible to delay their loss of market share to competitors. Already it's cheaper to have a cellphone for your home than a wired phone, and cheaper to have a dish than cable TV. In a few years it will become cheaper, and easier, for urban dwellers to have wireless Internet broadband than wired. If an alternative to copper isn't in hand by then, those who own copper die hard.

At least the supplier side of the business understands this argument. will be at Interop in about a week to see if the buyers get it, too.


Yesterday's Business Model, Today's Thief?

When outfits like Gator first came on the scene, in the 1990s, they were hailed for their new, innovative business models. Gator was an electronic wallet that made filling-out Web forms simple, and sites were eager to embrace it. This despite the fact that, from the beginning, its business model was to grab, say, L.L. Bean buyers by the shirt-front right before they clicked "buy" and offer them a discount for the same stuff at Lands' End (or vice versa).

That was then, this is now. Like politicians anxious to demonize an opponent, advertising-driven Web sites now deride Gator as "scumware" . What happened, in fact, is that the Web ad market collapsed. It became a zero-sum game. And the "avails" Gator was grabbing were being taken from content sites that needed every dime they could scrounge. Thus, the label.

The label dumped Gator into a bin with things like TopText, which throws ads into hyperlinks it creates on unsuspecting pages, and which (worse) comes bundled with the file-sharing program Kazaa. Gator didn't help matters when it defended its tactics aggressively and began employing TopText's distribution strategy (piggy-backing on other programs and loading in the background as part of that product's "price".)

Another derisive name for this kind of program is "spyware" (because one of its functions is to report back to its server on the user's activities) and it turns out to be fairly simple to get rid of with a tool such as Ad-Aware from Lavasoft . I used Ad-Aware myself a few days ago. It works. It's free.

All of which leads to a simple Clue, related to the "commercial war" we discussed before. Where government fails, the free market enters. And the word for free market law enforcement is vigilantism.


Is the Internet Evil?

Bruce Sterling (whose site was recently turned-off for exceeding his ISP's download limits thinks the Web is evil. (Well of course it is if you don't pay your bills.)

No, seriously. "Cyberspace is 'debasing itself in front of our eyes,'" he told the New York Times. The Internet is becoming a pit of spam and swindles, pornography, corporate advertising and government surveillance. He warns, "We will lose the Internet if we don't save it."

I hate spam too, Bruce. But porn, advertising, and government surveillance have their fans as well. The solution isn't less freedom, but more. In fact if you're truly the master of your own inbox domain, you don't even notice the grunge (which is what I think has your undies in a bunch here). I'm sick of porn spam, too. I'm getting 90 spams each day, but most of the porn is filtered-out, using simple techniques anyone can build directly into their e-mail program. There are better filters coming - nature (and business) abhor a vacuum.

Free us from spam and what's the problem? Government surveillance - take it up with the sponsors of the "war on terrorism." Corporate advertising - what are you, a commie? Swindles - keep your money in your pocket.

And who, by the way, is this "we" who's going to "save" the Internet, anyway? Who names this "we?" Because as sure as God made little green apples (with worms in them) you can be certain that "we" will quickly become "they," and "they" will not be so kind and public-spirited as "we" are. That's the problem with creating dictatorships (as we've seen with ICANN) - unchecked power can go to anyone's head, and it's an irresistible attraction to the ruthless.

The real problem with the Internet today is a lack of democratic institutions, a shortage of checks and balances. It's the lack of user input into the decisions made by registrars, and others who define the rules under which sites gain names and become accessible. Without democracy, anarchy is preferable to dictatorship. And that's the problem, Bruce, not the porn merchants.


Clued-in, Clueless

Clued-in is Jerry Nachman , MSNBC managing editor and talk show host, who actually answers his own e-mail. He doesn't answer all of it personally (he ignores the insults and Astroturf) but he doesn't fob off the work on others, and he doesn't complain about his audience, either. Good on 'ya.

Clueless is an MSNBC reporter buying any nonsense from spammers. When a reporter repeats lies without checking them (and they're not hard to check) then the reporter is a liar. When a publisher prints lies without checking them then the publisher is a liar. Spammers are thieves, period. Anyone who treats them differently earns our contempt.


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