News – 05/30/03
The Cheap Revolution
You know if George Gilder’s
on it, it’s a trend. At his recent Storewidth conference, Guru
Gilder and other industry luminaries extolled the virtues of
cheap, and it really does seem to be a trend that’s building
Rather than pay big bucks
for a few, specialized, high powered servers, for example, many
companies are instead deploying large numbers of inexpensive
commodity Intel-based hardware. And they’re not necessarily
putting our favorite software monopoly's bloated, security-hole-plagued
operating systems on these Cheap little boxes. Linux, the King
of Cheap, is becoming very popular in corporate America.
Forbes publisher Rich Karlgaard
pumped the Cheap notion in his introduction at the Storewidth
conference, which Forbes co-sponsored. In a bit of hyperbole,
“Sun's biggest competitor today is eBay, selling one-year old
The hottest tech stocks at
the moment are all Cheapies: EBay has seen its shares top $100
and stay there; Amazon.com recently rose to a new 52-week high
at $34.13; and Yahoo has traded as high as $28.85. What do two
of these market leaders have in common? Cheapie architecture.
Google is running on 12,000 cheap PCs and the free Linux operating
system, serving 150 million page views per month. Amazon uses
the secure Apache Webserver variant, Stronghold, to host its
sites. eBay, on the other hand, uses huge Sun mainframe-like
UNIX servers, and, perhaps coincidentally, is the only one of
the three to have had several significant outages.
Three trends are driving interest
in these companies’ stocks, according to Goldman Sachs, which
recently held a conference of its own. First, Goldman claims
that e-commerce has “finally crossed the chasm to mass-market
adoption.” Second, the investment firm expects that broadband
growth will pick up due to price reductions and drive e-commerce
and online advertising. Finally, consumer Internet companies
like the Big 3 represent one of the only “truly emerging growth
Huh? The Internet – the consumer
Internet no less – may be coming back into vogue on Wall Street?
Holy portfolio, Batman! How does this renewed investor interest
in post-Bubble companies square with the Cult of the Cheap?
It’s clear that any revolution
is actually over when the technology becomes cheap enough to
not really care that much about. Witness my favorite example,
presented by Kevin Kelly at a Delphi conference in late 2000:
the Sears Home Electric Motor. (Longtime SNS Readers can skip
this if you’ve heard it;
it’s still a great point, two and a half years further into
the current revolution.)
Former Wired editor
and author of the Bubble-y bestseller, New Rules for the
New Economy, Kevin Kelly related a story of the early 20th
century Sears Home Electric Motor. This product was a portable but expensive device that could
power all manner of labor saving devices. Kelly asserted that
people of that time couldn't imagine what was to come: Motors
disappeared into the fabric of home support systems.
true. Rather than a single, expensive, valuable resource that
needs to be conserved, managed, and maximized, domestic electric
motors today are in everything and we never think about them.
Try taking an inventory of all the motors in your house. Did
you remember to count any mechanical clocks? How about the timer
in your dishwasher or your washing machine?
is that computing will disappear into the background just as
so many other technologies have. It was an earlier cheap revolution
that made it possible for electric motors (and telephones, and
reliable electric power, and a myriad of other last-century
innovations) to fade into the fabric of our everyday lives,
rarely attracting our attention. Will this current Cheap Revolution
be the beginning of “computing too cheap to meter?”
Kelly’s way of
describing this Cheap Phenomenon was as a cost curve that approaches
zero. A corollary to his thinking is my assertion that, “On
the Internet, everything devolves to free.” (See my presentation
from that same Delphi conference for
more on that subject, here.
Email me if you want the PowerPoint file; it’s good for
a post-Bubble laugh.) Incidentally, Kelly is currently researching
his next book, an attempt to answer the question, what does
I’m tempted to
answer Kelly’s question flippantly, harking back to the old
“Information wants to be free” saw – Technology wants to be
free, and technology wants to be expensive.
Few people who
are familiar with the “Information” quote, uttered almost 20 years ago by futurist Stewart Brand, are
aware that the back part of that quote is, “information wants
to be expensive.” This
quote has been flying around the Net since its inception and
has been used as the justification for all manner of foolishness.
(Old timers will remember Stewart Brand as the creator of the
Whole Earth Catalog, and also the pioneering electronic community
the Well, AKA Whole Earth 'Lectronic Link, as well as a founder
of the Global Business Network.)
Brand originally said, in
1984 at the first Hackers' Conference, “On the one hand information
wants to be expensive, because it's so valuable. The right information
in the right place just changes your life. On the other hand,
information wants to be free, because the cost of getting it
out is getting lower and lower all the time. So you have these
two fighting against each other.”
Three years later, he had
refined the message somewhat, in The Media Lab: Inventing the Future at MIT: “Information
Wants To Be Free. Information also wants to be expensive. Information
wants to be free because it has become so cheap to distribute,
copy, and recombine – too cheap to meter. It wants to be expensive
because it can be immeasurably valuable to the recipient. That
tension will not go away. It leads to endless wrenching debate
about price, copyright, 'intellectual property', the moral rightness
of casual distribution, because each round of new devices makes
the tension worse, not better.”
In later talks at the Media
Lab, Brand added one final elaboration on this theme: “Information
wants to be free (because of the new ease of copying and reshaping
and casual distribution), AND information wants to be expensive
(it's the prime economic event in an information age)... and
technology is constantly making the tension worse. If you cling
blindly to the expensive part of the paradox, you miss all the
action going on in the free part. The pressure of the paradox
forces information to explore incessantly. Smart marketers and
inventors quietly follow-and I might add, so do smart computer
So why am I belaboring this
point? Well, try substituting the word “technology” for information
in Brand’s quotes and you get an interesting insight into the
On the one hand technology
wants to be expensive, because it's so valuable. The right technology
in the right place just changes your life. On the other hand,
technology wants to be free, because the cost of getting
it out is getting lower and lower all the time. So you have
these two fighting against each other.
Technology wants to be free because it has become so
cheap to distribute, copy, and recombine – too cheap to meter.
It wants to be expensive because it can be immeasurably valuable
to the recipient. That tension will not go away.
If you cling blindly
to the expensive part of the paradox, you miss all the action
going on in the free part. The pressure of the paradox forces
technology to explore incessantly. Smart marketers and
inventors quietly follow-and I might add, so do smart computer
Kind of creepy the way it
fits. And it does make a nice pat answer to Kelly’s question.
But Kelly is serious about his question. What does technology want?
As technology becomes
more animated and autonomous, I think we should be asking ourselves
where it wants to go, what its biases are and how far it can
govern itself. We need to know this at the very least in order
to push back expertly and with appropriate force -- otherwise
we push in blindness.
I believe these deep ruminations
have something to do with the Cheap Revolution. For example,
part of the Cheap Revolution is IBM’s push for computing as
a service. And part of computing as a service is IBM’s support
for grid computing, the ability to link together hundreds, thousands
or even millions of computers to provide computing muscle on
demand. Big Blue is reaping the benefits of this devolution
to Cheap: According
to Forbes’ Karlgaard, E-Trade recently “yanked 50 Unix servers
that cost $220,000 apiece and brought in a gaggle of $4,000
IBM servers.” Grid is a Cheap technology that wants to take
over the enterprise.
(OK, I can’t resist, as long as we’re taking
a stroll down memory lane in this piece. E-Trade’s former Chairman
and CEO, Christos Cotsakos,
used to be CEO of ACNielsen back in 1996 when I worked there.
He was asked by a fellow employee at a trade show what he thought
of the Internet. “The Internet is crap,” he said, sending a
chill up my spine, since I was responsible for the only Internet
efforts at ACNielsen at the time. E-Trade was his first job
after leaving ACNielsen, and for years following his departure,
my email signature featured his quote.)
If you can stand one more
pundit, according to Karlgaard and my buddy Graeme Thickins,
business guru and author of The Innovator’s Dilemma, Clayton
Christensen told the crowd at the Storewidth Conference you
can escape the Cheap Revolution's margin pressure in only three
product offering faster than anybody else can. This tactic works, generally, only for market leaders with a good brand
name, a greased distribution channel and financial might. (Think
Intel.) And it works only as long as the market wants the added
functionality and is willing to pay for it.
custom solutions that answer a customer's needs. Xilinx, with its programmable logic chips, does this. So does IBM, despite
its size. IBM's trick has been to go modular and bring into
its Big Blue tent an army of third-party solutions providers.
The old, highly integrated IBM would never have been able to
react quickly enough to customers' needs.
Find an unserved
market and serve it cheaply.
This is the way of the disrupter, says Christensen. The product
or service should be so cheap, in fact, that the industry's
old guard thinks there's no money to be made and walks away.
An example, says Christensen, is how Sony served teenagers with
transistor radios in the 1950s. Their parents owned expensive
tabletop vacuum-tube radios from RCA or Philco. For their part,
RCA and Philco knew all about transistors. But they figured
these solid-state curiosities would never replace vacuum tubes
until they were capable of producing a superior sound. That
left the teenagers unserved. Tinny-sounding as transistor radios
were in 1955, they were--by the standard of no radio at all--good
enough. By serving the unserved, Sony got a toehold in consumer
electronics and never looked back.
Thickins said Christensen
painted MBAs as the anti-innovators. Christensen said Sony has
had 12 bona fide disruptive technologies, “but the 'Walkman'
was the last one, in 1979. What happened? A Sony exec told [Christensen]
that every decision used to be made by the CEO, conferring with
only five close assistants. Their policy was to never do market
research. What happened? In 1982, they hired their first MBA.”
So what do these various trends
– the Cheap Revolution, the stock resurgence of consumer Internet
plays, information/technology wants to be free/expensive, grid
computing, and disruptive innovation – have in common and, more
importantly, what do they portend for the future?
Tune in next issue to see
if I can pull it all together.
- Shameless Self-Promotion Dept.: My feature
article, Grid Computing Takes Off in the Enterprise, was published
in the inaugural issue of Fawcette Technical Publications’
Enterprise Architect magazine. (Registration required
My article, “Innovative Marketers Target Unwired Customers”
was published in the NetSuds
Coming Soon: A new eBook, Be On the Wave Or Under It™
will collect the best of SNS’ insights over the last couple
of years, along with additional material from CTOMentor white
papers and new material. It will make a great gift (Father’s
Day?) for associates and friends in need of a guide to the
latest and greatest technology. Watch for more information
in upcoming SNS issues.
I was quoted extensively on eLearning in a recent issue of
the Minneapolis magazine, Upsize, which is aimed at growing
A couple issues ago I debuted SNS Begware, an opportunity
for you, gentle reader, to express your appreciation by tipping
your server via PayPal. See the sidebar for more info. Total
in the kitty so far: $46.48. Thanks, Mike!
I’ve reworked the TrendSpot
and Opinion sections, adding a Prediction
Tracking page to track the various predictions I’ve made,
and also added a Stuff I Said page with some quotes of things I said a
decade or so ago on the Net.
I repurposed and adapted an article about the wireless service
known as Short Messaging Service (SMS) for the Reside newsletter.
It’s entitled, Wherever they go, there you are and it points out
how marketers can use – carefully – this new way to contact
I’m featured in Manyworlds’ Thought Leader Showcase, which lists a few of the white
papers I’ve done. I’ve also added their fancy icon to the
- The Continuing Saga of FeaturePrice: I’ve
written before about my struggles with my old Web hosting company,
FeaturePrice. I’m safely away from the weirdness that has
enveloped that company, but I’m fascinated, in a slow motion
train wreck way, by the continuing spectacle. Recently I got
an email from the founder and former co-owner of FeaturePrice,
who obviously absconded with their client list before he left
in December. He’s spinning a wild tale that I don’t quite
believe. His chief “evidence” is several postings on the FeaturePrice
site that refer to the company going out of business. Yet
I suspect that perhaps these postings were the result of hacking,
perhaps by an insider, perhaps, say, an ex-partner? If you
like a good mystery, check out the link.
- Charge for Spam: This
scheme is brilliant: Charge people for reading their emails.
Talk about the Attention
- Say Goodbye to Bananas: If you
needed proof that it’s not nice to fool Mother Nature, check
out the plight of the banana. Seems that bananas are sterile
mutants of the wild banana, and have been asexually reproduced
through cultivation for centuries. That means all modern bananas
are clones, and thus have the same genes. That’s an evolutionary
no-no, and Emile Frison, head of a worldwide network of banana
researchers (oh, yeah!) called the International Network for
the Improvement of Banana and Plantain (INIBAP), is worried
the fruit will be extinct in 10 years. Now this sounded fishy
to me, so I did a bunch of checking and found the story at
two different reputable sites. Still and all I could have
slipped up and this story will make a monkey out of me!
- It Could Come To This: Regular
SNS Readers know I’m not a fan of silly trademarking/patenting.
Well this item shows the logical conclusion of the type of
stupid patent granting that’s become an epidemic. Keep in
mind that this is satire. But it could happen.
- More on Qurb: Alert SNS Reader Ken
Florian reports his experience with the spam filter Qurb:
The [Qurb] whitelist
is pretty straightforward...Only those inbound addresses that
already exist in the Outlook Contact list at the time Qurb is
installed or addresses that are later specifically and manually
designated as ‘accepted’ get to the Inbox...others go to the
Up to now, I've not
used anything other than some lame Outlook rules so I have little
to compare. The fact that the "Qurb" box shows
up as an Outlook folder is very convenient.
As you know, there
is no perfect solution, because I still need to check Qurb for
welcome senders. Even so, it's easier to process
that way because I know that most items in the Qurb folder are
spam, spam, spam, spam....and the visual inspection of what
to keep and what to whack is faster than it would be scanning
the Outlook Inbox.
A short time ago I took the costly step of registering all
the major domains containing a form of my name. Eventually,
I will designate one as "super secret" to be distributed
only to those I trust to have secure systems. The others I will
use gradually over time and dump one if/when it is compromised.
I was way too cavalier when I first registered my original domain...I
used it everywhere, now to my chagrin. This may be advice that
is too basic for your readership but if anybody bothers to register
their name (or something like it), they need to preserve it
carefully...once it has been grabbed by the general populace,
it is "gone" forever!