Net Economy Re-engineers Biotech
By Clay Shirky
clay@shirky.com
[January issue of Business 2.0]
business2.com
Like railroad track being laid from both ends of a continent, biology and information science have been heading toward one another for years, but it is only recently that the golden spike has been driven in. Information science's influence on biotech is going to reshape biology in a way that will catch many by surprise, but make millionaires of those who prepare for it.
Biotechnology, that once and future empire, has re-emerged from the shadows to become one of the major headlines of the year. The race to sequence the human genome, the attempts at genetic therapy in humans, and the recent struggles over genetically modified crops have made biotech hot news again, almost as hot as it was in the early '90s. The burning question about biotechnology is not why this is happening now, but rather why it did not happen then. Long before technology investors had heard the word "Web," biotech was the darling of the stock market, with steadily rising prices, only to see average share prices stagnate by the middle of the decade as the Internet tech sector began its well-publicized explosion.
We have recently started seeing some of the gains we expected at the beginning of the decade. The difference between then and now is that in the early 90s biotech was attempting to leverage information technology, whereas now biotech is succeeding because it has become information technology. Biology is undergoing the same revolution that information science had mid-century, when mechanical systems gave way to digital ones. This turned IT from a manufacturing industry concerned with building cash registers and punch-card readers into an industry mainly concerned with intellectual property. As the price of producing and handling pure information falls, the biotech industry is being reformed in ways that should look familiar to anyone who has been watching the Web.
A Web graft
The cost of sequencing live DNA into strings of nucleotide data falls dramatically every year, to the point that a single commercial lab ? Celera ? has been able to challenge a multinational consortium of government labs in the race to sequence the human genome, by investing in next-generation sequencing equipment and supercomputers. The net effect of all this is to split biotech into two camps familiar to the IT industry: software and infrastructure. As more biologists are working with pure information, the idea that every biology lab will buy its own sequencing equipment is giving way to the reality of centrally located clusters of sequencers for hire, clusters that will take the live DNA and render it into pure information. Similarly, the idea that every company will have its own tools for visualizing sequence data is giving way to biologists' paying for access to visualization software over the Internet. (If you think distributed DNA sequencing sounds a lot like server farms, and networked visualizing tools sound a lot like application service providers, you're getting warm.)
The revolution we've seen on the Internet can increasingly be applied to biology, because the effect of separating the data from its containers is the same for both industries: a class of massive infrastructure providers will make their money from economies of scale (think IBM or MCI WorldCom), and will sell their services to thousands of small companies vying to create the Next Big Thing (think TheStreet.com or Hotmail). This in turn will alter the economy of the biotechnology industry almost beyond recognition.
The industry is currently dominated by "big pharmas," big pharmaceutical companies that have the capital necessary to invest in sequencing and research that a startup can't afford. Though now each research group builds its own lab and buys its own equipment, the reduced costs of doing business over the Net coupled with the raised importance of biotech will give huge economies of scale to "rendering farms," places that can sequence on demand for smaller labs with good ideas and little capital. The advantage will move from the largest companies to the swiftest companies, and the big pharmas will see their role shift to something more like VC firms than research outfits, as they pick and choose among the smaller companies for an investment strategy. (If you think the division between capital-intensive infrastructure companies and idea-intensive software companies looks a lot like Silicon Valley, you're getting warmer.)
Biotechnology is at a critical inflection point, moving from prizing size to prizing speed, and as we know from the early days of the Web, those who make the transition early have a good chance at being around for the long haul. In particular, with the large and growing importance of pure DNA-sequence information, those who understand how to build online infomediaries to match people with ideas will become critical new players. This landscape is already being populated: Companies such as Hyseq with its GeneSolutions.com site and Pangea Systems with DoubleTwist.com are making their bid to be the Yahoo! and Slashdot of the new industry. When this shift happens, pay attention to the players who don't have startled looks on their faces, because they're the ones who stand to profit most from the revolution.
Clay Shirky (clay@shirky.com) is a professor of new media at Hunter College in New York. |
