Post #9062 continued...
If you still believe the Optical Networking revolution is about to slow, read on. The reaction is self-sustaining. - JGH
June 12, 2000
PUBLISHER@FORBES.COM
Digital Rules
EXPONENTIAL SHOCK
UNLESS YOU'VE BEEN ASLEEP FOR 20 YEARS, YOU UNDERSTAND Moore's Law. Or think you do. It works like this: The number of transistors that chipmakers can squeeze onto a silicon chip doubles every 18 months. The chip industry has pulled off this trick, like clockwork, for 41 years. Another 10 years looks likely.
Chip speed doubles about every 24 months. It's slower because more transistors require more circuits; thus electrons have greater distances to travel. Electrons can zip around a chip pretty fast, but not infinitely fast. They are finally governed by the speed of light--11.8 inches per nanosecond.
Data storage and data communications have their own Moore's Law. Storage doubles at the rate of every 20 months. Nobody expected this. The smartest pencil-necks in Silicon Valley were taken by surprise--as was Intel, which spent hundreds of millions on the idea that nearly all computer storage would migrate onto chips by 2000. I also got this wrong. After all, disk drives are hopeless contraptions, whirligigs of complexity. Just the fact that your hard drive doesn't croak every hour is a miracle. It performs a feat equal to a supersonic jet's circling the globe six inches off the ground.
The evolutionary pace of communications is of a wider spread. There are four mediums to think about: copper, air, cable and fiber--listed here from slowest to fastest. Copper has limits. Samuel F. B. Morse used it 156 years ago to send his famous first message, "What hath God wrought?" The speed was 4 bits per second. (A human wrist can't tap out Morse code any faster than that.) Today you sit in your hotel room, hoping--praying--to transmit and receive at 56,000 bits per second. Better for your blood pressure to hit the minibar, flick on Spectravision and lie down. Only under perfect circumstances will you get 56K. Optical fiber, though, is stunning stuff. Thanks to an engineer's trick called "wave division multiplexing," a single fiber-optic thread can carry upwards of 10 trillion bits per second. Put a thousand of these threads in one pipe, and, as Everett Dirksen might have said, soon you're talking real bandwidth.
Squished Snail
Got it? While most CEOs, investors and policymakers say they "get" Moore's Law, few do. Exponential gain paths are not intuitive. A penny on the first day of the month, if doubled every day, would produce $10 million by month's end. Our instincts tell us to reject this idea. Since not even $100,000 would be obtained until six days to go, we even might laugh at the idea--for the first three weeks or so. Then the exponential shock would set in and we would gape in wonder.
Likewise, accepting Moore's Law (and its equivalents in storage and bandwidth) is not easy. Do it anyway. Bet the farm on it. Remember how as a kid it was hard to accept compound interest? If you had bought into the idea at 10, you'd be sitting pretty by 50. Now comes a phenomenon that makes compound interest look like a squished snail.
Faster, Ever Faster
True New Economy weirdness is how these exponential gains in hardware supply spur yet more demand. Say again? Don't supply gains always hurt demand? Not here, folks. What happens is that new software gets written to soak up supply. Always. Double chip speeds, and presto!--a new software app, like, say, voice recognition, suddenly works. Double storage, and bingo!--here comes digital photography. Double bandwidth, and voil…!--you've got Napster.
Hardware supply gluts last a few days or weeks but always get soaked up. Economics has never worked like this before. Radial tires tripled tire wear and temporarily hurt the tire industry. Digital stuff is different. That's because consumers of bits are not just people. They are also machines. Smart machines proliferate like bunnies and eat bits like horses. Telephone companies were slow to get the Web. Why? They refused to believe in infinite demand for voice--and they were right. But smart machines have an endless appetite for data ... which will subsume voice (and much more).
My faith in these endless cycles of new hardware supply and software innovation--and subsequent killer new business models--got a boost in mid-May, when a startup called Yipes Communications stopped by for lunch. Yipes offers a way to suck bits into your company's network--today, 1 gigabit per second; soon, 10 to 80 gigs--straight off of fiber backbone lines. Shunned altogether is your local phone company with its cloddy frame relay switches and slow provisioning schedules. (Yippee for Yipes!) With Yipes, you pay for bandwidth only when you want it. Example: Call Yipes and order a boatload for tomorrow's three-hour analyst videoconference. When you're done, scale back. Snap, just like that.
If Yipes works, you can easily imagine the new opportunities for software delivery and a video-rich Web. Imagine how a combination of, say, Global Crossing or Williams fiber and Yipes services could kill the local phone company.
Chip, storage and bandwidth capacity are doubling apace. The pace of innovation in this new ecology never slackens. It only increases. Embrace this, or look out.
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