Forwarded: to thread and Sonny,
I'm Buying Tech Stocks
Peter Huber, Forbes Magazine, 04.16.01
I signed up for MCI Mail in the mid-1980s, soon after it was
rolled out. For us pioneers, MCI offered to print out our e-mails
near their destination, and hand them off to the post office for
final delivery to the unwired masses. Today, of course, e-mail is
a ubiquitous, must-have application, that sells countless
billions of dollars worth of PCs, Web appliances and handhelds.
Most of the growth in digital markets has come in sudden,
convulsive spasms, with periods of relative calm in between.
Each successive stage of eye-popping growth requires years of
incubation, during which hardware and software accumulate and
networks form. Then some critical mass is finally reached, a
chain reaction begins, and the product or service makes an
abrupt transition from techno-curiosity to mass-market
necessity. Wall Street overreacts to the quiet interludes just as
much as it overreacts to the crescendos. While the
technologists calmly play their way through the never-ending
symphony, the momentum traders swing from euphoria to
despair, and then—count on it—back to euphoria once again.
Microprocessors good enough to power PCs emerged in the
1970s. Wall Street hardly noticed until enough hardware and
software had trickled into the market to attract the attention of
IBM. Then, in short order, every office worker with a desk
needed a machine to run the spreadsheet or word processor,
and there followed the industry's first great boom. The PC
conquered the desktop. Microprocessors got cheap, and spread
into microwave ovens and the dashboards of cars. PC-grade
technology was now commonplace and boring. By the early
1990s, serious observers were declaring that the PC market was
"saturated." We'd bought all the digital desktop we could use.
But not all the digital network. The early PCs were built to
stand alone; indeed, their main claim to fame was what they
didn't need, connection to an obsolete mainframe somewhere
behind the wall. In my MCI Mail days, I wasted endless,
frustrating hours tweaking modems to set up even the simplest
machine-to-machine connections. But by the mid-1990s, the
hardware and software of the PC had finally advanced enough,
and PCs themselves had become abundant enough, for the next
tsunami to form. It swept us to where we are now—blasé users
of a huge infrastructure of Web servers, linked via a relatively
low-speed network that's good enough for e-mail and graphical
pages. The technology is now spilling out of the PC into cheap
digital appliances. The Web business looks saturated, its
technology now looks dull. We've bought all we can use.
Nonsense. The next great surge in the market will be propelled
by streaming audio, followed quickly by streaming video. These
services are now at the MCI Mail stage of things. But the
Napster generation is already addicted to them, and the rest of
us will follow soon enough. Everything we currently call radio
and television is going to migrate to the Web's digital platform,
because that platform offers far richer capabilities and far more
choice.
Nothing much will happen until some critical mass of users
assembles. Then everything will happen fast. We can track the
new crowd as it forms. Streaming audio and video require
broadband connections to the Web. About 6 million Americans
have such connections today, and their ranks are growing fast.
Judging from past experience with PCs, cell phones, e-mail and
today's graphical Web, it takes about 20 million to reach the
tipping point, setting off a shoulder-to-shoulder stampede of
consumers and investors. The critical mass of broadband
subscribers will be in place some time before the end of 2003.
The transition from 20 million to 100 million will then occur
before 2010.
Which means the industry will sell more hardware and
service in the next 10 years than it sold in the last 30—more
microprocessors, audio cards, graphics chips, disk drives,
flat-panel screens, digital radios, broadband hardware and
fiber-optic glass; more browsers, viewers and players; more
subscriptions to online audio books, music, movies, soap
operas, college lectures.
Picking individual winners off the ticker is harder than
describing broad trends. Suffice it to say that I'm buying.
Peter Huber, a Manhattan Institute senior fellow, is the author
of Hard Green: Saving the Environment from the
Environmentalists and the Digital Power Report. Find past
columns at www.forbes.com/huber. |
