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from Gilder Publishing THE FRIDAY LETTER e-mailed weekly, for friends and subscribers ====================================================== | www.gilder.com | Issue 8.0/May 18, 2001 HEADLINES: * In The American Spectator/George Gilder on "The Coming Boom" * In Dynamic Silicon/Data MEMS * Friday Feature/Charlie Burger's Eve of Disruption * Poll Question/Adieu Lucent? * Readings * Conference Calendar ~~~~~~~~~~~~~~~ IN THE AMERICAN SPECTATOR/"The Coming Boom" "In every era, the definitive abundance is revealed by the price of a key factor of production, plummeting over a cliff of costs and releasing. Like a giant river reaching a falls, the key resource releases a surge of kinetic energy into the economy as the price drops. From horsepower to kilowatt hours, the countries, companies and individuals that exploit the ever-cheaper resource gain market share against all others, and end up casting the character of the age. "Over the last forty years, the key resource has been transistors and bits of memory. The new era, however, will ride a new factor of production over a new paradigm cliff: the price of communications bandwidth, falling between two and ten times as fast as the fall in the price of transistors. "The plummeting price of a key resource creates what my friend Andy Kessler calls a low-pressure area in the economy. Low-pressure systems pull in weather from elsewhere(storms. Conventional economists have long favored equilibrium-economies that gravitate toward perfect balance, blue skies and moderate weather. This remains the ideal of Eurosclerosis. In entrepreneurial economies, however, low-pressure zones such as Silicon Valley concentrate energy in spirals of growth, twisters of creative destruction. "Driving today's low-pressure economy is the rampant spread of the Internet and its transformation through the power of fiber optics. The Internet lowers the cost of transactions, of price information, and of search, and facilitates the setting of prices. The Internet saves the key scarcity of the new economy of abundance-time. Extending markets and proliferating new products, it lowers the cost of capitalism and raises the comparative price of socialist policy. "The low-pressure economy drives prices down most dramatically in the highest growth sectors such as technology-and these low prices reverberate throughout the economy. Pondering the numbers, many economists will continue to warn against inflation and call for tighter money, as they did throughout much of the Great Depression. They will oppose tax rate reductions in order to pay back debt or balance the budget, as Americans did in the 1930s and the Japanese did during the 1990s. "If the current administration and Federal Reserve follow those well-trodden paths of failure, they will delay the tidal wave of new growth. But they cannot stop it. The world economy is increasingly unified and if the U.S. gives up leadership, other countries will move into the low-pressure breach. Bad policy can drive American venture capital overseas, just as bad policy in Japan and Europe shifted capital to the U.S. over the last two decades. But the Telecosm will still prevail, and investors who understand its dimensions will be able to spurn the catastrophists and prosper from the largest opportunity in the history of the world economy." George Gilder Excerpted from "The Coming Boom," in The American Spectator, May 2001. Read the full story at www.gilder.com. And subscribe online-50% off the annual cover price. ~~~~~~~~ IN THE MAY 2001 DYNAMIC SILICON/MEMS Meet Data Storage "Two forces encourage the development of MEMS-based data storage: proliferating portable devices and the superparamagnetic limit. Small devices need cheap, rugged, capacious data storage. Hard disks are within a few generations of reaching the superparamagnetic limit, where bit sizes are too small to remember their data (thermal noise randomizes the bits). The search has begun for alternatives to longitudinal magnetic recording." The May issue of Dynamic Silicon, by Nick Tredennick and Brion Shimamoto, posts Monday May 21. Subscribe now or log in at www.dynamicsilicon.com. ~~~~~~~~~~~~~~~~~~ FRIDAY FEATURE/Eve of Disruption? The GTR's irrepressible optics analyst Charlie Burger writes: Somewhere over the rainbow, in a motley lab infested with neoteric lenses and microscopic mirrors, two optical gurus ply their genius toward the ultimate WDM multiplexer. Avanex is in their crosshairs, IPO on their minds. Then a VC slips up, a long-winded, eccentric professor drops the wrong hint, and suddenly they're on our radar and splashed all over the next GTR. Disruption! Those mythic geeks-and merely mythic they are-have another hideout: in the psyches of anyone invested in (or thinking about) Avanex and other Telecosm companies. Indeed, if my story were true, how could we know? Techno-pundits point to disrupters here, there, and everywhere-they're swarming out of the telecosmic woodwork into the fibers of your portfolio. MEMS, photonic switches, tunable lasers, holey fiber, optical integrated circuits, silicon optical amplifiers-all have been portentously declared 'disruptive' at one time or another. And then heads turn. Wallets open. It's the flavor of the month. Then again, the true disrupters may already have surfaced-and just haven't yet been identified. How do we know if a technology disrupts or sustains? Can you determine if an industry or industry segment is in "overshoot" or "undershoot"? How long will it take for a disruptive (or sustaining) technology to overtake the old ways? Is the last one in a rotten egg, or is it first in, first out? Well, it depends. Will today's paradigmatic technology be paradigmatic tomorrow? Avanex and its closest rival, Chorum Technologies ("co-conspirators," really, since Chorum legitimizes the Avanex vision and helps create a much larger market), get new competitors daily. Arroyo Optics, Optoplex, Southampton Photonics, Wavesplitter, Oplink, JDSU, New Focus, all boasting new ways to combine and separate colors of light onto a fiber-optic thread. I've undoubtedly missed a few others. And still more companies claim all-optical add/drop multiplexers, another key WDM component. So should you be sweating over Avanex? Based on our ongoing analysis of multiplexing technologies, I'd say no. But if you're determined to sweat it anyway-or to sweat any other Telecosm company or technology-here's a favor you can do yourself. Visit our old friend and former colleague Clayton Christensen's web site, www.innosight.com Download his new report, "After the Gold Rush: Patterns of Success and Failure on the Internet." It's a lot more than a dot-com post-mortem-more an update to his bestselling book, "The Innovator's Dilemma" (which you've read twice over, right?). "After the Gold Rush" gives you what you need to become the Dick Tracy of disruptive optics or disruptive whatever-else. And put an end to flippant disruptionism. P.S. Is the Internet a disruptive or sustaining technology? Think hard and take a stab at the answer. Then read the first page of Gold Rush and find out why you're wrong. ~~~~~~~~~~~~~~~~ THIS JUST IN/Gilder.com Poll Results 11-18 May 2001 Question: Will Lucent survive as an independent company? 54% Yes! 46% No!. (Oh, no! LU in Alcatel's Sights: http://www.nytimes.com/2001/05/18/business/18LUCE.html) Up next: Are we in a Tech Slump, Business-cycle slump, or policy slump? Weigh in at www.gilder.com. ~~~~~~~~~~~~~~~ UNDO: The correct name of David Gelernter's software company is Mirror Worlds Technologies. For information about its revolutionary new software visit www.scopeware.com. =-=-=-=-=-==-=-=-=-=advertisement =-=-=-=-=-=-=-=-= Special Online Offer - a FREE Trial Issue of Forbes Magazine! Click on the URL below to order today. https://commerce.cdsfulfillment.com/FRB/subscriptions.cgi?IN_Code=IK03FTA =-=-=-=-=-=-=-=-=-=-==-=-=-=-=-=-=-=-=-=-=-=-=-=-=-= READINGS Down With WAP http://www.internetworld.com/news/archive/05152001c.jsp AMAT:A $30 Million Household Word? http://interactive.wsj.com/archive/retrieve.cgi?id=SB989792692400320094.djm&;template=pasted-2001-05-14.tmpl (subscription required) Intel's Internet On a Chip http://news.cnet.com/news/0-1006-200-5952785.html P2P: Disrupting Disruption http://www.internetworld.com/051501/05.15.01webobservatory.jsp TI: Mixed Signals http://www.forbes.com/forbes/2001/0528/080.html (registration required) The Long & Winding Road to IPv6 http://interactive.wsj.com/archive/retrieve.cgi?id=SB98979192937941302.djm&;template=pasted-2001-05-14.tmpl (subscription required) Pro Forma and Other Fantasies http://www.businessweek.com/magazine/content/01_20/b3732001.htm Photonic Computing? http://www.sciencedaily.com/releases/2001/05/010515075526.htm Not Dead Yet: Web Advertizing http://www.ecompany.com/articles/mag/0,1640,11620,00.html Nerds for Telecosm http://slashdot.org/article.pl?sid=01/05/15/1448225&;mode=thread There You Go Again http://dailynews.yahoo.com/h/ap/20010511/tc/microsoft_bundling_1.html Real Relief: Art Laffer, Lawrence Kudlow and Stephen Moore on the cap gains avoidance http://interactive.wsj.com/archive/retrieve.cgi?id=SB989801520550572292.djm&;template=pasted-2001-05-14.tmpl Lemelson: The Anti-Edison? http://www.fortune.com/indexw.jhtml?channel=artcol.jhtml&;doc_id=202216 Waves Beat Warming http://www.nytimes.com/2001/05/15/science/15WHIT.html?searchpv=site03 (registration required) Art-ificial http://www.wired.com/news/culture/0,1284,43685,00.html http://www.kurzweilcyberart.com/ http://www.kurzweilai.net/index.html http://poet.kurzweilcyberart.com/poetry/rkcp_overview.php3 Thanks For All the Fish http://news.bbc.co.uk/hi/english/uk/newsid_1326000/1326657.stm =-=-=-=-=-=-=-=-=-=-==-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=- GET THE GILDER TECHNOLOGY REPORT Monthly, From the Heart of the Telecosm http://www.gildertech.com ~~~~~~~~~~~~~~~~ GET NEW ECONOMY WATCH Reshaping the Competitive Landscape http://www.neweconomywatch.com ~~~~~~~~~~~~~~~~ GET THE DIGITAL POWER REPORT Electrons Matter http://www.digitalpowerreport.com ~~~~~~~~~~~~~~~~ GET DYNAMIC SILICON Linking the Microcosm and the Telecosm http://www.dynamicsilicon.com ~~~~~~~~~~~~~~~~ GET THE AMERICAN SPECTATOR Online special--50% off cover price! http://www.gilder.com/AmSpecSub.asp =-=-=-=-=-=-=-=-=-=-==-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=- GILDER CONFERENCE CALENDAR September 12-14, Telecosm V, Squaw Creek Resort, Lake Tahoe CA. The one and only. Produced by Forbes Inc and Gilder Publishing. Details and registration at http://www.forbes.com/conf/telecosm/agenda1.shtml October 22-24, Powercosm 2001, Featuring Peter Huber and Mark Mills, The Fairmont Hotel, San Francisco, CA Digital Power in the Silicon Age. Register now at http://www.gilder.com/powercosm_forms/Conference.asp -=-=-=-=-=-=-=-=-=-==-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=- The Friday Letter is published weekly for subscribers and friends of Gilder Publishing. If someone you know would enjoy it, please feel free to forward a copy. SUBSCRIBE and UNSUBSCRIBE information can be found at the bottom of this email. FRIDAY LETTER STAFF ~~~~~~~~~~~~~~~~~~~~~~~ John Hammill (jhammill@gildertech.com) Jorin Hawley (jhawley@gildertech.com) E-Mail Wizard Dave Dortman CONTRIBUTORS THIS WEEK: Charlie Burger, Aaron Charlwood, Dave Dortman, Spencer Reiss ADVERTISING INFORMATION ~~~~~~~~~~~~~~~~~~~~~~~ The Friday Letter is mailed each week to more than 60,000 subscribers and friends of Gilder Publishing. For information about advertising, contact Brian Cole, VP Business Development at bcole@gildertech.com, tel 860-434-0614. FEEDBACK AND PROBLEMS ~~~~~~~~~~~~~~~~~~~~~ Send letters to the editor to Fridayletter@gildertech.com For technical problems, please e-mail Fridayhelp@gildertech.com You can also contact us via: Gilder Publishing, Customer Service 888-484-2727; outside the U.S.1-413-274-3000 1-413-274-3030 (fax) Copyright 2001 Gilder Publishing LLC --- You are currently subscribed to gilder-technology-report as: alewis@ect.enron.com To unsubscribe send a blank email to leave-gilder-technology-report-661837S@earth.lyris.net
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