I really enjoyed reading this piece from George Gilder on Forbes.com talking about the Ten Laws of the Telecosm. I was particularly enamored of the notion that dumb networks with smart edges prevail over smart networks with dumb edges. From the article:
Dumb networks will prevail over smart networks. The future is all-fiber networks that do nothing but transmit bits. Intelligence belongs at the edges and endpoints.
This is our “life after television” paradigm. It separates content from conduit. If you have the best conduit, you will want everyone’s content on it. You won’t want to restrict it to your own content. On the other hand, if you have the best content, you will want it on everyone’s conduit. You won’t want to keep it on your own network. Players that try to combine content and conduit will eventually split apart and often bleed financially in the process (e.g., AOL-Time Warner).
Based on this observation with which I agree, I have to question AT&T and Verizon’s strategies for television services. Cable and satellite television companies have been in this space so long the best thing the new entrants can do is give more power to the end user to choose their own content. More on demand content on non-exclusive basis. No channel packages, and I want my freakin’ NFL Sunday Ticket over whatever platform I choose to have as the pipe into my house!
Gilder goes on to pick some winners and losers in this paradigm. He favors Corning, Finisair and PMC-Sierra/Passave for their role in providing optical network components. As the edge devices such as TVs, PCs, mobile phones and countless interim and hybrid devices get smarter and thirstier we are going to demand bigger and bigger pipes.
Law of Abundance. Far-seeing entrepreneurs waste what is abundant in order to save what is scarce. Today, processing power is abundant. Bandwidth is becoming abundant. Electrical power, on the other hand, is becoming scarce. So invest in chips and computer architectures designed to save on power.
How true this is! Electricity is allegedly Google’s most significant expense, and I’ve been reading a lot about the power demands of large web hosting centers. Power conservation technologies are going to be big, as are green energy production technologies (duh). A big question we’ll need to answer as a society is whether or not we’re going to consider expanding our nuclear generation capability to fill in the gap until we all get our Mr. Fusion.
I am particularly fond of this train of thought at the end of the article:
This is the final entropy law from the fertile mind and mathematics of Claude Shannon of MIT and Bell Labs, who defined information as unexpected bits. (Predictable bits convey no information content, no entropy.) Information entropy is measured by its surprisal.
My summation of this law is: “High entropy messages (full of surprise) require a low entropy (no-surprises) carrier.” Only if the carrier itself is predictable can the information be distinguished from the noise at the other end. Thus the key insight of the telecosm is that in an information age information and value will migrate to the perfect sine waves of the electromagnetic spectrum.
I believe that this is a more general law than Shannon perceived. The heart of capitalism is creativity. Creativity, as Albert Hirshmann of Princeton once wrote, always comes as a surprise to us. If it didn’t we would not need it. Socialism would work. But the upside surprises of creativity require a low entropy environment of predictable property rights, taxes and other business laws ultimately based on trust in a moral order. All these conditions are essential to an entrepreneurial economy.
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