Thursday, December 21, 2006

10 Tech Concepts You Need to Know for 2007

Popular Mechanics writer Alex Hutchinson discusses technologies folks will be talking about next year.

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Bendable Concrete
The nickname for Engineered Cementitious Composites (ECC) is self-explanatory: bendable concrete. Specially coated microscopic polymer fibers slide past each other instead of snapping under stress, so ECC bends without breaking. The material has been used to create stretchable expansion joints for a Michigan bridge, and to allow the coupling beams in a 41-story tower in Yokohama to flex during Japan's frequent earthquakes.
SHORT-TERM IMPACT: LOWIt could take years for ECC to be commonly used in construction, unless a major earthquake puts it in the spotlight.

PRAM (Phase-Change Random Access Memory)
Flash memory, with no moving parts to break or wear down, is the data storage technology of choice for devices such as iPods and digital cameras. But phase-change RAM is set to overtake flash entirely—it uses a chemical found in rewritable discs, which is alternately heated and cooled to store data. The result is memory that's 30 times faster than flash, with more than 10 times the life span.
SHORT-TERM IMPACT: HIGHSamsung demonstrated a PRAM prototype in September and expects PRAM-enabled devices to be available in 2008.

Printed Solar Panels

Tomorrow's solar panels may not need to be produced in high-vacuum conditions in billion-dollar fabrication facilities. If California-based Nanosolar has its way, plants will use a nanostructured "ink" to form semiconductors, which would be printed on flexible sheets. Nanosolar is currently building a plant that will print 430 megawatts' worth of solar cells annually—more than triple the current solar output of the entire country.
SHORT-TERM IMPACT: LOWSolar power still isn’t in wide use, so even a tech breakthrough will take time to have an effect. But the long-term outlook is brighter.

Passport Hacking

Starting this year, all new U.S. passports will include a radio-frequency identification (RFID) chip that stores a digital photo of the owner, as well as biographic data (name, date of birth and so on). The goal is to prevent passport counterfeiting, but hackers already have flexed their muscles: A German security researcher publicly cloned an e-passport at a Las Vegas conference last summer. The State Department promises additional encryption, which hackers will no doubt put to the test.
SHORT-TERM IMPACT: LOWMost people won't need a new passport for years. And even if counterfeiters are able to swipe data to make forged documents, these RFID chips won't hold financial information or Social Security numbers.

Vehicle Infrastructure Integration
Your car may have GPS navigation and radar blind-spot monitoring, but it still doesn’t stand a chance against traffic. The Department of Transportation’s Vehicle Infrastructure Integration program, which faces its final testing in 2007, might even the odds. The program involves installing a 5.9-GHz short-range wireless link in your car that can talk with other cars, as well as with control units at intersections and along the side of the road. Pool all the information being beamed from cars—speed, location, whether the wipers are on—and you have a map of traffic and weather conditions, so that drivers can be directed away from trouble spots.
SHORT-TERM IMPACT: LOWThis is only the latest — albeit the smartest — in a long history of federal initiatives to win the war on traffic. Next year, lawmakers will decide whether to wire up hundreds of thousands of intersections and roads, but getting automakers to install standardized transmitters might prove even trickier.

Body Area Network

Picture this: The cellphone in your pocket sends a tiny electrical current—a fraction of an amp—along your skin, so your car door springs open at your touch and your PC logs in when you grab the mouse. That’s what German startup ImCoSys says its new smartphone will be capable of, thanks to body area network (BAN) technology. Of course, proving those claims would require partner companies to build BAN-compatible devices, and no such deals have been announced since the phone was released last summer.
SHORT-TERM IMPACT: LOWUsing your body as a secure network is smarter than sticking finger- print scanners everywhere, but there’s no guarantee that BAN products will ever materialize.

Plasma Arc Gasification
Garbage can be a gold mine—when it's heated to 10,000 F. A plant being built in Florida will use a plasma arc jet (like the one shown at left) to turn 3000 tons of garbage a day into steam for nearby factories, sludge for road construction and 120 megawatts of electricity—all with promise of minimal emissions.
SHORT-TERM IMPACT: LOWThe Florida plant will go on line in 2009, at the earliest.

VoN (Video on the Net)
The first Video on the Net (VoN) conference was in 1998, but the concept of watching videos on your PC is only now reaching maturity. Products like Apple’s iTV video-streaming box, due to launch this year, promise to simplify the sometimes geeky process of finding and playing video files. And Google’s $1.65 billion acquisition of YouTube last fall is evidence that VoN is big business, though exactly what kind of business is anyone's guess.
SHORT-TERM IMPACT: HIGHTiVo, DVRs and iTunes have already changed the way many people watch TV, and VoN is likely to make shows and movies more accessible than ever.

Smart Pills

These swallowable, vitamin-size sensors won’t make you smarter, but anything that lets you avoid an endoscopy is a pretty good idea. The FDA-approved sensor (right), from Buffalo-based SmartPill, transmits data about pressure, acidity and temperature to a 5 x 4-in. receiver that patients carry around with them during the pill’s trip through their gastrointestinal tract. SmartPill already has competition—the Israeli company Given Imaging has developed a similar sensor called PillCam.
SHORT-TERM IMPACT: HIGHWhile you won't be popping them on a daily basis, these sensors — which at press time were on the verge of being shipped—could make a wide range of invasive procedures obsolete.

Data Cloud

Ferrying data from one hard drive to another via e-mail, flash memory thumb drives or rewritable discs is no way to live. What if every one of your files, from skimpy documents to gigabyte-hogging music collections, were accessible from any Internet connection, forming a vast data cloud that follows you wherever you go? A host of products and services let you create a data cloud right now, from Maxtor’s networked hard drives to Google’s rumored Gdrive, with “unlimited” storage on the search giant’s servers. Add a synchronization service such as Microsoft’s Folder­Share, which applies a change you’ve made on your PDA to that same file on your laptop and PC, and you’re one step closer to retiring the original data storage device—the one in your head.
SHORT-TERM IMPACT: HIGHFor better or worse, data clouds are here to stay. With improved file sharing as well as new security concerns, they’re already changing the face of computing.

Tech lessons learned from the wisdom of crowds

Declan McCullagh of CNet.com discusses how Silicon Valley is learning to love prediction markets.

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SUNNYVALE, Calif.--In a 1945 paper, the great Austrian economist F.A. Hayek described how prices set by a free market are really "a mechanism for communicating information" about the probability of future events.

If a war in the Middle East is seen as likely, for instance, oil prices will probably increase. Hayek's insight showed that the results can be surprisingly accurate, as long as enough people are allowed to wager real money on the outcome.
Prediction markets

Now, technology firms are using a modern twist on this idea, called prediction markets, as a way to save money, harness the distributed knowledge of their rank-and-file employees, and even answer questions like: When will this software ship? And what will memory prices be like in a few months?

At a micro-conference that Yahoo convened at its headquarters here on Wednesday evening, representatives from Google, Yahoo, Microsoft and Hewlett-Packard described their experiments with prediction markets. "The really valuable knowledge is in the organization as a whole," said moderator James Surowiecki, author of the book The Wisdom of Crowds.

The companies' experiences went as follows:

Google: It's no secret that Google is using prediction markets internally: Bo Cowgill, a Google project manager, described it in a blog post last year.

Cowgill suggested that companies use reputation systems that encourage employee participation by showing whether someone is scoring better or worse in the prediction realm than his colleagues. "You can have winners in each department," Cowgill said, adding that he'd like Google's employee directory to reveal each person's accuracy.

Google offers cash prizes and T-shirts to employees who score well, and the winners are calculated quarterly, Cowgill said. But he still stressed reputation systems as a better method: "In order to make it attractive in a forward sense you have to spend more and more money or the laws are going to have to change. I don't think either is likely to happen anytime soon."

HP: HP Labs has created betting software called BRAIN that's designed for employees and managers; pharmaceutical giant Pfizer will use it starting next year. The unique feature is that BRAIN assigns people a profile based on how risk-averse they are.

To test BRAIN, HP compared it to existing ways of forecasting memory prices--a key figure since memory represents up to 10 percent of the cost of a computer and HP spends billions of dollars on it a year. Instead of a 4 percent error rate for the existing method of forecasting DDR and DDR2 512MB memory prices, the prediction market had a 2.5 percent error rate, or a 37 percent improvement. A second trial to forecast HP Services operating profits yielded similar results.

"We are able to pay real cash money to people without running afoul" of the Commodity Futures Trading Commission said HP's Leslie Fine, because the betting market gives participants only rewards and does not let them lose money.

Yahoo: David Pennock, a principal research scientist at Yahoo Research, said the company has created a currency called a Yootle. It's described as a "scorekeeping system for favors owed."

Pennock offered as an example a programmer offering to write a piece of code for a few Yootles. Or, when organizing a dinner outing, one employee could use an internal SMS tool to bid 2 Yootles for Italian and 4 Yootles for Mexican. "If you don't get to go to the restaurant you want to, you get compensation" in Yootles, he said.

Related to Yootles is Yahoo Research's experiment with a fantasy prediction market for technology called the Tech Buzz Game. It's a modified version of software licensed from NewsFutures in conjunction with O'Reilly Media and features topics like Atlantic hurricanes and portable media devices. Winners are those who predict how popular a topic will be on Yahoo Search.

Microsoft: When Todd Proebsting, director of Microsoft's Center for Software Excellence, tested a prediction market internally, managers quickly gave it their blessing.

The goal: to have 25 members of a development team predict when a Microsoft product would ship (this was an internal product, not one sold externally). The prediction market was set up in August 2004, and the product that "had been in the works for a long time" was scheduled to ship in November 2004. Each "trader" received $50 in their account to start with, and was told that the more accurate their prediction, the more money they would make. The market opened with an initial price of on-time delivery set to 16 2/3 cents.

"The price of 'before November' dropped to zero right away," Proebsting said. "The price of 'on time' in about two to three minutes dropped to 2.3 cents on the dollar." Translated, that's more than 30-to-1 odds against on-time delivery.

Then the woman who was responsible for scheduling started trying to convince her colleagues who were buying and selling future delivery dates. "She was able to talk (on-time delivery) up to around 3 cents," Proebsting said. "People really enjoyed moving the price...They loved this."

"The next day the director comes into my office and said, 'What have you done?'" Proebsting said. But further investigation showed that the product actually was behind schedule, even though nobody was telling management, and it eventually shipped in February.

Policy analysis markets: Chris Hibbert is an inventor and programmer who's writing open-source software to build a prediction market. It's called Zocalo.

Prediction software should work with play money, real money and an internal corporate currency that might be reputation-based, Hibbert said.

Most existing prediction markets like the Hollywood Stock Exchange and Tradesports.com focus too much on topics like sports and movie success, when policy and political questions can be more interesting, Hibbert said.

Robin Hanson, an associate professor of economics at George Mason University, is the closest that prediction markets have to a founding father. But he became a politically controversial one when his idea of a policy analysis market that could, for instance, help to predict terrorist attacks was savaged by Democratic senators eager to take a swipe at the Republican administration that funded it.

"The example that you provide in your report would let participants gamble on the question, 'Will terrorists attack Israel with bioweapons in the next year?'" Sens. Ron Wyden, D-Ore., and Byron Dorgan, D-N.D., wrote to the Defense Advanced Research Projects Agency in 2003. "Surely, such a threat should be met with intelligence gathering of the highest quality--not by putting the question to individuals betting on an Internet Web site."

On Wednesday, Hanson quipped that the flap wasn't the publicity "we would have asked for in starting an industry." A paper he wrote, though, showed that more informed journalists and more recent news articles were more likely to give a positive impression of policy analysis markets.

Hanson said that conditional probabilities were worthy of more experimentation: If a company switched ad agencies, would it increase revenue? If the U.S. provides cash subsidies to Jordan, will that nation have a better economy or a worse one?

"The market is telling you the consequences of your actions," Hanson said. "If you do this, what are the consequences?"

Friday, December 08, 2006

More Than You Know Wins Another Best Book Award

Congrats again to our good friend Michael Mauboussin and his terrific book "More Than You Know." It was just named by BusinessWeek as one of the "Best Books of 2006."

Here's the link:

http://www.businessweek.com/magazine/content/06_51/b4014099.htm

Thursday, December 07, 2006

Disrupter Man goes after TV this time

A great piece by my friend, Kevin Maney, at USA Today. Enjoy!

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SAN FRANCISCO — Few entrepreneurs have truly disrupted a single industry. Niklas Zennstrom has done it to two — and he has his sights on a third.

Zennstrom and business partner Janus Friis founded file-sharing service Kazaa, which by 2001 became the world's favorite way to steal copyrighted music. Entertainment companies all over the world lined up to sue. Next came Skype, the first globally popular free Internet calling service, which crumbled international telecom company business models. EBay bought Skype last October for $2.6 billion, and Zennstrom is Skype's CEO.

Now Zennstrom and Friis have a side endeavor. They've co-founded a secretive Internet TV venture called The Venice Project, which analysts say could threaten the viability of network television.

"There's never been a secret sauce" to his disruptive success, Zennstrom says with apparent modesty while flashing a grin. He creases his 6-foot-4 frame into a stuffed chair in his hotel room and looks more like a rumpled high-school chemistry teacher than a high-powered executive. "It's just that our timing has always been good."

In part, he's right. Zennstrom and Friis have never been first with a technology: They've followed with the right thing at the right time. Still, Zennstrom has established himself as a man the tech industry watches carefully. Hence the attention paid to The Venice Project, even though hundreds of video sites already crowd the Internet.

"Niklas and Janus … are two of the most extraordinary people I have ever met," says Tim Draper of venture capital firm Draper Fisher Jurvetson, which helped fund Skype. "I think they will succeed again and again."

Zennstrom, who hails from Sweden and lives and works in London, rarely gives interviews. This one is happening on his first trip to the USA in five years. He stayed out of the country to avoid being served in Kazaa lawsuits, which were recently settled.

He is just 40. His take from selling Skype to eBay is estimated at more than $400 million. Investors stand ready to back him. Zennstrom says he pledges himself to Skype and eBay for three to four years, but probably no longer.

"Don't expect to interview me in 20 years and I'm still CEO of Skype," he says.

In other words, Zennstrom could be starting companies for a long time to come — probably with Friis. Zennstrom is 10 years older and more of the leader. Friis is the hacker and tinkerer who gets the technology off the ground.

The biggest question about Zennstrom is whether he's good only at launching disruptive companies, not at building them into substantive businesses. Tech analysts say they still don't understand why eBay paid so much for Skype when similar free Internet calling services are offered by everyone from AOL to start-ups like Jajah.

136 million and growing

In an hour-long interview, Zennstrom does not seem to have an outsized ego — until he talks about his ambitions for Skype. When he started it in 2003, he told Fortune, "There is multibillion dollars in potential in Skype. We're not here to try to make some small business."

"It's the same plan," he says now. "We have 136 million users. There aren't many telephone companies that have more customers. We are still in growth mode. In terms of revenue per user, Verizon gets much more, but they also have much higher costs."

Zennstrom met Friis, a Dane, while working for Swedish telecom company Tele2. They left in 1999 to start an Internet company together to build a fast, easy-to-use technology called FastTrack. It was peer-to-peer (P2P) technology. It had no central data center, borrowing all the users' computers on the network to store and forward files.

It's a technical challenge, but if done well, P2P can be a cheap, fast way to move large amounts of data around the Net.

On top of FastTrack, Zennstrom and Friis built Kazaa, which surfaced just as the music industry shut down Napster in 2001. Millions of Napster users had become addicted to free music and switched to Kazaa because it was easy to use. Zennstrom and Friis became the Recording Industry Association of America's chief target.

After years of cat-and-mouse legal games, Zennstrom, Friis and Kazaa settled with the music industry in July for $100 million. They've rid themselves of Kazaa ownership, selling pieces in a series of legal maneuvers.

Kazaa set the stage for Skype. While considering what to do after Kazaa, Zennstrom says he and Friis thought about how "any digital content should be delivered over the Internet because it's so much more efficient." They then thought about the high cost of international phone calls, which are just another form of digital content.

"I remember us saying (around 2002) that Internet telephony should work by now," Zennstrom says. "We certainly didn't invent Internet telephony, but it wasn't very good and was too hard to use."

They realized that P2P could do for phone calls what it had done for music files. "We learned a lot by doing Kazaa," Zennstrom says. But they had to create a more sophisticated P2P, because calls must reach the right person and work with good quality in real time.

Still, when Zennstrom and Friis started Skype, they were considered pirates and outliers. "It was difficult to hire and raise money," Zennstrom says. But then Draper, who has always had a penchant for funding tech renegades, chipped in $8.5 million. "I recall first meeting Niklas in London," Draper says. "I had set up a meeting for half an hour, and I stayed for two."

Skype became the fastest-growing start-up in history. After 12 months, it was on pace to grow five times faster in numbers of users than eBay did in its first years. Seeing that, in 2005 eBay came calling.

Learning from eBay

"We didn't plan to sell," Zennstrom says. "We started a conversation with (eBay CEO) Meg Whitman because we thought we should work with eBay." He actually thought eBay wouldn't like Skype because a Skype voice connection could be a way for sellers and buyers to cut deals that eBay couldn't track.

Whitman saw something else: a fast-growing business that might also help eBay users talk to each other and close transactions more easily, especially those that involve big-ticket items like cars. "We always seek to remove friction from e-commerce," Whitman told USA TODAY soon after the Skype deal. "It leads to a better experience and an increase of velocity of trades."

She also liked Zennstrom and Friis. "They are impressive entrepreneurs who will be a great cultural fit with eBay," she said.

Zennstrom got thinking, too. He didn't want Skype to do an IPO in the dot-com bust years. Based in Europe, which is not known for Silicon Valley-style start-ups, Skype had trouble hiring executives who had been part of hyper-growth tech companies. And while Skype was growing like mad in Asia and Europe, it had trouble penetrating North America.

"We realized if we partnered with eBay, they could help us," Zennstrom says.

Whitman has been criticized for the deal by analysts and investors. She has not clearly shown how Skype helps the eBay site — though, on the flip side, it's clear that eBay's marketing muscle has helped Skype grow 122% in North America in 2006.

"In general, they're not doing a bad job in the VOIP (voice over Internet protocol) space," says Mirabel Lopez, vice president of research at Forrester Research. She pegs Skype revenue at $200 million in 2006, up from $60 million in 2005. "Since most people use it because it's free, the fact that they're making money at all is a good thing."

Zennstrom insists he's happy with the marriage. "You never know how the chemistry will be, but it's been really great," he says. "Meg did not impose on us to do everything the eBay way." He says he's learning a lot about management from Whitman and other eBay executives. Several attempts to talk to Friis were unsuccessful.

Fixing TV

The Venice Project is the brainchild of Zennstrom and Friis, but they aren't running it. Friis, though, spends significant time working on the new entity. EBay says this is fine and within the boundaries of the eBay-Skype merger.

The service is not yet live, and details are under wraps. It's difficult to say why The Venice Project will be much different from YouTube or AOL TV, except that it will — like Kazaa and Skype — be based on P2P technology. That could make The Venice Project cheaper and more flexible than other Internet video services, which centrally host videos on server farms.

Zennstrom describes it this way: "We're trying to do the full TV experience by taking the good things from television and putting them together with the Internet and video sharing." A blog on theveniceproject.com says, "We're fixing TV, removing artificial limits such as the number of channels that your cable or the airwaves can carry, and then bringing it into the Internet age, adding community features, interactivity, etc."

Significantly, The Venice Project will be a secure, rights-protected service that intends to work with content producers such as film studios and sit-com creators, not against them. This is Zennstrom learning from past mistakes.

And it will be ad supported. Zennstrom insists that The Venice Project will work in ways that are familiar to TV viewers — as simple to use as iTunes or an on-screen TV grid.

Interactive features

So The Venice Project is intended to be a pipeline directly between content producers and consumers, with relevant ads inserted on the fly — the way Google plops ads onto websites. Interactive features will let viewers rate content and form social groups around videos and programs.

If it takes off, The Venice Project could be Zennstrom's third disruptor, because it stands to knock cable TV services like Comcast and network TV affiliates out of their middleman positions. Of course, taking on such powerhouse industries is a tall order, and The Venice Project could get squashed before it makes a dent.

A few years from now, maybe Zennstrom will take charge of The Venice Project, or maybe he'll move on to a new target.

"Three to four years seems like a good time frame to make commitments," he says. "That's what I told Meg. I'm here and committed for some time. I want to build the business and contribute to eBay as well."

But after that, time to tee up the next disruptor.

Wednesday, December 06, 2006

The Globalization of R&D

Here's an interesting finding that I came across while reading the current issue of Stratgey & Business:

"More than 75 percent of the new R&D centers that businesses plan to open during the next three years are to be located in China or India, according to a recent study by Booz Allen and INSEAD."

Here's the link to the article:

http://www.strategy-business.com/press/article/06405?gko=a2f1b-1876-20606671-6405

Mr. Future Shock

Here's a link to an interview with Alvin Toffler from the recent issue of Strategy & Business. I enjoyed Toffler's new book "Reveloutionary Wealth" and find him to be one of the most stimulating deep thinkers on the planet.

http://www.strategy-business.com/media/file/sb45_06408.pdf

The Information Factories

Here's a link to a provocative piece by George Gilder that was published in WIRED magazine not long ago on how technology is evolving.

http://www.wired.com/wired/archive/14.10/cloudware_pr.html

The Eco Thing

Here's a comment that caught my eye from a recent piece by my friend Kevin Maney at USA Today. Kevin did a story on Scott McNealy, former CEO of SunMicrosystems.

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Inside Sun, McNealy seems most jazzed about pushing what he calls "the eco thing." He says that by 2012, 40% of tech budgets will be consumed by energy costs. Driving Sun to create low-energy computers is both a moral imperative and business opportunity, McNealy says. Sun even has a vice president of eco-responsibility, David Douglas.

Tuesday, December 05, 2006

Night and Day

"I actually think the insanity of the late 1990s is repeating itself."

- Julian Robertson, quoted in Value Investor Insight, 11/30/06


"We reiterate our (wildly) bullish opinion on US stocks. At this stage, owning US equities feels like stealing."

- Steven Vannelli, GaveKal Research, 12/4/06

I came across these two quotes from two highly respected Wall Streeters recently and wonder how is it that two intelligent camps can have such diverse opinions. It's like night and day! Truth be told, I have never understood the way Julian Robertson thought about the macro economy and the overall stock market. If you recall, Mr. Robertson shut down his firm precisely at the time when so-called "value stocks" - his bread and butter - were about to go through the roof on a relative basis. My sense is that the GaveKal guys are closer to the mark.

Apparently, Ken Fisher is in the GaveKal camp, according to a recent blog post by Rich Karlgaard at Forbes. See Rich's notes from a talk Ken gave recently:

Ken Fisher's Bullish Take On 2007

Ken Fisher spoke Sunday and today. Ken, of course, is the longtime Forbes columnist (22 years) who by day runs his $35 billion Fisher Investments firm in California. Some of his thoughts:

-- Markets are discounters of all known information.

-- Forget everything you know about P/E ratios. It is a meaningless figure unless you also know the cost of borrowing.

-- Invert P/E to E/P and you get "earnings yield"--a public company's after-tax cost of raising capital.

-- The S&P earnings yield is 6.8%. The 10-year U.S. Treasury bond is 4.45%. The gap will close. It always closes over time. If the gap closed simply by lowering the S&P earnings yield to match the 10-year U.S. Treasury bond, the market would go up 47%.

-- I am wildly optimistic about 2007.

More reasons why Ken is bullish:

-- Third-year presidential terms are usually big-growth years for the market. We haven't had a negative third-year presidency since 1939.

-- Around the world, companies are buying back their stock. We are globally destroying the supply of equities at a rate of 5% a year. This is mind-boggling.

Thought Leaders

My good friend Michael Mauboussin at Legg Mason sent me the link to his annual "Thought Leader" conference yesterday. You can check out the agenda and read transcripts at the link below.

enjoy!

http://www.leggmason.com/thoughtleaderforum/2006/conference/index.html

Friday, December 01, 2006

Read It and Weep

Here's an exchange between Mike Holland and Herb Greenberg from economist Larry Kudlow's TV show that discusses the unintended consequences of government regulation - in this case, the Sarbanes-Oxley Act...

Mike Holland: I'd like to put a fact in here. Before Sarbanes-Oxley, 50 percent of all IPOs around the world listed in the United States. Would anyone, including Herb, like to guess how many since Sarbanes-Oxley have listed in the U.S.?

Herb Greenberg: Give me the number.

Mike Holland: It's 8 percent. And the last 25 largest IPOs, they all listed abroad. I was in Europe a couple weeks ago--they're talking about erecting statues to Sarbanes and Oxley in London's financial center.

Immelt on the Global Economy

One of my favorite things to do is meet with the folks at the world headquarters of General Electric, which is about 15 minutes away from my office. GE, as I like to say, is a window to the global economy. Here's a recent quote from CEO Jeff Immelt from FORTUNE that I found interesting...


"I don't see a slowdown… I think the U.S. consumer is still in pretty good shape. Unemployment is low, risk positions are healthy, so maybe the economy is growing by 4% and it'll slow down to 3% or something like that, but it's still going to be very good. Europe still is not robust, but it's positive. The developing world continues at a pretty good clip. The odds of China slowing down before the 2008 Olympics are de minimis. Oil at $60 a barrel transfers $300 billion a year to five countries in the Middle East; they're going to spend a lot of money. Latin America is very strong. So the global economy I think is going to be pretty good, pretty good."

- Jeffrey Immelt, CEO, General Electric
Quoted in FORTUNE, Dec 11, 2006

Gilder's Ten Rules For Tech Investors

Below are what technology strategist George Gilder calls his "Ten Key Rules for Early-Stage Technology Investors to Triumph in This Time." George isn't a professional investor, so I would take his investment recommendations on individual companies with a grain of salt. That said, he is a provocative thinker...

Gilder's 10 Key Rules

1. No one knows less about the fast-growth tech business than the CFO. Early-stage tech is about the future. CFOs deal with past numbers. In effect, CFOs are trying to steer companies by looking in the rearview mirror. Moreover, CFOs tend to focus on internal problems, and early-stage tech companies should not try to solve problems. They instead should pursue opportunities. Solving problems sounds good, but it is a loser. You end up feeding your failures, starving your strengths and achieving costly mediocrity.

2. The elasticity of Moore's Law. In the tech world, Moore's Law ordains that prices routinely drop 50% every 18 months for a given rate of performance. In older businesses, price collapses would be bad. But in the tech world, users multiply when prices drop. You get positive elasticity.

3. Metcalfe's Law. The value of a network rises by the square of the number of compatibly connected users. Obviously not literally true, yet a rough and useful guide.

4. 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.

5. Software hardens at the core of a network--hardens into glass--pure fiber. Software softens at the edge.

6. The edge of the network is analog, because that's where humans live, in an analog world. But the analog world is one of shortages, because there is a shortage of great analog engineers in the U.S. and throughout the world. Therefore, great digital-to-analog design will almost always produce great profits.

7. 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. Electricity, on the other hand, is becoming scarce. So invest in chips and computer architectures designed to save electricity.

8. Law of Scarcity. Speed of light is the scarcity that governs networks. Span of life is the scarcity that will govern human interactions and consumer businesses. Consumers hate to have their time wasted. That's why broadcast TV is a failing model--it wastes the consumer's time.

9. The computer is dead--hollowed out by fast networks that move data faster and store data more cheaply. As computers hollow out, value migrates to the search and sort function. This law was put forth by Sun's Eric Schmidt a decade and a half ago. Schmidt, of course, is now the CEO of Google, where search and sort has paid off rather nicely.

10. Every ten years there is a hundredfold drop in the cost of computing, leading to a new paradigm in computing. Google-like server farms are the new computing paradigm. But in five years, something newer and more radical will take its place.