It is clear enough that Moore’s Law played a foundational role in the founding of Netflix, indirectly led to Microsoft and underpins the development of all things related to use of the internet and its lead applications.
All consumer electronics, including smartphones, automotive features, GPS, location services; all leading apps, including social media, search, shopping, video and audio entertainment; cloud computing, artificial intelligence and the internet of things are built on the foundation of ever-more-capable and cheaper computing, communications and storage costs.
For connectivity service providers, the implications are similar to the questions others have asked. Reed Hastings asked whether enough home broadband speed would exist, and when, to allow Netflix to build a video streaming business.
Microsoft essentially asked itself whether dramatically-lower hardware costs would create a new software business that did not formerly exist.
In each case, the question is what business is possible if a key constraint is removed. For software, assume hardware is nearly free, or so affordable it poses no barrier to software use. For applications or computing instances, remove the cost of wide area network connections. For artificial intelligence, remove the cost of computing cycles.
In almost every case, Moore’s Law removes barriers to commercial use of technology and different business models. The fact that we now use millimeter wave radio spectrum to support 5G is precisely because cheap signal processing allows us to do so. We could not previously make use of radio signals that dropped to almost nothing after traveling less than a hundred feet.
Reed Hastings, Netflix founder, based the viability of video streaming on Moore’s Law. At a time when dial-up modems were running at 56 kbps, Hastings extrapolated from Moore's Law to understand where bandwidth would be in the future, not where it was “right now.”
“We took out our spreadsheets and we figured we’d get 14 megabits per second to the home by 2012, which turns out is about what we will get,” says Reed Hastings, Netflix CEO. “If you drag it out to 2021, we will all have a gigabit to the home." So far, internet access speeds have increased at just about those rates.
The point is that Moore’s Law enabled a product and a business model that was not possible earlier, simply because computation and communications capabilities had not developed.
Likewise, Microsoft was founded with an indirect reliance on what Moore’s Law meant for computing power.
“As early as 1971, Paul (Allen) and I had talked about the microprocessor,” Bill Gates said in a 1993 interview for the Smithsonian Institution, in terms of what it would mean for the cost of computing. "Oh, exponential phenomena are pretty rare, pretty dramatic,” Gates recalls saying.
“Are you serious about this? Because this means, in effect, we can think of computing as free," Gates recalled.
That would have been an otherwise ludicrous assumption upon which to build a business. Back in 1970 a “computer” would have cost millions of dollars.
The original insight for Microsoft was essentially the answer to the question "What if computing were free?". Recall that Micro-Soft (later changed to MicroSoft before becoming today’s Microsoft) was founded in 1975, not long after Gates apparently began to ponder the question.
Whether that was a formal acknowledgement about Moore’s Law or not is a question I’ve never been able to firmly pin down, but the salient point is that the microprocessor meant “personal” computing and computers were possible.
A computer “in every house” meant appliances costing not millions of dollars but only thousands. So three orders of magnitude price improvements were required, in less than half a decade to a decade.
“Paul had talked about the microprocessor and where that would go and so we had formulated this idea that everybody would have kind of a computer as a tool somehow,” said Gates.
Exponential change dramatically extends the possible pace of development of any technology trend.
Each deployed use case, capability or function creates a greater surface for additional innovations. Futurist Ray Kurzweil called this the law of accelerating returns. Rates of change are not linear because positive feedback loops exist.
Each innovation leads to further innovations and the cumulative effect is exponential.
Think about ecosystems and network effects. Each new applied innovation becomes a new participant in an ecosystem. And as the number of participants grows, so do the possible interconnections between the discrete nodes.
So network effects underpin the difference in growth rates or cost reduction we tend to see in technology products over time, and make linear projections unreliable.
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