Moore's Law Explains a Lot

We will likely never know for certain how much an understanding of Moore’s Law has played a vital role in the fortunes of firms whose business models rely on internet access, but there are tantalizing examples. 

At a time when Netflix was still mailing out DVDs to its customers, internet access was still generally running at about 56 kbps, not fast enough to support video streaming. 

The problem, says Hastings in an interview today at the Wired business conference, was that back then they couldn’t stream movies over 56 kbps modems.

But there was Moore’s Law and improvements in bandwidth which could be plotted, and that is exactly what Hastings did. “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.”

And Hastings arguably is not the only person whose knowledge of Moore's Law has led to surprising business conclusions. 

Perhaps the most-startling strategic assumption ever made by Bill Gates was his belief that horrendously-expensive computing hardware would eventually be so low cost that he could build his own business on software for ubiquitous devices. 

How startling was the assumption? Consider that, In constant dollar terms, the computing power of an Apple iPad 2, when Microsoft was founded in 1975, would have cost between US$100 million and $10 billion.

Optical fiber communications in the local loop does progress, in terms of bandwidth, about as fast as Moore's Law, even if the progress of optical fiber in the local access network does not necessarily progress at that rate. 

In other words, Hastings and his team understood there would come a moment when video streaming was feasible, based in large part on internet access trends propelled by Moore’s Law improvements in semiconductor technology. 

A perhaps-related insight might be inferred. Moore’s Law contributes to a trend of ever-lower costs for computation and communications. 

Over time, what that means, as a practical matter, is that applications can be created, and use cases created, that assume the cost of computing and communications is no barrier to widespread use. Some of us might point to the development of high-definition TV as an example. 

At a time when analog versions of HDTV required 40 Mbps per channel, some believed HDTV could be done in six Mbps per channel. As ait turns out, we can do so using less bandwidth than that. 

We might argue that a wide range of businesses, use cases and applications now are possible precisely because of Moore’s Law impact on the costs of computation and communication, ranging from financial technology including mobile payments to fraud detection; cloud computing; social media; e-commerce; the sharing economy; affordable artificial intelligence or the internet of things. 

Navigation apps; all forms of on-demand services; video streaming and every form of recommendation and personalization features, plus speed-to-text or text-to-speech are enabled by radically-lower costs of computation.