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Hype Springs Eternal

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Hype Springs Eternal

  1. 1. Why is there Hype? ….and other things about predicting Technology Futures Alan Patrick May 2012 broadsight 1
  2. 2. The Broadstuff Bubble-O-Meter Things said in jest…. 1. There is a New New Thing that trancends the Old Economics, and you cannot value It the Old Way. This Time It will Be Different. Dumb Money companies start paying over the odds for New Thing acquisitions. 2. Smart people who have been there before start calling it a Bubble (or at least a "Frothy Market"), New New Thing apostles make ever more glowing claims of the dizzy heights available, while "Startup Networking Events" start to proliferate (to supply new startups). 3. Companies with founders deemed to have "rubbed off the right stuff" (ie sons of, ex employees of, etc etc) get funded straight Jan off at eye watering valuations for next to no product proof or traction. March 4. There is a flurry of new incubators and investments started by (newly minted) VCs (trying to buy in) May ‘11 5. Companies start getting funded "off the slide deck" with no actual product Feb ‘12 6. MBAs start leaving banks to start up companies May ‘11 7. The "Big IPO" happens (Netscape et al) 8. The big Investment Banks start to make a market in the New New Thing, punting in your pension money, and have "entrepreneurial" options and divisions to retain les autres MBAs 9. Your Taxi Driver gives you advice on what stock to buy - you punt in your own pension money 10. A New New Thing darling buys an Olde Industry thing at Stupid $$$. This is the Top Of The Bubble. broadsight 2 Copyright Broadsight Ltd
  3. 3. Today is a Major Hype Payoff Day The “Hype PO” equation Facebook Punters IPO Funders Facebook Hyped Optimistic Subscribed & Out Washed broadsight 3 Copyright Broadsight Ltd
  4. 4. So, why does Hype exist? A challenge…. I have been “anti hype” for as long as I can recall, but I could see “Bubble 2.0” coming and wondered about hype’s role, and I came to a few conclusions: •Technology (and most other) Innovations have a waveform nature •The economics of Creative Destruction need Big Waves – i.e. bubbles •Bubbles need to be created – so need hype to inflate them •Good Old Greed is the game theory payoff broadsight 4 Copyright Broadsight Ltd
  5. 5. New Innovations come in waves.... Major new technology waves emerge every 50 years or so...... 1771 1821 1871 1921 1971 2021 Industrial Steam & Steel & Automobile ICT Biotech? Revolution Rail Engineers Age Age Nanotech? Invent Install In... 1880 - 1920 - 1950 - 1920 1950 1980 (....also, there are arguably 75 (Kondratieff) and 25 year (Kuznets) cycles of innovation.) 5 broadsight Copyright Broadsight Ltd
  6. 6. ....each made of smaller waves of adoption.... There are normally several generations of S curve in any one technology wave, its useful to look at which one you are in. 6 broadsight Copyright Broadsight Ltd
  7. 7. But all new New Things start out on very shaky ground – how do they take off? Machiavelli had it taped in 1532 “There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. For the reformer has enemies in all those who profit by the old order, and only lukewarm defenders in all those who would profit by the new order, this lukewarmness arising partly from fear of their adversaries … and partly from the incredulity of mankind, who do not truly believe in anything new until they have had actual experience of it.” - Nicolo Machiavelli, The Prince 7 broadsight Copyright Broadsight Ltd
  8. 8. To succeed, the New Thing needs the Madness of the Crowd, not its Wisdom.... Machiavelli suggested brute force, but Schumpeter noted Irrational Exuberance also works, and creates fewer (directly attributable) bodies. Forces against Change Requirements to Change Vested Interests “Creative” Destruction resist the New Order - “Pirate World” Massive Technological Uncertainty about the Experimentation Right path to follow - Darwinian Competition Credit creation for “build No infrastructure to It and they will come” plans support the New Thing - This means Bubbles! Source: Carlota Perez 8 broadsight Copyright Broadsight Ltd
  9. 9. The deployment of every big New Thing is marked by a large popping sound.... For every new wave, there is a bubble..... 1771 1821 1871 1921 1971 2021 Industrial Steam & Steel & Automobile ICT Biotech? Revolution Rail Engineers Age Age Nanotech? Roaring 2008 Canal Amazing 20's 2001 Railway Financial Mania Inventions Great ICT Mania Service & Losses Depression Bubble Bubble? Pre Bubble Bubble Post Bubble - market chooses winners Burst - Regulation and - Innovation focuses on Phase - Innovation focus on infrastructure deployment Shift good service rollout Source: Carlota Perez 9 broadsight Copyright Broadsight Ltd
  10. 10. The Bubble popping signifies a change of state, from Old to New For an Innovative new wave to succeed, it needs a bubble of cash to wash away the old. Maturation, Bubble slower Burst growth The Bubble bursting marks the change of state from one system to another – Fast marks when the high growth Growth “installation” phase is over Early Irrational Exuberance - creating a Days Bubble is the only way to get sufficient capital formation to wash away the Old infrastructures (semi) peacefully Invent Install In Place Product Deployment Service Innovation Innovation Innovation 10 broadsight Copyright Broadsight Ltd
  11. 11. The Other Moore's Law - each new thing needs to jump the chasm to survive Geoffrey Moore - Technology Adoption and the “Chasm” into which many promising technologies fall and die The detritus of failed innovations Source: Geoffrey Moore 11 broadsight Copyright Broadsight Ltd
  12. 12. Hype creates the Irrational Exuberance – it moves crowds from Wisdom to Madness to jump that Chasm Hype drives the optimist to become Irrationally Exuberant - spend early, spend large. Bubble Burst 12 broadsight Copyright Broadsight Ltd
  13. 13. The Economics of Hype – where are the payoffs? Where is the money made? Selling it Investing Running In it it Consolidation workouts Marketing it Conferences about it Re-Investing in it 13 broadsight Copyright Broadsight Ltd
  14. 14. And now for something completely different – Technology Prediction It is difficult to make predictions, especially about the future…* • There are some broad laws, its not that hard to tell what may come to pass • But there is many a slip – nay, a Chasm – between possible and probable • What is one thing, When is another thing entirely • Old soldiers never die…. • Hype is quite useful as it is a leading indicator difficult to make predictions, especially about the future (*Berra, Bohr, Borge, Einstein, Marx, Quayle, Shaw, Twain) broadsight 14 Copyright Broadsight Ltd
  15. 15. Three Laws...... 3 laws have driven ICT technology for the best part of 5 decades 1. Moore's Laws Moore's first law - “the number of transistors that can be placed inexpensively on an integrated circuit doubles approximately every two years.” Moore's second law - the capital cost of a semiconductor fab also increases exponentially over time. 2. Metcalfe's Law the value of a telecommunications network is proportional to the square of the number of connected users of the system 3. Kryder's Law magnetic disk area storage density doubles approximately every 2 years, 15 broadsight Copyright Broadsight Ltd
  16. 16. ...a Predictive Exercise. Picture this....the High End iPhone.... Feature iPhone 3 Iphone 4 IPhone 5 IPhone 6 Iphone7 Iphone 2018 2012 2014 2016 Processor 600 MHz 1 GHz 2 GHz 4 GHz 8 GHz 16GHz RAM 256 Mb 512 Mb 1 Gb 2 Gb 4 Gb 8 Gb Storage 32 GB 64GB 128 GB 256 GB 512 GB 1 TB Display 165 ppi 330 ppi 660 ppi 1.2 kppi 2.4 kppi 4.8 kppi Low end laptop Today's high end today “hot” gaming PC 16 broadsight Copyright Broadsight Ltd
  17. 17. ...and another! ....and the iPhone Micro (halving the size 4 times) $ 50 in 2020 $ 400 in 2010 17 broadsight Copyright Broadsight Ltd
  18. 18. ...or, Maybe Not Sage's Amendment to Murphy's Law For all laws, there is one exception, which will occur at the most critical possible point and time (in the case of mobiles, it was/is the battery power) And of course, The Other Moore’s Law – that Chasm thing – very few make it over 18 broadsight Copyright Broadsight Ltd
  19. 19. Augustine’s Law of 1.4.... Augustine's Law on Timing of Complex Technologies.... Any task can be completed in one-third more time than is currently estimated. (In fact he found a factor of c 1.4 at NASA with complex New Thing technologies, which my experience over many years corroborates) 19 broadsight Copyright Broadsight Ltd
  20. 20. Augustine’s Laws on the dangers of Prediction On the risks of Mathematical Extrapolation.... In the year 2054, the entire US defence budget will purchase just one aircraft. This aircraft will have to be shared by the Air Force and Navy 3-1/2 days each per week except for leap year, when it will be made available to the Marines for the extra day…. 20 broadsight Copyright Broadsight Ltd
  21. 21. ….but that same graph points to a New Wave Drone Wars - the hidden story of Afghanistan •Use of drones has ramped up from a few missions in 2001 to thousands by 2011 •Predictably, as with WW1 aircraft, they have shifted from reconaissance to strike roles – 200+ in 2010 21 broadsight Copyright Broadsight Ltd
  22. 22. The death of the Old is always exaggerated… Riepl's Law.. Source: Baekdal 22 broadsight Copyright Broadsight Ltd
  23. 23. (In) Conclusion Any technology fits within greater waves.....and swimming against the tide is a very hard game Most new New Things fail to jump The Chasm A game changer has to be large and fast enough to sweep away the Old Bubbles re-distribute capital from the Old to the New rapidly, they are necessary for Creative Destruction.... Hype springs eternal in the human breast, and is the time honoured way that Bubbles are inflated. Greed is Good for Hype - there is a payoff in the Hype game, so follow the money Prediction is easy – timing is much harder. The imminent death of the Old is always much exaggerated 23 broadsight Copyright Broadsight Ltd
  24. 24. Question? Or, read our blog – Broadstuff www.broadstuff.com @broadstuff on Twitter Or... email me: alan.patrick@broadsight.com 24 broadsight Copyright Broadsight Ltd

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