Intellectual Capital (1)
Saturday, January 29, 2011
This is a collection of the columns I wrote for Intellectual Capital during the all too brief years that publication existed. Published by Pete Du Pont (former Governor of Delaware), it was a splendid collection of ideas and thoughts. It was also a victim of the dot bust. The collection was compiled in about 2001.
These are presented more or less in the order they were written. The final as it appeared in Intellectual Capital was somewhat different: the editor, Bob Kolasky, managed to make them shorter, and, I hate to admit it, better. Not many editors can do that with my work. In most cases the titles were supplied by the editors.
Dr. Jerry Pournelle is the doyen columnist of the computer industry. His "Computing at Chaos Manor" has appeared in BYTE since 1979. He is also a best selling science and science fiction author. FOOFTALL by Larry Niven and Jerry Pournelle was #1 on the New York Times bestseller list, and Lucifer's Hammer was #2 for 14 weeks. His next book is Starswarm, from Tor Books.
He is Chairman of the Citizen's Advisory Council on National Space Policy, and a co-author of The Strategy of Technology, a book that has been used as a text in all three US Service Academies as well as the Air War College. The Strategy of Technology, and excerpts from Starswarm, are available at www.jerrypournelle.com
Moore's Law states that computing power doubles and price falls by half every eighteen months. We are on such a steeply rising section of that curve that I won't have room to mention, much less discuss, every technology trend. We can look at a few.
First, the trend toward ever larger data pipes for the last mile of the road ahead. The original Internet was set up between institutions with high bandwidth, but most of us now live at the bottom of a low speed well. That's changing. Right now we have satellite download with slower radio or land-line uplinks. There's cable modem, again either fast down and slower telephone up, or cable all the way. There's DSL, which is digital end to end. Meanwhile, our normal phone lines can support 56K, although the FCC stupidly won't allow more than 53K on a voice line. All told, communications are getting faster.
There are a lot of implications to this. The obvious one is that complex graphics including full motion video become available to the rest of us. The increase in market potential will send more R&D and production money into services that take advantage of mass access to high bandwidth, which will increase demand. It's a feedback loop that won't end until every one of us has a Dick Tracy Two-Way Wrist TV. More useful than that will be a Personal Data Assistant (PDA) about the size and weight of a paperback book. It will link to the web, which means to everything. While books and magazines will continue to exist, those in the publishing business might think hard about what it is they sell when everyone can have access to any book or magazine just about at will, complete with high quality color pictures. We won't get there this year, but we're on the way - and the 3COM Palm Pilot or Apple's Newton will get more and more of us used to carrying a viewable electronic device. Of course it won't be long before that gadget is also your telephone.
You can't get lost. Already the Palm Pilot knows how to listen to a GPS receiver; pretty soon all that will be smoothly integrated with your telephone. (You may have the problem of making phone calls without giving away your location.) Personal viewer, pocket tape recorder, task list, calendar, pager, shopping list, notebook, telephone, map and your position on it; all the books in the world, and all the current magazines and newspapers you care to subscribe to; links to calculating engines of enormous power: all available in a gadget not a lot bigger than the cell phone you carry now. When? Pilot models with many but not all those functions this year. The fully Monty by the end of the millennium.
This year we'll see home networking systems: radio and IR beams to let your computer control things. Home entertainment centers built around a personal computer. Imagine a hi-fi system with a 120 slider equalizer. Of course those sliders will be virtual, but they'll work as well as real electro-mechanical sliders, and won't cost anything. Radio link to your bedroom TV. Make that High Definition TV, which we can hope will emerge this year-the technology is in place, all we need is standards. Add enormous storage capacity: record any movie, any conversation, any phone call. As I write this, digital storage is under $50 a gigabyte for hard disks, under $5 a gigabyte for recordable CD or digital audio tape media. A year from now it will be half that. (How long will video tape rental be a viable business?)
HP's brilliant new JetSend points to the new world of distributed objects: everything we use will be smart and talk to us. They'll also talk to each other. When I say everything we use, I mean nearly everything: not just our TV's and cars and VCR's and PDA's and telephones. Our very toasters and coffee pots, door locks and windows and light switches, ovens and refrigerators and house heaters, nattering about us behind our backs; it will be astonishing if that doesn't produce surprises, and it all starts now. You'll see some of it at trade shows this year.
With high band width there is no computing problem you can't farm out, assuming you don't have the computing power available locally. Need a solution to an Einstein tensor? Hand it out to the web, where idle systems can take a whack at it. You'll get the answer back before you've had your coffee. On a less lofty plane, small art shops will have the computing power to design, construct, animate, and render complex 3D visual objects. Jurassic Park on your desktop: not quite yet, but a great deal closer than you think.
Finally there is the information revolution itself. We drown in information, some true, some false. High band width communications gives you a chance to ask for help and check facts. Some will use that opportunity to advance truth and knowledge. Others will use it to deceive, and make no mistake, the opportunities to seize riches and power through deception have never been greater: billions ride on issues like global warming. Should we do something now? Can we afford to wait until we know more? Fortunes are at stake.
Bayesian analysis is a tool for determining the value of information given costly alternatives to an indeterminate future. Some have gotten rich from knowing that. This time next year anyone will be able to evaluate complex information expressions in an Excel spread sheet. Whether they'll do it or not is another story; but all will be able to, and smart people will do it.
Unfair as it may seem, while computers help us all, they help smart people even more. It's knowing when and how to use the new tools we all have available that will make one rich. The ability to memorize details gets less important but the ability to grasp a dozen concepts, squeeze them together, and extract a new product idea-information or hardware-becomes vital. The competition to hire smart people will get more intense next year, as it has every year; it's a direct consequence of Moore's Law.
There are too many trends to list, but this much is obvious: Moore's law holds. Information processing is fast, cheap, and out of control. Processing equipment is fungible with full competition, meaning that profit margins inevitably fall. What made money last year may be useless next year.
Lawyers and regulators will try to stuff that genie back in the bottle. How well they succeed is the only real uncertainty. They may do well protecting established firms for a while. Hiring lawyers and lobbyists can still pay off; but for the long haul my bet's on the genie.
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Dr. Jerry Pournelle is the doyen columnist of the computer industry. His "Computing at Chaos Manor" has appeared in BYTE since 1979. He is also a best selling science and science fiction author. FOOFTALL by Larry Niven and Jerry Pournelle was #1 on the New York Times bestseller list, and Lucifer's Hammer was #2 for 14 weeks. His next book is Starswarm, from Tor Books.
He is Chairman of the Citizen's Advisory Council on National Space Policy, and a co-author of The Strategy of Technology, a book that has been used as a text in all three US Service Academies as well as the Air War College. The Strategy of Technology, and excerpts from Starswarm, are available at http://www.jerrypournelle.com
If you think Microsoft is dominant now, wait until the computer comes free with the operating system, and that OS is in ROM (Read Only Memory). This will probably happen a great deal sooner than most people expect. Moore's Law states that computing power doubles and price halves every eighteen months. It's right on track: those who have bet against that law have vanished from the computer industry.
Applying Moore's Law to the current situation leads us to conclude that well before the end of the century, all computer hardware will sell at consumer prices.
This doesn't mean "network computers", or some other crippled product. I'm talking about full up computers with on-board mass storage, at prices low enough to leave little room for profit margins on the hardware. You can already get hard disk drives for under $50 a gigabyte; the profit margin on hard drives is vanishingly small, precisely as your Economics 101 text predicts for fully fungible products.
Other components follow the same laws: Who knows what brand of memory is in his computer? (Whether or not you should pay attention to memory brand names is another question for another time.) For the moment FCC regulations about "radio frequency noise" have artificially kept case and power supply prices above what they could be, but pretty soon the entire computer will be encased in a "no user serviceable parts" case, greatly simplifying compliance with what are, after all, silly and needless regulations (a lot of people operate their computers with the case open or without filling in all the slots with slot covers, but airplanes don't fall from the sky, and if anyone has ever been arrested or even officially annoyed for running his machine without the case closed, I haven't heard about it).
Incidentally, while I have made a number of successful predictions about small computers, beginning in 1979 when I said "By the year 2000, every member of Western Civilization will be able to get the answer to any question that has an answer," my worst prediction was on mass storage. One of Pournelle's Laws was "Silicon is cheaper than iron," meaning that mass storage would move from high precision spinning metal to some kind of solid state storage. Of course it did, in the sense that we now have small computers with 64 megabytes of memory - I made that prediction when a 5 megabyte hard disk was the size of a small washing machine and cost many thousands of dollars-but of course I was wrong. What I hadn't factored into my prediction was the effect small computers would have on high precision fabrication techniques.
I won't make that mistake again. You can't ignore the effect the information revolution has on fabrication techniques: it's one of the reasons Moore's Law has held for so long.
As I write this, electronics stores have full up Pentium quality systems, with memory, mass storage, operating system, and better business software than the best was 4 years ago, for just under a thousand dollars-and that's with a monitor. At the same time, digital recordings give previously unobtainable video quality, driving everyone to upgrade at least one television set to what amounts to SVGA computer monitor capability. Television sets have their own price drivers, but the electronics in them follow Moore's Law as inexorably as anything else: meaning that it won't be long before you will be able to buy a TV set with an all up computer in it, and well before that happens computers that can use your TV as a monitor will be so cheap they can afford to sell you the software and throw the computer in for free.
And that, I think, is something Bill Gates and Microsoft realized some time ago, and is why Microsoft wants to incorporate its net browser into the operating system: the software you buy to get your free computer will come from Microsoft.
Gates long ago set as a goal "A computer on every desk top and one in every home." He didn't say, but clearly implied, that every one of those should be running one or more Microsoft software products. That goal is now realizable. Microsoft loves cable, and no wonder: the set top computer is an inevitable development as TV quality goes up and electronic prices plummet. Microsoft wants to own the set top market, as it wants to own all other markets.
Many years ago IBM had an internal philosophy: "we only want our fair market share, and that fair share is all of it." It wasn't widely publicized, but it was what IBM marketing people were taught to believe. IBM abandoned that concept some time ago. Microsoft hasn't.
We live in interesting times.
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You may not have seen it among White House stories, but last week Microsoft settled one round with the Department of Justice, and Netscape decided to give away not just its browser, but the source code. Both events would be good news for the rest of us if that let both Microsoft and Netscape get back to work improving their products.
Unfortunately, that is not the end of the matter. Barksdale, CEO of Netscape, also announced that he's liquidating better than 10% of his company, in part to compensate for losing the 13% of revenue that the Netscape browser represented. When Gates announced Internet Explorer he said "It's priced to sell," and Netscape found out you can't sell what your competitor gives away for free.
Of course even with the browser revenue Netscape was losing money. Laying off 400 people, assuming a per capita cost of $120,000, saves $48 million a year, not quite enough to compensate for a quarterly loss of $14 million, but close enough - until you factor in the loss of revenue from the browser. Now what?
Apparently, Netscape will rely on the Department of Justice to put a primary hamper on Microsoft, and hope that will do something useful to Netscape. Whether it will or not is another story.
Historically, Microsoft has had a tiny Washington lobby office (but a large and effective sales office), and regarded Public Relations as keeping the computer press happy. They've done that well. Every major computer writer has access to Microsoft PR people, and Microsoft technical staff aren't afraid to talk to the press. IBM, by contrast, has a policy of restricting communications with the press except through their executives. IBM executives in the branches I have had to deal with were apparently required to have a lobotomy before their elevation. As a result, no computer reporter I know of will ever share an IBM source with colleagues, much less rivals.
IBM does keep a very powerful Washington lobby staff. You may recall a decade or so ago when IBM was one of the prime movers in getting the US government to set up a cartel to keep the price of memory chips high. The benefit to IBM was clear if not obvious: if memory costs were high, it was difficult for clone makers to compete with IBM for Personal Computer sales, since the best way to compete was by offering features, and that took memory. Of course the strategy failed; Moore's Law worked inexorably to bring down the price of memory chips, and eventually the cartel collapsed.
Netscape press relations are a great deal closer to IBM than Microsoft, and like IBM they worry a lot about Washington. They also participate in alliances to hamper Microsoft sales. As a result we have the rather silly image of Ralph Nader giving the computer industry advice. Nader is about as relevant as was Mohammed Ali at last year's MacWorld Expo when Apple brought him in to bolster the Apple image. (Of course a number of people, including me, were quite proud to shake hands with Ali; Nader doesn't inspire the same enthusiasm.)
Microsoft retains their historic good relationships with the computer press, but now they've hired Haley Barbour, former Republican National Chairman, and former Democratic White House lawyer Mark Fabiani to do PR. One can bet they will now begin making donations to politicians on both sides of the Congressional aisle, and probably paying Imperial tribute in the form of big parties and receptions for White House and Congressional staff. None of this will add a thing to the value of Microsoft products.
Meanwhile Microsoft has agreed to something meaningless: computer manufacturers will be able to get Windows without Internet Explorer preinstalled, and to remove the "The Internet" icon from the desktop. Whether any rational manufacturer will choose to sell Windows that way is another story: so far none of the big players have announced any intention to do so. More important, now that Netscape is free, will manufacturers choose to preinstall it on machines they sell? Again none have said they will, but my bet is that once the dust settles, most machines will come with both. Whether this is any favor to the user is another question.
Discussions of Microsoft get emotional. I have had readers send me email saying "I'm tired of having them cram their buggy bloatware down my throat!" and become quite obscene when mentioning "Microsoft's monopoly."
Well, of course Microsoft really does have what amounts to a monopoly on the operating system, and that has led to a fairly heavy dominance in applications software as well. It didn't have to be that way: not many years ago, Windows was a small accessory to OS/2, with IBM's Presentation Manager serving as most of the user interface. At one of his dog and pony shows for managers, Gates said "Back in 1989 I went to all the software publishers and asked them to write applications for Microsoft Windows. They wouldn't do it. So then I went to the Microsoft Applications Group, and they didn't have that option."
So why didn't anyone want to write applications for Windows? At bottom it comes down to how few people, even in this industry, really understand the implications of Moore's Law. When Windows first appeared, it was exceedingly slow and clunky. I recall watching Word for Windows take half a minute to do a simple 'page down' of a text document; it was worse than Apple's Lisa, which was one of the most painfully slow machines I have ever used.
So what? Shortly after that, a Canadian company, ATI, brought out a graphics accelerator for Windows. Suddenly Windows was useful, and everyone wanted it - and Microsoft was ready with productivity software. Lotus 1-2-3 once had a near monopoly on spread sheets for PC systems; but they failed to bring it over to Windows quickly, and by the time they did, Microsoft Excel, originally written for the Mac, was running nicely on Windows. Much the same happened with word processors and data base programs - and about the time the other companies got their programs running on Windows, Microsoft was offering the entire suite, word processor, spread sheet, data base, and a bunch of accessories, for not much more than the others charged for a single component.
In today's paper Fry's advertises Office 97 for $250. Naturally it has all the above plus web editors, Internet Explorer, 3-D graphics, a major part of Microsoft Bookshelf, spelling and grammar checking, 150 fonts, a way to write mathematical formulas, and a partridge in a pear tree. When this came out a year ago I spurned it as bloatware because it needed 200 megabytes of disk space. This year those 200 megabytes are about 10% of the smallest disk drive you can buy and cost maybe twenty bucks; while the machines have got so fast that you don't notice whether Office 97 is slow.
Some companies strive for elegance. They write beautiful software, well done, efficiently coded, tightly compiled - and by the time it is on the market it's irrelevant. Microsoft goes the other way: get it out the door quickly, and if it's slow and takes up too many resources don't worry about it, the hardware will improve and bail you out.
It sounds sloppy, and offends conservationists - but what in the world is there to conserve? The machines are faster, cost less, and use less energy every year, and that will happen no matter what you do with the software. There's no point in conserving disk space and code size.
And that's the lesson Microsoft's competitors have to learn, and they better learn it fast, because putting a hamper on Microsoft so that they have to run slower and give us less for more money while paying for big Washington parties isn't going to be very good for the rest of us.
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Last time I mentioned Bayesian analysis. Several readers have asked me to explain.
One consequence of widespread computing power is that it becomes easier to make rational decisions. I'm not sure I've seen many signs of it yet, but the possibilities are certainly there.
Take global warming: although nearly all the debate on the subject has been purely political or emotional or both, there really is rational way to look at it, and the computing power to do it is available to nearly anyone; and the method has been known since 1763, when the Reverend Thomas Bayes posthumously published his "Essay Towards Solving a Problem in the Doctrine of Chances". Bayes considered a situation in which there can be several different states of nature. Each state demands a course of action, and each of those actions has a cost.
Now if there's overlap in those actions, we need only ask, is it cheaper to do it now and at leisure, or later when we are in a hurry. In the past it was usually better to start now; things didn't get cheaper. Nowadays we have to take into account Moore's Law; which states that every 18 months our electronics get twice as powerful and cost half as much. Of course, as a reader has pointed out, Moore's Law isn't a 'law' in the same sense as Newton's law of gravitational attraction. It's purely empirical. On the other hand, it has held up quite well for a couple of decades, those who have bet on it have got rich, and those who thought it was a fluke that would soon go away have gone broke.
The real dilemma comes when the actions you must take are quite different depending on the future: which is of course the case regarding global warming. If the Earth really is heating up, we had better do something fast, and it's going to be expensive. On the other hand, for a long time we were told to worry about a new Ice Age, and fighting that will take quite a different course of action.
The problem is, we don't know the probabilities of either event. This is where Bayesian analysis comes in: through fairly simple techniques you can determine just how much you ought to spend to find out the probabilities (actually to increase the accuracy of your estimates) of the states of nature. Even a rough cut shows that this information is worth a lot, and that rather than spending money on conferences that generate treaties with virtually no chance of ratification, we would be a lot better off increasing the budgets for the National Science Foundation and instructing them to go find out just what really is happening.
Of course this is pretty obvious in this case, but there are plenty of situations where it's not so clear, but every one of them is susceptible to this kind of analysis, and it can be done with an Excel Spreadsheet.
"Do not ascribe to malice that which is adequately explained by incompetence." Napoleon Bonaparte
That's the charitable way to view The Great Anthrax Charade of the February 20-22 weekend. The FBI was supposedly taking no chances when, acting on a tip from a known blackmailer, they arrested Larry Wayne Harris and William Leavitt for presumed possession of "military grade anthrax." They must have been proud of themselves, since they summoned the cameras, made the arrests in public view, and paraded their 'suspects' in chains and orange jumpsuits for the world to see.
Then came the revelation that the liquid seized was no more than anthrax vaccine, available from any country veterinary laboratory and often administered by parsimonious farmers without the services of a vet. It is just as well, since the arrest was made with ludicrous precautions--wrapping the top of a car while leaving the bottom part unsealed is no protection against a real biological war agent-and the supposed "military grade" anthrax was allowed to rattle around in the trunk until it could be removed at a military base. A clownish performance, doubly so since not the slightest courtesy or consideration was extended to citizens not convicted of any crime, and in fact never charged with one; but we have become inured to casual acts of tyranny. At least this bishop of the Mormon church was not burned alive.
We can hope that this whole performance was mere incompetence (and casual disregard for long disregarded constitutional rights to decent treatment), and not a media circus designed to distract our attention from the latest tricks with White House interns. It was farce, except of course to the people involved, and we note the curious similarity between the statements of Leavitt and the performance of POW's praising their captors while admitting to anything their jailers demand of them. I kept watching for Morse or POW tap code messages.
The farce does raise a serious question: Can we have constitutional rights in this modern era?
But surely, it will be protested, this is different: Harris and Leavitt may not have had "military grade" anthrax, but might not the authorities have believed they did? And doesn't the potential damage that might do justify almost any action, just in case?
If so, we surely must give up the whole notion of individual rights, and return to some more ancient system. Bring back lords, who will know and protect their subjects. Revive the ancient Norman cry of Haro! Have ways to earn status, and thus be exempt from suspicion: because the simple truth is that as of this afternoon, everyone in this forum has access to means of causing as much damage as Harris and Leavitt could have caused had they possessed "military grade" anthrax.
Back in 1977 I said, "By the year 2000, anyone in Western Civilization will be able to get the answer to any answerable question." We are well ahead of schedule; and "any question" includes questions like "How can I make enough botulin toxin to kill every vertebrate creature on the Earth?"; "How can I make war gasses from ingredients I probably already have in my house?"; and "How would I go about getting an anthrax culture if I wanted one?"
Note well that second question: the fact is that tens of thousands of people in the US both possess the ingredients for nerve gasses, and know how to make them. Should every one of them-including some of you readers-be paraded in chains absent proof they haven't done it already?
But if this is so, how will we combat terrorism?
If that is asking how we get absolute safety, clearly we don't; but then we never had absolute safety. If it means, how much liberty will we trade for safety, we haven't had a national debate on that since Ben Franklin answered the question his way , and perhaps it's time we did. If the question means, how do we discourage nations from conducting terror wars against us, the answer lies with our foreign policy. If it means, how do we convince the citizens that their fears of tyranny are unfounded, I would not myself think that acting like tyrants does much to allay those fears.
The good news is that most chemical and biological weapons of mass destruction aren't that massively destructive. The Hollywood scenario of the biological agent that spreads across the land until we're all dead isn't very good science fiction. Chemical and biological weapons are deadly all right. Villages suffered worse than 50% casualties to 'yellow rain", and there were similar effects in Kurdish villages attacked by Iraqi chemical weapons. However, in neither case did the effects spread much further than the areas where the agents were applied. Iraq used both chemical and biological weapons in its war with Iran, but that didn't win them the war.
Chemical and biological weapons kill people, but so do other weapons. The Czech village of Lidice suffered 95% casualties, and that took nothing more than SS men with machine guns. Dresden was pretty much destroyed by iron bombs; but to really break things and kill people, the best choice is nukes.
And here the news is not good at all. First, anyone with above average smarts, some mechanical ability, and access to the world wide web can learn how to make a fission bomb in a couple of weeks. Second, weapons grade nuclear material has reportedly shown up on the world black market many times; and by definition those are only the times we know about. Becoming a nuclear power never was a matter of learning how; the hard part was obtaining the fissionables, which required either big nuclear reactors or a very large isotope separation plant. Neither of those is easy to hide; but given a few kilograms of 90% U-235, your bomb factory is indistinguishable from a precision machine shop, and unlikely to be found by inspectors. The best way to find it would be to bribe one of the people working in it, and that's hardly a sure thing.
Depend on it: within a few years the Nuclear Club is going to get crowded, and that's assuming it hasn't already.
Nukes have this similarity to biological weapons: the problem isn't getting them, it's delivering them. In the case of biological toxins, you need them in a powdered form - that's 'military grade,' not the liquids in Harris's car that were branded 'military' - and then you need a way to disperse them over wide areas. Harris boasted that it could be done with crop dusting aircraft, and while that's true in theory, there's a large devil in the details: how do you load it without killing your ground crew? Or disperse it without doing in your pilot? There are other problems.
With nukes you just need a missile. Anyone who can acquire a fission bomb can manage to buy a missile to carry it several hundred miles.
One supposes that several tin horn dictators already have a bomb and a bird. What they do with them is another story. Maybe they go pet the bomb once in a while as an ego boost.
Another thing about nuclear missiles: as long as there aren't too many of them, you can intercept them in flight. Well, right now of course we can't intercept them because we never deployed any missile defenses, but we know how to do it. No one ever expected a leak-through defense against the USSR; there were too many birds. The purpose of SDI in the Cold War was to so complicate the Soviet war plan as to make their whole expensive missile establishment "impotent and obsolete." Impotent, because they could never be used: SDI wasn't good enough to defend all our cities, but it would have been good enough to defend some of our primary missiles: enough of them to destroy the USSR and probably bounce the rubble.
SDI would never have been good enough to intercept all of a big Soviet strike, but it sure can be good enough to catch anything Saddam Hussein, Khadaffi, and for that matter most of the USSR successor states will ever be able to throw at us or our allies.
Building that kind of defense system wouldn't cost a lot more than we're spending on sending and keeping troops to the Gulf, either.
Neither would Thor. I described the Thor concept some years ago: imagine a fleet of tungsten telephone poles in orbit. Each contains a Global Positioning System receiver and other navigational computers, and a means for steering it after it enters the atmosphere. The result is a long tungsten pole that comes in on target at about 12,000 feet per second with an accuracy of under ten feet. I guarantee you it won't need a warhead, few targets will survive it, and there is no fallout. There's also no potential loss of pilots and soldiers.
We have come a long way from John Quincy Adams who said our foreign policy was "We are the friends of liberty everywhere, but we are the guardians only of our own." If that were our policy, a 300 ship Navy, some strategic and air defenses, and Thor would be sufficient for our needs, and few terrorists would consider an attack on us worth the risk.
That's not our policy. Instead we have opted for the New World Order. I don't know what we need to impose a peaceful New World Order. Soldiers are best at breaking things and killing people, and that's not a very peaceful activity. SDI and Thor could help, but they wouldn't do the job alone. I do know we don't have anything like the military establishment we'll need for that job.
One last point. The big buzz today is "information warfare", in which we use modern electronics to disrupt the other guy's way of life. Keep him from communicating with his troops. Spread false information. Ruin his stock exchange. Bollix up his bank transfers. The goal is, we have reliable information and he doesn't, and surely that will convince him to give up.
It might and it might not, and he might have information sources - runners, carrier pigeons - we can't intercept, or use old fashioned paper to keep track of his transactions. The fact is, we're more vulnerable to that kind of attack than Saddam Hussein.
But if information warfare has any utility - and we're sure acting like it does - then consider this. God made men, but Sam Colt made them equal. In the world of electronics, God made nations, but Intel and Moore's law are rapidly making them equal. Not only can anyone acquire the tools of information warfare, but they get twice as effective and half as expensive every couple of years.
We live in interesting times. One thing seems certain: we're not going to make them less interesting by protecting ourselves through televised acts of ludicrously incompetent tyranny. That's assuming it wasn't malice.
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The good news is that the world won't end on October 28, 2028 at 3 PM Greenwich Mean Time. The mile-wide asteroid will miss us, not by 30,000 miles, but half a million. The scientists are sure of that. Pretty sure, anyway.
Back when the prediction was 30,000 miles with a probable error of twice that, the chances were about one in a thousand that it would smack into us; and even though we now think there's almost no chance of a hit, that's this particular asteroid, on this pass. There are plenty more "Earth grazing" asteroids out there, many more than we used to think, and we certainly haven't found them all. If we can overlook one a mile wide, we can overlook anything. We'll find more. Depend on it.
If that one did hit, things would be grim. Earth is 80% water, so a water strike is likely: tidal waves over a hundred feet high, reaching far inland: after Krakatoa, a Dutch gunboat was deposited miles inland and about 90 feet above sea level, and this thing has more energy than Krakatoa. Figure about the amount of energy contained in the nuclear inventory of both sides at the height of the Cold War, and you won't be too far off. So: coastal plains scrubbed down and soaked in salt water.
After the tidal waves and earthquakes - it will probably trigger every major fault on the planet - comes rain, then gloom. When the Sumatran volcano Tambora went off in 1815 the resulting clouds and dust caused "the year without a summer." Mary Shelley, in Switzerland for a honeymoon vacation, found that so depressing she wrote Frankenstein, the first science fiction novel, which got its gloomy tone from the bad weather. Several years of bad harvests, floods, rain, lousy weather, famines, and of course that's in the part of the world where it didn't hit; and it wasn't as violent as our asteroid would be.
In other words, it wouldn't kill the lot of us, but it would make one great big mess, and while civilization might not collapse, we'd all be a lot poorer for at least a couple of generations. Put conservatively, the cost would be a hundred trillion dollars. Probably more.
That's a big number. Multiply it by a very small probability and you still have a big number. The technical term for the cost of the disaster times the probability of it happening is "expected value." You should be willing to spend up to that amount to prevent it, and any way you slice it, that's billions. In fact, it turns out it's worth a billion just to do a real sky survey to find out how many of those things there are, and what is the real chance one will hit us.
Now: who ought to do something? Whose job is it to look out for our grandchildren?
At one time there were plenty of institutions that took the long view. Churches began cathedrals to be completed a century and more later. Kings worried about not creating problems for their grandchildren, and wealthy aristocratic families planted trees and built terraces for future generations. Bell Labs did look ahead, and was arguably the advanced planning department of the human race.
We don't have any such institutions now. Death taxes have finished off aristocratic families, there aren't any kings, and churches are more likely to hold AA meetings than commission cathedrals. Bell Labs, no longer part of a regulated public utility, has to look to short term profits like the rest of us.
Certainly the great corporations won't look far ahead. The discounted value of a dollar in twenty years is very nearly zero, and any corporation that invested serious money for a payoff in thirty years would be the target for a hostile takeover.
If anyone is going to look ahead, it will have to be the government: and government notoriously doesn't seriously plan beyond the next election. Worse, when government does sponsor big projects they are often disasters, as witness the Shuttle, and Space Station. Government's normal method for attacking a problem is to create a bureaucracy, and while bureaucracy is the right answer to some problems - animal control is a good example - it's seldom the right answer to research and development.
There is a way. Before MacNamara killed the X projects in the name of arms control, the X programs out at Edwards Air Force Base were a mine of new military and civilian aerospace technology; indeed, it's arguable that the X programs, beginning with the X-1 in which Major Chuck Yeager first broke the sound barrier, were the best investments the U.S. government ever made.
True X projects are small; have limited scope; run for a limited time; and seek not so much to develop new technology as to show what we can do with the best we have, and thus identify what we need to know next. The ideal X projects identify and reduce risks at government expense, after which private enterprise exploits the technology. One of the best examples was the X-4 Stiletto, the first airplane to take off from a runway, go supersonic, and land. It would have been worthless as a fighter, but the X-4 led directly to the Lockheed F-104 Starfighter, a plane that dominated military air space for nearly twenty years.
We owe it to our children to be concerned about the possibility of disasters from space. The right way to deal with them is not a big NASA crash program (including the overly ambitious X-33 Venture Star), but a series of small X projects designed to reduce the technical risks of getting to space. If we allocated a couple of billion a year to projects with a 4 year life span and a top limit of two billion dollars per project, within a decade we'd know how to deal with that asteroid and all like it - and get rich in the bargain.
Of course what we'll probably do is nothing, until one day someone discovers a big rock aimed to hit us in four years or so; at which point we will panic, spend far too much money on the wrong things, and likely get smacked.
God looks after fools, drunks, and the United States of America, but I suspect he wouldn't mind if once in a while we gave Him a hand by looking ahead. Reviving the X projects is the right way to do it.
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We've just been to NAB, the annual convention of the National Association of Broadcasters, and what we saw made it clear: Digital television is coming fast, and the broadcasting stations will either get on board or be left far behind. They've lived on slowpoke time for seventy years; now they'll get on internet time or go under.
HDTV, high definition television, has been around seemingly forever, safely ignored by networks, local stations, and the FCC alike. It was a misnomer to begin with: the 'definition', or number of lines, of 'entry level' digital television is no greater than the current NTSC with its 480 interlaced lines. For that and other reasons, the name HDTV has become accursed, and you will never see it broadcast under that name.
However, DTV, or Digital TeleVision, is really HDTV with a new suit of clothes - and it's inevitable. Starting this summer those stations accepting DTV frequencies will be required to broadcast two hours of content each evening, and while there won't be very many able to receive it, those who do will never want ordinary television again. Technically DTV doesn't have more lines than NTSC TV, but it looks a whole lot better.
To begin with, today's TV color is a kludge, phase modulation of the black and white carrier. Given the requirement that it be backward compatible with black and white it was inevitable that color TV would be a hack, but that doesn't make it any prettier. TV engineers say "NSCT": never the same color twice. With DTV the color is digital, bits is bits, and you get the same colors every time. You also get sharper edges, better color separation.
Second, NTSC TV is interlaced: the set paints every other line each frame, then the next frame paints in between them. This causes flicker, and makes it very hard for your eye to see details; it's the main reason you can't use a TV as a computer screen without going blind. DTV is 480 lines "progressive": the line is painted and stays there until something changes. When you watch DTV you find you need new eye training: you're so used to lack of detail in TV you don't look close. When you see DTV you'll wonder why you put up with NTSC mush.
Finally, DTV is compressed, and the miracle of compression allows up to 5 channels in the bandwidth now taken by your regular TV. They can put anything in those channels: the same program but in a different language, text for the deaf, or a home shopping channel along with Friday night's 'Homicide' adventure. There are other advantages to DTV, but the vastly better pictures and 5 channels are enough.
Other trends: most people have computers. This has driven the cost of electronics down to commodity levels. In particular, memory and storage costs have dropped through the floor. It is now possible to have vast amounts of disk storage, tens of gigabytes and more, in home computer systems - and for the same costs, in home entertainment systems including TV. You can also get good sound processing for your computer, and competition has driven high fidelity to ridiculously low costs. I have better sound systems (electronics and speakers) for each of my computers than I had as the main home stereo a few years ago.
Cheap electronics, cheap storage, and digital signal compression make Video On Demand absolutely inevitable; you no longer have to rewire your house even if you have the slowest possible cable, and you'll still get hi fidelity sound and really high quality digital video; those who have experienced Digital Video on Disk (DVD) will know what I mean. It makes what you get on tapes look sick. We're talking about signal quality far too rich to broadcast in real time, but you can still get Video on Demand without leaving your house to rent a digital video CD.
It works this way: you call or otherwise communicate to the cable company that you want to see a film. Up comes a 'splash screen' welcoming you, and some legal stuff about not recording this. There are other screens of information, mostly text and voice. You won't notice it, but while this is going on, the disk drives built into your set top cable box are clattering furiously: the beginning of the movie is being stored. Now the movie begins. It's playing off your local disk, and as that happens, more is coming off the cable and stored on those disks. If your system is slow enough and the movie both long and complex enough - complex signals take more bandwidth than simple ones - the movie may have to declare an intermission while the station pours more signal into your disks. Usually that won't happen.
So when does all this come about?
Some this year. ATI, the Canadian video board company whose video accelerator cards made Microsoft Windows usable, will bring out DTV cards in the next couple of months, meaning that early adopters will be watching DTV on their computer monitor screens by Fall. Everyone with a computer is a potential DTV viewer: just add a board to the system.
Moving from the computer to the home entertainment center will take a bit longer, but not much. The long pole in the tent right now is the cost of monitors good enough to display DTV properly. Just now a good 21" monitor costs a bit more than a thousand dollars. Those prices have been coming down - ViewSonic cuts prices every year - but the real cost here is in the bottle, and unlike electronics, that that kind of silicon doesn't follow Moore's Law: you won't get twice the performance for half the cost in 18 months. You may, however, get the same performance for half the cost.
There are also competing systems. Flat screen monitors are mostly electronics, and their performance is getting closer and closer to glass bottle TV/monitors. Given a choice you'd rather have flat screen - it's lighter, and you can hang it on a wall if you like - and those will more or less follow Moore's Law.
So will projectors. They're more convenient than flat screens, because you can change the image size and project them anywhere, and of course they already accept almost any signal: NTSC, European TV, VCR signals, or the output of a PC including DVD. Projectors already have the necessary video quality, they just cost too much. Moore's law says that will change.
The largest screen TV's already use projection systems. In ten years (probably a lot less) projection TV will be the norm, with glass bottles mostly used for small and specialty applications like a TV in the kitchen and another in the bathroom.
SO: add up all the factors. Mass storage at low and falling cost. Higher quality pictures. Video on demand. Flat screen and projection systems at high quality and falling cost. Early adopters watching DTV on their computer monitors. There will be a steep curve here as people learn what's available, and the more who want it, the lower the price. As with computers, the number of users starts small but grows fast.
If the broadcasters and cable companies don't learn to live in internet time, the next thing you see will be DTV coming to you right over the net. In fact, that's starting already. NTSC TV was defined in the 30's and has been around since the 50's. It served us well enough, but its time is over. Like it or not, we're living at a different pace now.
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How Microsoft Got That Way
It happened in 1989. Bill Gates put on a full court press to get every major computer and technology writer and Wall Street analyst to come to his Really Big Show, "Charting a Course for the Future," at which he would demonstrate and evangelize for the new graphical interface operating system to replace DOS. The show would take place on the new Campus in Redmond, but in a temporary building because they'd just moved in, and the Presentation Center building wasn't ready yet.
The walls were decorated with huge banners and posters touting the operating system of the future. Each of us got a briefing book with copies of the charts each speaker would use. These were made using Microsoft Power Point running on an Apple Macintosh; no IBM PC was capable of doing it. The new operating system would run graphics programs like Power Point; until it came out, though, if you wanted that capability, you had to buy a Macintosh.
The name of the new operating system? IBM OS/2, to be developed in partnership with Microsoft. Every one of those charts said "OS/2: Charting a Course for the Future," and to rub in the point they gave away small boxed compasses. I still have mine.
Windows hardly appeared on any of those charts; it was a supplement to OS/2, which would feature an extra-cost interface to be called "Presentation Manager."
The meeting started at 0900, with a welcome from Bill Gates. He waxed enthusiastic about OS/2, then turned the meeting over to the IBM Executive. The IBM Exec spoke for five minutes, then apologized: he had to catch a plane back to Boca Raton, Florida, where the IBM "Entry Systems Division" (that's how they thought of desktop computers in those days) was headquartered. Then he walked out, leaving most of his hour vacant.
Gates filled in as best he could, but it was clear to everyone in the room that something was terribly wrong. Here Gates had assembled a stellar cast of financial and technical analysts and writers, calling some personally to get them to come; and in front of this group, in Microsoft's new headquarters, IBM pronounced that their "partner" was not important enough to keep their Executive around to finish his speech. It was a terrible insult, and no one knew it better than Gates.
He brooded that day and through dinner that night - in those days Gates had both lunch and dinner with his guests - and the next day he announced that if you wanted to get your applications running on OS/2, your best route would be to get them running on Windows first. Shortly after that, IBM broke off the partnership with Microsoft, and Windows and OS/2 were in competition to be the future operating system for desktops. Most industry insiders predicted a clear win for OS/2; after all, IBM was a much larger company than Microsoft, had splendid marketing capability, and a very strong stable of very competent programmers. How could they lose?
Gates, meanwhile, went to every major software developer in the industry to try to get them to port their applications to Microsoft Windows.
They wouldn't do it. Word Perfect dominated the PC word processing market. Lotus 1-2-3 was the runaway leader for PC spread sheets. Both turned him down flat, and without word processors and spread sheets, Windows was doomed.
Keep in mind that Microsoft Word had small market share with PC's, but a big presence in the Apple Macintosh world; moreover, Microsoft Excel and Power Point, while very big in the Mac world, wouldn't even run on PC compatibles.
As Gates put it in a 1995 presentation, "In 1989, I went to all the major software houses and asked them to write applications for Microsoft Windows. They wouldn't do it. Then I went to the Microsoft Applications Group, and they didn't have that option."
So: as the final decade of this Millennium opened, most people didn't know they wanted or needed a Graphical User Interface (known in the computer trade as a GUI), and those who did used Macintosh computers. Most large corporate systems ran one or another variant of Unix, and lived with what we would today consider clunky and hard to use applications; if you wanted pretty printing, or graphics, you got a Mac. (Or you might learn TeX, pronounced 'Tech', an arcane formatting language known by Department Secretaries in major universities and almost nowhere else.) OS/2 would fix all that, but IBM was in no hurry. Wait for it.
And then Gates bet the company on Windows. He threw every asset he had into coding and promoting Windows and getting applications running on it. He was betting that the PC industry was in for a huge spurt of growth, and that most of the growth would be among new users who didn't want to learn command lines like "C:\copy A: /s/v"; who didn't want to use a typewriter to fill out forms because there wasn't any graphical word processor that did forms properly; who didn't want to pay the very high prices Apple charged for their graphical systems; and who wouldn't wait for IBM to take care of "entry systems" customers.
IBM did offer an alternative to Microsoft in operating systems: you could buy genuine IBM PC DOS for your 'entry system'. Most users couldn't tell it from MSDOS, and it only came standard on IBM built machines anyway.
Gates made the right bet, of course. We know that now. It wasn't so clear back then.
Windows was pretty awful when it first came out, but machines got more powerful (Moore's Law at work). Each new Windows release was an improvement, both in bug fixes and adding new features. ATI developed the Graphics Accelerator Board. Suddenly Windows began to catch on, in homes, and schools, and then in offices. So did Microsoft Word, and Excel, and Power Point, all ported from the Mac to Windows, then rewritten for Windows from scratch. And then came Windows for Workgroups, which ate the lunches of several companies that had made a good business out of selling peer-to-peer PC networking. Microsoft was accused of unfair practices, but then IBM included that feature in their catch-up version of OS/2, and that particular hubbub died out.
IBM hung on for a while with OS/2. They had superior technology, but they didn't have the applications, and they didn't act as if they wanted any: at a time when Microsoft was literally forcing free copies of their applications and driver developer kits on people walking past their booths at trade shows, IBM was proud of charging "only $695" for their driver developer kit. Incidentally, one of the main complaints against OS/2 was the lack of drivers for a great number of hardware devices people had in their existing machines. If you wanted OS/2, you bought a machine that used OS/2 compatible hardware; they left all those "legacy systems" to Microsoft.
And eventually IBM abandoned OS/2 for the rest of us (there's still some corporate level support, but none for end users), and Apple, having always gone for immediate profit rather than market share, imploded; and Lo!, Windows stood out there nearly alone.
Now Judge Bork, and Bob Dole, and Ralph Nader are piling on, accusing Microsoft of being a monopoly. Microsoft is very bad for consumers, and the government must step in to protect the rest of us.
Now true, at one time the rest of us had to pay over $1000 just for essential software: say Word Perfect, Lotus 1-2-3, a good outliner like Grandview - when now you can buy a whole computer with Microsoft Office installed for not much more. But think of the future. Microsoft keeps offering more features for less money, but one of these days they'll change and act like true monopolists, and we have to set a bureaucracy to watch before that happens.
But your old software and operating system will continue to work: you won't have to buy anything new if it's overpriced. Microsoft may be a monopoly, but surely the time to sic government on Bill Gates is when he acts like a monopolist? So far he's given us better products for less money. That has cut profits for a lot of people, who now want the government to do something about it so they can keep some market share.
Apparently their profits aren't so small they can't hire Bork, Dole, and Nader.
I don't carry water for Microsoft, and I'm as hard on their bad products as anyone else. I was a great champion of OS/2 as technically superior to Windows. And so what?
Gates bet the company and won. That's called competition. Those subsidizing the Bork, Dole, and Nader show bet the wrong way and now want government to hedge their bad bets. That's called sour grapes. If I were in a worse mood, I'd say it's called tyranny.
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Microsoft, DOJ, Price/Earnings ratios, and the long boom
The champagne corks were popping, if not all over Silicon Valley, then at least in parts of it. Bing Bang! The Wicked Witch of the North was, if not dead, then wounded, and best of all, the Department of Justice is paying for the witch hunt.
At the last minute, Microsoft halted shipment of Windows 98 to PC box makers, giving DOJ one more chance to cut a deal. I have no idea of what will result from that, but it doesn't matter. The real news is that Microsoft's competitors have managed to sell the Department of Justice a really new and dangerous interpretation of the anti-trust laws.
Disclaimer: I am no lawyer. On the other hand, I know a good Washington lawyer, sometimes IntellectualCapital contributor David Colton, and I listen good. Of course any mistakes I make here are mine, not his.
As I understand the law, up to now the anti-trust acts were intended, and have been held by the courts, to protect consumers, not competitors. That is: it's no crime to have 90% of the market share. The crime comes in using illegal practices to get and maintain that share, or in using that market dominance to gouge consumers. Robert Bork himself once wrote that the law protects competition, not competitors.
Moreover, competitors have all kinds of rights to lawsuits under the anti-trust laws. If they can prove they are the victims of monopoly practices, they can sue for heavy damages.
Why, then, have Sun, and Oracle, and Netscape not brought suits in their own names? Why are they cheering the Department of Justice on, but not really getting involved themselves?
The obvious answer is that it would be extremely expensive, a legal bloodbath sapping the strength of all the participants. Technical experts would be drawn away from their real work and their talents pre-empted by the legal department; and when it was all over, they would very probably lose. If they had much of a case they would have brought suit long ago. They didn't, and they don't.
But by encouraging the Department of Justice to bring the suits, they hamper Microsoft, force Microsoft to endure the costs both financial and in loss of technical focus, and avoid those costs themselves. In other words, they've found the business plan works better to have Washington supply the troops for this battle. We'll get to that business plan and the likely consequences in a moment; first some fundamentals.
The computer industry is capitalized in the hundreds of billions of dollars, more than the net worth of any other industry. Add up the Big Three automakers, the dwindling number of airline companies, and any other industry you care to name, and their combined values won't equal that of Silicon Valley. This capitalization is based on stocks selling at 50 and more times earnings. Microsoft is valued at 70 times earnings.
A moment's thought will tell you that a high price to earnings ratio means it will take a long time for you to collect in dividends what you paid for the stock. The only way you are going to sell that stock at a profit is for the company to keep growing; and if there's a strong hint that the growth can't be sustained, there's a likelihood that the stock will actually lose value, and you'll lose money.
Companies grow in two ways: acquisitions, and expanding actual production, sales, and shipments. They've got to do both.
The electronics industry has a special feature: Moore's Law. Computers get twice as fast for half as much money every eighteen months, and while that's an empirical phenomenon not a law of nature, you'd be foolish to bet against it. Which means that, although your computer will continue to work and do all you bought it to do, it will in a couple of years be obsolete compared to what's available to everyone else including your competitors. You have to buy another. Yet even if you do, that's not growth, merely sustaining what you have.
Software companies have one additional feature: they don't have many salable assets. If a software house goes broke, there's slim pickings on the bones: computers rapidly getting obsolete, some office furniture, and possibly an office building. The real assets have already circulated their resumes, and their willingness to bail may well have been the cause of the company's collapse.
So. To keep their employees, software companies have to pay them, either in real money, or, more likely, with stock options. Stock options are worthless unless the stock is going up. If the stock falls, the employees are in trouble. So are the lenders who put up the money for their overvalued houses. And so forth.
On the other hand, hardware houses are just as vulnerable, as Moore's Law inevitably makes their products obsolete, while strong competition makes computer hardware a fungible commodity. The best examples are memory and disk drives, but really there is little in a computer box that can justify much of a price markup.
And there we have Sun in particular. They sell high end expensive servers and work stations, and so far at a high margin. So does Silicon Graphics Incorporated, but the difference is that SGI has made a deal with Microsoft: they'll help Microsoft get a high end graphics capability it doesn't now have, and Microsoft will let them live. Sun has no such deal, and one doubts they could get one in the unlikely event they wanted one.
So here is Microsoft slowly but inexorably improving NT. For the moment, neither Windows nor NT is stable enough for mission critical applications. Without getting too technical the reason is that they are so constructed that badly behaved applications programs - programs written by third parties - can crash the system. In an extreme case, a junior engineer installs a game and the whole system crashes because the game was badly written. Windows, resting on DOS and having to deal with tons of old software, will never be stable enough. This isn't to say it isn't useful: you can make Windows run troublefree for years if you are careful what you put on it. The problem is that you have to really be careful.
NT on the other hand gets inexorably better, more robust, more able to survive bad applications - and NT runs on conventional Windows/Intel hardware. NT isn't yet a rival for the big servers that make up most Sun's revenue stream, but the day when it will be comes ever closer. Compaq and Intergraph already make NT boxes selling for under ten grand with capabilities you couldn't have bought from Sun for half a million a few years ago.
And that appears to be Sun's strategy. They can't sue Microsoft because they won't win. They can buy access to Government. They can use government to put what Stephen Potter's classic Gamesmanship called a primary hamper on Microsoft: a way to throw Microsoft off its game, interrupt its orderly business plan by interfering with the revenue stream from Windows 98, and suck up a lot of Microsoft resources from product development into legal defense. That will delay NT, and let them sell servers at high markup a little while longer.
As a cynical business strategy this is pretty good.
Unfortunately, as the market soars to giddy heights, 50, 60, 70 times earnings, everyone is nervous. No one wants to miss out on rising stock prices, but at the same time, everyone knows a crash is possible, and looks over his shoulder at all times: no one wants to be late in getting out of the market Comes The Day.
And that makes things a bit unstable, and demonstrating that even the giants can be brought under the control of a government that sells access to the Lincoln Bedroom and coffee in the Map Room at bargain prices cannot make the analysts more confident.
Moreover, Microsoft isn't going to lie down and take it forever. Gates is smart and while he is contemptuous of government and mostly wants to be left alone, he's quite capable of hiring his own experts and buying his own access: of diverting assets from research and production to public relations and political work.
And no matter who wins that struggle, we all lose. When government comes in, much of the dynamism goes out: look how long the telephone company, forbidden by government to incorporate computer products into the services it provided, was stagnant. If government accepts the new theory that anti-trust protects competitors rather than consumers, Microsoft will be forced to get government permission to incorporate new features into the operating system. So will everyone else, and our growth industry won't be growing so fast.
Those popping corks may be heralding an event the celebrators didn't contemplate: the beginning of the end for the long boom. Well, it was a great ride while it lasted; and Gates isn't dead yet. We do live in interesting times.
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Next Set of Intellectual Capital Columns: Balance of 1998