Research & Analysis for Business
and Investment Clients
An information fire hose, bits transmitted along optical fibers inform, rate, communicate, and automate. With only ones and zeros this digital vine instantly disseminates the fruits of our intellectual and un-intellectual labor.
What we see today is a modern day Steinbeck scenario soon to be composed on the Apple iPad®. Seeing current events through this light pipe, the world makes more sense.
Just as the tractor, an innovation, drove families to the promised-land (California) and altered farm-based business dramatically, the world-wide web (built largely in the promised Silicon Valley) has destroyed many "traditional" information-based business models.
With nearly cost-free intercontinental communications, jobs evaporate faster than your senator can say "job creation".
Just as the tractor increased agricultural efficiency, trading, building, and info sharing are more efficient on the digital vine.
Dramatic information sharing efficiencies increase information supply (in fact an information glut or super-abundance as The Economist termed it). In turn we see an explosion in trade (securities more than hard assets), but also production improvements.
It is difficult to build trillion dollar CDS/CDO markets without these fibers of wrath. How else can you spook an international herd of hedge hogs faster than you can say "execute my stop loss order"?
Yet who today complains about the "evil tractor"? Not a word is written about the workhorse in comparison to the gigabytes dedicated to the tragic demise of traditional print media.
Traditional printers, ink producers, advertisers, and authors must all learn to drink from the digital fire hose. We anticipate a content war is just beginning to unfold.
Distribution efficiencies are not the only improvement. The internet also altered coordination problems (intelligent information sharing). Craigslist, Zip Car, Twitter, and Facebook often make information sharing more efficient and relevant. As a result, manufacturers and traditional media company business models must evolve.
Novel business models exist and evolve. As discussed by Surowiecki & Howe, crowds can self-assemble to generate complex work products (with careful business model design).
Companies offering free tools leveraging user time to create a product (e.g., Facebook) grow at extraordinary rates (presumably the free model is ad driven).
While far from perfect, the fibers of wrath offer opportunity to many millions—stiff competition.
Companies generating hard physical assets, with tightly controlled processes and steep reliability demands, must be careful when relying on crowds to generate the work product.
While processes must remain tightly controlled, new twists on standard models are emerging. Success stories include: Innocentive, Mechanical Turk, & Your Encore.
Internet crowds will not self-assemble to produce microprocessors, but hard asset producers can rely on information tools to drive down production costs, access knowledge faster, and distribute knowledge goods to the right employees quickly. Expect the innovation pace to increase.
Do divisions in your organization communicate? Many divisions might well be distinct businesses if no communication occurs. To this end, companies, hesitant to share proprietary information publicly, are utilizing controlled internal social networks and the private cloud.
Undoubtedly, digital vines will generate much wrath. Coordinating political, legal, technical, and human interests is always messy.
However, Onyx anticipates many a high school student will absorb future content, lamenting technological change, on an interface we can't imagine, displaying an image of the Apple iPad under the Historical Notes section (i.e., we always fear the unknown).
Innovation is never smooth.
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