{"id":77,"date":"2018-06-14T19:04:27","date_gmt":"2018-06-14T19:04:27","guid":{"rendered":"https:\/\/pressbooks.ccconline.org\/bus3060\/chapter\/ch05\/"},"modified":"2026-02-13T20:16:29","modified_gmt":"2026-02-13T20:16:29","slug":"ch05","status":"publish","type":"chapter","link":"https:\/\/pressbooks.ccconline.org\/bus3060\/chapter\/ch05\/","title":{"raw":"5.1 Introduction","rendered":"5.1 Introduction"},"content":{"raw":"
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Learning Objectives<\/span><\/p>\r\n\r\n<\/header>\r\n

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After studying this section you should be able to do the following:<\/p>\r\n\r\n

    \r\n \t
  1. Define Moore\u2019s Law and understand the approximate rate of advancement for other technologies, including magnetic storage (disk drives) and telecommunications (fiber-optic transmission).<\/li>\r\n \t
  2. Understand how the price elasticity associated with faster and cheaper technologies opens new markets, creates new opportunities for firms and society, and can catalyze industry disruption.<\/li>\r\n \t
  3. Recognize and define various terms for measuring data capacity.<\/li>\r\n \t
  4. Consider the managerial implication of faster and cheaper computing on areas such as strategic planning, inventory, and accounting.<\/li>\r\n<\/ol>\r\n<\/div>\r\n<\/div>\r\n \r\n\r\n<\/div>\r\n

    Faster and cheaper\u2014those two words have driven the computer industry for decades, and the rest of the economy has been along for the ride. Today it\u2019s tough to imagine a single industry not impacted by more powerful, less expensive computing. Faster and cheaper puts mobile phones in the hands of peasant farmers, puts a free video game in your Happy Meal, and drives the drug discovery that may very well extend your life.<\/p>\r\n\r\n

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    Some Definitions<\/h2>\r\n

    This phenomenon of \u201cfaster, cheaper\u201d computing is often referred to as Moore\u2019s Law<\/a><\/span>, after Intel cofounder, Gordon Moore. Moore didn\u2019t show up one day, stance wide, hands on hips, and declare \u201cbehold my law,\u201d but he did write a four-page paper for Electronics Magazine<\/em> in which he described how the process of chip making enabled more powerful chips to be manufactured at cheaper prices (Moore, 1965).<\/p>\r\n

    Moore\u2019s friend, legendary chip entrepreneur and CalTech professor Carver Mead, later coined the \u201cMoore\u2019s Law\u201d moniker. That name sounded snappy, plus as one of the founders of Intel, Moore had enough geek cred for the name to stick. Moore\u2019s original paper offered language only a chip designer would love, so we\u2019ll rely on the more popular definition: chip performance per dollar doubles every eighteen months<\/em> (Moore\u2019s original paper assumed two years, but many sources today refer to the eighteen<\/em>-month figure, so we\u2019ll stick with that).<\/p>\r\n

    Moore\u2019s Law applies to chips\u2014broadly speaking, to processors, or the electronics stuff that\u2019s made out of silicon1. The microprocessor<\/a> is the brain of a computing device. It\u2019s the part of the computer that executes the instructions of a computer program, allowing it to run a Web browser, word processor, video game, or virus. For processors, Moore\u2019s Law means that next generation chips should be twice as fast in eighteen months, but cost the same as today\u2019s models (or from another perspective, in a year and a half, chips that are same speed as today\u2019s models should be available for half the price).<\/p>\r\n

    Random-access memory (RAM)<\/a><\/span> is chip-based memory. The RAM inside your personal computer is volatile memory<\/a><\/span>, meaning that when the power goes out, all is lost that wasn\u2019t saved to nonvolatile memory<\/a><\/span> (i.e., a more permanent storage media like a hard disk or flash memory). Think of RAM as temporary storage that provides fast access for executing computer programs and files. When you \u201cload\u201d or \u201claunch\u201d a program, it usually moves from your hard drive to those RAM chips, where it can be more quickly executed by the processor.<\/p>\r\n

    Cameras, MP3 players, USB drives, and mobile phones often use flash memory<\/a><\/span> (sometimes called flash RAM<\/em>). It\u2019s not as fast as the RAM used in most traditional PCs, but holds data even when the power is off (so flash memory is also nonvolatile memory). You can think of flash memory as the chip-based equivalent of a hard drive. In fact, flash memory prices are falling so rapidly that several manufactures including Apple and the One Laptop per Child initiative (see the \u201cTech for the Poor\u201d sidebar later in this section) have begun offering chip-based, nonvolatile memory as an alternative to laptop hard drives. The big advantage? Chips are solid state electronics<\/a><\/span> (meaning no moving parts), so they\u2019re less likely to fail, and they draw less power. The solid state advantage also means that chip-based MP3 players like the iPod nano make better jogging companions than hard drive players, which can skip if jostled. For RAM chips and flash memory, Moore\u2019s Law means that in eighteen<\/em> months you\u2019ll pay the same price as today for twice as much storage.<\/p>\r\n

    Computer chips are sometimes also referred to as semiconductors<\/a><\/span> (a substance such as silicon dioxide used inside most computer chips that is capable of enabling as well as inhibiting the flow of electricity). So if someone refers to the semiconductor industry<\/em>, they\u2019re talking about the chip business2<\/sup>.<\/p>\r\n

    Strictly speaking, Moore\u2019s Law does not apply to other technology components. But other computing components are also seeing their price versus performance curves skyrocket exponentially. Data storage doubles every twelve months. Networking speed is on a tear, too. With an equipment change at the ends of the cables, the amount of data that can be squirted over an optical fiber line<\/a><\/span> can double every nine months3<\/sup>. These numbers should be taken as rough approximations and shouldn\u2019t be expected to be strictly precise over time. However, they are useful as rough guides regarding future computing price\/performance trends. Despite any fluctuation, it\u2019s clear that the price\/performance curve for many technologies is exponential, offering astonishing improvement over time.<\/p>\r\n\r\n

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    Figure 5.1<\/span> Advancing Rates of Technology (Silicon, Storage, Telecom)<\/p>\r\n

    \r\n\"Advancing\r\n<\/a><\/p>\r\n\r\n

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    Adopted from Shareholder Presentation by Jeff Bezos, Amazon.com, 2006.<\/p>\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n

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    Get Out Your Crystal Ball<\/h2>\r\n

    Faster and cheaper makes possible the once impossible. As a manager, your job will be about predicting the future. First, consider how the economics of Moore\u2019s Law opens new markets. When technology gets cheap, price elasticity<\/a><\/span> kicks in. Tech products are highly price elastic<\/em>, meaning consumers buy more products as they become cheaper4<\/sup>. And it\u2019s not just that existing customers load up on more tech; entire new markets<\/em> open up as firms find new uses for these new chips.<\/p>\r\n

    Just look at the five waves of computing<\/em> we\u2019ve seen over the previous five decades (Copeland, 2005). In the first wave<\/em> in the 1960s, computing was limited to large, room-sized mainframe computers that only governments and big corporations could afford. Moore\u2019s Law kicked in during the 1970s for the second wave<\/em>, and minicomputers were a hit. These were refrigerator-sized computers that were as speedy as or speedier than the prior generation of mainframes, yet were affordable by work groups, factories, and smaller organizations. The 1980s brought wave three<\/em> in the form of PCs, and by the end of the decade nearly every white-collar worker in America had a fast and cheap computer on their desk. In the 1990s wave four<\/em> came in the form of Internet computing\u2014cheap servers and networks made it possible to scatter data around the world, and with more power, personal computers displayed graphical interfaces that replaced complex commands with easy-to-understand menus accessible by a mouse click. At the close of the last century, the majority of the population in many developed countries had home PCs, as did most libraries and schools.<\/p>\r\n

    Now we\u2019re in wave five<\/em>, where computers are so fast and so inexpensive that they have become ubiquitous\u2014woven into products in ways few imagined years before. Silicon is everywhere! It\u2019s in the throwaway radio frequency identification (RFID) tags that track your luggage at the airport. It provides the smarts in the world\u2019s billion-plus mobile phones. It\u2019s the brains inside robot vacuum cleaners, next generation Legos, and the table lamps that change color when the stock market moves up or down. These digital shifts can rearrange entire industries. Consider that today the firm that sells more cameras than any other is Nokia, a firm that offers increasingly sophisticated chip-based digital cameras as a giveaway as part of its primary product, mobile phones. This shift has occurred with such sweeping impact that former photography giants Pentax, Konica, and Minolta have all exited the camera business.<\/p>\r\n\r\n

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    Ambient Devices and the Fifth Wave<\/h4>\r\n

    Carl Yankowski almost never gets caught in the rain without his umbrella. That\u2019s because Yankowski\u2019s umbrella regularly and wirelessly checks weather reports on its own. If the umbrella gets word it will rain in the next few hours, the handle blinks with increasing urgency, warning its owner with a signal that seems to declare, \u201cYou will soon require my services.\u201d Yankowski is former CEO of \u201cfifth wave\u201d firm Ambient Devices, a Massachusetts start-up that\u2019s embedding computing and communications technology into everyday devices in an attempt to make them \u201csmarter\u201d and more useful (the weather-sensing umbrella was developed while he helmed the firm).<\/p>\r\n

    Ambient\u2019s ability to pull off this little miracle is evidence of how quickly innovative thinkers are able to take advantage of new opportunities and pioneer new markets enabled by Moore\u2019s Law. The firm\u2019s first product, the Orb, is a lamp that can be set up to change color in real time in reaction to factors such as the performance of your stock portfolio or the intensity of the local pollen count. In just six months, the ten refugees from MIT\u2019s Media Lab that founded Ambient Devices took the idea for the Orb, designed the device and its software, licensed wireless spectrum from a pager firm that had both excess capacity and a footprint to cover over 90 percent of the United States, arranged for manufacturing, and began selling the gizmo through Brookstone and Nieman Marcus Copeland, 2005; Miller, 2003).<\/p>\r\n

    Ambient has since expanded the product line to several low-cost appliances designed to provide information at a glance. These include the Ambient Umbrella, as well as useful little devices that grab and display data ranging from sports scores to fluctuating energy prices (so you\u2019ll put off running the dishwasher until evening during a daytime price spike). The firm even partnered with LG on a refrigerator that can remind you of an upcoming anniversary as you reach for the milk.<\/p>\r\n\r\n<\/div>\r\n \r\n

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    Figure 5.2<\/span><\/p>\r\n

    \r\n\"Products\r\n<\/a><\/p>\r\n

    Products developed by \u201cfifth wave\u201d firm Ambient Devices include the orb lamp and the weather-reading Ambient Umbrella.<\/p>\r\n\r\n

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    Peter Morevill \u2013 Information at a glance from Ambient Devices<\/a> \u2013 CC BY 2.0.<\/p>\r\n\r\n<\/div>\r\n<\/div>\r\n \r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n

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    Moore\u2019s Law inside Your Medicine Cabinet<\/h4>\r\n

    Moore\u2019s Law is about to hit your medicine cabinet. The GlowCap from Vitality, Inc., is a \u201csmart\u201d pill bottle that will flash when you\u2019re supposed to take your medicine. It will play a little tune if you\u2019re an hour late for your dose and will also squirt a signal to a night-light that flashes as a reminder (in case you\u2019re out of view of the cap). GlowCaps can also be set to call or send a text if you haven\u2019t responded past a set period of time. And the device will send a report to you, your doc, or whomever else you approve. The GlowCap can even alert your pharmacy when it\u2019s time for refills. Amazon sells the device for $99, but we know how Moore\u2019s Law works\u2014it\u2019ll soon likely be free. The business case for that? The World Health Organization estimates drug adherence at just 50 percent, and analysts estimate that up to $290 billion in increased medical costs are due to patients missing their meds. Vitality CEO David Rose (who incidentally also cofounded Ambient Devices) recently cited a test in which GlowCap users reported a 98 percent medication adherence rate (Rose, 2010).<\/p>\r\n\r\n

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    Figure 5.3<\/span><\/p>\r\n

    \r\n\"A\r\n<\/a><\/p>\r\n

    The GlowCap from Vitality, Inc., will flash, beep, call, and text you if you\u2019ve skipped your meds. It can also send reports to you, your doctor, and your loved ones and even notify your pharmacy when it\u2019s time for a refill.<\/p>\r\n\r\n

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    Juhan Sonin \u2013 Glowcap<\/a> \u2013 CC BY 2.0.<\/p>\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n

    And there might also be a chip inside the pills, too! Proteus, a Novartis-backed venture, has developed a sensor made of food and vitamin materials that can be swallowed in medicine. The sensor is activated and powered by the body\u2019s digestive acids (think of your stomach as a battery). Once inside you, the chip sends out a signal with vitals such as heart rate, body angle, temperature, sleep, and more. A waterproof skin patch picks up the signal and can wirelessly relay the pill\u2019s findings when the patient walks within twenty feet of their phone. Proteus will then compile a report from the data and send it to their mobile device or e-mail account. The gizmo\u2019s already in clinical trials for heart disease, hypertension, and tuberculosis and for monitoring psychiatric illnesses (Landau, 2010).<\/p>\r\n\r\n<\/div>\r\n \r\n\r\n<\/div>\r\n

    One of the most agile surfers of this fifth wave<\/em> is Apple, Inc.\u2014a firm with a product line that is now so broad that in January 2007, it dropped the word \u201cComputer\u201d from its name. Apple\u2019s breakout resurgence owes a great deal to the iPod. At launch, the original iPod sported a 5 GB hard drive that Steve Jobs declared would \u201cput 1,000 songs in your pocket.\u201d Cost? $399. Less than six years later, Apple\u2019s highest-capacity iPod sold for fifty dollars less than the original, yet held forty times<\/em> the songs. By that time the firm had sold over one hundred fifty million iPods\u2014an adoption rate faster than the original Sony Walkman. Apple\u2019s high-end models have morphed into Internet browsing devices capable of showing maps, playing videos, and gulping down songs from Starbucks\u2019 Wi-Fi while waiting in line for a latte.<\/p>\r\n

    The original iPod has also become the jumping-off point for new business lines including the iPhone, Apple TV, iPad, and iTunes. As an online store, iTunes is always open. ITunes regularly sells tens of millions of songs on Christmas Day alone, a date when virtually all of its offline competition is closed for the holiday. In a short five years after its introduction, iTunes has sold over 4 billion songs and has vaulted past retail giants Wal-Mart, Best Buy, and Target to become the number one music retailer in the world. Today\u2019s iTunes is a digital media powerhouse, selling movies, TV shows, games, and other applications. And with podcasting, Apple\u2019s iTunes University even lets students at participating schools put their professors\u2019 lectures on their gym playlist for free. Surfing the fifth wave has increased the value of Apple stock sixteenfold six years after the iPod\u2019s launch. Ride these waves to riches, but miss the power and promise of Moore\u2019s Law and you risk getting swept away in its riptide. Apple\u2019s rise occurred while Sony, a firm once synonymous with portable music, sat on the sidelines unwilling to get on the surfboard. Sony\u2019s stock stagnated, barely moving in six years. The firm has laid off thousands of workers while ceding leadership in digital music (and video) to Apple.<\/p>\r\n\r\n

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    Table 5.1<\/span> Top U.S. Music Retailers<\/p>\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n
    1992<\/th>\r\n2005<\/th>\r\n2006<\/th>\r\n2008<\/th>\r\n<\/tr>\r\n<\/thead>\r\n
    1. Musicland<\/td>\r\n1. Wal-Mart<\/td>\r\n1. Wal-Mart<\/td>\r\n1. iTunes<\/strong><\/td>\r\n<\/tr>\r\n
    2. The Handleman<\/td>\r\n2. Best Buy<\/td>\r\n2. Best Buy<\/td>\r\n2. Wal-Mart<\/td>\r\n<\/tr>\r\n
    3. Tower Records<\/td>\r\n3. Target<\/td>\r\n3. Target<\/td>\r\n3. Best Buy<\/td>\r\n<\/tr>\r\n
    4. Trans World Music\r\n

    <\/p>\r\n<\/td>\r\n

    		\u2026\r\n

    7. iTunes<\/strong><\/p>\r\n<\/td>\r\n

    		4. iTunes<\/strong>, Amazon tie\r\n

    <\/p>\r\n<\/td>\r\n

    		4. Amazon, Target tie\r\n

    <\/p>\r\n<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n

    Moore\u2019s Law restructures industries. The firms that dominated music sales when you were born are now bankrupt, while one that had never sold a physical music CD now sells more than anyone else.<\/th>\r\n<\/tr>\r\n<\/tfoot>\r\n<\/table>\r\n
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    Source: Michelle Quinn and Dawn C. Chmielewski, \u201cTop Music Seller\u2019s Store Has No Door,\u201d Los Angeles Times<\/em>, April 4, 2008.<\/p>\r\n\r\n<\/div>\r\n<\/div>\r\n

    While the change in hard drive prices isn\u2019t directly part of Moore\u2019s Law (hard drives are magnetic storage, not silicon chips), as noted earlier, the faster and cheaper phenomenon applies to storage, too. Look to Amazon as another example of jumping onto a once-impossible opportunity courtesy of the price\/performance curve. When Amazon.com was founded in 1995, the largest corporate database was one terabyte, or TB (see Note 5.14 \u201cBits and Bytes\u201d<\/a> below) in size. In 2003, the firm offered its \u201cSearch Inside the Book\u201d feature, digitizing the images and text from thousands of books in its catalog. \u201cSearch Inside the Book\u201d lets customers peer into a book\u2019s contents in a way that\u2019s both faster and more accurate than browsing a physical bookstore. Most importantly for Amazon and its suppliers, titles featured in \u201cSearch Inside the Book\u201d enjoyed a 7 percent sales increase over non-searchable books. When \u201cSearch Inside the Book\u201d launched, the database to support this effort was 20 TB in size. In just eight years, the firm found that it made good business sense to launch an effort that was a full twenty times<\/em> larger than anything used by any<\/em> firm less than a decade earlier. And of course, all of these capacities seem laughably small by today\u2019s standards. (See Chapter 11 \u201cThe Data Asset: Databases, Business Intelligence, and Competitive Advantage<\/strong>\u201d.) For Amazon, the impossible had not just become possible; it became good business. By 2009, digital books weren\u2019t just for search; they were for sale. Amazon\u2019s Kindle reader (a Moore\u2019s Law marvel sporting a microprocessor and flash storage) became the firm\u2019s top-selling product in terms of both unit sales and dollar volume. The real business opportunity for Amazon isn\u2019t Kindle as a consumer electronics device but as an ever-present, never-closing store, which also provides the firm with a migration path from atoms to bits. (For more on that topic, see Chapter 4 \u201cNetflix: The Making of an E-commerce Giant and the Uncertain Future of Atoms to Bits<\/strong>\u201d.) By 2009, Amazon (by then the largest book retailer in North America) reported, \u201cFor books that are available on the Kindle, sales are already 35 percent of the same books in print\u201d (Schonfeld, 2009). Apple\u2019s 2010 introduction of the iPad, complete with an iBook store, shows how Moore\u2019s Law rewrites the boundaries of competition\u2014bringing a firm that started as a computer retailer and a firm that started as an online bookstore in direct competition with one another.<\/p>\r\n\r\n

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    Bits and Bytes<\/h4>\r\n

    Computers express data as bits that are either one or zero. Eight bits form a byte (think of a byte as being a single character you can type from a keyboard). A kilobyte refers to roughly a thousand bytes, or a thousand characters, megabyte = 1 million, gigabyte = 1 billion, terabyte = 1 trillion, petabyte = 1 quadrillion, and exabyte = 1 quintillion bytes.<\/p>\r\n

    While storage is most often listed in bytes, telecommunication capacity (bandwidth) is often listed in bits per second (bps). The same prefixes apply (Kbps = kilobits, or one thousand bits, per second, Mbps = megabits per second, Gbps = gigabits per second, and Tbps = terabits per second).<\/p>\r\n

    These are managerial definitions, but technically, a kilobyte is 210<\/sup> or 1,024 bytes, mega = 220<\/sup>, giga = 230<\/sup>, tera = 240<\/sup>, peta = 250<\/sup>, and exa = 260<\/sup>. To get a sense for how much data we\u2019re talking about, see the table below Schuman, 2004; Huggins, 2008).<\/p>\r\n\r\n

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    Table 5.2<\/span> Bytes Defined<\/p>\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n\r\n
    <\/th>\r\nManagerial Definition<\/th>\r\nExact Amount<\/th>\r\nTo Put It in Perspective<\/th>\r\n<\/tr>\r\n<\/thead>\r\n
    1 Byte<\/strong><\/td>\r\nOne keyboard character<\/td>\r\n8 bits<\/td>\r\n1 letter or number = 1 byte<\/td>\r\n<\/tr>\r\n
    1 Kilobyte (KB)<\/strong><\/td>\r\nOne thousand bytes<\/td>\r\n210<\/sup> bytes<\/td>\r\n1 typewritten page = 2 KB<\/td>\r\n<\/tr>\r\n
    1 digital book (Kindle) = approx. 500\u2013800 KB<\/td>\r\n<\/tr>\r\n
    1 Megabyte (MB)<\/strong><\/td>\r\nOne million bytes<\/td>\r\n220<\/sup> bytes<\/td>\r\n1 digital photo (7 megapixels) = 1.3 MB<\/td>\r\n<\/tr>\r\n
    1 MP3 song = approx. 3 MB<\/td>\r\n<\/tr>\r\n
    1 CD = approx. 700 MB<\/td>\r\n<\/tr>\r\n
    1 Gigabyte (GB)<\/strong><\/td>\r\nOne billion bytes<\/td>\r\n230<\/sup> bytes<\/td>\r\n1 DVD movie = approx. 4.7 GB<\/td>\r\n<\/tr>\r\n
    1 Blu-ray movie = approx. 25 GB<\/td>\r\n<\/tr>\r\n
    1 Terabyte (TB)<\/strong><\/td>\r\nOne trillion bytes<\/td>\r\n240<\/sup> bytes<\/td>\r\nPrinted collection of the Library of Congress = 20 TB<\/td>\r\n<\/tr>\r\n
    1 Petabyte (PB)<\/strong><\/td>\r\nOne quadrillion bytes<\/td>\r\n250<\/sup> bytes<\/td>\r\nWal-Mart data warehouse (2008) = 2.5 PB<\/td>\r\n<\/tr>\r\n
    1 Exabyte (EB)<\/strong><\/td>\r\nOne quintillion bytes<\/td>\r\n260<\/sup> bytes<\/td>\r\n<\/td>\r\n<\/tr>\r\n
    1 Zettabyte (ZB)<\/strong><\/td>\r\nOne sextillion bytes<\/td>\r\n270<\/sup> bytes<\/td>\r\nAmount of data consumed by U.S. households in 2008 = 3.6 ZB<\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n<\/div>\r\n<\/div>\r\n \r\n\r\n<\/div>\r\n

    Here\u2019s another key implication\u2014if you are producing products with a significant chip-based component, the chips inside that product rapidly fall in value. That\u2019s great when it makes your product cheaper and opens up new markets for your firm, but it can be deadly if you overproduce and have excess inventory sitting on shelves for long periods of time. Dell claims its inventory depreciates as much as a single percentage point in value each week (Breen, 2004). That\u2019s a big incentive to carry as little inventory as possible, and to unload it, fast!<\/p>\r\n

    While the strategic side of tech may be the most glamorous, Moore\u2019s Law impacts mundane management tasks, as well. From an accounting and budgeting perspective, as a manager you\u2019ll need to consider a number of questions: How long will your computing equipment remain useful? If you keep upgrading computing and software, what does this mean for your capital expense budget? Your training budget? Your ability to make well-reasoned predictions regarding tech\u2019s direction will be key to answering these questions.<\/p>\r\n\r\n

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    Tech for the Poor<\/h4>\r\n

    Nicholas Negroponte, the former head of MIT\u2019s Media Lab, is on a mission. His OLPC (One Laptop per Child) project aims to deliver education to children in the world\u2019s poorest communities via ultralow-cost computing devices that the firm has developed. The first offering, the XO laptop, costs roughly $175, although a sub-$100 tablet is in the works. The XO sports a rubberized keyboard and entirely solid-state design (flash RAM rather than hard drive) that helps make the machine durable. The XO\u2019s ultrabright screen is readable in daylight and can be flipped to convert into an e-book reader. And a host of open source software and wiki tools for courseware development all aim to keep the costs low. Mesh networking allows laptops within a hundred feet or so to communicate with each other, relaying a single Internet connection for use by all. And since the XO is targeted at the world\u2019s poorest kids in communities where power generation is unreliable or nonexistent, several battery-charging power generation schemes are offered, including a hand crank and foldout flexible solar panels. The OLPC Foundation delivered over 1.6 million laptops to children in twenty-four countries (Lawton, 2009). The XO is a product made possible by the rapidly falling price of computing.<\/p>\r\n\r\n

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    Figure 5.4<\/span> The XO PC<\/p>\r\n

    \r\n\"The\r\n<\/a><\/p>\r\n\r\n

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    Roberto Greco \u2013 OLPC XO: Background and Review<\/a> \u2013 CC BY-NC-SA 2.0.<\/p>\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n

    While the success of the OLPC effort will reveal itself over time, another tech product containing a microprocessor is already transforming the lives of some of the world\u2019s most desperate poor\u2014the cell phone. There are three billion people worldwide that don\u2019t yet have a phone, but they will, soon. In the ultimate play of Moore\u2019s Law opening up new markets, mobiles from Vodafone and Indian telecom provider Spice sell for $25 or less. While it took roughly twenty years to sell a billion mobile phones worldwide, the second billion sold in four years, and the third billion took just two years. Today, some 80 percent of the world\u2019s population lives within cellular network range (double the 2000 level), and the vast majority of mobile subscriptions are in developing countries (Corbett, 2008).<\/p>\r\n

    Why such demand? Mobiles change lives for the better. According to Columbia economist Jeffrey Sachs, \u201cThe cell phone is the single most transformative technology for world economic development\u201d (Ewing, 2007). Think about the farmer who can verify prices and locate buyers before harvesting and transporting perishable crops to market; the laborer who was mostly unemployed but with a mobile is now reachable by those who have day-to-day work; the mother who can find out if a doctor is in and has medicine before taking off work to make the costly trek to a remote clinic with her sick child; or the immigrant laborer serving as a housekeeper who was \u201cmore or less an indentured servant until she got a cell phone\u201d enabling new customers to call and book her services (Corbett, 2008).<\/p>\r\n

    As an example of impact, look to poor fishermen in the Indian state of Kerala. By using mobile phones to find the best local marketplace prices for sardines, these fishermen were able to increase their profits by an average of 8 percent even though consumer prices for fish dropped<\/em> 4 percent. The trends benefiting both buyer and seller occurred because the fishermen no longer had to throw away unsold catch previously lost by sailing into a port after all the buyers had left. The phone-equipped fleet now see more consistent pricing, spreading their catch more evenly whereas previous fisherman often inefficiently clustered in one market, overserving one population while underserving another. A London Business School study found that for every ten mobile phones per one hundred people, a country\u2019s GDP bumps up 0.5 percent (Ewing, 2007).<\/p>\r\n

    Bangladeshi economist Mohammed Yunus won the Nobel Peace Prize based on his work in the microfinance movement, an effort that provides very small loans to the world\u2019s poorest entrepreneurs. Microfinance loans grew the market for Grameen Phone Ltd., a firm that has empowered over two hundred and fifty thousand Bangladeshi \u201cphone ladies\u201d to start businesses that helped their communities become more productive. Phone ladies buy a phone and special antenna on microcredit for about $150 each. These special long-life battery phones allow them to become a sort of village operator, charging a small commission for sending and receiving calls. Through phone ladies, the power of the mobile reaches even those too poor to afford buying one outright. Grameen Phone now has annual revenues of over $1 billion and is Bangladesh\u2019s largest telecom provider.<\/p>\r\n

    In another ingenious scheme, phone minutes become a proxy for currency. The New York Times<\/em> reports that a person \u201cworking in Kampala, for instance, who wishes to send the equivalent of five dollars back to his mother in a village will buy a five-dollar prepaid airtime card, but rather than entering the code into his own phone, he will call the village phone operator and read the code to her. [The operator] then uses the airtime for her phone and completes the transaction by giving the man\u2019s mother the money, minus a small commission\u201d (Corbett, 2008).<\/p>\r\n

    South Africa\u2019s WIZZIT and GCASH in the Philippines allow customers to use mobile phones to store cash credits sent from another phone or purchased through a post office or kiosk operator. When phones can be used as currency for purchases or payments, who needs Visa? Vodafone\u2019s Kenyan-based M-PESA mobile banking program landed 200,000 new customers in a month\u2014they\u2019d expected it would take a year to hit that mark. With 1.6 million customers by that time, the service is spreading throughout Africa. The \u201cmobile phone as bank\u201d may bring banking to a billion unserved customers in a few years.<\/p>\r\n\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n<\/div>\r\n<\/div>","rendered":"

    \n
    \n
    <\/div>\n<\/div>\n
    \n
    \n
    \n
    \n

    Learning Objectives<\/span><\/p>\n<\/header>\n

    \n

    After studying this section you should be able to do the following:<\/p>\n

      \n
    1. Define Moore\u2019s Law and understand the approximate rate of advancement for other technologies, including magnetic storage (disk drives) and telecommunications (fiber-optic transmission).<\/li>\n
    2. Understand how the price elasticity associated with faster and cheaper technologies opens new markets, creates new opportunities for firms and society, and can catalyze industry disruption.<\/li>\n
    3. Recognize and define various terms for measuring data capacity.<\/li>\n
    4. Consider the managerial implication of faster and cheaper computing on areas such as strategic planning, inventory, and accounting.<\/li>\n<\/ol>\n<\/div>\n<\/div>\n

       <\/p>\n<\/div>\n

      Faster and cheaper\u2014those two words have driven the computer industry for decades, and the rest of the economy has been along for the ride. Today it\u2019s tough to imagine a single industry not impacted by more powerful, less expensive computing. Faster and cheaper puts mobile phones in the hands of peasant farmers, puts a free video game in your Happy Meal, and drives the drug discovery that may very well extend your life.<\/p>\n

      \n

      Some Definitions<\/h2>\n

      This phenomenon of \u201cfaster, cheaper\u201d computing is often referred to as Moore\u2019s Law<\/a><\/span>, after Intel cofounder, Gordon Moore. Moore didn\u2019t show up one day, stance wide, hands on hips, and declare \u201cbehold my law,\u201d but he did write a four-page paper for Electronics Magazine<\/em> in which he described how the process of chip making enabled more powerful chips to be manufactured at cheaper prices (Moore, 1965).<\/p>\n

      Moore\u2019s friend, legendary chip entrepreneur and CalTech professor Carver Mead, later coined the \u201cMoore\u2019s Law\u201d moniker. That name sounded snappy, plus as one of the founders of Intel, Moore had enough geek cred for the name to stick. Moore\u2019s original paper offered language only a chip designer would love, so we\u2019ll rely on the more popular definition: chip performance per dollar doubles every eighteen months<\/em> (Moore\u2019s original paper assumed two years, but many sources today refer to the eighteen<\/em>-month figure, so we\u2019ll stick with that).<\/p>\n

      Moore\u2019s Law applies to chips\u2014broadly speaking, to processors, or the electronics stuff that\u2019s made out of silicon1. The microprocessor<\/a> is the brain of a computing device. It\u2019s the part of the computer that executes the instructions of a computer program, allowing it to run a Web browser, word processor, video game, or virus. For processors, Moore\u2019s Law means that next generation chips should be twice as fast in eighteen months, but cost the same as today\u2019s models (or from another perspective, in a year and a half, chips that are same speed as today\u2019s models should be available for half the price).<\/p>\n

      Random-access memory (RAM)<\/a><\/span> is chip-based memory. The RAM inside your personal computer is volatile memory<\/a><\/span>, meaning that when the power goes out, all is lost that wasn\u2019t saved to nonvolatile memory<\/a><\/span> (i.e., a more permanent storage media like a hard disk or flash memory). Think of RAM as temporary storage that provides fast access for executing computer programs and files. When you \u201cload\u201d or \u201claunch\u201d a program, it usually moves from your hard drive to those RAM chips, where it can be more quickly executed by the processor.<\/p>\n

      Cameras, MP3 players, USB drives, and mobile phones often use flash memory<\/a><\/span> (sometimes called flash RAM<\/em>). It\u2019s not as fast as the RAM used in most traditional PCs, but holds data even when the power is off (so flash memory is also nonvolatile memory). You can think of flash memory as the chip-based equivalent of a hard drive. In fact, flash memory prices are falling so rapidly that several manufactures including Apple and the One Laptop per Child initiative (see the \u201cTech for the Poor\u201d sidebar later in this section) have begun offering chip-based, nonvolatile memory as an alternative to laptop hard drives. The big advantage? Chips are solid state electronics<\/a><\/span> (meaning no moving parts), so they\u2019re less likely to fail, and they draw less power. The solid state advantage also means that chip-based MP3 players like the iPod nano make better jogging companions than hard drive players, which can skip if jostled. For RAM chips and flash memory, Moore\u2019s Law means that in eighteen<\/em> months you\u2019ll pay the same price as today for twice as much storage.<\/p>\n

      Computer chips are sometimes also referred to as semiconductors<\/a><\/span> (a substance such as silicon dioxide used inside most computer chips that is capable of enabling as well as inhibiting the flow of electricity). So if someone refers to the semiconductor industry<\/em>, they\u2019re talking about the chip business2<\/sup>.<\/p>\n

      Strictly speaking, Moore\u2019s Law does not apply to other technology components. But other computing components are also seeing their price versus performance curves skyrocket exponentially. Data storage doubles every twelve months. Networking speed is on a tear, too. With an equipment change at the ends of the cables, the amount of data that can be squirted over an optical fiber line<\/a><\/span> can double every nine months3<\/sup>. These numbers should be taken as rough approximations and shouldn\u2019t be expected to be strictly precise over time. However, they are useful as rough guides regarding future computing price\/performance trends. Despite any fluctuation, it\u2019s clear that the price\/performance curve for many technologies is exponential, offering astonishing improvement over time.<\/p>\n

      \n

      Figure 5.1<\/span> Advancing Rates of Technology (Silicon, Storage, Telecom)<\/p>\n


      \n\"Advancing
      \n<\/a><\/p>\n

      \n

      Adopted from Shareholder Presentation by Jeff Bezos, Amazon.com, 2006.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

      \n

      Get Out Your Crystal Ball<\/h2>\n

      Faster and cheaper makes possible the once impossible. As a manager, your job will be about predicting the future. First, consider how the economics of Moore\u2019s Law opens new markets. When technology gets cheap, price elasticity<\/a><\/span> kicks in. Tech products are highly price elastic<\/em>, meaning consumers buy more products as they become cheaper4<\/sup>. And it\u2019s not just that existing customers load up on more tech; entire new markets<\/em> open up as firms find new uses for these new chips.<\/p>\n

      Just look at the five waves of computing<\/em> we\u2019ve seen over the previous five decades (Copeland, 2005). In the first wave<\/em> in the 1960s, computing was limited to large, room-sized mainframe computers that only governments and big corporations could afford. Moore\u2019s Law kicked in during the 1970s for the second wave<\/em>, and minicomputers were a hit. These were refrigerator-sized computers that were as speedy as or speedier than the prior generation of mainframes, yet were affordable by work groups, factories, and smaller organizations. The 1980s brought wave three<\/em> in the form of PCs, and by the end of the decade nearly every white-collar worker in America had a fast and cheap computer on their desk. In the 1990s wave four<\/em> came in the form of Internet computing\u2014cheap servers and networks made it possible to scatter data around the world, and with more power, personal computers displayed graphical interfaces that replaced complex commands with easy-to-understand menus accessible by a mouse click. At the close of the last century, the majority of the population in many developed countries had home PCs, as did most libraries and schools.<\/p>\n

      Now we\u2019re in wave five<\/em>, where computers are so fast and so inexpensive that they have become ubiquitous\u2014woven into products in ways few imagined years before. Silicon is everywhere! It\u2019s in the throwaway radio frequency identification (RFID) tags that track your luggage at the airport. It provides the smarts in the world\u2019s billion-plus mobile phones. It\u2019s the brains inside robot vacuum cleaners, next generation Legos, and the table lamps that change color when the stock market moves up or down. These digital shifts can rearrange entire industries. Consider that today the firm that sells more cameras than any other is Nokia, a firm that offers increasingly sophisticated chip-based digital cameras as a giveaway as part of its primary product, mobile phones. This shift has occurred with such sweeping impact that former photography giants Pentax, Konica, and Minolta have all exited the camera business.<\/p>\n

      \n
      \n

      Ambient Devices and the Fifth Wave<\/h4>\n

      Carl Yankowski almost never gets caught in the rain without his umbrella. That\u2019s because Yankowski\u2019s umbrella regularly and wirelessly checks weather reports on its own. If the umbrella gets word it will rain in the next few hours, the handle blinks with increasing urgency, warning its owner with a signal that seems to declare, \u201cYou will soon require my services.\u201d Yankowski is former CEO of \u201cfifth wave\u201d firm Ambient Devices, a Massachusetts start-up that\u2019s embedding computing and communications technology into everyday devices in an attempt to make them \u201csmarter\u201d and more useful (the weather-sensing umbrella was developed while he helmed the firm).<\/p>\n

      Ambient\u2019s ability to pull off this little miracle is evidence of how quickly innovative thinkers are able to take advantage of new opportunities and pioneer new markets enabled by Moore\u2019s Law. The firm\u2019s first product, the Orb, is a lamp that can be set up to change color in real time in reaction to factors such as the performance of your stock portfolio or the intensity of the local pollen count. In just six months, the ten refugees from MIT\u2019s Media Lab that founded Ambient Devices took the idea for the Orb, designed the device and its software, licensed wireless spectrum from a pager firm that had both excess capacity and a footprint to cover over 90 percent of the United States, arranged for manufacturing, and began selling the gizmo through Brookstone and Nieman Marcus Copeland, 2005; Miller, 2003).<\/p>\n

      Ambient has since expanded the product line to several low-cost appliances designed to provide information at a glance. These include the Ambient Umbrella, as well as useful little devices that grab and display data ranging from sports scores to fluctuating energy prices (so you\u2019ll put off running the dishwasher until evening during a daytime price spike). The firm even partnered with LG on a refrigerator that can remind you of an upcoming anniversary as you reach for the milk.<\/p>\n<\/div>\n

       <\/p>\n

      \n
      \n
      \n

      Figure 5.2<\/span><\/p>\n


      \n\"Products
      \n<\/a><\/p>\n

      Products developed by \u201cfifth wave\u201d firm Ambient Devices include the orb lamp and the weather-reading Ambient Umbrella.<\/p>\n

      \n

      Peter Morevill \u2013 Information at a glance from Ambient Devices<\/a> \u2013 CC BY 2.0.<\/p>\n<\/div>\n<\/div>\n

       <\/p>\n<\/div>\n<\/div>\n<\/div>\n

      \n
      \n

      Moore\u2019s Law inside Your Medicine Cabinet<\/h4>\n

      Moore\u2019s Law is about to hit your medicine cabinet. The GlowCap from Vitality, Inc., is a \u201csmart\u201d pill bottle that will flash when you\u2019re supposed to take your medicine. It will play a little tune if you\u2019re an hour late for your dose and will also squirt a signal to a night-light that flashes as a reminder (in case you\u2019re out of view of the cap). GlowCaps can also be set to call or send a text if you haven\u2019t responded past a set period of time. And the device will send a report to you, your doc, or whomever else you approve. The GlowCap can even alert your pharmacy when it\u2019s time for refills. Amazon sells the device for $99, but we know how Moore\u2019s Law works\u2014it\u2019ll soon likely be free. The business case for that? The World Health Organization estimates drug adherence at just 50 percent, and analysts estimate that up to $290 billion in increased medical costs are due to patients missing their meds. Vitality CEO David Rose (who incidentally also cofounded Ambient Devices) recently cited a test in which GlowCap users reported a 98 percent medication adherence rate (Rose, 2010).<\/p>\n

      \n
      \n

      Figure 5.3<\/span><\/p>\n


      \n\"A
      \n<\/a><\/p>\n

      The GlowCap from Vitality, Inc., will flash, beep, call, and text you if you\u2019ve skipped your meds. It can also send reports to you, your doctor, and your loved ones and even notify your pharmacy when it\u2019s time for a refill.<\/p>\n

      \n

      Juhan Sonin \u2013 Glowcap<\/a> \u2013 CC BY 2.0.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

      And there might also be a chip inside the pills, too! Proteus, a Novartis-backed venture, has developed a sensor made of food and vitamin materials that can be swallowed in medicine. The sensor is activated and powered by the body\u2019s digestive acids (think of your stomach as a battery). Once inside you, the chip sends out a signal with vitals such as heart rate, body angle, temperature, sleep, and more. A waterproof skin patch picks up the signal and can wirelessly relay the pill\u2019s findings when the patient walks within twenty feet of their phone. Proteus will then compile a report from the data and send it to their mobile device or e-mail account. The gizmo\u2019s already in clinical trials for heart disease, hypertension, and tuberculosis and for monitoring psychiatric illnesses (Landau, 2010).<\/p>\n<\/div>\n

       <\/p>\n<\/div>\n

      One of the most agile surfers of this fifth wave<\/em> is Apple, Inc.\u2014a firm with a product line that is now so broad that in January 2007, it dropped the word \u201cComputer\u201d from its name. Apple\u2019s breakout resurgence owes a great deal to the iPod. At launch, the original iPod sported a 5 GB hard drive that Steve Jobs declared would \u201cput 1,000 songs in your pocket.\u201d Cost? $399. Less than six years later, Apple\u2019s highest-capacity iPod sold for fifty dollars less than the original, yet held forty times<\/em> the songs. By that time the firm had sold over one hundred fifty million iPods\u2014an adoption rate faster than the original Sony Walkman. Apple\u2019s high-end models have morphed into Internet browsing devices capable of showing maps, playing videos, and gulping down songs from Starbucks\u2019 Wi-Fi while waiting in line for a latte.<\/p>\n

      The original iPod has also become the jumping-off point for new business lines including the iPhone, Apple TV, iPad, and iTunes. As an online store, iTunes is always open. ITunes regularly sells tens of millions of songs on Christmas Day alone, a date when virtually all of its offline competition is closed for the holiday. In a short five years after its introduction, iTunes has sold over 4 billion songs and has vaulted past retail giants Wal-Mart, Best Buy, and Target to become the number one music retailer in the world. Today\u2019s iTunes is a digital media powerhouse, selling movies, TV shows, games, and other applications. And with podcasting, Apple\u2019s iTunes University even lets students at participating schools put their professors\u2019 lectures on their gym playlist for free. Surfing the fifth wave has increased the value of Apple stock sixteenfold six years after the iPod\u2019s launch. Ride these waves to riches, but miss the power and promise of Moore\u2019s Law and you risk getting swept away in its riptide. Apple\u2019s rise occurred while Sony, a firm once synonymous with portable music, sat on the sidelines unwilling to get on the surfboard. Sony\u2019s stock stagnated, barely moving in six years. The firm has laid off thousands of workers while ceding leadership in digital music (and video) to Apple.<\/p>\n

      \n

      Table 5.1<\/span> Top U.S. Music Retailers<\/p>\n\n\n\n\n\n\n\n\n\n\n
      1992<\/th>\n2005<\/th>\n2006<\/th>\n2008<\/th>\n<\/tr>\n<\/thead>\n
      1. Musicland<\/td>\n1. Wal-Mart<\/td>\n1. Wal-Mart<\/td>\n1. iTunes<\/strong><\/td>\n<\/tr>\n
      2. The Handleman<\/td>\n2. Best Buy<\/td>\n2. Best Buy<\/td>\n2. Wal-Mart<\/td>\n<\/tr>\n
      3. Tower Records<\/td>\n3. Target<\/td>\n3. Target<\/td>\n3. Best Buy<\/td>\n<\/tr>\n
      4. Trans World Music<\/p>\n

      \n<\/td>\n

      		\u2026<\/p>\n

      7. iTunes<\/strong><\/p>\n<\/td>\n

      		4. iTunes<\/strong>, Amazon tie<\/p>\n

      \n<\/td>\n

      		4. Amazon, Target tie<\/p>\n

      \n<\/td>\n<\/tr>\n<\/tbody>\n

      Moore\u2019s Law restructures industries. The firms that dominated music sales when you were born are now bankrupt, while one that had never sold a physical music CD now sells more than anyone else.<\/th>\n<\/tr>\n<\/tfoot>\n<\/table>\n
      \n

      Source: Michelle Quinn and Dawn C. Chmielewski, \u201cTop Music Seller\u2019s Store Has No Door,\u201d Los Angeles Times<\/em>, April 4, 2008.<\/p>\n<\/div>\n<\/div>\n

      While the change in hard drive prices isn\u2019t directly part of Moore\u2019s Law (hard drives are magnetic storage, not silicon chips), as noted earlier, the faster and cheaper phenomenon applies to storage, too. Look to Amazon as another example of jumping onto a once-impossible opportunity courtesy of the price\/performance curve. When Amazon.com was founded in 1995, the largest corporate database was one terabyte, or TB (see Note 5.14 \u201cBits and Bytes\u201d<\/a> below) in size. In 2003, the firm offered its \u201cSearch Inside the Book\u201d feature, digitizing the images and text from thousands of books in its catalog. \u201cSearch Inside the Book\u201d lets customers peer into a book\u2019s contents in a way that\u2019s both faster and more accurate than browsing a physical bookstore. Most importantly for Amazon and its suppliers, titles featured in \u201cSearch Inside the Book\u201d enjoyed a 7 percent sales increase over non-searchable books. When \u201cSearch Inside the Book\u201d launched, the database to support this effort was 20 TB in size. In just eight years, the firm found that it made good business sense to launch an effort that was a full twenty times<\/em> larger than anything used by any<\/em> firm less than a decade earlier. And of course, all of these capacities seem laughably small by today\u2019s standards. (See Chapter 11 \u201cThe Data Asset: Databases, Business Intelligence, and Competitive Advantage<\/strong>\u201d.) For Amazon, the impossible had not just become possible; it became good business. By 2009, digital books weren\u2019t just for search; they were for sale. Amazon\u2019s Kindle reader (a Moore\u2019s Law marvel sporting a microprocessor and flash storage) became the firm\u2019s top-selling product in terms of both unit sales and dollar volume. The real business opportunity for Amazon isn\u2019t Kindle as a consumer electronics device but as an ever-present, never-closing store, which also provides the firm with a migration path from atoms to bits. (For more on that topic, see Chapter 4 \u201cNetflix: The Making of an E-commerce Giant and the Uncertain Future of Atoms to Bits<\/strong>\u201d.) By 2009, Amazon (by then the largest book retailer in North America) reported, \u201cFor books that are available on the Kindle, sales are already 35 percent of the same books in print\u201d (Schonfeld, 2009). Apple\u2019s 2010 introduction of the iPad, complete with an iBook store, shows how Moore\u2019s Law rewrites the boundaries of competition\u2014bringing a firm that started as a computer retailer and a firm that started as an online bookstore in direct competition with one another.<\/p>\n

      \n
      \n

      Bits and Bytes<\/h4>\n

      Computers express data as bits that are either one or zero. Eight bits form a byte (think of a byte as being a single character you can type from a keyboard). A kilobyte refers to roughly a thousand bytes, or a thousand characters, megabyte = 1 million, gigabyte = 1 billion, terabyte = 1 trillion, petabyte = 1 quadrillion, and exabyte = 1 quintillion bytes.<\/p>\n

      While storage is most often listed in bytes, telecommunication capacity (bandwidth) is often listed in bits per second (bps). The same prefixes apply (Kbps = kilobits, or one thousand bits, per second, Mbps = megabits per second, Gbps = gigabits per second, and Tbps = terabits per second).<\/p>\n

      These are managerial definitions, but technically, a kilobyte is 210<\/sup> or 1,024 bytes, mega = 220<\/sup>, giga = 230<\/sup>, tera = 240<\/sup>, peta = 250<\/sup>, and exa = 260<\/sup>. To get a sense for how much data we\u2019re talking about, see the table below Schuman, 2004; Huggins, 2008).<\/p>\n

      \n

      Table 5.2<\/span> Bytes Defined<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
      <\/th>\nManagerial Definition<\/th>\nExact Amount<\/th>\nTo Put It in Perspective<\/th>\n<\/tr>\n<\/thead>\n
      1 Byte<\/strong><\/td>\nOne keyboard character<\/td>\n8 bits<\/td>\n1 letter or number = 1 byte<\/td>\n<\/tr>\n
      1 Kilobyte (KB)<\/strong><\/td>\nOne thousand bytes<\/td>\n210<\/sup> bytes<\/td>\n1 typewritten page = 2 KB<\/td>\n<\/tr>\n
      1 digital book (Kindle) = approx. 500\u2013800 KB<\/td>\n<\/tr>\n
      1 Megabyte (MB)<\/strong><\/td>\nOne million bytes<\/td>\n220<\/sup> bytes<\/td>\n1 digital photo (7 megapixels) = 1.3 MB<\/td>\n<\/tr>\n
      1 MP3 song = approx. 3 MB<\/td>\n<\/tr>\n
      1 CD = approx. 700 MB<\/td>\n<\/tr>\n
      1 Gigabyte (GB)<\/strong><\/td>\nOne billion bytes<\/td>\n230<\/sup> bytes<\/td>\n1 DVD movie = approx. 4.7 GB<\/td>\n<\/tr>\n
      1 Blu-ray movie = approx. 25 GB<\/td>\n<\/tr>\n
      1 Terabyte (TB)<\/strong><\/td>\nOne trillion bytes<\/td>\n240<\/sup> bytes<\/td>\nPrinted collection of the Library of Congress = 20 TB<\/td>\n<\/tr>\n
      1 Petabyte (PB)<\/strong><\/td>\nOne quadrillion bytes<\/td>\n250<\/sup> bytes<\/td>\nWal-Mart data warehouse (2008) = 2.5 PB<\/td>\n<\/tr>\n
      1 Exabyte (EB)<\/strong><\/td>\nOne quintillion bytes<\/td>\n260<\/sup> bytes<\/td>\n<\/td>\n<\/tr>\n
      1 Zettabyte (ZB)<\/strong><\/td>\nOne sextillion bytes<\/td>\n270<\/sup> bytes<\/td>\nAmount of data consumed by U.S. households in 2008 = 3.6 ZB<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<\/div>\n

       <\/p>\n<\/div>\n

      Here\u2019s another key implication\u2014if you are producing products with a significant chip-based component, the chips inside that product rapidly fall in value. That\u2019s great when it makes your product cheaper and opens up new markets for your firm, but it can be deadly if you overproduce and have excess inventory sitting on shelves for long periods of time. Dell claims its inventory depreciates as much as a single percentage point in value each week (Breen, 2004). That\u2019s a big incentive to carry as little inventory as possible, and to unload it, fast!<\/p>\n

      While the strategic side of tech may be the most glamorous, Moore\u2019s Law impacts mundane management tasks, as well. From an accounting and budgeting perspective, as a manager you\u2019ll need to consider a number of questions: How long will your computing equipment remain useful? If you keep upgrading computing and software, what does this mean for your capital expense budget? Your training budget? Your ability to make well-reasoned predictions regarding tech\u2019s direction will be key to answering these questions.<\/p>\n

      \n
      \n

      Tech for the Poor<\/h4>\n

      Nicholas Negroponte, the former head of MIT\u2019s Media Lab, is on a mission. His OLPC (One Laptop per Child) project aims to deliver education to children in the world\u2019s poorest communities via ultralow-cost computing devices that the firm has developed. The first offering, the XO laptop, costs roughly $175, although a sub-$100 tablet is in the works. The XO sports a rubberized keyboard and entirely solid-state design (flash RAM rather than hard drive) that helps make the machine durable. The XO\u2019s ultrabright screen is readable in daylight and can be flipped to convert into an e-book reader. And a host of open source software and wiki tools for courseware development all aim to keep the costs low. Mesh networking allows laptops within a hundred feet or so to communicate with each other, relaying a single Internet connection for use by all. And since the XO is targeted at the world\u2019s poorest kids in communities where power generation is unreliable or nonexistent, several battery-charging power generation schemes are offered, including a hand crank and foldout flexible solar panels. The OLPC Foundation delivered over 1.6 million laptops to children in twenty-four countries (Lawton, 2009). The XO is a product made possible by the rapidly falling price of computing.<\/p>\n

      \n
      \n

      Figure 5.4<\/span> The XO PC<\/p>\n


      \n\"The
      \n<\/a><\/p>\n

      \n

      Roberto Greco \u2013 OLPC XO: Background and Review<\/a> \u2013 CC BY-NC-SA 2.0.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

      While the success of the OLPC effort will reveal itself over time, another tech product containing a microprocessor is already transforming the lives of some of the world\u2019s most desperate poor\u2014the cell phone. There are three billion people worldwide that don\u2019t yet have a phone, but they will, soon. In the ultimate play of Moore\u2019s Law opening up new markets, mobiles from Vodafone and Indian telecom provider Spice sell for $25 or less. While it took roughly twenty years to sell a billion mobile phones worldwide, the second billion sold in four years, and the third billion took just two years. Today, some 80 percent of the world\u2019s population lives within cellular network range (double the 2000 level), and the vast majority of mobile subscriptions are in developing countries (Corbett, 2008).<\/p>\n

      Why such demand? Mobiles change lives for the better. According to Columbia economist Jeffrey Sachs, \u201cThe cell phone is the single most transformative technology for world economic development\u201d (Ewing, 2007). Think about the farmer who can verify prices and locate buyers before harvesting and transporting perishable crops to market; the laborer who was mostly unemployed but with a mobile is now reachable by those who have day-to-day work; the mother who can find out if a doctor is in and has medicine before taking off work to make the costly trek to a remote clinic with her sick child; or the immigrant laborer serving as a housekeeper who was \u201cmore or less an indentured servant until she got a cell phone\u201d enabling new customers to call and book her services (Corbett, 2008).<\/p>\n

      As an example of impact, look to poor fishermen in the Indian state of Kerala. By using mobile phones to find the best local marketplace prices for sardines, these fishermen were able to increase their profits by an average of 8 percent even though consumer prices for fish dropped<\/em> 4 percent. The trends benefiting both buyer and seller occurred because the fishermen no longer had to throw away unsold catch previously lost by sailing into a port after all the buyers had left. The phone-equipped fleet now see more consistent pricing, spreading their catch more evenly whereas previous fisherman often inefficiently clustered in one market, overserving one population while underserving another. A London Business School study found that for every ten mobile phones per one hundred people, a country\u2019s GDP bumps up 0.5 percent (Ewing, 2007).<\/p>\n

      Bangladeshi economist Mohammed Yunus won the Nobel Peace Prize based on his work in the microfinance movement, an effort that provides very small loans to the world\u2019s poorest entrepreneurs. Microfinance loans grew the market for Grameen Phone Ltd., a firm that has empowered over two hundred and fifty thousand Bangladeshi \u201cphone ladies\u201d to start businesses that helped their communities become more productive. Phone ladies buy a phone and special antenna on microcredit for about $150 each. These special long-life battery phones allow them to become a sort of village operator, charging a small commission for sending and receiving calls. Through phone ladies, the power of the mobile reaches even those too poor to afford buying one outright. Grameen Phone now has annual revenues of over $1 billion and is Bangladesh\u2019s largest telecom provider.<\/p>\n

      In another ingenious scheme, phone minutes become a proxy for currency. The New York Times<\/em> reports that a person \u201cworking in Kampala, for instance, who wishes to send the equivalent of five dollars back to his mother in a village will buy a five-dollar prepaid airtime card, but rather than entering the code into his own phone, he will call the village phone operator and read the code to her. [The operator] then uses the airtime for her phone and completes the transaction by giving the man\u2019s mother the money, minus a small commission\u201d (Corbett, 2008).<\/p>\n

      South Africa\u2019s WIZZIT and GCASH in the Philippines allow customers to use mobile phones to store cash credits sent from another phone or purchased through a post office or kiosk operator. When phones can be used as currency for purchases or payments, who needs Visa? Vodafone\u2019s Kenyan-based M-PESA mobile banking program landed 200,000 new customers in a month\u2014they\u2019d expected it would take a year to hit that mark. With 1.6 million customers by that time, the service is spreading throughout Africa. The \u201cmobile phone as bank\u201d may bring banking to a billion unserved customers in a few years.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"author":217,"menu_order":1,"template":"","meta":{"pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[49],"contributor":[],"license":[],"class_list":["post-77","chapter","type-chapter","status-publish","hentry","chapter-type-numberless"],"part":72,"_links":{"self":[{"href":"https:\/\/pressbooks.ccconline.org\/bus3060\/wp-json\/pressbooks\/v2\/chapters\/77","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/pressbooks.ccconline.org\/bus3060\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/pressbooks.ccconline.org\/bus3060\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/bus3060\/wp-json\/wp\/v2\/users\/217"}],"version-history":[{"count":7,"href":"https:\/\/pressbooks.ccconline.org\/bus3060\/wp-json\/pressbooks\/v2\/chapters\/77\/revisions"}],"predecessor-version":[{"id":590,"href":"https:\/\/pressbooks.ccconline.org\/bus3060\/wp-json\/pressbooks\/v2\/chapters\/77\/revisions\/590"}],"part":[{"href":"https:\/\/pressbooks.ccconline.org\/bus3060\/wp-json\/pressbooks\/v2\/parts\/72"}],"metadata":[{"href":"https:\/\/pressbooks.ccconline.org\/bus3060\/wp-json\/pressbooks\/v2\/chapters\/77\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/pressbooks.ccconline.org\/bus3060\/wp-json\/wp\/v2\/media?parent=77"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/bus3060\/wp-json\/pressbooks\/v2\/chapter-type?post=77"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/bus3060\/wp-json\/wp\/v2\/contributor?post=77"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/bus3060\/wp-json\/wp\/v2\/license?post=77"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}