Alan Patrick's presentation to Creative DigiFest at the University of Southampton, May 2012

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