Embracing Technology for Growth

By Elliott Reitz, 7/3/97

Lots of people and businesses get by just fine without a computer. Yet more and more, it's getting more difficult to keep up to our world without taking advantage of technology. Technology was the backbone of the industrial revolution. Now, we are in the middle of the information revolution leading us into the "Information Age". Technology growth such as processing power and communications open new doors for both personal and business growth.

Major technology revolutions this century include the telephone, radio, TV, satellite communication, computers, and the WWW (World Wide Web). What's next?

Processing

Processing capability has historically grown at an exponential rate. Moor's 1st Law states (and has proven accurate for 30 years) that the number of transistors that fit on a piece of silicon doubles every 1.5 years. That's only part of the picture. Consider that as transistors become smaller they also get faster. While manufacturing foundry costs still rise (Moor's 2nd law) volume production, higher yield, larger chips, and faster growth of related technologies offset the cost factor. This makes the same size chip with more transistors cheaper. Better yield rates enable larger sized chips, which also reduces system costs.

Computer processing is not just limited to the speed of the processor. Larger RAM, faster and larger disk storage, and better software dramatically improve performance. RAM keeps the processing electronic rather than mechanical. Software improves the human interface, and mostly gets better by building on the previous design. Note that disk storage itself has grown at a rate of 4x per year for equal cost.

All in all, this leads to a desktop PC performance/cost rate much better than Moor's law would indicate. A commonly accepted industry standard estimate is:

Desktop processing/cost grows at 3x per year. For businesses that aren't directly involved in technology development, this directly leads to the most common standard for refreshing computing equipment at 1/3 the equipment each year.

Consider that in 1983, a Z80 with 1 floppy, 48K RAM, and no HDD was $4,000. Now a similar investment will buy a Pentium-II 233MHz, printer, scanner, 20" monitor, modem, 128M RAM, and 4G HDD, and CD Writer. I estimate 313 = 1.6x106 as the difference between two systems. This is especially true considering the power of the WWW, and various other capabilities (ie: a Hard Disk Drive), which weren't practical in 1983.

Communications

Communications are at the core of what make computers run. It's also one of the primary benefits of the technology. Computers use the binary system to communicate. Since the communication rates have exceeded the bandwidth required for voice, video, and other classically analog communication there is a continuing shift from analog to digital. With the shift come many side benefits. These include teleconferencing, mobile computing, encryption, electronic commerce and the WWW.

Teleconferencing enables face-to-face meetings without the high cost of travel. It doesn't replace the handshake, but does much more than voice alone. Mobile computing enables a person to have an office on the road. Encryption technology is controversial because it allows fully secure communications. This can be used for good or bad. On the good side is the business necessity of keeping confidential data secure. Electronic commerce expands the market place. The coupling of web pages to describe products with encrypted credit card payments is becoming common. In many cases this eliminates the storefront altogether. See http://www.cdw.com for a good example.

The WWW is the hottest new arrival to the desktop PC's communications capabilities. This technology opens up the world of information beyond the old fashion library. In a library, books are the primary media. Books still make a good media for much information. The average person has only dreamed of writing and publishing his or her own book. With the WWW, average people with less than $2000 invested can publish their own work on the Internet. Most ISPs (Internet Service Providers) provide 10MB free web space with basic service. Without pictures 10MB is over 5000 printed pages. With pictures it's still allot. This means that many would-be writers are actually getting started by writing for the WWW (myself included). For business this means that product information can be cheaply maintained and distributed without the high printing costs of the past.

Example Personal Applications of Technology Growth

Today my 6-year-old daughter wrote a story. While I was writing this article, she drew pictures to go with the story. She took brakes from coloring and we enjoyed searching Yahoo for Turtles, Bats, Cats, Dalmatian puppies, and Chickens. I printed several of the coloring-book images and she colored them.

When I was her age my thrill with technology was watching a mechanical adding machine at my grandfather's bus company. While the thrill of amazement was similar, her experience was far greater than my own. She learned about several types of turtles, bats, chickens, and how the Dalmatian puppies didn't have spots till they got older. For me, it was also a thrill because I saw her having fun and learning at the same time. She asked, "How come the pictures take so long to download". I explained how the image came over the telephone and pictures took longer than text.

After we scanned her drawings she watched intently as I scaled and balanced the image colors to reduce the file size maintaining image quality. When she asked why I made the pictures smaller I reminded her how the puppies took so long to download and that I was making it faster. I followed her desire for the color balancing.

After we came home from the beach with her friends, she got to enjoy showing them the story from their house because we published it on the WWW.

Another example of the personal use of technology is pagers. Originally they were primarily used for doctors. Now they are replacing the dinner bell (or loud call) for parents. I use my own pager to stay available to friends and family as well as for business. And for business, they sure beat the old P.A. systems.

A friend who has a teenaged daughter is very pleased to have a cell phone in her car. She can use it if she's in trouble, or just for directions navigating through Boston. They also enable mobile communication for business.

Example Business Application

Consider an asset management company as an example where technology growth is having a big impact. Traditional asset management is based on hunches, intuition, inside (both legal and illegal) information, risk-taking, and experience. Portfolio managers would use their experience to invest client's money with the hope of a better than average return.

About 15 years ago, mutual funds became a very popular investment where small clients pooled their resources together so that one highly skilled investor could earn them a bigger profit. This is still common today.

Another technique which started showing up about 15 years ago was the use of computers to forecast trends in the market. At the start these were just simple graphic routines designed to give the investor a picture of the stock performance over time. This technique is where the biggest growth is happening and will continue for years to come.

In 1991, I wrote computer programs for my MSEE Thesis to predict faults in aircraft servo systems. Processing 500 samples of 3 parameters took 12 hours on my PC. Now the same processing is instantaneous. So what? Well, that processing included the calculation of the correlation between the parameters, and prediction of their trends. It plotted the trend along with a confidence interval for the prediction. It was also scalable, limited only by the available processing power. In 1990, application of such an algorithm to asset Management was a novel idea, but not really practical.

Today (1997), an equivalent cost desktop computer can process 500 samples of 729 parameters in the same 12 hours (729 = 3 x 310/2, the 10 because it was an upgraded 1985 PC, and the /2 because the processing is on NxM matrix). Obviously this is getting somewhere. With a faster PC, more samples and parameters are practical. With >5 parameters it becomes difficult for a human to look at a graph and intuit the correlation and trends. I should also point out that the algorithm did use linear regression analysis, which means that non-linear events were not predicted. Five more years of technology growth will increase this capability exponentially. Extrapolating, 11364 = 3 x 315/2 so 12 hours on 500 samples will cover 11364 parameters (or 1000 samples on 6000 samples). Extrapolating 10 years (177K = 3 x 320/2). So what does this mean?

For aircraft fault prediction, linear analysis is good at predicting when things wear out rather than when things just break. Similarly, stocks and other investments fluctuate with both linear and non-linear events. Thus, hunches, intuition, inside information, risk-taking, and experience are still important factors. Yet the computer is becoming and increasingly powerful tool. For example, running the 500 days worth of all the Wall Street Journal's daily stock quotes through such an algorithm, the smart investor can get valuable clues where to apply traditional skills. It could highlight the correlation between a particular stock and a foreign currency, showing a highly accurate leading-indicator available for profit making. Further investigation of the stock and currency may validate or discredit the prediction leading to very wise investment choices.

Five years from now it will be practical to run such an algorithm on the all data available. 10 years from now, the analysis will be available instantaneously while covering more parameters, more time samples, and producing better results.

Note that commodities are considered very profitable and very risky because hourly fluctuations so directly effect the value of the investment. In such cases, hourly data can be used to shorten the prediction cycle. I mention this case in particular because so many commodities have daily cycles of high and low.

On the human side, technology can free investment managers from the drudgery of too much research to do. With limited time, more research can be accomplished. An experienced manager will balance the surplus time to improve both the research quality and customer contact time.

On the non-human side, WWW pages can give customers a greater understanding of how their money is invested and how those investments are doing. This leads to increased confidence.

New businesses created by technology offer great opportunities. One example is the video rental industry. The invention and popularization of the VCR led to an industry as widespread as fast food. Good trend-spotting software with powerful hardware can pick out such a trend while the stock is still small and obscure. The computer power and software expands the size of the time x parameter matrix that can be calculated automatically, enabling such trends to be spotted sooner. Analysis of the reason for the growth gives an understanding for why. This in tern leads to wise investment.

Foreign market penetration is another great opportunity opened with technology. In foreign markets there is often a necessity for technology which is "old" by US standards. For example, many third world countries are in great need of basic water and energy systems. In such cases our technology itself is the commodity on demand. In other cases such as Japan, technology is already fairly mature. In these cases the technology becomes a common tool in joint ventures and import/export. For example, electronic currency exchange reduces the cost of trade as well as enabling foreign investments.

Note that the Mars probe is set to land on the 4th of July! Maybe we'll find gold.

What's Next?

What happens when everyone uses this sort of technology? Historically, growth has been exponential. Thus each step of growth has lead to even faster growth.

Technology is making our world smaller by the day. Personally, people are becoming better connected. Rather than mutual assured destruction or peace through strength, we are transforming into peace through friendships, understanding, and common interests. In business opportunities abound. In the near term this means better visibility for customers, improved human and non-human contact, new industries, and greater penetration into foreign markets. In the longer term it means the information age has arrived. This will give us both better lives and better jobs.

One common factor that slows technology growth is our human desire to keep things the same. This often leads to a desire to hide from both technology and ourselves. Technology challenges our paradigms. This is where dreams come in. Science fiction can be both uplifting and frightening at the same time. Since new technology can be used for either good or evil, it's important that all of us consider it. This way our culture and us as individuals have the opportunity to enjoy the new things as they arrive. For example, some people fear the WWW because they don't understand it. By embracing it into my life I have gained a great deal from it. Science Fiction is becoming more popular. This is a good sign. Shows like Star Trek, and The X-Files offer ideas for our culture and individuals to consider.

Keeping pace with the technology growth is an important fact of life. If you're thinking of buying a computer, upgrading, or refreshing the technology of your business, see my article, Buying Strategies for Computers.

It's been widely noticed how adaptive children are to technology. What will you share with your children? My grandfather bought my first computer in 1983. Recently, I built computers for both my father and his father. My father has had better success with his computer than my grandfather. Maybe a better question is "What will our children share with us?" As individuals, we can enable more growth for our children by focusing on our own growth. Just think where that will bring us. What will the world be like in 20 years?

Contact: info@EDANS.org, EDANS

Keywords: SOS, SOSE, System Of Systems, Family Of Systems, consulting, information, technology, service, network, computer, systems, engineer, and management, novel, patents, research.

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