Every now and then, timing is all. Take George Gilder’s Aug. 28 Forbes ASAP piece, “The Coming Software Shift.” Lucky Forbes readers got their copies in mid-August, smack between the year’s two biggest technology events–Netscape’s record-hot IPO and the release of Windows 95. Gilder used the timing to explain why creative energy and profits in desk-top software would soon migrate from Microsoft to the Internet and toward companies like Netscape. Needless to say, Gilder’s point is controversial, drawing fire and praise from a host of computerdom’s biggest names
Nathan Myhrvold, Group Vice-President, Applications and Content Group, Microsoft.
As usual, George Gilder’s diagnosis is dead-on. The software industry functions by turning its fuel-cheap processing power, as described by Moore’s Law–into value for consumers. In turn, software soon soaks up CPU power, fueling market demand, which sustains Moore’s Law. The software-hardware twosome is about to become a ménage à trois, with the addition of communications. The three-way cycle will drive growth and value creation in each area at an even faster rate than we’ve seen so far. I begin to differ when George frames the computer industry in lurid terms of battle.
In reality, computer industry shifts are quite dull affairs. The multidecade decline of the mainframe has been a lot like watching a glacier melt. A leading company fails to invest in new technology and ultimately finds its product obsolete. New entrants might capitalize on this, but most–including Netscape and HotJava–blaze new trails instead. When an established leader does fall, the proximate cause is almost always slow suicide or atrophy through internal mismanagement; not the wounds of combat. The Internet means opportunity for all software developers–new and old.
Mosaic and its commercial descendants are currently at the center of the cyclones, but their day in the sun will pass just as surely as it did for previous Internet standards like Gopher or FTP. The instant rise of Mosaic and Netscape foreshadows what George might dub another Law of the Telecosm: In a world with easy electronic distribution, it is very hard to hang onto your position–easy come, easy go. A particular weakness of HTML is that it is a data format no different in spirit from the protocols of 1970s-vintage mainframe terminals. Next-generation Internet software will use programmability at both ends of the pipe. Java is noteworthy and may play a role, but its hype falls into a very old trap. Every new programming language is heralded as a breakthrough. Fortran was going to computerize science and engineering, Cobol would revolutionalize business, and Lisp (and later, Prolog) would deliver us to the promised land of AI.
The reality is quite different–new languages offer some modest benefits, but all of the real value resides in the programs created with them. Finally, I must comment on the obsession with finding the next Gates. Bill has been my friend and colleague for nearly 10 years, so the topic is familiar. Writing great software and founding a company is a first step, but that only matches Bill Gates circa 1976. The secret that made the Bill Gates of 1995 is to have the technical and business skills to develop new product lines repeatedly. Microsoft is unique in this accomplishment. Our competition is invariably single-product companies, or ex post facto assemblages of them. I don’t doubt that the next Gates will eventually appear, and the Internet may fuel her rise, but it’s one hell of a tough act to follow.
Scott Mcnealy, Chief Executive Officer, Sun Microsystems:
I’d like to compliment George Gilder for so eloquently articulating Sun’s nearly decade-old credo: “The network is the computer.” I believe in Gilder’s thesis that we are, indeed, at the onset of the age of network-accessed, disposable software. Desktop operating systems, utilities and applications will soon be relegated to peripheral status. The network will be the operating system, and, as Gilder points out, this change is being brought about the almost incomprehensible momentum of the Internet. The ultimate change agent, Gilder suggests, may in fact be Java, yet another technology that Sun has offered to the industry in an open and barrier-free way. Java is a programming language that creates the first true network operating system for the globe, because it is safe, secure, robust, fault tolerant and, among many other attributes, platform-independent. Here’s how we see it playing out. three computer science students from Berkeley hacking code late at night will create a Java word processing program. Let’s call it “NetWord.” They put it on their Web server at http://www.netword.com. It will be free because these kids want fame first, knowing that will lead to fortune as with their hero, Marc Andreessen.
It will be 100,000 lines of code versus 1.5 million for WordPerfect, because NetWord isn’t bogged down with all the APIs [applications programming interfaces] and other extraneous baggage of typical applications that must interoperate with a specific operating system, or have become overfeatured. So you’re shopping for a new word processing program. You’ve seen the ads offering Word on sale for $249. Of course, you know that means you get the privilege of upgrading in a year for another $89. Your buddy sends an e-mail and says check out NetWord. You take a test drive. It works! Cool! You are not alone. A few million others have heard about NetWord. Now the makers have a following and in a few months they start a company and offer NetWord 2.0 for a mere $2 per copy. You and 10 million other avid followers have no qualms about paying the nominal fee. It sure beats the competition.
In fact, at that price, you’ll be checking the NetWord home page monthly to download the latest copy. As of the three college kids, they are now millionaires. Suddenly the OS that controls the CPU on your desktop is a legally of an old paradigm, relegated to a secondary tier in the software food chain. This means that Microsoft is now a severely overpriced personal productivity tools applications vendor with an OS business that is no longer able to “captivate” the end user by being the only platform to run desired applications. Keeping API’s secret won’t work anymore. Controlling the interfaces won’t work anymore. The wall is down and there’s no turning back. So where will that leave Microsoft? Scrambling to explain to investors why the company’s market cap is 10 times revenues, scrambling to explain how they can survive in the world of disposable, run-anywhere Internet software.
Of course, the marketing muscle up in the Northwest will try to figure out a way to play in this space. But playing now means playing on a level field. The rules are the same for everyone. They’re spelled TCP/IP, Mosaic, WWW, HTTP, HTML and now Java–all the open protocols and languages that make up the Internet. It’s barrier-free computing. It’s consumer choice. It’s a free-market economy in the information age, finally. From there, just about anything is possible.
Larry Tesler, Vice President and Chief Scientist, Apple Computer
To report technology history accurately is a difficult task requiring percipience, perspiration and perspective. Gilder has done it. He has combed through the attics of computing and assembled for the family a gripping album of the events and circumstances that created the phenomenon we call the Web. If the past is buried in clutter, however, the future is still more difficult to perceive, especially before the dazzle of Netscape and Java.
In my view, the Web is a catalyst, but it is not all that matters about the Internet. The browser is to the Internet what the spreadsheet was to the desktop computer. Mosaic is the new VisiCalc, Netscape Navigator the new Lotus 1-2-3. Microsoft would like to make Explorer the new Excel. Wall Street is as enamored with Netscape today as it was with Lotus when that company went public. Netscape is a winner, but is the winner? With the aid of its ally, the Sun King, will it inherit the throne? Not necessarily. Where is the proprietary operating system that runs not merely the equivalent of spreadsheets, but thousands of applications? Where is the PI that some megalomaniac weaves into, well, a web, to attract, ensnare and ultimately consume hapless applications developers and most of the profits they worked so hard to earn?
I hope that the nameless idealists who create the Internet on a daily basis succeed in their resistance to central control more successfully than did their computer club counterparts a decade ago. If they do, there may be no single successor to Bill Gates. If they don’t then it’s anyone’s guess who will maneuver into that role. The drama promises to remain gripping.
Howard Anderson, Founder, Yankee Group
George, George, George – what took you so long? What is so surprising is that you were so surprised that the Netscape revolution may supersede the Microsoft revolution. Think back! Fifteen years ago, the office automation hype was about word processing, but the real revolution was electronic mail. Today 36 million Americans get their mail electronically and no one really gives a damn about new word processing packages. Your beatification of Marc Andreessen is a little premature, don’t you think? There are many visionaries, but few company builders. We in the venture community intuitively know that there is little likelihood that the visionaries will turn into the operating managers new industries need. Other than Gates, who? What you have proposed (correctly) is that the peripheral becomes the major focus. Five years ago, the thought that IBM and the clone industry would become “value-added resellers” for Intel and Microsoft would have been heresy. Now you are suggesting that the Internet will become the major focus–and Intel and Microsoft will be relegated to that “value-added” focus. You are right. Nonetheless, quite frankly, the Internet needs three years to be ready for prime time. Meanwhile, we will go through a sine curve of hype, backlash, then reality. Just when the naysayers sound and seem logical, the Internet will begin to fulfill its destiny, and that destiny is to become the most potent force in technology. And George, invite your mother to dinner for me. Of your technobabble family, she seems the most interesting!
John Perry Barlow, Rancher, Writer, Web Guru,
Grateful Dead Lyricist
I am enormously encouraged by George Gilder’s discovery of the World Wide Web. I’m tempted to stoop to catty remarks about how long it took him. Lately, he’s seemed almost alone among intelligent commentators in continuing to credit the myth of the information superhighway–a belief that you can sustain only if you don’t know about the Web or if your perceptions have been profoundly altered by the reality-distortion fields generated within large content conglomerates, telcos or cable companies, or the vast cluelessness that is Washington, D.C.
In fact, anyone using the phrase information superhighway is almost certainly in the thrall of some large and doomed institution, or is a complete nimrod who knows only what he hears on television. Which is, for obvious reasons, filled with people who believe in it. They’re not going to be roadkill on it, by golly. They’re going to find that on-ramp . . . hey, they’re going to be the on-ramp! No way, San Jose! The future of the Industrial Era media megaliths, whether Disney, Time Warner or, more to the point, Microsoft, will arrive over the Web, not the mythical infobahn. The Web will be the end of them.
We are up against a discontinuous leap as we hit the next layer of interactive complexity, both in software and in thought. It has now reached a point where about the only way to develop all the scripts, scraps and code objects from which the next World Wide Operating System (WWOS) will assemble itself is to grow them in the distributed, massively parallel amalgam of minds and processes that make up the Net. The Web is alive, and filled with life, nearly as mysterious, complex and, well, natural as a primordial swamp. Microsoft is a factory. You can’t manufacture life in a factory. You have to grow it in nature. This ___________ so new, really. _______________’s proprietary claims notwithstanding, I take the first WWOS, Unix, as proof that if enough graduate students type into enough terminals long enough, they will eventually produce an operating system. And given enough graduate students, you can be sure that somewhere among them will be a Bill Joy or a Marc Andreessen. In accordance with Joy’s Law, they won’t be working at Microsoft.
Furthermore, the Web and most browsers give them a way to crib from one another, lavishly and easily. All that’s necessary to see the code that generated what’s on your screen is to click: “View source.” All that’s necessary to get your page employing some of the same innovations is to copy and paste. This creates an environment of dense autocollaboration. To see how productive it’s already been in less than two years of existence, get on the Web now. This will make the micromputer revolution look like a good start. Gilder’s article is a fine thing. I’ve been talking about the End of Microsoft for a couple of years and have felt like a madman parading a ragged sign. When it starts coming from such impeccable seersuckers as George Gilder, it may be time to short a little of that Microsoft stock.
Bert C. Roberts, Jr., Chairman & CEO MCI Communications
Gilder is dead-on right that hardware and operating systems will become subordinate to the network; that the network will, in effect, become subordinate to the network; that the network will, in effect, become everything and the only thing. And he’s right, too, about the evolution and impact of the Internet and the resultant focus on content. Gilder’s allusions to Gates and Microsoft, however, yield a very real question: Can they deal with the coming transformation? Doing so will require a new vision of the future and a new understanding of merging industries, evolving ways of computing, and some hard new facts.
Here’s a key one: Companies that don’t address and act on the need for collaborative work from a widening universe will fall hard–and fast. Confronting any rival with the market dominance of Microsoft will be very difficulty. But trying to run in place could be even harder. The challenge is not only to understand, as Gilder writes, “that your computer will never be the same”–but also that it’s your company that will never be the same. Dan Lynch, Founder, Interop Chairman, Cybercash Gilder has got it figured out. His article is dead-on about how the Internet is the architecture of the future for information dissemination. Want proof? Pouring huge resources into its Microsoft Network and Microsoft Navigator offerings, Microsoft admits that it does not really know the business model for how to make money in this new arena, but it is determined to get on the playing field in a big way.
Meanwhile, Sun is too hooked on hardware profits to make a new fortune on this round. No doubt that Java is the right technology for making the Net be the center of the universe. Sun should simply spin that group out as a new company unfettered by dragging along hardware. The only fault I find with Gilder’s article is his picking Marc Andreessen as the next Bill Gates. Marc only has a few percent of Netscape stock; Bill has tons of Microsoft stock. Marc will make a lot of others much richer and he surely won’t suffer, but he will not become a feared/loved mogul because of Netscape. Maybe he and Bill Joy should bolt and start their own company? Marc is still younger than Gates was when Microsoft got its plum from IBM.
I asked Marc one question when I met him during his brief stint at EIT in Menlo Park. What was the central design assumption for Mosaic? He said 45 megabits per second! I asked why. He said that it makes it easy to program because you do not have to develop hairy mechanisms to mask out the slowness of the network. Then commercial reality set in when he and Jim Clark got together and they recentered their Netscape Navigator for the 14.4 kilobit world, thus giving us the MS-DOS of the Internet. It is a good start, but Marc was right about 45 megabits–only it is not just to make the programmer’s life easy, it is to make the consumer’s life joyful.
Nicholas Negroponte, Director, MIT media Lab Author, Being Digital
Once again, George Gilder’s got it right. His guide to the past and future of the Net is on the digital dime and, as best I hear from my colleagues at the MIT Media Lab, Java is really hot. We’re betting our house on it. The Net, however, is no place for kings. It is a collective intelligence that will work in spite of government and any attempts to control it. No Carnegies, Rockefellers or Harrimans this time. The white envelope, George, is empty. When Larry Roberts invented the Internet in 1969, his decentralist approach made the idea interesting for the military, because it was fail-safe. More than 25 years later, after the Vietnam and Cold wars, the Net is also safe from dominance of any kind. Supercomputer émigrés, Unix hackers and Media Lab alumni have moved it forward (not Windows or Mac users), because they are made of the right stuff. This is serious media and computer science, not the world of Windows applications.
Here is where George is wrong. The next Bill Gates is not Marc Andreessen. Yes, Marc will do very well. However, if you were a sucker to pay $75 per share for Netscape at the opening on Aug. 9, keep it to yourself (if I hadn’t been traveling between Rio and Buenos Aires that day, I would have sold short and made 25 points in a few minutes). There will be many browsers, hundreds of them. Today, I’ll bet on Niki Grauso’s, which will come out in 37 languages. Browsers are the surface of a much deeper phenomenon. Sun Microsystems has it right: Java. Why? Because Java is a language and many smart people will express themselves and invent new applications in that language. Netscape is but one awning on the Virtual Boulevard of Digital Cafes. Java is the coffee.
Andy Grove, President and CEO, Intel
George, George, George–you haven’t met a new technology you didn’t like, and conversely you haven’t met an older one that you don’t think is ready to be toppled by the new. Do you remember when you wrote that “specialized computers-to-a-chip will become the prevailing product category”? Well, it didn’t happen. Not that silicon compilers were back, not that ASICs are insignificant, but the general-purpose computer that you pooh-poohed has become the prevailing paradigm of the subsequent six years since the publication of Microsm.
Now you predict that the PC will become a peripheral attached to an all-knowing, all-powerful Internet. I don’t think so, George. Not that the Internet won’t be important; I look at it as one of the most important applications that will be used on my PC in the future. And that is the difference between us. What matters to me is my computer. I use my computer. I am using a word processor to write this response; I use e-mail to communicate with hundreds of coworkers from my desk and from my home; I use CompuServe to get updated industry news; I use ProShare conferencing to do business with partners across the world in real time. And I use Netscape to check out a new home page that I have hears about.
A couple of years from now, I may spend more time in the Net-based applications than in some of the others, just as today I spend my time differently among my applications than I did five years ago. My computer will evolve and adapt (as PCs have been so good at doing) to the ever-changing mix of applications with which I work. You are wrong in another area. Implicit in so much of your writing is a fantasy: the notion of high-bandwidth communications reaching every PC. Today my computer is connected with ISDN to other computers; it is also connected to LANs and to an ordinary phone line.
Five years from now, my computer will still be connected to an ordinary phone line and to ISDN, but also to broadband networks via a cable modem and to an ATM network to reach other luck computer users; and probably to do some kind of wireless connection. Ten years from now, it will be another set of communications transport media. But it will never be a single superconnection, because goodness doesn’t arrive in a sing step. It comes a little at a time. To be sure, if God erased all computers and networks and forced us to start from scratch, we would certainly come a lot closer to your utopian view of broadband to the computer, with intelligence cleverly distributed between network and computers. But then, if God erased New York City, it would not be rebuilt the way it is today.
In real life, both cities and computer networks evolve, increment by valuable increment. The bottom line is this: The magic of the PC business is that there is a computer that I can look at, put my hands on and say, “This computer is mine, and it opens the universe of tens of millions of computers to me through its screen and keyboard–and whatever connection scheme is available to me.” Don’t bury this magic; cherish it.
Andy Kessler, Partner, Unterberg Harris
Once again, my colleague and trendtender, George Gilder, has eloquently set forth the next wave of innovation. But in the process, the PC or client device will not be hollowed out. Rather than living with fast servers and PCs acting as relatively dumb terminals, which is the architecture of Mosaic and the Web and even Java so far, the endgame is instead a network where every device is a server, even your own lousy PC. This means terribly intelligent and “fat” clients, enabling rather than just hanging off the network. Moreover, it is much too early to be handing out crowns to the new kings of the network. George’s trends are dead-on, but the kings are coronated by natural selection, not by just showing up and claiming the throne.
Stephen Manes, Columnist, New York Times, Author of Gates
Slow down, George! Sake’s alive! Ma missed signs four and five! What sprang to mind upon reading Gilder’s latest panegyric was not the rosey technology future, but a Burma Shave ditty from my youth. I don’t know Colombian beans about Java, but I’ve been watching this industry too long not to reach for my methane detector when somebody announces in the language of corporate propaganda that “your computer will never be the same.” This particular locution almost always signifies too much time spent amid the rarefied gases that hove around chairmen and CEOs. A particularly toxic dose is to be suspected when the proclaimed agent in change is an interpreted language. Interpreted languages have a long line of champions, not the least of whom is that great Basic patron, William Henry Gates III (who seems less “Archimdean” than Charles Foster Kancan). But their magic has its limits, as Gates himself found out when Microsoft developed its Multiplan spreadsheet on the interpreted runs-on-everything (but kinda slow) model and watched the compiled runs-on-DOS-only (but really fast) Lotus 1-2-3 force some massive recalculations at Microsoft headquarters.
Wasn’t it only a few months ago that the press went gaga over General Magic’s interpreted Telescript, which now reportedly has, uh, some problems? The runs-everywhere promise of interpreted languages generally manages to get broken when it hits some Least Common Denominator–say, another LCD, the liquid crystal display. If you want to run Gilder’s helicopter model on your crappy little Personal Digital Assistant, you may not have to worry about having AutoCAD on your hard drive, but you probably will have to worry about having a hard drive, not to mention a screen with enough detail and contrast to make the thing look vaguely like the original. The IBM PC version of Multiplan was no prize, but it looked and felt great compared with the on that ran on the toy Commodore 64. Software is never truly independent of the hardware it runs on, interpreting programs tend to run with all the speed of a tricycle, and bandwidth is still a long, long way from being free.
Jesse Berst, Editor, Windows Watcher
Mr. Gilder’s article on the coming software shift is 10% fact and 90% wishful thinking. Fact: Windows’s dominance will come to an end when it is rendered irrelevant by a new platform. Wishful thinking: hoping the new platform will be owned by somebody other than Microsoft. Gilder’s fantasy of a Microsoft-free computer industry might come to pass if Bill Gates spent his time in his vault counting his money. he doesn’t He obsessively watches the horizon for threats to his hegemony. When he spots a danger, he works feverishly to use his current monopolies to leverage his way into the new arena. He spotted the Internet danger about two years ago and has already spent more than $100 million to make sure that Microsoft isn’t left out.
Yes, George, we will all eventually emigrate from the Windows desktop empire. But when we get to the new promised land, we’re likely to find that Bill Gates has already acquired the prime real estate. Scott Cook, Chairman, Intuit Gilder chronicles invention like no other. He finds the history in the most recent events. He finds the significance in invention before that significance is real or realized. But Paul Saffo of the Institute for the Future tells how the innovations that reshape our lives follow their enabling inventions by years or decades. Gutenberg invented movable type. It took another 40 years for an entrepreneur named Aldus to assemble what created book publishing as we known it. Marconi invented radio exactly 100 years ago. It took another 25 years for entrepreneurs in Pittsburgh and New York to create broadcasting. It was through broadcasting that radio reshaped our lives. None of us expect it will taken 25 years for this chapter of the Internet story. But I hope Gilder will tackle the next question: How will these inventions change our lives? Gordon Bell, Research Fellow, Microsoft, Inventor of Digital VAX computer Telecosm, like microcosm, is another interesting Gilder story. Like transistors that follow Moore’s Law, bandwidth increases at 60% per year. The Gilder Fallacy is that transistors and bandwidth will also be cheap. This may be true in the very long run, and I hope to live long enough to see it.
Meanwhile, the memory cartel has kept prices constant at $50 per megabyte and the telephone cartel has metered out bits in 64 kilobit POTS [plain old telephone service] = chunks for decades. For example, full ISDN lines (two voice lines) cost at least twice POTS. ISDN is also very inelegant since it makes poor use of the precious last mile, and is not adequate or scaleable. Only modems, created by a new datacom industry, have gotten faster. My version of the Internet story is at http://www.uvc.com. It is called “Internet 1.0 (Arpanet), 2.0 (today), and 3.0 (what we need),” subtitled: “It’s bandwidth and Symmetry, Stupid.”
In 1987, I chaired the cross-agency federal task force that proposed NREN [National Research and Education Network], aka NII [National Information Infrastructure], aka GII [Global Information Infrastructure]. Our recommendation was “that an advanced network be designed and developed to interconnect academic, industrial and government research facilities in the U.S.,” with the plan for a factor of a ten thousandfold increase in bandwidth by 2002. Things have gone according to our “vision” to maintain constant doubling for the last 25 years. Thank goodness Berners-Lee created the http://www network, aka the Web, so that Andreessen could build Mosaic and its viewers; that’s the serendipity part. Public funding of research (this time at Illinois’ National Center for Supercomputing Applications) “saved” us again.
Intermixed in Gilder’s piece is another story about a new Sun programming language, Java, which when combined with the Web, will render Microsoft ineffective. If that’s the case, then Sun needn’t support the anti-Microsoft legal consortium and should concentrate on toppling it with their products. However, as a newly hired Microsoft researcher, anxious to work his way down the corporate hierarchy to programmer, I hope that he’s wrong about our undoing. Microsoft is its own greatest enemy if it fails to make every product embrace the Internet. In an organization that has to keep with chaotic hardware platform evolution, having an external standard and threat is the best thing that could happen. Of the 50-plus million Word and PowerPoint users, however, perhaps 10,000 will see Java as an Internet development tool. More likely it’s a tool for developing Internet tools. Word already produced HTML pages and PowerPoint should have the goal of being the most used Internet content editor. I’ll bet that Windows NT (created by Dave Cutler, who also happens to be the world’s greatest programmer) will become the “standard” server platform, just as the Wintel platform, like the Gilders use, runs nearly all the viewers. As for staying in the center of the sphere—Gilder’s right: Andreessen’s there, but I wouldn’t count Gates out . . . yet.
Charles Mann, Contributing Editor, Atlantic Monthly
The vision Mr. Gilder proposes is wonderfully attractive–who could not like the idea of a future in which nobody has to struggle with the maddening limitations and incompatibilities of the PC? But the idea of plugging everyone into the Net for their work and play poses problems of its own, pride of place perhaps going to security. The number of Internet crackers and wannabe crackers is rising; worse, the very speed and ubiquity of the Net means that each new break-in technique becomes instantly available to all of them, as the spread of Root Kit an its analogues attests. Putting the whole world online will increase the opportunity for mischief enormously. At present, we have two basic means for fending off these guys–firewalls and encryption. Put crudely, firewalls are small computers that stand between you and the Net, scanning for unwanted incoming bits. (CheckPoint Software Technologies in Israel, makes one of the more interesting examples).
In one way or another, firewalls intercept and read parts of every Internet packet that comes your way. If everyone’s software is based somewhere “out there” on the web, the computing power and bandwidth required to filter every screen dump and rewrite through the firewall is interesting to contemplate.
A worse problem comes when the information is encrypted–how is the firewall to read it without decoding it? And if it does decode it, aren’t you decoding information outside the intended recipient network? It’s a problem. For this reason, most Net aficionados argue that some form of public-key encryption is the answer. Leaving aside the extraordinary reserves of computing power that will be required to encrypt every bit of info going in and out of every system in the world–and the even more vexing question of who will pay for it, a subject on which I am not nearly as sanguine as Mr. Gilder–one has to worry about the possibilities of breakthroughs such as those reported recently in Science, where researchers took advantage of the vagaries of quantum mechanics to reduce the time required to factor large numbers enormously. Because encryption in its present form depends on the huge amount of time it now takes to factor such numbers, these advances have dismaying implications. We could face a future in which advances in encryption and decoding race each other, Red Queen-style–hardly a situation favoring the confident use of a global network. Until these problems are resolved, they will be a big damper on the kind of bustling, productive, interconnected future that Mr. Gilder and I both hope is just around the corner.
Bob Metcalfe, Ethernet Inventor and 3Com Founder,
To refind Gilder’s model for how Gates gets dethroned, I’ll briefly explain how Gates made his billions. Gates came of age just as Grosch’s Law about the scale economies of bigger computers was giving way to Moore’s Law about the volume economies of smaller computers. Gates saw early and clearly the profit potential in controlling standards, like the horizontal protocol standards for communicating back and forth among computers, and like the vertical interface standards for communicating up and down between applications software and underlying computer operating systems software. I went with horizontal protocol standards, namely Ethernet, which I advanced by giving it away to all other comers. Gates went with vertical interface standards, namely IBM’s PC-DOS, which he advanced more shrewdly by giving it away to IBM but selling it to all comers.
To build the value of PC-DOS, Gates gathered a huge flock of application software developers and got them committed to his interface standards. Then by controlling changes to DOS’s interfaces, upgrading them step-by-step all the way up to Windows 95, Gates was also able to sell them over and over again in upgraded forms. With that money, he could exploit inside knowledge of his own interface changes to pick off one after another of the larger application developers, like those in word processing, spreadsheets, presentations and, now, electronic mail and databases. His only major failure to date has been in networking, where he’s failed so far to kill Novell. That failure involved control of Novell’s protocol standards rather than interface standards where Microsoft is king.
Gilder says that Moore’s Law is giving way to Metcalfe’s Law, which projects the runaway value of numerous internetworked computers. According to Gilder’s point of view, this exponential effect shifts importance from the vertical programming interface standards upon which the Redmond Rockefeller’s fortune is built to horizontal communication protocol standards which the likes of Marc Andreessen might be expected to dethrone Gates, perhaps becoming the Microsoft of the Internet. But Gates, of course, aims to be the Microsoft of the Internet. And he need only broaden his tried-and-true interface strategy to include the protocols from the World Wide Web, now threatening his standards dominance. Gates has the advantage of his current Windows monopoly, which he is now trying to leverage into control of the Web–let’s hope our antitrust sheepdogs eventually arrive on the scene. Andreessen and company have the disadvantage of coming from the virtuously open but fractious Unix world. Unless they can keep their Web standards act together, they will lose the Web to the Windows Microsoft Network in the same way they lost Unix to DOS.
MSN and Netscape will likely shape up to be the major opponents in the coming Web Wars. MSN is making its play to replace Berners-Lee’s Web standards with its own under Blackbird. Microsoft is now giving away MSN browsers like Netscape and can be expected at some point to sell MSN servers and tools directly opposite Netscape’s servers. Netscape, on the other hand, with its very busy Web pages is looking more and more like an on-line service in competition with MSN, advertising and all. I must say that this battle is one that my InfoWorld readers will enjoy, as the fierce competition will drive the Web toward its full potential. Gates doesn’t need it, and certainly doesn’t expect it from me, but I do have to defend him. Andreessen and company have not yet made their billions, and they now look innocently charming, gregarious and eager, attractive compared with the shrewd and intense Mr. Gates. But, I’ve seen close up what even $1 million can do to people, and frankly Gates handles his billions about as well as it is reasonable to expect.
Stephen S. Roach, Chief Economist, Morgan Stanley & Co.
Gilder’s gushing hype has finally come full circle. He has come to the key recognition that there’s more to the information age than the alluring power of Moore’s Law. This time-worn mantra of a vendor-driven rhetoric extols the miracles of performance of payback–the productivity paradox whereby startling advances in computational speed fail to deliver the value-added solutions that truly matter for society as a whole. But now Gilder heralds a new “killer app” in user-friendly browsers and new “minimalist” programming languages such as Java. But don’t count on it–at least not yet.
In the fast-track 1990s, technology must still come to grips with a profound upheaval in American lifestyles. For the first time ever, white-collar workers–fully two-thirds of the U.S. workforce–are being asked to up the ante of their own productivity contributions through longer and harder work, squeezing family and leisure time as never before in the last 50 years. Surfing the Net in a quest for the “best” application–and learning how to use each of the new tools–takes considerable time. And that’s the rub: Time-intensive surfing is in direct conflict with the harsh realities of a time-constrained era.
In the end, it all boils down to return. The average U.S. worker who has toiled under the burden of stagnant real wages for more than a decade will insist on measurable improvements in personal productivity before squandering ever-greater amounts of leisure and family time on an open-ended journey on the telecosm. However alluring the latest breakthroughs in electronic shopping, banking, and video selection may seem to be, my guess is that they don’t meet the hurdle rate for the average American. That’s the crux of the dilemma that Gilder still doesn’t get: The promises of the telecosm will ring hollow until new means of income generation and wealth creation for society as a whole are created. At best, a flexible software paradigm is merely another means to automate existing tasks. The big steps come with applications that truly change the functions of work and leisure. And they have yet to be taken.
Larry Ellison, Founder, CEO and Chairman, Oracle Systems Corp.
I believe George has it half right. The center of gravity is indeed shifting away from the personal computer and toward the network–specifically toward the Internet’s World Wide Web. Despite the Clinton administration’s most determined regulatory efforts, networks are getting faster and cheaper. Various telecommunication bills pending in Congress will decrease regulation, increase competition and accelerate this trend. Cost and ease-of-use improvements, plus video capability, will make the World Wide Web as popular as the familiar TV and telephone networks for communication and commerce, as well as for information and entertainment. Bandwidth will expand exponentially and so will the quality and quantity of information on the Net. The information age will move from dawn to full daylight. And our world will be changed. But probably not by Netscape: Wall Street and Mr. Gilder are greatly charmed by he most exciting startup since 3DO, but it is important to remember that Netscape’s improbably $2.4 billion valuation comes without earnings or any quick hope thereof.
In the absence of any commercial competition, Netscape was able to achieve a 70% =”market share” by distributing its browser for free via the Internet. When a clearly superior Browser becomes available, people will replace their Netscape browser just the way they got it–with the touch of a button. The most important new feature announced for a future version of the Netscape browser in Sun’s hot new Java programming language, which Sun is trying to make an open standard. We’re all for it, but you don’t get to be the next Microsoft by distributing Sun software and helping create open standards. You get to be Microsoft by creating your own proprietary standard, while convincing everybody it’s actually an open standard.
Fortunately, this trick usually works only once, so there will be no new Microsoft. One is quite enough, thank you. Marc Andreessen is not Bill Gates. It’s probably possible to be great without being Bill. But it takes a lot of work. Gates is the chairman of Microsoft, the CEO, its founder and the man who makes every key hiring decision. Andreessen is neither chairman (that’s Jim Clark), nor CEO (that’s Jim Barksdale), but a hired gun. Hired, in fact, by Jim Clark. History generally shows us only one Rockefeller per industry–the first one tends to get rid of future rivals. If a cosmic shift causes King Bill to lose his throne, it will not be filled by Andreessen or anybody else. There is no next Bill Gates–in software–at least.
Steve Case, President and CEO, America Online
I have a simple request: Let’s not forget about the customer. A “reality gap” exists between technologists (breathlessly enchanted with the latest and greatest revolutionary developments) and the mass consumer market (inevitably preferring evolutionary incrementalism). Invariably, developers have powerful workstations, superfast networks, and a certain affinity for complexity. Meanwhile, tens of millions of people out there struggle with memory-deprived 386s, painfully slow modems (in the real world 14.4 kbps is considered pretty fast, and 28.8 kbps is the promised land), and a tremendous thirst for simplicity.
Yes, telephone companies are getting more aggressive with ISDN pricing and marketing, and developers are reaching for plug-and-play solutions, but it’s still too hard and still too expensive. Yes, cable companies are testing cable modems, but the tests are going slowly and broad deployment is likely to take many years. Switching gears to software, Gilder embraces the commonly held notion that Netscape’s browser is the standard, commanding a dominant (“70%”) market share. But all of the commercial on-line services now provide Web access, and they have overnight become the dominant force in the consumer Web. Neither of the two largest existing players (AOL and CompuServe), nor the most significant entrant (Microsoft), are Netscape’s licensees, so Netscape’s market share is therefore zero in this emerging segment.
The already fragmented Web market is likely to get even more fragmented, creating havoc for publishers and confusion for consumers. Ultimately, the services with the largest audiences will drive standardization. So when I read about the “dynamically portable” Java, linked with the Netscape browser “standard” and coupled with a “bandwidth tidal wave,” leading a “telecosmic advance” towards a world chock-full of custom applets filled with tasty morsels of “executable content,” Exciting, but I wonder how — and when — it will all come together into a mass market for interactive services. People don’t buy browsers. They don’t buy objects. They don’t buy bandwidth. They buy services. They want access to a broad range of content, packaged and presented in a friendly, useful, engaging manner, priced simply and affordably, with a strong underlying sense of community.
At AOL, our aim is to reach tens of millions of people and help shape this new medium. We will continue to leverage technology to do — but we’ll also remind ourselves that although technologists believe the journey is the reward, for everybody else, the destination is what really counts.
George Gilder Replies:
When the responses to an article exceed the original in pith and pertinence, the writer may be tempted merely to step back, point and applaud. However, at the risk of revealing Forbes ASAP trade secrets, I will correct the impression that I am some kind of sappy seersucker who gets his information from doting CEOs, perhaps in the telephone and TV industries. In fact, much to the irritation of the PR firms surrounding large companies, I invariably rely mostly on engineers, programmers and other technologists and consult the imperial suits chiefly en route to the illuminati in the nether reaches of their companies.
As Stephen Roach of Morgan Stanley has noticed with some impatience, I also give short shrift to the kind of macrovisions, strategies and statistics that float up to the top of economic models. These data are too light on the technical details in which reside the angels and devils of industrial destiny. For example, Roach remains perplexed by the “productivity paradox,” the lack of evident payoff of information tools, the failures of the industry to surmount the hurdle rates of humbler households, all in the face of some 60 million worldwide prospective PC sales in 1995, exceeding TV unit sales in the U.S., with e-mail passing the U.S. Postal Service in message units. Meanwhile, U.S. companies are capturing some 50% of all the profits of the industrial world and maintaining market share between 60% and 90% in most leading-edge products, while deploying three times as much computer power per capita as either Europe or Japan.
Roach trusts government productivity data and wage levels more than the demonstrable achievements of U.S. companies and calls the conflict a portentous paradox. I say that both the wage and productivity data are largely bunkum, based on silly deflators that mostly fail to capture the plummeting prices in the industry, while U.S. leadership in PCs, peripherals, networks and software is the real payoff. PC companies alone have generated some $250 billion in market caps over the last decade; Internet companies will generate trillions. These bonanzas answer all the questions on hurdle rates and social yields (though if you want to see some real high-speed hurdling in homes, wait until cable modems proliferate next year). The payoff of information technology is the global leadership of the U.S. economy despite appalling policy mistakes from the Bush and Clinton administrations.
Like me, Andy Grove likes to wrangle and I hesitate to deny him his pugilistic jollies. Among the new technologies I did not like from the outset are HDTV, interactive TV, TV shopping, game machines, Japanese fifth-generation computers, NMOS, videophones, flash memories, serial Crays, Thinking Machines, 3DO and pencentric PDAs. But perhaps we can make a deal. I will concede to him and Andy Kessler that the use of the term “hollowing out of the computer,” borrowed from the estimable Eric Schmidt of Sun, is hyperbolic, even misleading in an absolute sense. But they should acknowledge that in relative terms, the balance between desktop and network is shifting sharply. After all, in five out of the six PC uses Grove cites, most of the value originates on the network. Nonetheless, I do cherish the PC; indeed, using the Internet, I believe it will displace both the telephone and television over the next five years or so.