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The Blankenhorn Effect: How to Put Moore's Law to Work for You

by Dana Blankenhorn

206 pages; quality trade paperback (softcover); catalogue #02-1082; ISBN 1-55395-367-3; US$24.95, C$38.95, EUR25.40, £17.60

The Blankenhorn Effect explains how Morre's Law, a challenge laid down in 1965, has been applied to all the technology we touch. Not only do billions of circuits dance on slivers no bigger than a fingernail, but similar improvements have been made in magnetic memory, optical memory, optical storage, and even radio to create today's Internet.

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about the book      about the author      excerpt      catalogue info

About the Book     The Blankenhorn Effect explains how Moore's Law, a challenge laid down in 1965, has been applied to all the technology we touch.     Not only have silicon engineers met Gordon Moore's 1965 challenge, so that today billions of circuits dance on slivers no bigger than a fingernail, but so have those working with magnetic memory, with optical memory, with optical storage, and even with radio to create today's Internet.     Here you can learn why copper networks are obsolete, see why Enron and Worldcom self-destructed, and meet the Hollywood starlet who created digital radio.     In just a few hours, The Blankenhorn Effect will turn you from a technology novice into a knowing member of the digerati, able to understand how Moore's Law is changing your work, your industry, and your children's future.     You'll also gain a new perspective on the future. You'll learn about exciting new frontiers of technology and get a list of detailed Web addresses you can use for your own flight to the future.     You are not a Dummie. But if you don't understand Moore's Law you've been made to feel like one. Now, with the Blankenhorn Effect, you can take your place confidently in the 21st century.

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About the Author     Dana Blankenhorn has been a technology journalist for over 20 years, and a professional journalist for 25. His fans compare his writing style to that of H. L. Menken, for its acerbic wit and biting satire.     Over the years Dana's articles and columns have appeared in dozens of newspapers and magazines, and on dozens of Web sites. His Interactive Age Daily was the first online news column covering the World Wide Web, in 1994. He as also written (or co-written) a half-dozen books. He's a proud alumnus of Rice University, and holds a Masters' in Journalism from Northwestern's Medill School. He currently writes the free weekly newsletter A-Clue.Com, and a blog at Corante.Com/mooreslore about technology trends. He lives in Atlanta, Georgia.

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Excerpt

The Kitten Market

    In the middle of the Internet bubble, a Houston company called Enron was playing fast-and-loose with technology, markets, and (possibly) the law.
    Enron was launched in the 1980s as an energy company. I knew its predecessor firm as Houston Natural Gas, a staid gas utility. But a combination of factors - the Internet, hubris and its own corporate culture among them - caused Enron to take another turn in the 1990s.
    Instead of just making and selling energy, Enron began making markets in energy. It bought, sold and traded gas, oil and electricity the way Wall Street firms did pork belly futures. But there was a difference. Not only did Enron organize the markets, it played in them, earning the kind of profits a dealer with a knowledge of fancy shuffles can earn at a poker table. Allegedly it played all sorts of other games to hide profits (and losses) from its shareholders, moving money into offshore affiliates and debt instruments. The Internet was Enron's great tool. The Internet allowed its traders to stay in touch with the markets, with one another, and with other traders. Enron's culture seemed to be like that of Microsoft, where the smartest people with the "highest bandwidth" (Microsoft-speak for smarts) were given free rein. In developing this culture Enron was following the advice of its own consultants, McKinsey & Co.
    Enron was politically plugged-in (its executives advised Governor George W. Bush and his Presidential campaign, while also giving substantially to Democrats), its results always seemed to "beat the market," and its stock price kept rising through the bubble years.
    Then, in 1999, Enron decided to enter yet another market, the market for fiber bandwidth. The company began to sign contracts for using the data carrying capacity of its own fiber network. It signed many such contracts.
    But bandwidth, as we've seen, isn't like oil, or gas, or electricity.
    In the energy markets, you have a good idea of supply as well as demand. (I started my journalism career in Houston, covering the oil boom of the late 1970s.) Someone in the "oilpatch" might bring in a new field, or a utility might adjust its generating capacity in response to summer's demand for air conditioning. But a savvy trader can balance supply-and-demand, on a yearly, monthly, or even real-time basis. Plus if you're both running the market and playing in it, you're like a Vegas card dealer who knows some card tricks and is betting in their own game - you can't lose.
    Bandwidth doesn't work that way. Bandwidth supply can explode, exponentially, and quite suddenly. A company has one line, but changes the electronics at each end, and suddenly it has 100, or 1,000 lines. Or a company is using a half-dozen fibers in one line and then decides to "light" the rest, again exploding capacity.
    The best analogy I can come up with is kittens. Economics teachers like to talk about widgets in their classes - imaginary products with endless utility but no real economic value. I figure kittens are the same way.
    Enron was trading kittens. It signed a contract for bandwidth, then assumed all its lines would sell for the same price. It knew the bandwidth was really costing it nothing to produce, so it set aside all that money as pure profit.
    The same thing can happen with kittens. Mr. & Mrs. Enron have two cats and a litter of 8 kittens. Some fool offers them $100 for one of the kittens. So they take the money, call it profit, and look again at the litter. I guess that means we have $700 worth of kittens, they figure, plus we still have the cats. Those cats might produce, say, a half-dozen more litters over their lifetime. And the kittens will produce cats, too. So the "asset value" of the two cats might be as much as $10,000. Guess where they put the money? Right, they bought more cats.
    But anyone whose cat has ever gotten pregnant knows that's not right. Yes, some fool might buy one of your kittens. But generally, kittens are hard to even give away. It's a relief for most families to relieve themselves of litters, and the next thing most families do is take those cats to the vet to get fixed, so the nightmare won't return.
    Unfortunately Enron's oh-so-clever "bandwidth traders" didn't know they were selling kittens. They thought they were selling an asset like oil or gas, something whose supply was limited and whose demand was growing. In fact they were selling something whose demand was constrained but whose supply was unlimited.
    A lot of other companies made the same mistake. In fact, the whole energy sector was treating bandwidth as an energy market. But when reality hit, when final demand didn't meet the unlimited supply made possible by DWDM and Moore's Law, Enron (and the other players) were caught-out.
    In 2001 executives debated whether the "bandwidth glut" was "fact or fiction." But reality eventually hit. So-called "OC-3" circuits, 155 Mbps lines running between New York and Los Angeles, worth $1.8 million per year in 2000, were trading for under $150,000 just 16 months later.

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Catalogue Information

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