Chapter 26 Section 3 Reverse Moore's Law

Eric Schmidt, CEO of Google (Google), pointed out in an interview that if you look at Moore's theorem in reverse, if an IT company sells the same amount of the same products today as it did eighteen months ago, its Turnover will drop by half. IT circles call it Anti-Moore's Theorem.Anti-Moore's theorem is very sad for all IT companies, because an IT company spends the same labor, but only gets half of the previous income.Anti-Moore's theorem forces all hardware equipment companies to catch up with the update speed stipulated by Moore's theorem.In fact, all hardware and equipment manufacturers live very hard.The following table lists the stock value of the largest companies in each field today and the proportion of their highest value.

IBM: 82%. CISCO: 40% Intel: 33% AMD: 30% Marvel: 60% HP: 70% Dell: 35% Sun Microsystems: 10% Motorola: 33% Among them, except that IBM is not just a hardware manufacturer, but has strong service and software revenue to maintain the stock at a high level, the rest of the companies are far from their best level.And today, the U.S. stock market is almost at an all-time high.This shows that hardware-based companies are struggling to survive due to the influence of anti-Moore's theorem.If you are interested in reading the financial reports of these companies, you will find that the development of these companies is very volatile. Once they cannot achieve the development speed stipulated by Moore's Theorem, their profitability will plummet.Some companies may even suffer catastrophe, such as SGI, which was very prosperous ten years ago.Even if they develop well today, there is no guarantee that they will double their progress ten years later. Therefore, investment guru Buffett never invests in these IT companies.

In fact, the positive side of the anti-Moore's theorem is more important, it promotes qualitative progress in the field of science and technology, and provides the possibility of survival and development for emerging companies.Like the development of all things, there are two kinds of technological progress in the IT field: quantitative change and qualitative change.For example, if the architecture of the same processor has not changed much, but only the main frequency has been increased, this kind of progress is the progress of quantitative change.When the processor rises from sixteen bits to thirty-two bits, and then to sixty-four bits, there is a small qualitative change.If one day nanotechnology or biotechnology can be used, then a qualitative leap will be achieved, and the integration level of semiconductors will increase hundreds of times.To catch up with the pace of development predicted by Moore's theorem, quantitative changes will not be enough.Every technology, within a few years, the potential of quantitative change will be tapped out, and at this time, revolutionary inventions must be born.

In the process of quantitative changes in technological progress, new small companies cannot compete with old large companies, because the latter have unparalleled advantages in old technologies.For example, Nokia, which was born in a wood factory, cannot compete with Motorola, the leader of traditional communication equipment, on old-fashioned analog mobile phones.However, some small companies will do better than large companies in seizing opportunities for qualitative change, because they have no burden and are more flexible than large companies.This is why there are so many new technology companies in Silicon Valley.

Thirteen years ago, my first Internet connection was with a 2.4 kilobaud (Kbps) modem.Two years later, one of my classmates, the founder of Netscape, the earliest Internet company in China, gave me a modem with the latest 14.4Kbps at that time, and I immediately felt that the speed was much faster.Since the transmission rate of our digital telephone today is limited to 64Kbps, the transmission rate of the modem can reach up to 56Kbps, so by 1995, several of my colleagues predicted that the speed of Internet access with telephone lines would not exceed this limit.If you stay in the traditional way of speeding up the modem, it is true that Moore's theorem will not apply in a few years.But in the 1990s, DSL technology appeared, which can increase the data transmission speed on the telephone line by nearly 200 times. Although the DSL technology was first published by the Bell Core Laboratory, it was Professor John Chaffee of Stanford University who really turned it into a practical technology.Professor Chaffee became a Fellow of IEEE when he was in his thirties, and became a member of the American Academy of Engineering when he was just forty. In 1991, with several of his students, he started a small DSL company, Amati. In 1997, he sold Amati to Texas Instruments (TI) for $400 million.This is a typical success story of a new technology company in Silicon Valley.In the quantitative stage of modem development, there will not be a small company like Amati, and even if it does, it will not be able to compete with Texas Instruments.However, once modem speeds approached the original limit, the new companies that can break through this limit have a chance to enter the stage of history.

Anti-Moore's theorem makes it impossible for the IT industry to only pursue quantitative changes like the oil industry or the aircraft manufacturing industry, but must constantly look for revolutionary inventions.Because any company whose technological development cannot keep up with the requirements of Moore's Theorem will be eliminated in a few years.Large companies, in addition to maintaining high R&D investment, must always pay attention to the development of new technologies related to themselves, and often acquire small companies with revolutionary new technologies.They even put money into some promising small companies.In this regard, the most typical representative is Cisco, which has bought back many small companies it invested in in the past two decades.

Anti-Moore's theorem also makes it possible for emerging small companies to be on the same starting line as large companies in developing new technologies.If a small company is successful, it can be acquired by a large company like Amati (this is a good thing for founders, investors, and all employees).Even they have the potential to replace the original big companies in their respective fields.For example, in the design of communication chips, BroadCom and Marvell have largely replaced the original Lucent's semiconductor department, and even Intel's business in the corresponding field.

Of course, running a company requires money, and no one can guarantee that an investment in a new company will be profitable.Some investors who are willing to take risks and pursue high returns put their money together, hand it over to professionals who know both financial management and technology, and invest in promising companies and individuals. This has gradually formed the venture capital mechanism in the United States. .Running a high-tech company also requires like-minded professionals who are willing to take risks. They are more interested in partially owning a company than relatively high wages, so there is an option system for high-tech company employees.

Since the development of the IT industry, it has its own way of survival and development.Instead of shrinking because of falling prices, it is growing more and more prosperous.We will introduce its development law successively in the future. Generally speaking, the IT industry is a rapidly developing industry; developing in this industry is like sailing against the current, if you do not advance, you will retreat.Due to the effect of Andy Beer's law, in the industrial chain of the IT industry, the upstream is the "invisible and intangible" software and IT service industry, while the downstream is the "visible and tangible" hardware and semiconductors .Therefore, if you are engaged in the IT industry and want to obtain high profits, you must start from the upstream.From Microsoft, to Google, to Facebook, it's all the same.The only exception is Apple, which realizes the value of software through hardware, because its products have become a fashion and trend in the past decade.