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Gilder's Daily Prophecy

November 07, 2020

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Technology is Eclipsing the Mounting Complexity of the World

George GilderDear Daily Prophecy Reader,

While our retro-phasist comedian Governor Charlie Baker retreats from his tentative-reopening teases in phase four COVID plans — moving back to phase 3B with more masks and curfews — I got an emergency call from John McClaughry, a dauntless humorist and colleague from my youth.

An eminent Vermont legislator, founder-chairman of the Ethan Allen Institute, and author of the hilarious screed Fair Play for Frogs by Nestle J. Frobish — John was in a re-panic mode, suffering from satirical sclerosis (SS). SS is a deadly affliction that sets in when reality outdoes parody or comedy. It’s victims’ smiles stiffen into a mortuary rictus, like a Governor issuing new COVID rules.

I just ran in a half-marathon Halloween trail race in snowbound Thacher State Park outside of Albany, where in years past, “Hairy Gorillas” in masks ambushed us on the trails with Halloween howls and the course was bordered with cardboard gravestones with the names of the runners.

This year they decided, “That’s not funny!” and required the runners to wear the masks. We all had to be face-covered at the starting line, though we went off in waves six feet apart. Then they mandated reapplying the face coverings whenever we passed anyone on the trails and when we finished, and ordered us to carry cups with us in order to avoid contamination or congestion at water stops, and not gather after the race for prizes (no awards or food). And on and on into an egregious parody of precautionary overreach (like Baker’s glove mandate in nail salons, or Starbucks sealing off restrooms for “our safety and wellbeing.” Don’t they know that coffee is a diuretic?).

All this pettifoggery for outdoor racing has the chief effect of keeping people indoors where the virus (mostly innocuous) may actually spread. While 80% of the infections happen indoors, the mask rules chiefly apply outdoors. It’s another case of SS.

Joking about the COVID panic, I feel as if I was back in my anti-Feminist days of Sexual Suicide. “That’s not funny!!!” I’m told, and indeed no one is laughing any more in Maskachusetts or New York. They’re too busy piling up the “cases” with massive tests and retests and covidizing flu and pneumonia deaths into a fake second or third wave crisis (look ma, no flu anymore). In this SS extremity, I have got to call in cackle-power from out of state.

The Centralization of Technology

In a new compendium of decentralist essays, McClaughry threatened to reprint a chapter of my 1989 book Microcosm: The Quantum Era in Economics and Technology that appeared first in the Harvard Business Review in early 1988.

“Hey, that’s long-ago John,” I complained, “I’ll have to rewrite it. The Law of Micro-COVID SS, how no one appreciates our jokes anymore.”

But John was strangely serious. So I dug up the old Harvard Business Review and reread my “Law of the Microcosm” article. It read well — “The computer on a chip outperforms the computer on a pedestal” — but it did need some rebalancing between the rise of smart phones decentralizing everything, and the rise of data centers recentralizing information technology.

In the article and book, I answered the argument for centralization of technology by such multiply degreed pundits as Harvard’s Robert Reich, critic of chronic entrepreneurialism, MIT’s Lester Thurow, prophet of a zero-sum society, and MIT’s Charles H. Ferguson, exponent of a law of technological complexity.

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As Ferguson wrote: “Costs rise with complexity and complexity rises with the number of objects to be managed.” More transistors on more highly integrated circuits mean more complex systems that entail more hierarchical organizations, more government leadership ordaining standards and funding advanced research. Power, data, and money all rise to the top of a military-industrial complex.

Metcalfe’s law ordains that the number of connections between nodes of a network increases by the square of the number of nodes. Similarly, complexity rises by some exponent of the number of transistors on chips, of components in a data center, or lines of software code in a computer system.

Ferguson argued that the same law applies to semiconductor companies, which themselves comprise an industrial system of uncoordinated and narrow-based components that will suddenly be swamped by a tsunamic wave of complexity.

Thirty-two years later, where do we stand? Lester Thurow’s “Zero-Sum Society” seems to stretch out all around us, with constant plaints about a maldistribution of wealth. Robert Reich seems to have won on “chronic entrepreneurialism” as the number of initial public offering (IPOs) have shrunk to a precious lucrative few, the number of public companies has dropped over 50%, and the number of mergers and acquisitions has risen massively, by various measures, from around one twenty-second of the number of IPOs in the late-90’s to seven times more than the number of IPOs in recent years.

The movement to merge has broken out overwhelmingly in the microchip industry where Ferguson focused. Five years after Intel took over gate array star Altera for $16.7B, and three years after Intel’s $15B move on Israel’s automotive AI star Mobileye, and a few months after Intel’s acquisition of Israel’s AI star Habana and data transit leader Moovit. Now AMD is acquiring Altera-rival Xilinx for $35B.

Graphics processor and AI king Nvidia is absorbing Intel x86 standard microprocessor competitor ARM after moving on memory controller and network processor star Mellanox of Israel. Marvell acquired Octeon micro pioneer Cavium and is now moving to pick up communications connections’ leader InPhi just in time for 5G — the government’s hyped new mobile wireless standard.

Today’s Prophecy

What is going on here? Were these guys right and I wrong? Perish the thought!

Decentralization continues and accelerates with every new generation of smart phones and laptops more powerful than supercomputers of old, edge processors in compact “containers,” datacenters in automobiles, and blockchain distributed everywhere.

The yin and yang of consolidation and dispersion of power is ubiquitous and inexorable. But the ultimate rule — as I argue in Life After Google and my new short book Gaming AI — is that computer power is most effective when it is distributed as widely as the human minds that create it.

The ultimate law of the Microcosm still holds. Complexity increases in the macro world, but in the microcosm of semiconductors efficacy grows far faster than complexity.

As investors, we continue to bet on the rise of efficacy on single chips eclipsing the mounting complexity of the world. Your smart phone epitomizes the ever-increasing proportion of total computer power moving to the edge from the center and amplifying the power of human minds.

Regards,

George Gilder

George Gilder
Editor, Gilder's Daily Prophecy

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