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The Technical Whirlwind

By Roy D. Follendore III

Copyright (c) 2001 by RDFollendoreIII


July 10, 2001

We are all in effect riding on a technical whirlwind and we are all wondering how the ride will end.  I have previously explained that Tech Stocks have and always will have economic value and that is true.  Just as there is an arrow of time, there is an arrow to manufacturing of technology.  We simply can't go backwards in technology because old technology could not be profitably manufactured any longer.  Modern technology not only does far more than it used to do, it also does far less.  Take computers for example.  Over the years modern computers have become capable of processing many more kinds of data, information at far faster rates and they employ far less of people's time in doing so.  

Once they are purchased and become fully operational, new technology computation, transport and presentation become so cheap it is all but free, and yet it takes vast amounts of World economic resources to maintain and upgrade by organizations.  Everyone in modern business eventually comes to understand just how fast a computer needs to be replaced because it eventually becomes too slow, and quickly does not have enough resources like memory or hard disk space.  What is often misunderstood, particularly by economic investors is that this is not simply a direct product of technology for technology sake, but is a phenomena emerging from an essential expression human dynamics. 

To begin to understand this let's do a small small experiment of the mind.  Let's assume that for a moment we could stop technical progress and consider the basic consequences.  We stop the technical engine.  If there were a sudden stoppage of technology growth, those organizations with the latest technology would not necessarily be better off than those with technology that is two generations old.  Two generation old technology would also be far superior to three and four generation technology.  The reason for this is simple.  First and second generation technology is not yet fully integrated.  Interoperability, and access to replacement parts are not just an important part of technical expansion, it is also an essential part of daily maintenance. Moreover, software and hardware bugs need to be managed and that just can't be accomplished without change.  Two generation technology is known, but first generation technology, is simply unknown.

When we turn back on our technology engine we find that the unknown is part of productive value becomes all of the "bandwidth" of technology transfer.  There is an absolute cost to maintaining old technology too long and that is simply that it becomes unprofitable to maintain.  The reason for this begins with the simple human emotion of fear.  People fear risk and it is risky to refuse change.  Even costly uncertainties of untried technical risk feels better than the certainty of the risk of failure through diminished returns and it is true.  

Competitive business requires the acceptance of risk.  Some may benefit and gain from technical change, but certainly others will fail and failure can be in and of itself a positive change as a whole.  It is through failure as much as success that true market contenders emerge.  

One might think that one could simply rise to the top market position through the failure of others to make the good technical decisions, but just remember that no decision is in effect a decision in and of itself.    We must not forget that this technical engine relentlessly continues moving.  The certainty of technical risk increases with time, it does not simply stop because decisions are not made.  To stay in a current third rate position, technical decisions must be made at the same rate as if we were contenders for the top position.  The difference is that each independent decision does not have to be as risky because the reliability of the technology is expected to be known.

All of this is great to understand, but from a technical perspective if you do not get anything else get this one single idea.   

The only way to continue to move forward in the competitive status quo and gain the major portion of economic share is to go for and remain at the top position in technology.  

The difference in revenue can be substantial.  The forces that drive technology stocks are fundamental to the nature of who and what we are as organizations and we can not change that.  Only one thing is certain, this tornado is self sustaining because it is integrally hooked into the basic fabric of our economy, and to us.

 It is the same kinds of internal qualities that drive the desire for new technologies that drive the stock market investors.   Those who are complaining of their loss of tech stock value will be the same ones that complain that they missed the ship when tech stocks rebound and they get on board too late.  There will always be winners and losers when people play with dynamic forces as zero sum games.    




Copyright (c) 2001-2007 RDFollendoreIII All Rights Reserved