Investors Should Ignore Materialistic Superstitions

Nearly 40 years ago, in a Marriott next to the Newark Airport, Carver Mead of Caltech legend provided me with a crucial paradigmatic insight: Entrepreneurs succeed by wasting what is abundant to conserve what is scarce.

In technology today, the world reverberates with campaigns to waste what is scarceto save what is abundant. That is another way of saying that decisions are being made according to sentiment and convention, fashion and convenience, rather than according to the rigorous tests of entrepreneurial learning.

These errors open up new opportunities for savvy investors.

Wealth is not material resources. It is knowledge. Growth is not accumulated materials. It is learning. And money is not a commodity. It is tokenized time.

The prevailing paradigm is to save bandwidth, as if it were scarce. Waste transistors by the trillions for local processing (Moore’s Law — transistors become free), waste power by the thousands of watts (just plug your server into the socket in the wall), and waste silicon area by the thousands of square miles on printed circuit boards arrayed in serried rows of racks across the datacenters of the globe.

But bandwidth is not intrinsically scarce at all. In my book Telecosm (2000), I wrote: “The central event in technology over the last decade is a growing awareness that the electromagnetic spectrum — its bandwidth or range of frequencies and wavelengths available to carry signals — is not severely limited, as previously believed, but essentially infinite.”

Why save bandwidth in an era of bandwidth abundance? Measured by the expansion of Internet traffic at steadily declining prices, the price of bandwidth is decreasing and availability increasing by a factor some four times Moore’s Law.

Today, however, the telecommunications industry has allied with governments everywhere in a massive far-reaching campaign to conserve the electromagnetic spectrum. They claim it is precious, analogous to “beachfront property”. It must be nationalized and rationed out in “exclusive bands” by the government to winners of auctions.

Meanwhile, wasted wantonly are the potential talents of engineers who could vastly expand usable spectrum. Tapping more frequencies or wavelengths for use in communications entails increasing the sensitivity, selectivity, and isolation or granularity of the systems employed to access the “air.”

One theme of development is “software defined radios” that can change frequencies on the fly to adapt to available or unused spectrum. These “smart radios” or “cognitive radios” represent future generations of the spread spectrum tools pioneered over the last two decades by Qualcomm.

These “smart radios” can allow exploitation of underused spectrum spans such as the “white spaces” between TV channels. Called “very high” (VHF) and “ultra-high” (UHF), these are actually choice frequencies in the megahertz range that reach large distances and penetrate walls and foliage. Using agile transmitters or receivers to exploit temporarily vacant bands could obviate all auctions for exclusive spectrum.

A New Paradigm Underway

The new paradigm follows the priorities of Nick Tredennick’s “leading-edge wedge”— seeking to reconcile three incompatible goals:

  1. Zero delay or latency (fast hot chips for supercomputer processing)
  2. Zero power (cool low energy devices with unending battery life)
  3. Zero cost (free transistors and bandwidth).

Tredennick ordains: Waste bandwidth to conserve power (the relevant power supply is your smartphone battery, not the grid). Waste bandwidth to save silicon area (the relevant space is the constricted smartphone cavity, not the giant datacenter). And waste bandwidth to minimize cost by putting nearly all the functionality in a one-chip-system manufactured by the billions and interlinked around the globe (rather than buying billions of chips and jamming them together on those datacenter racks).

This trend can be summed up as moving computation from the datacenter to the “edge.” This advances the goals of zero delay, zero power, and zero cost.

From steam engines and coal providing power and replacing human muscle, to transistors replacing human rote calculations, to lasers and fiber optic lines multiplying bandwidth, technology continually supplies new abundances for entrepreneurs to exploit. But the political world prefers to obsess about possible scarcities.

Reflecting this deceptive salience of scarcities, materialist superstitions such as Marxism and environmentalism lead to zero-sum assumptions of economic reality. A gain by one party is always assumed to mean a loss by another; gains and losses always add up to zero. Larger populations always burden the planet rather than increase the abundance of creative minds to enhance it.

The economists’ stress on scarcity also springs from professional biases. Shortages are measurable and end at zero. They constrain an economic model to produce a calculable and deterministic result.

Abundances, by contrast, are difficult to calculate and have no obvious cap. They tend to end in a near-zero price and thus escape economics altogether. As they become more vast and vital — like air and human creativity — they become invisible economically. Economists relegate them to the category of “externalities,” which are not their department. Socialists move in eagerly to take them over for governments.

My critic from Purdue, Habi Zhang, points out that the entire field of economics seeks this predictability and determinism. Thus, economists will reject my information theory of economics with its stress on unpredictable abundances. Information theory, after all, defines information as surprising or unexpected knowledge. Therefore, deterministic sequences bear no information.

Today’s Prophecy

To the extent that economics is deterministic — it can surely predict the future from the past — it cannot anticipate the most important economic events as defined by their information content or entropy. These events are entrepreneurial inventions springing from human creativity, which always come as a surprise to us.

So, paradigms cannot determine the future. The future will nearly always surprise us. But paradigms can point us where to look.

As Japanese futurist Taichi Sakaiya wrote, echoing Carver Mead: “Survival dictates that human beings develop ethics and aesthetics that favors exploiting fully those resources that are abundant and economizing on what is scarce.”

A good way to tell the difference is to recognize that the ultimate scarcity is time and that real money is tokenized time. The goal of economic activity is to waste resources, which are always abundant, to save time, which is inexorably scarce. Ultimately, limiting time are the speed of light and the span of life.

Today, with “sustainability” cults and notions of “peak” physical resources (name your favorite exhaustion theory) we are in danger of doing the opposite. We are pursuing a fools’ errand, wasting our precious minds and minutes in order to conserve infinitely abundant and eternal atoms and frequencies.

Investors should always seek entrepreneurs who are tapping new abundances of technology, rather than nursing old scarcities and materialist superstitions.

Regards,

George Gilder
Editor, Gilder’s Daily Prophecy

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George Gilder

George Gilder is the most knowledgeable man in America when it comes to the future of technology — and its impact on our lives.

He’s an established investor, writer, and economist with an uncanny ability to foresee how new breakthroughs will play out, years in advance.

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