The Flawed Argument that Tech is Too Cheap to Meter

Vinnie raises two very good points about Moore’s Law and consumer vs. enterprise scale, all in response to Chris Anderson’s contention that the tech industry preoccupies itself with managing scarcity when it should be taking advantage of an abundance of capacity and encouraging waste.

I want to pick on Moore’s Law for a minute, which is relevant because Anderson devotes a significant amount of his foundational argument to it. Moore’s Law is one of a great many axioms that gets bastardized to fit any argument and in the process the originating thesis is discarded for convenience. Metcalfe’s Law and Gilder’s Law are similarly applied to things they never we intended for… I guess the only true law is that every industry sector believes they are deserving on their own grand unifying theory that can be used to justify continued capital expenditures.

I don’t consider myself an expert on semiconductor manufacturing but I do know enough about it to understand that Moore’s Law focuses on the cost of manufacturing as a consequence of fitting more on to a single chip which results in greater density on a wafer which then results in greater yield because wafers are round and flaws typically concentrate around the perimeter which as a declines as a percentage of total volume as the wafer grows in size and/or achieves higher density. The declining consumer cost was not a result of chip density but the manufacturing unit cost decline experienced through increased yields.

Unfortunately for those that attempt to apply Moore’s Law for their own purposes, there is a second law that Moore observed that the R&D and manufacturing capital expenditures are enormous for each new node on the curve, rising exponentially for each new generation of fab. This helps explain why the semiconductor industry hemorrhages money when operating at anything less than 100% of capacity.

There is something quite relevant in Moore’s second law that counteracts Anderson’s free theory… because we all know that nothing is free and services that are free to the consumer are simply cost shifted to another constituency. Like semiconductors, in order to Anderson’s free theories to apply the producer has to be able to sustain massive volumes as near 100% of capacity utilization in order to justify the increasing capital expenditures required for each new generation of service.