Two days ago, the tech sector was all ears in anticipation of Cisco's announcement that was going to, in the company's words, "forever change the internet". Yesterday, following the announcement of CRS-3, Cisco's new, powerful router that can move up to 322 terabits per second, there seemed to be an air of disappointment. Cisco stock was down slightly following the news. My sense is that the market has been expecting a new business/product line, as Cisco's been getting closer to the consumer (via the Flip) and these days, announcements like this have been Apple's provenance with very cool consumer devices.
However, I think the announcement is extremely important, as it brings us closer to an "always connected" environment. Cloud computing and multimedia streaming have been two huge ideas over the last couple of years, and the reason is that they contain an enormous value proposition, through optimization of resources at the network level. This is dependent entirely on the bandwidth of the network. And the routers can be a big source of bottleneck on the network.
Two weeks ago, I had the chance to experience Cisco's telepresence offering and I can vouch that it was like nothing I have seen before. The experience was virtually indistinguishable from an in-person meeting. The CRS-3 is a critical step in beginning the proliferation of the bandwidth that makes such an experience possible, the elimination of the router
bottleneck and is a big step towards "forever changing the internet".
To close out, I want to relay a few soundbites from the announcement in terms of what the new router enables (via Mashable):
– the entire printed collection of the Library of Congress to be downloaded in just over one second
– every man, woman and child in China to make a video call, simultaneously
– every motion picture ever created to be streamed in less than four minutes.
Larry Cheng has a post a few days ago listing the decade-by-decade returns of major US financial indices. Here are the returns from 2000 to 2010:
I am not an Economist so I will not comment on the first two numbers, except that, as Larry also notes, it's much more difficult to count on 6-8% returns from the stock market that we've been taught to assume.
However, the NASDAQ number does make me think. 2000-2010 was the decade in which we saw the biggest breakthroughs in the connected economy. In this decade, we saw:
- The maturing of Google as the precursor of the connected OS.
- The enormous drop in the cost to test ideas by creating lean startups.
- The emergence of video over IP, with Youtube (Google) streaming more than a billion videos a day now.
- The creation of the first attempts to own the identity layer of the connected economy, with Facebook and Twitter.
- The blockbuster hits of digital media consumption hardware, with the iPod and perhaps the Kindle.
- The biggest milestones of the mobile computing convergence: the iPhone and Blackberry.
- The breaking of stale structures of content creation and distribution, through blogging and social media.
- The availability of almost-free voice communication with Skype.
- The power with which customers of content innovate to get to content of their choice, legally or otherwise, at minimal cost, represented by the torrent universe.
Each of these areas represent enormous leaps forward in utility and value. Yet, the financial proxy for these innovations, arguably NASDAQ, is down for the decade. My explanation for this is the inefficiency of the index in representing this value.
The individual stock prices and market capitalizations may be less and less relevant in accurately representing the value these companies will generate. How do you value a record label during a seismic shift in how digital content is consumed? How could we have been able to predict the impact of iPhone, Kindle, or Google in our lives, before these products are launched? This problem cuts both ways. It can over or under-represent a technology/media company's value.
My point is that we are coming out of a decade of giant leaps forward in the connected economy. The reflection of this massive creation of value and decrease of friction will have to be represented in dollars and cents. Apparently, it is not being reflected in NASDAQ just yet. Maybe it will catch up, or manifest itself through other measures. However, I continue to be very bullish about the economic implications of the connected economy.