SES NYC Day 2 Keynote – Nick Carr “The Big Switch”

SES New York is in full swing. The energy level of the show is very good – with a buzz reminiscent of a few years ago. I really like the way the new format is shaping up. The sponsored session about Google Analytics and Website Optimizer were packed, with people covering every inch of floor space. There seems to be a lot of interest in unfiltered information from the leading companies in the space. The solo session (versus panel) format is also holding its own, with high attendance and positive response from the audience.

Nick Carr’s keynote kicked off the day with a discussion based on his new book “The Big Switch”. He draws strong parallels between the electrification of industrial countries in the 1800’s and the creation of the “worldwide computer” being ushered in by the Internet. Power generation used to be a necessity for every business, and needed to be developed locally within it. As soon as large-scale generating plants and distribution via wires made it possible to get power to the end-customers, local power generation plunged (to its current 5% levels). The “grid” had won via its scale and efficiencies and allowed all kinds of “innovations at the socket”. New appliances and devices like the refrigerator, and television transformed our daily lives.

Computers are next. A similar transformation is happening with the Internet. Like the electrical grid, computer networks are both “general purpose technologies”, and in fact are the only two that can be supplied over a grid or network.

Currently most companies maintain local data-centers to support their operations at an ever increasing cost (with I.T. labor growing from 5% to 45% of total capital equipment budgets between 1968 and 2000). Each business is in effect producing local power – much in the way industrial companies did 150 years ago. This enormous drag on productivity can be freed up as soon as computing power, storage, and bandwidth become commodities that can be supplied by the worldwide “cloud”. The cloud taps into the efficiencies of the large centralized data centers being built by the likes of Google. With increases in bandwidth, and the “virtualization” of hardware (emulating hardware in software to deploy server configurations of arbitrary scale efficiently), it finally becomes possible to efficiently draw computing power and data storage from the cloud.

Several trends were predicted by Mr. Carr as a result of this transition:
– Software as media – The line between the two will blur as entertainment and technology companies battle for turf
– Continued consolidation – The percentage of total pageviews for the top-10 Internet properties has actually risen from 31% in 2001 to 40% in 2006 (while overall volume grew 75%)
– The worker-less company – Large worldwide enterprises built on cheap infrastructure can spring up overnight based on increasing retunrs-to-scale, global reach, and free user-generated content (Skype, YouTube, CraigsList, and PlentyOfFish)

But everything is not perfect and rosy. One of the implications of these trends is the continued concentration of power and wealth in the hands of the “digital elites”, and the corresponding stagnation or actual decline of middle class quality of life. There are also significant privacy implications as our personal data is stored centrally and aggregated. Increasing polarization and balkanization of viewpoints is a growing problem as people get only the information that supports and reinforces their pre-existing point of view. The emerging “world wide computer” both liberates us (giving us choice) and controls us in gross and subtle ways (often without our knowledge). This tug-of-war is inherent, and should be consciously fought and debated by everyone.

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