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Day 3 Summary – Gilder Telecosm 2006

Steve Forbes, John Rutledge, and Carver Mead. In one day, in one place. Fantastic stuff, though readers should be warned you’ll gain more insight into my political rather than my technical beliefs by reading this post. You can be assured they are just as opinionated.

The day began with Steve Forbes and a lightweight ‘Don’t Worry, Be Happy’ presentation. If you are familiar with his platform, you have an idea of what he talked about and I will not go into detail. It was fantastic to see him speak in person. It’s clear why his Presidential bid failed – the guy is just too honest about what he believes in. Either you agree with his ideas or you don’t, and for the most part I do. Where do I disagree?

  • I don’t buy into the concept that Gold is the uber-currency because it is an empty store of value. You buy gold, it just sits there. It’s a non-productive asset. The concept of Gold as a currency is just as creaky as the Bretton Woods hotel it was originally proposed at.
  • He also waved off the risk of trade imbalances. While I am more terrified of the idea of the government ‘doing something’ I am not comfortable that the export of our wealth to China in exchange for cheap plastic furniture and other useless crap at Wall-Mart is not a problem.
  • Forbes also told us to prepare for conflict with Iran. Sorry, but the stick doesn’t seem to be working to well on the Islamists. Let’s figure out how to make them rich- more Milken and less Forbes.

John Rutledge followed up. I was not familiar with him until today, and his ideas resonated with me in a particularly strong way.  He keeps a blog here.

One of his ideas that resonated with me was the concept of redistributing Iraq oil wealth to the citizens of Iraq – a la the state of Alaska. This would have the positive effect of incentivizing citizens to crush the insurgency and give people a stake in the countries future. It’s classic Reagan thinking, and I like it.

I am willing to bet it would also fracture Iraq from the OPEC alliance, as the citizens would be jumping up and down to pump oil. I wonder if this is an intended outcome…

He also talked about the risks involved with globalization and that in the aggregate it is fantastic, but there would be local discontinuities that suffered – like the guy turning a wrench in Kentucky. My opinion: you cannot have Democracy without a middle class, and it is this wealth gap that Schumpeter warned us about we he envisioned an eventual fall of entrepreneurship to socialism.

I sat with Rutledge at his table at lunch and was lucky to participate in a wide ranging discussion. I proposed that he familiarize himself with the ideas of GaveKal, and read their book The Brave New World. It’s a fantastic take on how globalization financially impacts investors, governments and corporations. It is a must read. Several people at the conference were familiar with them, and I noticed two copies of the book. Gilder should get GaveKal to come next year as their message would resonate well with the audience.

The conference wrapped with Carver Mead. He is a living tech legend. He also wrote my college textbook on VLSI (Still on my shelf, should have brought it for an autograph). He talked about our incredible progress in computing and how it has been totally meaningless in the context of artificial intelligence.

  • Ben Franklin was his childhood hero
  • He still has copies of Gordon Moore’s sketches that lead to Moore’s law
  • No one initially believed that shrinking transistors by 1/2 would double the speed and cut power usage by a factor of 8. It was “A flagrant violation of Murphy’s law”
  • Speed and density went up, but supply voltages never dropped at the same rate (I think this is because of noise immunity) so power consumption skyrocketed. This wasn’t a big problem until 10 years ago.
  • Impinj (Chris Segura, are you out there?) builds a .5cm^2 RFID chip with full digital radio, Flash memory and CPU that runs on 5 microwatts. This is 1/10000 the power density of an Intel CPU.
  • Artificial Intelligence is not a computing power problem, it is a problem of too many inputs. It is a classic pattern recognition problem. Our best CPU’s cannot compete with the goo in the brain of a housefly dissipating a few mW.
  • Described the brain and synapses as a very big analog mux tree, with many inputs and a few outputs. These mux trees are all cross wired. Most Input pulse sequences are squelched by the tree, some are amplified.
  • This computing concept is exponentially more powerful than the one we use today. There is no reason why this could not be done in silicon.

There were several company presentations during the day in addition to the above presenters. When I get the time, I’ll post my thoughts and notes on the Ikanos (IKAN), EZ-Chip (LNOP). Raza Microelectronics, and Sigma Designs (SIGM) as well as a final wrap up.

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Rutledge Notes

  • It’s now fashionable to call everyone a Fascist. Gilder is a “Tech Fascist” :)
  • Not fair to judge people you don’t know and blow up people you haven’t met.
  • Same danger applies to American perceptions of China. They are hungry and Americans don’t realize it. He feels it is necessary to educate the American people to the entrepreneurial spirit of the Chinese people.
  • Saper Vedere – Leonardo di Vinci – To know how to see. It is more important to envision the final sculpture than it is to wield the chisel. This is also a good model for investing.
  • You need idiots in the marketplace to misprice assets. Otherwise it is impossible to make money. Followers of Macroeconomics provide a ready supply of idiots.
  • Recessions happen when small businesses and companies can’t access capital at market rates and instead must pay higher ‘shadow pricing’ rates.
  • Discussion of Ricardian growth. Ricardo assumed that physical and human capital couldn’t flow. 200 years ago he was right. Modern reality is that physical capital flows from the developed world to the emerging markets, and human capital flows from emerging markets to the developed world. Telecommunications has connected the service sectors and created very large bidirectional capital flows that can change very quickly. This creates discontinuities and investment opportunities.
  • These large flows are turbulent, and while global GDP will improve, and USA GDP may improve, but many people in the US will lose out and this is a problem. Unskilled workers are in big trouble.
  • Inflation is such a destructive force in China, and caused so many revolutions, that they have pegged their currency to the US. This effectively outsources inflation control, and they believe the US will do a better job then their own government.
  • Financial market prices are wrong. Biggest area of discontinuity is telecom. More specifics here would have been better given the audience.

This post is one of a series as I blog the Gilder Telecosm 2006 conference. All posts can be found by searching for ‘Telecosm 2006′.

Discussion

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  1. Andrew, I am still out here :) RFID is an excellent example of Moore’s law in action. The early Intel 8086 contained about 29k transistors and was ~33mm^2. Fast forward 25 years later and typical RFID chips contain several thousands more transistors than the 8086 but yet are only 0.5mm^2 (typical chip is about 700um on a side) in area and getting smaller.

    Posted by Chris Segura | October 10, 2006, 12:42 PM
  2. Andrew, if you’re interesting in Forbes Iran comments, you might be interested in this:

    http://www.theoildrum.com/story/2006/10/5/215316/408

    Posted by RinseAndRepeat | October 10, 2006, 3:56 PM
  3. I believe you misunderstand or at least mis-state Forbes’ (and most other classical economists’) position on the use of gold. Gold need not be the currency and in fact is impractical as currency. But the value of gold offers a measure – hopefully constant – that can be used to determine, even if loosely, that the correct amount of money is being added or subtracted from the economy. Think of it as a monetary North Star. The best explanation you will find is probably the relevant chapter in Jude Wanniski’s The Way The World Works. Jude was an oddball in some ways but he nailed it here.

    Posted by Mike Sanders | October 11, 2006, 9:48 AM
  4. So Rutledge said Telecom is mis-priced but he didn’t say in which direction? That’s not really fair.

    –Scott

    Posted by Scott Raynovich | January 9, 2007, 10:33 AM
  5. On Gold and Supply Side economics:

    Gold is a horrible investment. Until it’s not. Its “dead money” property is exactly what makes it a good currency. It’s nonfungible, shiny, and historically ubiquitous. This is what makes it great during times of financial crisis –you know that gold will always be gold. I think its a dandy thing to have when the world financial systems get a bit wobbly, especially when currencies around the world are being manipulated to all get-go. IMO gold is going higher now.

    On supply siders: Cheap capital is great but can’t you go overboard? One by-product of the oversupply of capital is financial shenanigans. Check out 1999 and Enron. When money is cheap, it’s easy to disguise fraud. And the greatest businesses are build in tough times, when money is tight, because it is such a challenge.

    Posted by Scott Raynovich | January 9, 2007, 11:50 AM
  6. Scott- his comment about mispricing assets was a general one, not focused on telecom.

    Posted by Andrew Schmitt | January 10, 2007, 1:14 AM
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