The “genie out of the bottle” character of technological progress leads to some interesting possibilities.
If suppliers think that future demand will be high, then they’ll invest in research and development that
lowers the long-run cost of production, and those lower costs will stick permanently, even if future
demand turns out to be not too high.
Well, they might invest in r&d. If they can take adavatge to increasing returns to scale in meeting demand they’d likely
just build more whatevers.
Assuming you like the resulting price reductions, this could be interpreted as an argument in
favor of bubbles, at least if you ignore the long-term damage that these might impose on people’s
confidence to invest.
Interesting, but I think the damage to willingness to invest would be too dear a loss and wouldn’t assume it away.
Don’t know how much extra was gained through the tech bubble in terms of tech we wouldn’t otherwise have had.
The bublle was in speculative financial market investment and not necessarily in in real economy actual stuff. I’ll grant
there is probably some crossover. Still, if people see real value in production they will demand those goods. Did we
get some gains in housing tech that we wouldn’t otherwise have had because of the housing bubble?
The crucial ingredient needed for technological progress is that demand from a segment with just
the right level of purchasing power should be sufficiently high. A small population that’s willing
to pay exorbitant amounts won’t spur investments in cost-cutting:
Won’t it? I think it will. Lower costs → higher accounting profits.
In a sense, the market segments willing to pay more are “freeriding” off the others — they don’t care enough to
strike a tough bargain, but they benefit from the lower prices resulting from the others who do
I don’t follow this. Given that they are early-adopters, only other early adopters are present in the market at
that point in time. How can they be freeriding off consumers who are willing to strike a tough bargain, as you say,
if those bargain strikers are not present in the market by definition? You mean they benefit later when the later adopters enter?
presumably the ealry adopters are at that time moved on to something newer and better.
Note, however, that if the willingness to pay for the new population was dramatically lower than that
for the earlier one, there would be too large a gap to bridge.
This need not be the case especially in the face of further tech improvements in production or dramatically
lower costs of factors of production, even for exogenous reasons.
In particular, the vision of the Singularity is very impressive, but simply having that kind of end in mind 30 years down the
line isn’t sufficient for commercial investment in the technological progress that would be necessary.
The intermediate goals must be enticing enough.
True enough it seems. And this is they way of things. The prospect of offering
transcontinental flight to a european forager millenia ago would have been absurd. A hangliding tour, maybe not so much.
From #5
I can broadly support the segments you’ve categorised. But I disagree with the notion that
“Progress in all three areas is somewhat related but not too much. In particular, the middle
is the part that has seen the most progress over the last decade or so, perhaps because demand
in this sector is most robust and price-sensitive, or because the challenges there are the ones
that are easiest to tackle.”
What do you mean by progress? Does progress mean more stuff being made in that segment, as in, able to
produce more of it? Production technology or the technology product itself? In either case I think the are
inextricably linked from the top down.
From #6 and 7
When I first began using computers they were 16k. I was 7. I take your point about the lack of urgency for average PC users to have
a great deal more ROM or RAM. But we use computers to do tasks not for their own sake and I take your point about complementary tasks.
Where I disagree is “On either end, therefore, the incentives for innovation seem low”. If the tools are there, people will find ever
more awesome ways of using them, and that is the history of tech progress!
Keep at it. Happy to go into more detail if it might be useful. I’ve been thinking a lot lately about the order of realisation of various
‘singularity’ techs and why it matters. Anyone interested? If so I’ll post up my thoughts.
What do you mean by progress? Does progress mean more stuff being made in that segment, as in, able to produce more of it? Production technology or the technology product itself? In either case I think the are inextricably linked from the top down.
I meant technological progress that improves the price-performance tradeoff. I measure it by “what sort of prices do I see when I go to Amazon and search for USB flash drives?”
Where I disagree is “On either end, therefore, the incentives for innovation seem low”. If the tools are there, people will find ever more awesome ways of using them, and that is the history of tech progress!
I do agree that if the tools are there and people get them (essentially) for free they’ll find ways to use it. If the tools are there but at exorbitant prices, they won’t. This gets back to the question of whether it’s easy enough to improve the price-performance tradeoff sufficiently dramatically to get to the threshold where people are willing to pay for it. The existence of early adopters and intermediate populations can help bridge the chasm.
Well, they might invest in r&d. If they can take advantage to increasing returns to scale in meeting demand they’d likely just build more whatevers.
This is true, and relates to the points i made later about the nature of demand and production structure mattering.
Won’t it? I think it will. Lower costs → higher accounting profits.
See the PS where I go into this in more detail.
I don’t follow this. Given that they are early-adopters, only other early adopters are present in the market at that point in time. How can they be freeriding off consumers who are willing to strike a tough bargain, as you say, if those bargain strikers are not present in the market by definition? You mean they benefit later when the later adopters enter? presumably the early adopters are at that time moved on to something newer and better.
Perhaps my language wasn’t clear. Obviously, they’re not freeriding at the point in time when the market is young. But by the time the market gets large enough and costs drop, they are effectively freeriding.
For instance, I would probably pay something like $50/month for Facebook, but I get it for free because Facebook knows that most of its users wouldn’t be willing to pay for their service, so they offer it for free. So I save $50/month, freeriding on the stinginess of other users.
You may argue that the early adopters paid their dues by buying the technology early on. But there could be a bunch of young people who “would have been early adopters” if they’d been around in the technology’s infancy but they weren’t around.
This need not be the case especially in the face of further tech improvements in production or dramatically lower costs of factors of production, even for exogenous reasons.
Yes, that is correct, it need not be the case. At the same time, I think it’s a consideration.
Thanks for your very detailed and carefully explained thoughts! I’m a bit busy with other things right now. I’ll respond to your points in a day or two, after I get the opportunity to double-check some of the points you raised.
Part 2
From #3
Well, they might invest in r&d. If they can take adavatge to increasing returns to scale in meeting demand they’d likely just build more whatevers.
Interesting, but I think the damage to willingness to invest would be too dear a loss and wouldn’t assume it away. Don’t know how much extra was gained through the tech bubble in terms of tech we wouldn’t otherwise have had. The bublle was in speculative financial market investment and not necessarily in in real economy actual stuff. I’ll grant there is probably some crossover. Still, if people see real value in production they will demand those goods. Did we get some gains in housing tech that we wouldn’t otherwise have had because of the housing bubble?
Won’t it? I think it will. Lower costs → higher accounting profits.
I don’t follow this. Given that they are early-adopters, only other early adopters are present in the market at that point in time. How can they be freeriding off consumers who are willing to strike a tough bargain, as you say, if those bargain strikers are not present in the market by definition? You mean they benefit later when the later adopters enter? presumably the ealry adopters are at that time moved on to something newer and better.
This need not be the case especially in the face of further tech improvements in production or dramatically lower costs of factors of production, even for exogenous reasons.
True enough it seems. And this is they way of things. The prospect of offering transcontinental flight to a european forager millenia ago would have been absurd. A hangliding tour, maybe not so much.
From #5
I can broadly support the segments you’ve categorised. But I disagree with the notion that “Progress in all three areas is somewhat related but not too much. In particular, the middle is the part that has seen the most progress over the last decade or so, perhaps because demand in this sector is most robust and price-sensitive, or because the challenges there are the ones that are easiest to tackle.”
What do you mean by progress? Does progress mean more stuff being made in that segment, as in, able to produce more of it? Production technology or the technology product itself? In either case I think the are inextricably linked from the top down.
From #6 and 7
When I first began using computers they were 16k. I was 7. I take your point about the lack of urgency for average PC users to have a great deal more ROM or RAM. But we use computers to do tasks not for their own sake and I take your point about complementary tasks. Where I disagree is “On either end, therefore, the incentives for innovation seem low”. If the tools are there, people will find ever more awesome ways of using them, and that is the history of tech progress!
Keep at it. Happy to go into more detail if it might be useful. I’ve been thinking a lot lately about the order of realisation of various ‘singularity’ techs and why it matters. Anyone interested? If so I’ll post up my thoughts.
I meant technological progress that improves the price-performance tradeoff. I measure it by “what sort of prices do I see when I go to Amazon and search for USB flash drives?”
I do agree that if the tools are there and people get them (essentially) for free they’ll find ways to use it. If the tools are there but at exorbitant prices, they won’t. This gets back to the question of whether it’s easy enough to improve the price-performance tradeoff sufficiently dramatically to get to the threshold where people are willing to pay for it. The existence of early adopters and intermediate populations can help bridge the chasm.
Thanks once again for your comments!
This is true, and relates to the points i made later about the nature of demand and production structure mattering.
See the PS where I go into this in more detail.
Perhaps my language wasn’t clear. Obviously, they’re not freeriding at the point in time when the market is young. But by the time the market gets large enough and costs drop, they are effectively freeriding.
For instance, I would probably pay something like $50/month for Facebook, but I get it for free because Facebook knows that most of its users wouldn’t be willing to pay for their service, so they offer it for free. So I save $50/month, freeriding on the stinginess of other users.
You may argue that the early adopters paid their dues by buying the technology early on. But there could be a bunch of young people who “would have been early adopters” if they’d been around in the technology’s infancy but they weren’t around.
Yes, that is correct, it need not be the case. At the same time, I think it’s a consideration.
More in my next reply comment.
Also, my other posts may interest you. I look forward to your comments on those as well :).
Thanks for your very detailed and carefully explained thoughts! I’m a bit busy with other things right now. I’ll respond to your points in a day or two, after I get the opportunity to double-check some of the points you raised.