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Thread ID: 57183	2005-04-25 22:15:00	Tuesday thoughts	Cicero (40)	PC World Chat

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348733	2005-04-25 22:15:00	Moore's Law . Listen to a billionaire explain why an understanding of Moore's Law is a key to unlocking business riches . Don Valentine founded Sequoia Capital in 1972 and presided over early investments in Apple Computer, Electronic Arts, Cisco Systems, Yahoo! and Google . He once told me the secret to his success: "That's easy . I just follow Moore's Law and make a few guesses about its consequences . " This April marked the 40th anniversary of Gordon Moore's famous dictum . In 1965 Moore (he co-founded Intel three years later) noted that components on silicon chips were doubling every year . In 1975 he amended that to every two years . Today Moore's Law has transcended silicon chips . It has become a way of saying that all digital stuff, from PCs to cell phones to music players, get twice as good every 18 to 24 months--at the same price point . Projecting from Moore's Law, venture capitalist Valentine saw a future of personal computers, games, routers and search engines . Now, go project! • The Back Side of Moore's Law . This one says that digital stuff gets 30% to 40% cheaper every year--at the same performance point . The back side of Moore's Law is why your $299 Treo 650 is as powerful as a $3,500 Compaq PC was in 1988 . It's why hundreds of millions of Chinese and Indians now own their personal portals to the global economy . • Andy and Bill's Law . The origin of this was a funny one-liner told at computer conferences in the 1990s . It went like this: "What Andy giveth, Bill taketh away . " It meant that every time Andy Grove--then chief executive of Intel (nasdaq: INTC - news - people )--brought a new chip to market, Bill Gates--then CEO of Microsoft (nasdaq: MSFT - news - people )--would upgrade his software and soak up the new chip's power . But beyond the laugh, there's deep truth . Moore's Law constantly enables new software . Often the new software is just an incremental improvement . But every few years the world gets a wild breakthrough--graphic computing in the 1980s, Web browsers in the 1990s, fast search engines today . Next? Surely something amazing . • Metcalfe's Law . This one's named after Robert Metcalfe, the inventor of the computer networking protocol Ethernet . Metcalfe said the usefulness of a network improves by the square of the number of nodes on the network . Translation: The Internet, like telephones, grows more valuable as more join in . This is how eBay (nasdaq: EBAY - news - people ) grew so profitable so fast . • Gilder's Law: Winner's Waste . The futurist George Gilder wrote about this a few years ago in a Forbes publication . The best business models, he said, waste the era's cheapest resources in order to conserve the era's most expensive resources . When steam became cheaper than horses, the smartest businesses used steam and spared horses . Today the cheapest resources are computer power and bandwidth . Both are getting cheaper by the year (at the pace of Moore's Law) . Google (nasdaq: GOOG - news - people ) is a successful business because it wastes computer power--it has some 120,000 servers powering its search engine--while it conserves its dearest resource, people . Google has fewer than 3,500 employees, yet it generates $5 billion in (current run rate) sales . • Ricardo's Law . The more transparent an economy becomes, the more David Ricardo's 19th-century law of comparative advantage rules the day . Then came the commercial Internet, the greatest window into comparative advantage ever invented . Which means if your firm's price-value proposition is lousy, too bad . The world knows . • Wriston's Law . This is named after the late Walter Wriston, a giant of banking and finance . In his 1992 book, The Twilight of Sovereignty, Wriston predicted the rise of electronic networks and their chief effect . He said capital (meaning both money and ideas), when freed to travel at the speed of light, "will go where it is wanted, stay where it is well-treated . . . . " By applying Wriston's Law of capital and talent flow, you can predict the fortunes of countries and companies . • The Laffer Curve . In the 1970s the young economist Arthur Laffer proposed a wild idea . Cut taxes at the margin, on income and capital, and you'll get more tax revenue, not less . Laffer reasoned that lower taxes would beckon risk capital out of hiding . Businesses and people would become more productive . The pie would grow . Application of the Laffer Curve is why the United States boomed in the 1980s and 1990s, why India is rocking now and why eastern Europe will outperform western Europe . • Drucker's Law . Odd as it seems, you will achieve the greatest results in business and career if you drop the word "achievement" from your vocabulary . Replace it with "contribution," says the great management guru Peter Drucker . Contribution puts the focus where it should be--on your customers, employees and shareholders . • Ogilvy's Law . David Ogilvy gets my vote as the greatest advertising mind of the 20th century . The founder of Ogilvy & Mather--now part of WPP (nasdaq: WPPGY - news - people )--left a rich legacy of ideas in his books, my favorite being Ogilvy on Advertising . Ogilvy wrote that whenever someone was appointed to head an office of O&M, he would give the manager a Russian nesting doll . These dolls open in the middle to reveal a smaller doll, which opens in the middle to reveal a yet smaller doll . . . and so on . Inside the smallest doll would be a note from Ogilvy . It read: "If each of us hires people who are smaller than we are, we shall become a company of dwarfs . But if each of us hires people who are bigger than we are, we shall become a company of giants . " Ogilvy knew in the 1950s that people make or break businesses . It was true then; it's truer today .	Cicero (40)
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