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Prediction: If not Gates, someone just like him

(Editor's note: W. Brian Arthur is a former Stanford University professor who has studied the economics of high technology for the past 18 years.
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(Editor's note: W. Brian Arthur is a former Stanford University professor who has studied the economics of high technology for the past 18 years. He's now a professor at the Santa Fe Institute, a private think tank in New Mexico. He talked with ZDNN Executive Producer Patrick Houston about his own particular vision of what life would be like if Bill Gates, or Microsoft, had never been born. Here's the gist of his remarks.)

I've been arguing for many years that high-tech and software in particular are "increasing-returns" markets. In high-tech, what gets ahead gets farther ahead.

In the old industry, imagine there's a firm in Vermont, making plywood out of lumber. They get bigger and bigger. Sooner or later, as they get bigger and take more of the market, they have to ship their plywood farther and farther away, so it gets more expensive to fulfill their orders. And they might run out of forest, making it costlier to find the right type of raw materials.

That's the way the old economy worked -- companies eventually reached a point of diminishing returns.

Whereas in high tech, if I spent $300 million developing Windows 95, then the first disk costs $300 million -- and the second one costs only what it costs to copy the first.

The more you produce, the cheaper your unit costs get. The more you're out there, the more likely you're going to become a standard. The more people who learn to use your version, the more grooved in they are to your product.

Having dominated one market, you can start a juggernaut and leverage your users into the next market.

'To paraphrase Engels, in the absence of Bill Gates, another just like him certainly would have taken his place.'
-- W. Brian Arthur, professor of high technology


In the old economy, products consist of mass amounts of raw material, plus a tiny bit of knowledge. Now, in the new economy, they consist of a great deal of knowledge and very small amount of raw materials.

In the new economy, the raw material -- knowledge -- actually expands. This base of knowledge gives you the basis for which to produce the next product, so you don't lose anything.

If not Bill, then Larry?
So let's go back to Clarence the Angel. If Clarence was to show Bill Gates what life was like if Gates had never been born, my strong hunch is that the market might well be dominated by a single player with a different name. We might well have had Larry Ellison (of Oracle Corp.) dominating large parts of the software market.

Let's throw in a quote here -- it's a nice one -- from Frederick Engels. He said, "In the absence of Napoleon, another would have taken his place."

Well, in the absence of Bill Gates, another would have taken his place. Perhaps not exactly Gates, but I would expect to see one very dominant player in the market.


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