It would be very easy to say that with the dramatic changes we have already seen in technology we are coming to the end of this cycle. But we do not think that is the case. Quite the contrary, we believe this is really just the beginning of developments in technology – there should be a lot more to come.
In our view there are two key drivers behind the extraordinary disruption seen in the period from 2007 onwards. Firstly, Moore’s Law – the principle that the price of technology halves every 18 months. The economic consequence of this meant it became possible for consumers to purchase devices like the iPhone at an affordable price and with manageable energy consumption and size – none of which would have been possible back in 1999/2000. Up until that point most computers needed to be powered by mains electricity in order operate at a functioning speed, but the turn of the century marked a point where mobile devices moved from just being telephones to taking on the functions of personal computers. This generated a proliferation of devices and leads us to the second part of our thesis: the network effect.
In the mid-1990s, Robert Metcalfe developed a law in relation to telecoms, theorising that the value of a network increases exponentially with the number of users. This makes sense – if you have one person with a fax machine it is not really much use to anyone, but as the number of devices proliferates the network becomes more powerful and you can multiply the number of points of connection as a geometric progression. When you put these two factors together, you have the low cost of mobile computing together with Metcalfe’s law on networks, signalling an intrinsic value explosion and a host of new highly disruptive possibilities.