Commodities of the New Economy (Page 5 of 6)

1. Commodities of the New Economy
2. Hierarchy of Cyberneeds
3. Shift Happens
4. The New Economy
5. The New Commodities
6. Summary

The New Commodities

The emergence of the new economy has tracked the evolution of the computing and communications infrastructure. Without the infrastructure to shift to an access-driven model and now into the Webless Internet, the new economy would not be possible.

History has shown, however, that technology deficiencies create demand for more and greater technology, and that each of these increases in technology has become a commodity. The transition to the next stage begins when commoditization occurs.

With the shift to access-based computing and the Webless Internet, it is possible to distinctly identify the basic commodities of computing upon which the new economy rests. Additionally, it becomes clear that these commodities of the new economy relate to the more fundamental "Hierarchy of Cyberneeds."

While some of these are not sold as commodities, ala corn and oil, some are, and the potential for all of them to be sold, does exist.

While it is fairly easy to create the analogies between traditional commodities and new economies, there is a fairly clear and dangerous difference that may ultimately doom any attempt to create a "futures" market for most of these commodities, especially processing power and storage. Those two commodities could in fact be dislocated very rapidly by technological advances. Shown in the accompanying table are the computing stages and their associated technologies and commodities along with our estimate of their susceptibility to being technically dislocated.

Commodity Stage of Computing Technologies Techno-susceptibility
Electricity Creation Teletypes, Keyboard, Punch cards Low
Storage Capability Storage Memory, Disk, Tape Medium
Processing power Processing Processors, Memory High
Bandwidth Access - Webless Communications, Connectivity, Networks Medium


Following are more detailed descriptions of each of the commodities.

  • Power/Electricity

    • Power (electricity) is the most obvious commodity and one that would likely be overlooked. It is not as sexy as other new economy businesses, but without power, nothing could occur. In looking at potential markets, purveyors of technology products in general, and specifically Internet companies looking to capitalize on the less developed countries, should determine whether there is even a stable and reliable power infrastructure.

    Being designated as a commodity does not mean that power has to be delivered through traditional means. Indeed batteries, micro-generation, etc., are all valid ways of fulfilling the need for power.

    Of all the commodities of the new economy, power is already the one most traded as a commodity with on-line exchanges for power and off-line exchanges for futures.

  • Storage

    • The ability to retain information beyond the current instantiation is a crucial component of computing. As the technology of storage became more sophisticated, driving the cost of storage asymptotically toward zero, the emergence of access-based computing based on open standards has brought a renewed emphasis on storage. Within the access-based environment, there are several ways, above and beyond local, that storage is delivered. First, a key component of any hosting or ASP offering is storage of information. Second, entire businesses have been constructed around providing remote storage using the Internet as the way information is moved between the storage and consumption points.

    In the 1980s there was an attempt to create a futures market for DRAM. This worked fine until more semiconductor foundry capability became available. Beyond DRAM, we believe that the "storage commodity" is far less susceptible to technical dislocation than CPU power. This is because the nature of a bit is the same regardless of the specific technical implementation that happens to be used to store it. Ultimately, the end user does not know, and generally does not care, whether something is being stored on rotating media, thin-film technology, optical, or even RamDisk. The point at which customers become concerned is when there are radical variations in access time. Within the public Internet environment, it may not be readily obvious where latency of response issues reside.

  • Computing Power - MIPS

    • Probably the most ambiguous of the commodities is processing power, or MIPs. As more and more CPU became available, more complex problems were addressed. However, the shift to an access-based model of computing has left a world with incredible amounts of processing power distributed across organizations, most of it idle for the vast majority of the time. The shift to an access-based model has also shifted demand back toward shared computing resources that can be leveraged across all users, not just those with access to any particular desktop.

    Presently, MIPS are sold primarily as a) hardware configurations, or b) a component of a hosted environment. With the advent of the Internet infrastructure, the shared hosted environment and the ability to shift applications and processes around the globe in search of better/cheaper processing is possible. However, there are clear security concerns in this realm.

    A more interesting and far-fetched possibility is that the individual owner of a personal computer will make the processing power available for sale/barter when not in use. This is technically possible, but a fairly forward looking proposition. Currently, the closet application to this is the SETI screen saver that uses a person's PC to run an application that scans radio reception data for patterns. (This is part of the "Search for Extra-Terrestrials Initiative.") The same technology and philosophy could be applied for other applications, even to the point of making one's PC available for rent to whoever wants to pay. Hence, you can even trade this "right-to-run" on a commodity-like exchange. The act of taking delivery occurs when the purchaser's process or program is loaded into the host machine and processed. In many ways, today's hosting service companies, such as Concentric, Exodus, Navisite, and HostDivine are the outlet channel for processing power as a commodity, just as they are the primary outlet for storage as a commodity.

    Ultimately, the open standards of the Internet do not require that people and their computing resources be physically proximate. This lets organizations move applications and computers to locales that offer better conditions for housing those elements. Additionally, with an unsettled tax situation, the decisions on where to locate may likely be made based on political and social conditions, as long as the basic commodities are available.

  • Bandwidth

    • In reference to the previous discussion on bandwidth as one of the basic cyberneeds, we do not have any specific medium, speed, or technological implementation in mind when we discuss bandwidth. We are simply referring to the potential to move information between points using industry standards.

    Bandwidth is essentially the spinal column of the new economy, with information being the spinal fluid. When applied in conjunction with network and computing standards, bandwidth it is what has allowed the intellectual diaspora associated with access-based computing to happen. Things like being mobile, telecommuting, and the basic "no matter where you go, there you are" aspect of the Internet are made possible by vast amounts of bandwidth and industry standards. Companies such as Enron currently trade bandwidth as a commodity.


    Part 6 - Summary