Regulation vs Freedom

Question. Which competition do you fear the most? Oracle? Sun Micro-systems? 

Answer. The two guys inventing away in a garage somewhere.

A quote from Bill Gates during Microsofts height of dominance during the late 1990's

Human history has been a constant struggle for individual liberty. A belief to allow individuals to make choices for themselves and to allow everyone the right to pursue their own happiness. We should always bear this in mind. In the past the minority used to fight for the abolishment of slavery. They won. They fought for the vote for the common man. Then women. The key word is minority. Liberty is always initially pursued by the minority. The majority get used to the status quo and what is preached by the intellectuals paid for by the centralised powers. The majority of people are passive thinkers. They listen and obey. Then there are people who are able to question conventional intellectual thinkers and critique the theories that are espoused. 

Regulation. We need it. Or so we are told. Do we need central authorities telling individuals what they can and can't do? If people wish to enter into a mutual two way interaction then who has the moral right to stop such a human action? Regulation manifests itself as a third party, dictating to people what actions they can and can not perform. The false promise of regulation is protection. Protection of "consumer rights". Its classic twisted Government logic that in fact tramples on consumers rights and slows the progress of humanity. Big companies love Regulation. Its sold as protection to the little guys from the big guys. In reality it performs the complete opposite function. Bureaucracy in the form of regulation is big corporations way to stop the small competitors from even getting off the ground. It ensures they won't eat their lunch. Some of the most sluggish sectors in Western economies are also some of the most regulated ones.

Finance has become a big web of regulation. I find it embarrassing when people call it a bastion of freedom. During the so called "de-regulation" of the 1980's for every regulation Regan repealed in America, he created several new regulations. Small banks are no longer on the landscape, the megabanks are getting ever more powerful and larger. They can always pay for the armies of compliance officers and mountains of paper work. Small banks have no chance. 

Lets take the Financial Crisis of 2008 (soon to be eclipsed by the next financial crisis due to similar policies that are still in place). Interests rates which many agreed were too low were not just regulated but are set directly by the Government. Paul Krugman, one of the Governments paid intellectuals said at the turn of the century, that the Federal Reserve needs to lower interest rates in order to create a housing bubble to replace the Nasdaq bubble. Prior to this we had the near failure of large fund called LTCM. In a free market it would have failed, ensuring banks would always maintain prudent polices; if they didn't they would go to the wall. Instead, in what became known as the "Greenspan Put", they were bailed out by the Federal Reserve. This also had the effect of ensuring banks would be more reckless as the bigger they were the more likely they would fall into the Federal Reserves "Too big to fail" category.

A lot of media coverage was given to sub-prime, a so called failure of the free market. Yet it was the Government who encouraged reckless lending. From Clinton, to Bush, Acts were passed that actively lowered lending standards. This isn't fiction, feel free to look this up. The Government witnessed banks more prudent lending practices, the type that assesses a persons income, dependability etc as too restrictive in order to "give" everyone a home. Politicians demanded everyone should have a right to a home rather than having to earn one. Acts were passed that instructed banks to lend to people with poor credit histories and no incomes. Sub-prime was a Government initiative.

Large parts of the mortgage market was underwritten by Freddie Mac and Fannie Mae who were in effect backed by the US treasury. The so called "saviours", the guys who are regulating the market, were instead running with more leverage than hedge funds. They lent with complete disregard to credit-worthiness, heck, it was a good old Government Ponzi scheme. Many sub-prime mortgages were pushed through these Government mortgage institutions. Credit Default Swaps, Mortgage Backed Securities, the so called financial instruments of mass destruction, were, you guessed it; Regulated. Of course who was rating all this packaged sub-prime mortgages? The credit agencies who were funded and run by the Government. AAA grade for mortgages that were worth less then the Zimbabwe Dollar. America has several financial regulation (not just one!) institutions all with armies of workers and armed to the tooth with regulation laws. Yet the financial crisis still happened. It happened not from the absence of regulations but from the presence of such distortions. The crisis had been brewing for years. Just like the next one to come (the Government bond bubble).

We could look at a number of other sectors and we would see a long list similar to finance. Medicine continues to have increasing costs and a lack of consumer innovations due to regulation. Drug companies keep the little guy out by ensuring the FDA impose huge barriers for entry; in the supposed interests of the consumer. 

All regulation does is impede the producers, the wealth creators. It stops the trial and error process that creates prosperity. There are regulations to instruct Restaurants what colour tiles they are allowed, as certain colours could "hide" dirt (despite the fact the most deadly "dirt" to humans is invisible bacteria). Many have had to amend under such restrictive planning laws, passing costs onto society. Not contempt with current infringements on liberty the "do-gooders" now want to ban knives that are over 4 inches, ban fast food, ban certain fats to name a few ridiculous ideas. If people wish to eat in a dirty restaurant then they should be free to; likewise to eat so called "junk food". That's personal freedom and choice. To take those away is tyranny; pure and simple. If I wish to harm my body then no one has the right to tell me otherwise (we all do. Alcohol, wheat based food, cigarettes, sugar, man made fats - that's our choice). That's where the majority of passive thinkers give away their liberties. They are mislead into being told it is the duty of others to make decisions on their own behalf. It is supposedly the Government that has the moral right to protect us, despite the fact that freedom has done a far better job of protecting humanity throughout history that centralised authorities. 

What about the oil snake men wouldn't they just run rampant in an "unregulated" market? People like Bernie Madoff? First off all you will always get the con men in any economic system, it is unavoidable  Crooks are just a part of life. Its not freedom that creates such people, but they are who they are. The free market limits their powers. Secondly, Madoff was investigated a number of times by the SEC, the very regulators who "protect" us.

I was astonished. They never even looked at my stock records. If investigators had checked with The Depository Trust Company, a central securities depository, it would've been easy for them to see. If you're looking at a Ponzi scheme, it's the first thing you do.

Madoff was also in bed with the Regulators. He got away with it for so long because of their very existence. The freedom of choice that exists in all us is the ultimate form of regulation  Any rip-off businesses soon get punished with bad consumer reports and with the transparency of the Internet dispersing information in seconds to billions, no business can survive long with such a tool on the side of consumers.

From all the regulations imposed on finance a new digital finance sector is emerging to challenge conventional banking, known as Bitcoin. People involved in such communities are not seeking permissions for their own liberty; they are taking liberty into their own hands. Bitcoin has the potential to revolutionise finance the way the Internet revolutionised information. Finance is just the tip of the iceberg. By solving the Byzantine Generals Problem, Bitcoin will revolutionise anything that involves a trusted third party. "Smart Property" could be held on the blockchain such as the deeds to your house, saving society billions in legal fees. Shares in companies, bonds, tradeable assets such as Gold could be transacted through the blockchain. No need for expensive fraud services that costs the economy trillions, automated mathematics will handle that moving forward. Peer 2 peer lending reducing lending fees and removing the middle man that is banks with all their expensive offices, paper work and high paid staff. Another such example of enriching us all.

Yet with innovation comes the regulators. Usually for technology the Government turns their back but not when the technology imposes a direct threat on their monopoly of money. Their guise will be to protect the people but the real motive is to stop the competitor. Conventional banks will demand regulations as they, like Bill Gates, fear the two guys working in the garage. Its been too cosy for too long. Regulators aren't sure what to do, but they want to regulate something about Bitcoin even if its just to make a name for themselves. The most common slur against Bitcoin is that its used for "illicit" activities. Under such logic the US dollar should be banned as this funds 99% of global criminal activities. The government can not pass moral judgement on free will. Bitcoin is amoral and allows individuals to transfer value as they please. Peoples actions are their own choice. Bitcoin doesn't need regulation. It got here with no regulation. In the space of 5 years a Global Currency run by the free market has been created. Anyone with no documents, can set up an account and transfer money to anyone, anywhere around the globe in minutes. A single unit of the currency has gone from no value to hundreds of dollars in value. The services are increasing in sophistication by the day now that intellectual and monetary capital has started pouring in. When I started with Bitcoin there were very little startups. Now they pop up daily and regularly raise millions of dollars in cash. The accounts ledger is public for all to see, a truly revolutionary concept that has far more security than conventional centrally held ledgers. All of this has been done so quickly because there was no regulation. There were no barriers for entry. People under their own free will used Bitcoin at their own risk. If they didn't like the risk or the eco-system then they were free not to participate. Free Choice. There is no place here for regulation.

One common concern for people outside of the Bitcoin community is stories of Bitcoins being stolen. First off; if you don't like this, then don't use Bitcoin. People have no right telling other people who wish to take such risk that they can't use such a system. Second; in many cases there are some fly-by-night banking setups. Reputable businesses such as coinbase or Blockchain.info build a reputation of trust, removing the unreputable con men in the long run. Third; many cases have been poor security implementations. Bitcoin is new, its on the cutting edge; its called growing pains. Market forces without regulation solve such problems. They implement two factor authentication, open source their implementations. They come up with hardware wallets such as the Trezor or paper wallets; pulling the security out of cyber space and into the physical dimension. What would the regulators do to solve such issues? They would shut down such innovations. They don't understand any domain, the wealth producers do and go about solving such problems and create the wealth that the regulators ride along on. 

The Quote at the top from Bill Gates is what happens in the Technology sector. Regulation is minimal. The producers are free to challenge the status quo. There is no rule book to follow; anything goes. Regulators aren't producers. They are not even on the same level as consumers who earn their income. They are parasites, paid for by society. Not contempt with that they go around and stop the progress of human ingenuity, the trial and error process that enriches us all. Regulation will one day be banished, just as slavery was. Liberty; choice; freedom. They are the ultimate forms of regulation.

Healthcare has to be Earned

"Always have a healthy disregard for the status quo"

Myself

Healthcare. Should it be a right or should it be earned? Ask 99% of people and they will probably state it is a right for everyone within a developed nation. I'm the one percent. I believe healthcare needs to be earned. The crisis in healthcare within developed countries has not come about from the free market or a defunct laissez faire capitalist system. It has come about from years of Big Government. There is no crisis in the software and computer industry where costs are spiralling out of control with service quality in decline. The freedom of the human spirit and mind is the most powerful weapon to combat poverty. Abundant healthcare needs to be earned.

Altruism is the status quo with Big Government as the institution that forcefully implements such principles. I used to be a believer in the "mixed economy", the current system that we are taught at school, the "right" moral system that we should abide by. Then I started asking questions and the more questions I asked the more contradictions I would unravel whereby altruism is supposedly the only way a civilised society can be run. Healthcare was one such mystery. Why do markets improve services and bring down costs over time, yet I saw the so called "free market" healthcare system in the United States do the complete opposite. Many accept such a view; that the Healthcare system in the United States is free from Government control and that Healthcare needs to provided by Government. I didn't and kept asking questions; questions that need answering are hard; accepting conventional wisdom is easy. Healthcare, just like food, needs to be earned.

Food is a similar commodity to Healthcare in that it is vital for human existence.  In the present time-frame we find ourselves in we have an abundance of food. We can all comfortably eat ourselves to an early grave should we wish. It wasn't always like this. Back in the 19th century food bills consumed a large proportion of a workers pay. In the infamous 1848 food shortages that ran throughout Europe, many including Karl Marx, concluded that Capitalist systems had run its course. Food was a right. Many Western countries thankfully did not implement collectivisation, the policy to trick people into believing abundant food can be provided by a coercive state. Instead food was to be earned. People set to work improving agricultural methods, respecting private property and allowing entrepreneurs the freedom with their minds and resources to enable abundance. Thanks to such policies and people I now enjoy a nutritional diet that a King would once have dreamed of. However in countries that believed food to be a right the complete opposite happened. Under Tsarist Russia, a backward political system, the country exported grain to Europe. Under Collectivisation, food, rather than to earned, was deemed to be a right for all of society. In Lenins famous "bread, land and peace" speech the stage was set for the inevitable food shortages that would occur. Russia could put a man in space but they couldn't provide basic staples for the majority of the population. During the 1960's Khrushchev sold of a third of Russia's Gold reserves in order to avoid mass starvation. Zimbabwe, once the bread basked or Africa, under collectivisation became a barren land of pestilence and starvation for its people. Food, it was claimed in such countries, to be right.

Do we give a people a right to a car? To a phone? To a computer? To a 40" flat screen TV? When Henry Ford set out to make a car that was affordable for the common man many in the industry said it couldn't be done and he was mad for even trying. Well we should all be thankful for the people who have a healthy disregard for the status quo. Once an object of the elite Henry Ford revolutionised the way cars were made making them affordable. Re-known for his obsession to detail he had no interest in being a CEO in the office with elaborate job titles, instead he was constantly on the assembly line looking to make things more efficient. Innovation such as the moving assembly line and asking questions of why does that man have to turn for that component it should just be there, were the hallmarks of an wealth maker. He became rich but he made us all far richer in the process and we didn't have to lift a finger. Three Quarters of Americans who are classed as living in poverty now own a car thanks to people like Henry Ford. If the Government had mandated a car is a right that would not be the case - it would still be an object for the wealthy elite. Instead a car had to be earned with hours of dedication and freedom for individuals to pursue their own selfish interests.

If the Government had introduced a policy that mobile phones during the late 1980's should be a right for everyone what would have happened? One can be sure that the innovation that occurred over the next 25 years would not have happened. Back in the 1980's mobile phones were expensive. It would have required a subsidy program, regulation and government enforcement in the industry in order to provide a phone to everyone. Freedom for the wealth creators to pursue their own interests would have been blocked as the government would have artificially supplied everyone with a phone. Thankfully we had to earn that right. Now anyone can have a phone; the old ones go free. Phones are now so sophisticated its incredible. Car navigation, language translation, bar-code scanners, sound systems, all round entertainment wherever we go.

Why is all this important for healthcare? Because I believe healthcare is no more a right than any of the above. It needs to be earned and if it is earned then healthcare becomes abundant for all including the poorest in society. So the first thing to tackle is Americas so called "Free market" healthcare system. 

Around 50% of Healthcare payments in America is spent by government due to regulations, Medicare and Medicaid; I should just stop there as even an ardent socialist will realise that this is far from a free market. Then there is licencing. This is a process to ensure a limited supply of labour is supplied to a particular field in order to drive labour rates up for doctors. That's what creates artificial supply in doctors or a specialist. In the 19th Century Doctors didn't like the fact that anyone could enter medicine so lobbied government to restrict entry - under the guise of "helping" people. In reality all it did was to skew market forces and monopolise a profession. A monopoly that also controls how medicine should be practised stifling creative thinking. In Software this doesn't happen. Anyone can code you don't even need a degree despite the fact many computer systems are critical to all our lives and complex. Its based on reputation and merit; not monopoly organisations that can control entry. People quit university and never even qualify with formal education. Bill Gates didn't even do his degree in computers yet is one of the most renown names in the field and we all trust him with the software his company creates (and by all accounts he is a very good programmer).

Regulations in Americas healthcare system is a maze. Insurance policies in America include no direct correlation on lifestyle habits, age or previous history - the government bans it. Catastrophic healthcare is not an option, instead people claim insurance for routine inspections. Its like getting insurance for your car and the government mandating that it must include an oil change, wax and clean every month and minor wear and tear on parts such as tyres. There's a reason we just insure for major car damage and pay cash for tyres and optional extras. Its a more efficient way of people looking after property. If tyres were included then there would be no incentive for people to ensure they did not "burn rubber" or to maintain their tracking which rip through tyres. Insurance would rise as a consequence quite considerably. By regulating the government stifles start-ups that cease to even exist. Just getting a new drug approved means only large companies can create such innovations with all the paperwork involved no young start-up can do this. If there are huge costs and regulations as to what can be done then such start-ups will never exist. Free markets encourage trial and error. American healthcare persecutes such behaviour. 

Insurance in some cases has to cover for example massage therapy which many individuals would see as a non essential item. There's a whole host of treatments that "must" be included in a healthcare policy. Insurance companies can not offer insurance between states due to Government regulations. Patent laws enforced by Governments drive the price of drugs up. The West in my opinion are unwittingly pursuing genocide in continents like Africa due to such restrictions (patents are another issue for discussion, immoral and against free trade). As the Government is the largest single payer in America for healthcare they have no price conscious. There are flat fees for patient treatment resulting in no innovation to drive down costs. Why do hospitals need to drive down costs when the price paid will always be the same. Employers get tax breaks for offering employers insurance as part of their employment. Its like getting your car insurance paid by your company, the price concious consumer is removed. There should be no tax break and consumers should choose as required.

As the Government pays in many medical cases people have no incentive to look after their health. When healthcare is a right and someone else is paying, why bother. New technology should be making healthcare more inexpensive and plentiful instead the complete opposite is seen. If we have a MRI scanner shouldn't such equipment diagnose people quicker and require little human intervention. Yet costs continue to go up, despite the fact that the electronics field for example where equipment becomes more sophisticated and yet the costs to the end consumer continue to plummet.

With all the Regulation this stifles entrepreneurial doctors. If the Government has fixed prices and fixed rules on what they can do then how can your doctor challenge the status quo? How can they as experts use their judgement to make things more efficient? Many entrepreneurs in software were derided as nuts and went against what was convention in their selective field. Steve Jobs, Bill Gates, Larry Page and Sergy Brin. As IBM once said to Bill Gates "All the money will be in the computers; not the software", or when Steve Jobs and Wozniak created Apple, computer executives used to quip "What would an ordinary person want with a computer?". When the google co-founders decided that they would index the Internet that was growing at an exponential rate and offer the service for free many said, "How will this be sustainable and possible?". Healthcare in its current inception does not have the conditions in place for a Steve Jobs doctor. Entrepreneurs when allowed full freedom drag humanity towards prosperity and always start as a minority having a healthy disregard for the status quo.

Healthcare has been heavily Government regulated throughout he 20th Century so it is impossible to say what healthcare would look like under a free market. However one interesting area is Laser Eye surgery which has had very little regulation and government involvement. Once the preserve of the rich it has now become affordable for the common person. Prices have fallen and the quality has improved. This is despite the ever increasing sophistication in tooling. They can even do it with robotics and computing with no human intervention. So when economists such as Paul Krugman claim rising Healthcare costs are the result of every increasing technology think again. When a free market is at work; this brings down the costs. They don't go up.

Since the "Peoples Revolution" in Cuba, Castro and his followers declared healthcare was a right for all. Healthcare would be provided by the state for "free". Cubans now have this so called utopian system of free healthcare whereby people can no longer even obtain paracetamol that cost pennies here in the West. Many cases are reported of patients being neglected with woeful practices. Ambulances are in the form of people using wheel barrows to take their loved ones to hospital due to shortages of transportation. Some of the photos can be accessed online as many Cubans have had enough of Western tourists telling them of their utopian healthcare systems. The locals know the reality. The services they get aren't the special tourist built facilities Michael Moore viewed. His video actually worried Cuban officials so much they believed there would be uproar with people demanding such facilities for themselves. Cuba is so poor they export their Doctors to other nations, not from some altruist principle but to line the pockets of Castro and his cronies, another way the administration tries to gain hard currency. Contracting their principles like all good Socialists; they make a profit.

In the UK we have the National Health Service where healthcare is a right. Instead of insurance companies refusing treatments its the Government. Private Insurance will see you in days; with the NHS its months or years. As we have all the same market limitations as the United States we again have the problems of rising costs and declining customer service. There's many defences made for the NHS. Some say it was deprived from funding during Thatcherism, despite the fact Thatcher spent more on Health in real terms than Labour leaders such as Harold Wilson (rising 32% in real terms during the 1980's). More money is always pushed as a solution but it never works and never will (healthcare continues to rise as a percentage of GDP). Economic freedom is required. Scaremongering keeps everyone in line with current mainstream wisdom; fear tactics tell people they would be far worse under a free market, citing the so called free market healthcare system in the United States. The NHS is propped up by the free market due to the productive wealth of other freer areas of the economy that pay taxes and create long term prosperity which helps pay for the ever rising costs. 

When I was a teenager during the 1990's if someone had said to me one day that I will have access to unlimited email, have endless Video and Music content for free, be able to upload an unlimited number of photos and have a 42" screen Television I would have said what planet are you on. Humanity earned these services we didn't have someone say we needed them they just came about through hard work and the freedom given to free market capitalism. People pursing their own interests is the most powerful tool to solve poverty. It used to be when you couldn't have three square meals a day you were poor. Then when that became implausible they said if you didn't have a Television you were poor. Then a computer. Then a phone. Healthcare needs to take a look at history. If you want to solve the current lack of quality healthcare for all then don't state it as a human right or need. Healthcare needs to be earned and with it will come abundance. The unfettered free market can only solve such such a difficult issue.

IP and the Next Wave of Computers

"Microsoft is launching legal action against Motorola over its line of Android-based smartphones, claiming the manufacturer infringes a number of its patents. The lawsuit is the latest in a series of patent infringement cases being fought in the increasingly-competitive mobile market."

...

"The increasingly-popular Android software is also at the heart of a legal battle between Oracle and Google, while Nokia is embroiled in a long-running legal battle against Apple, and Apple is separately suing manufacturer HTC. Manufacturers have become quick off the mark in launching legal action against rivals, owing to a dynamic smartphone market across continents."

Article

"Google and a reseller of its products have filed a lawsuit against the U.S. Department of the Interior after the agency solicited bids for cloud-based e-mail and messaging services specifying that bidders must use Microsoft products."

Article

"Apple sues Motorola for infringing on patents related to multitouch and other access technologies in its Android smartphone lineup. Motorola had sued Apple earlier this month."

Article

Everyday the tech news always seems to have at least one new case of some computer company suing another. With so much at stake, companies want to gain any advantage they can over their competitors. Intellectual Property is an issue that is rarely discussed. Convention states that we require IP in order for innovation to occur otherwise there would be no incentive to create new products and ideas. However its a similar fallacy to the one where governments state we need to create inflation otherwise the economy would tailspin into depression and stagnation - the opposite is in fact true. The abandonment of IP and patent laws would be a great benefit to society and on the contary would create huge amounts of innovation. 

Xerox Modern Desktop

Back in the late seventies and early eighties Xerox invented the first modern computer that we have all come familiar with. That is a computer with a mouse, keyboard and a graphical user interface. The team that came up with the concept couldn't convince the Xerox execs that it was a good idea, with them dismissing it stating devices such as the mouse would never catch on. Where Xerox couldn't see potential Apple could. Steve Jobs went over there with his lead engineers and they copied everything they saw. He realised that this was the future of computers. Bill Gates did a similar thing with Microsoft after seeing the technology, he also copied the concept. Desktop history was written.

With all the lawsuits going on regarding patenting touch gestures or even trivial operations such as email synchronisation on mobile devices can we imagine if Xerox had done the same? The desktop revolution would never have exploded as quickly as it did. Royalties would have been paid to the monopoly holder of the Patent keeping prices higher than what they should be and preventing other communities and individuals adding bells and whistles to the initial concept. Can you imagine if the person who invented electricity, cars or the jet engine had patent monopoly rights?

The idea that we need patents or IP to ensure innovation is scaremongering. Its big corporations trying to monopolise markets at the expense of society. A true free market is one where ideas are open and free to all. Choice is given to consumers. Prices are continually brought down. Quality is continually raised. Companies still have plenty of need to innovate without IP laws.

iPhone

A common misconception is that the iPhone is the most superior phone you can currently get. Of course many realise this is not the case. There are many alternatives on the rapidly rising Android platform that have better technical specifications. The reason why people perceive the iPhone to be so good (apart from the glamorous advertising) is that it was the first slick smartphone on the market. It gained early market share, a critical concept for any company. Innovation is just as likely to occur under this premise as everyone wants initial market share. Companies and individuals would innovate under their own free will. Its in humans DNA. You don't need to patent ideas that make one person rich at the expense of everyone else. 

Open platforms have always been the most innovative. Telecommunications was heavily regulated up until the 1980's. The industry was a stagnant state monopoly. Then we gave it over to free enterprise and a plethora of gadgets and tools became available to us all. Companies all copied one another, putting out extras here and there as they would attempt to gain a competitive advantage over their rivals.

Libertarians agree with private property laws. For example I own a car and if someone was to take it from me then they would deprive me of the pleasure and utility of its use. Therefore the legal system should enforce physical property laws. However for an idea, why should we monopolise that? I write ideas on this blog, commentating on current events using economics and history to gain understanding of what is happening. I could charge a fee but I give it all away for free as I believe ideas should be available to all regardless of income or social status. If people read this and gain a greater understanding of events then how does that deprive me? I still have all my ideas. It's similar if hypothetically I came up with a great new way of producing electricity. Rather than sharing the idea I patent it and monopolise the idea so others can't benefit from it. If others were to use the idea how would this deprive me? I still have my original idea and can benefit from it. Others should also be able to benefit from it. In open systems someone may build upon my original idea and make it better. Now I can use their innovation for my own benefit. Innovation builds upon one another enhancing our capital structure.

Innovation is a human instinct. We all are naturally lazy, trying to think of ways to do things more efficiently. Sharing our discoveries greatly improves all our well being.

Computers next Big Cycle

I used the recent news of the various large computer firms suing each other as we are currently embarking on the next wave of innovation in computers. Like economics, the computer industry also works in cycles. 

• Humans to Mainframes 
• 1956 - 1966 (Innovation and Growth), 1966 - 1976 (Refinement)
• Mainframes to Desktops  
• 1976 - 1984 (Innovation and Growth), 1984 - 1992 (Refinement)
• Isolated computers to networked computers 
• 1992 - 2000 (Innovation and Growth), 2000 - 2008 (Refinement)
• Computers everywhere 
• 2008 - 2016 (Innovation and Growth), 2016 - 2024 (Refinement)

We are all familiar with the first three waves of computers. Mainframes used to rule the world then along came some individuals with vision such as Steve Jobs and Bill Gates (along with others) and said people are going to want their own computer. All the big mainframe players at the time dismissed the personal computer, IBM dismissed it as a toy and with that error they nearly went bust in the early 90's.

Then came the Internet. For years it had been the sole use of the military and been stagnant for years. Along came private initiative and enterprise and revolutionised the way we consume information and live. Again many dismissed the Internet. I remember first being connected during the growth phase and I thought it was brilliant, a revolutionary concept. A lot of other people I knew dismissed it and couldn't see the value, again saying it was a toy, that is until we hit the refinement stage.

We have only just entered the next new exciting phase of computers. Ubiquitous, pervasive computers, seamless to the user. Not only are they all connected but they are everywhere. In our cars, TV's, appliances, phones, all interconnected able to communicate with one another. Concepts like cloud computing are yet to really take off, but this is where we are heading. Our music, videos, news - our lives - accessible at the press of a button on any device, anywhere in the world.

Devices such as smartphones, Internet TV, iPads or Tablets are being wrongly dismissed as toys but these are the pioneering devices that will become common everywhere (they will evolve further, but the concept is there). Not only touch screens but swipe screens like the movie minority report. Phones that can read a computer in your fridge that reads RFID chips on its contents to tell you what to buy while at the supermarket. A new round of investment in computers has only just begun and with it a new way of using computers. 

Remove IP

In order to excel in this new era of innovation we need to reform the IP laws and allow everyone, individuals, small organisations and the large established corporations all to innovate sharing knowledge with one another as this growth phase takes off.

Microsoft vs Google vs Apple

The big three have very different approaches to the new wave of technology. Two were spawned during the personal computer revolution while Google was established during the network phase and there are signs that Microsoft is struggling to embrace the latest wave (I think Bill Gates could see what was coming). Google are embracing open standards and open source software, they know they can't fight free markets. They have created the popular mobile platform Android and gave it away for free. Microsoft's cash cows are its OS and the Office suite. Without these incomes, Microsoft would be a great deal smaller. 

Recently Microsoft has begun trying to get patent loyalties from the hardware manufactures that use Android, claiming that it infringes on Microsoft patent rights. Manufacturers pay the fee as its cheaper than a legal dispute, however it is merely delaying the inevitable. If Android was really infringing on Patent rights then why aren't Microsoft suing Google? Its because they know they don't have a case and Google would fight back, resulting in the them having no position to claim royalty fees from the manufacturers.

All of this is taking valuable business away from Microsoft in the next big market. On the desktop side, most people still believe they have a rock solid market share, but I beg to disagree. The numbers may still stack up on Microsoft's side, but not for long. The market will get them eventually.

Notebooks were once the in thing before the iPad. As they are designed to be a lightweight device many manufacturers thought rather than paying Microsoft a $50 licensing fee for each unit, why not use another OS, Linux, a free and open OS. When this happened Steve Ballmer quite literally bricked it and starting practically giving away XP licences trying again to regain the Microsoft monopoly. But all it does, like with Android, is delay the inevitable. Microsoft needs to continually sell new Operating Systems and Office products to keep the revenue coming in. As we progress through the current phase of computers the operating system will just be the container. People will use multiple OS's, interchanging seamlessly. The majority of the content will come through the web, the cloud, using standard formats read on any device. Our files. Our music. Photos. Documents. Games. People will not need to have Windows moving forward. Linux will provide more than an adequate alternative.

Google Chrome OS

The concept above is behind the soon to be released Google Operating system. It will merely be a container to control the local hardware but all the content will be online. Again like Android it is based on Linux and like Android has its source open to the public (relative of course, like their browser Chrome, Google control their official release). The price? Free. And so long as it doesn't deviate too much from the core of Linux it will be reliable, fast and secure. I believe this will open the way for other Linux distributions. If the manufacturers break from Windows once more to Linux then Windows will have problems going forward. Why pay for an OS when there is a free one that performs all the tasks and is superior? Video game lock in will only last so long, eventually that will become more open (and more orientated towards the web).

Steve Ballmer has dismissed Linux in the past as "Communist" - he really is as much of an idiot as he looks! Linux is a perfect example of free market economics. It was created by individuals all collaborating together, all sharing ideas with one another, open to everyone, controlled by no Government, Corporation or Cartel. Microsoft on the other hand used patents, and abused it power by enforcing closed standards and locking people onto its platform. Well the market always catches up with everything, its a universal law. Communist Russia, State monopolies, Government overspending - the free market always wins out. Microsoft's tight grip is slowly eroding. How can they compete with free?

Russia and China Adopting Linux

Emerging markets are going to be bigger consumers of computers going forward. Russia has recently announced it wants to create its own Linux OS to move away from Microsoft. China tells Microsoft that it likes its software, just like it tells the US government it will keep buying it bonds but on the other hand they are pushing Linux to its citizens to adopt its own version, Red Flag. Russia and China don't want to hand over income to the US as there's only so long they will be able to pirate Windows without political action. China wants to keep their trade surplus with the US and to make it as large as possible.

I think Linux will be the next big platform. It has the ultimate price point - free. It hasn't been adopted due to historic Microsoft lock in, but as uses of technology change so will peoples needs. Then the manufacturers will bundle Linux as the OS instead of Windows. Android is taking off, on mobile devices. Chrome OS I believe will be a winner eventually (although it may be slow - its ahead of its time) not just on netbooks but desktops eventually where the old magnetic hard disk will have the same fate as its 1.44" floppy cousin. People will have more choice and will not really care about the operating system they use so long as it can operate the hardware and connect to the web.

Apple, has it peaked?

The ultimate fashion accessory, iPad, iPhone, iPod, iTouch - they could bring out a brick and call it the iBrick and Steve Jobs would be able to fool people that it was special. Apple products are no more superior than Windows or Google products (I could list a lot of Apple defects, there seem to be new defects every day of late), its just they charge twice as much, have half the specification but make it look pretty. Apple are repeating the same mistakes as they did in the eighties. By not appealing on price their market share will slowly erode. I think they missed something with iOS. They should have made it open for any device. Instead they have one phone fits all, £600, the Apple ecosystem. Too expensive for many people when there are alternatives at a fraction of the cost. Apple has bugs just like Microsoft or Google. Its just Steve Jobs is a great liar. 

I think Apple will have its niche. But it won't get majority market share like many think it will.

We need to radically reform the Patent laws in order to breed innovation for the good of society not to enrich individuals at the expense of the majority. This goes for many industries, Music, Pharmaceuticals, Film, TV. You can close as many Napsters as you like, but another one will take its place. Its the free market telling us that the law needs to be reformed and allow IP content to be free to all.