Bill Gurley On The Digital Hand
Bill Gurley's newest Above The Crowd updates Adam Smith's idea of the invisible hand. The digital hand, in essence, is the force of Moore's law and Internet time gradually wending its way through various industries, entertainment and consumer products most recently:
Like Smith’s invisible hand, the digital hand is a true boon for the consumer, ensuring that fabulous products will be delivered in the most convenient way, and at ever lower prices. However, there is one big difference. The invisible hand suggests that both companies and customers can profit simultaneously. The digital hand is not nearly as charitable to the companies involved. In fact it can be downright brutal.
Bill analyzes the effects of all consumer electronic differentiation turning into standard features of readily available (and extremely cheap) semiconductors. He believes the $44 DVD player Wal-Mart sells today ("It plays DVDs, CDs, and MP3’s. It can decode Dolby Digital and Dolby DTS, and supports S-Video output.") is only the beginning and very much echos David's recent sentiments about the inflection point we're hitting in consumer devices:
As we look towards the future of the consumer electronics industry, the digital hand will ensure two realties. First, consumers will be blown away by the incredible products they are able to buy at shockingly low prices. Second, companies will be blown away by how incredibly hard they have to work in a shockingly competitive industry. Never forget that the undisputed leader of the PC industry has a supply chain and distribution advantage, not a technological one.
How can gurley write this article and never mention Moore's law? This is all kind of obvious over many generations of Moore's law grinding away at products, yet Gurley treats it as a unique "Above the Crowd" insight with a new gurley-created name -- the "digital hand". Some of his conclusions are vaguely unique -- as Moore's law makes hardware and software increasingly valueless, advantage moves to other parts of the chain -- but not that impressively unique.
I thought digital hand was something you did with on-line porn...