Evolution of Digital Media Technologies: Personal Technology & Flatteners

Kathy E. Gill31 October 2006

Overview

Course Projects Recap Last Week Guest Speaker Group Discussion Wiki Practice

Project Abstracts State the research area you have selected. (1-2

sentences – preliminary statement is the draft submitted via Peer Review, a Catalyst tool)

Explain why this is an important topic to research. Explain how you visualize breaking your topic into three

timelines (past-present-future). Explain what theories you expect to use to support your

claims. Provide an annotated list of at least five scholarly

resources related to your topic. Each resource should be from a unique source. Remember that the final project must have 12 scholarly citations as well as those from reputable media. Provide proper citation and include the type of information provided, including key arguments.

Generalizations

Missing annotations Citations missing access date Timeline too narrow Formatting:

Don’t “justify”! Think “professional”

Flashback of the week:

This instrument can teach, it can illuminate; yes, and it can even inspire. But it can do so only to the extent that humans are determined to use it to those ends. Otherwise it is merely wires and lights in a box. There is a great and perhaps decisive battle to be fought against ignorance, intolerance and indifference. This weapon of television could be useful.

Murrow, 1958, RTNDA Convention

Recap: Theories

Linear innovation-diffusion theory The process by which an innovation is

communicated through certain channels over time among the

members of a social system.

Rogers, 1995, page 5

Recap: Theories

Technological determinism Tech is “autonomous” – out of human

control – the “cause” of change Social construction of technology

Society shapes technology

Guest Speaker: Chris Pirillo

Reading Discussion

15 minutes – marshall your forces! Groups 1-5, in sequence, report on

your section of Friedman Question:

What are the implications for the US economy and position in the world?

Economics & Technology

US Civilian Labor Force Approximately 145 million 6.9 million “unemployed” Economy needs to “grow” by about

150,000-170,000 per month to absorb new entrants For the unemployment rate to drop, the

economy must grow faster than the sum of productivity plus labor force growth.

Supply and Demand

Most widely used economic model Describes how consumers and

producers interact to determine the price of a good and the quantity that will be produced/sold

Demand Curve

Shows the quantity of a good (or service) that consumers are willing to buy at each price

Assumes “all other things” remain constant (static)

Law of Demand: curve slopes “downward” (P on the vertical axis)

Supply Curve

Shows the quantity of a good (or service) that businesses are willing to sell at each price

Assumes “all other things” remain constant (static)

No “law of supply”

Supply-Demand

Types of Goods (1/2)

Non-rival - a good that can be used by more than one person at the same time (an idea)

Non-excludable - it is not possible for the “owner” to exclude others from consuming this good (non-patented idea)

Types of Goods (2/2)

Rival Non-Rival

Excludable

Most consumer goods Private land Services: dental, rental cars, tax prep Single license software

Trade secrets Multi-license software Patents Subscription web sites

Non-Excludable

Public land Most roads Water?

Basic research Defense, police, firemen Lighthouse “Open” websites Air?

Supply of innovation

Dependent on State of scientific/technological

knowledge (technological opportunity) Cost, availability of inputs (knowledge

workers, equipment) Ability to capture increased profits

arising from the innovation (appropriability)

Demand for innovation

Dependent on Cost reduction (process innovation) Consumer benefit from new product

(product innovation) Consumer benefit from improvement in

existing product (incremental product innovation)

Network effects (1/2)

Static analysis: One person’s decision to adopt a new

piece of software (or other technology) has no effect on someone else’s welfare or decision to adopt

Assumes no network externality

Network effects (1/2)

Dynamic analysis: The value of the software (or technology)

depends upon the decisions of others (interoperability, for example)

Assumes there is a network externality

Locked In!

Consumers may be locked into a network because of “cost of exit” (switching) Contracts (cell phone 24-month policies) Training (learn a new system – ugh) Data conversion (from Word to Word Perfect, for

example) Search cost (finding the new product) Loyalty cost (frequent flyer programs, “minutes

carry-over”)

Tipping

As market share increases for any one product (system, technology), there are increasing returns (externality) from increasing consumer demand, leading to dominance by one system

Examples (1/2)

AM v FM radio Beta v VHS Mac v Windows QWERTY v DVORAK

Examples (2/2)

OS/2 introduced in 1991 OS/2 sales = 400K; Win sales = 18M OS/2 technically superior – 32-bit

processing not provided by Win until late 1995

OS/2 withdrawn from market (failed) due to incompatibility with other software (cause of poor sales?)

Market Structure

Number of firms Ease of entry and exit Ability to differentiate product from

competitor’s Four types

Competitive (perfect) markets

Consumers believe products are undifferentiated (substitutability)

Firms can enter/exit freely (low capital investment)

Buyers and sellers know the prices (access to info)

Low transaction costs Firms are “price-takers”

Example: dial up service (ISPs)

Monopoly

One supplier No product substitution Does not lose all sales if it raises price Price setter Natural monopoly: One firm can produce all

output at lower cost than several firms combined Example: water utility, cable utility, MSWindows

(according to US Gov’t)

Oligopoly

A few relatively large firms High barriers to entry Products are good (not perfect) substitutes Each firm can set its price Market failure: sub-optimal consumption

Example: wireless/long distance telecom, cable/satellite/dsl

Monopolistic Competition

Many relatively small firms Freedom of entry/exit Differentiated products > brand

preferences Market failure: excess capacity

Is variety really the spice of life?

Incentives for innovation?

Monopolist has less incentive to innovate Already has some profit Cost reduction is spread over smaller output

Monopolist has relatively more incentive for minor than for major innovations

Kenneth Arrow in Nelson, R. (ed.), The Rate and Direction of Inventive Activity, Princeton University Press (1962). Cited by Prof. Bronwyn H. Hall, Berkeley, Economics 124

Economics and Innovation (1/3)

Schumpeter’s first “model of innovative activity suggests that ease of entry will promote innovation and that small- and medium-sized enterprises (SMEs) will most often be the vehicles of technological advance.”

Economics and Innovation (2/3)

The “Schumpeter of Capitalism, Socialism, and Democracy… conceived of technological progress as emanating from the industrial research laboratories of large firms that enjoyed positions of static market power.”

Economics and Innovation (3/3)

The consensus seems to be that “the level of investment in research and development is likely to be too low, from a social point of view, whether market structure is nearly atomistic, a highly concentrated oligopoly, or something in between.” [Martin 1999]