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- THE FRIDAY LETTER -
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for friends and subscribers)
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| http://www.gilder.com/ | Issue 316.0/November 9,
2007
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HEADLINES:
- The
Week / Equinix: Proxy for the Internet
- Friday Feature / The
Supply-Side Solution (WSJ)
- Friday Blogger Bonus / From the Gilder Telecosm Lounge
- Readings /
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The Week / Equinix: Proxy for the Internet
Andrew Schmitt, Nyquist Capital
(11/6/07): Lane Patterson, Chief Technologist of Equinix (EQIX) shared his thoughts on data centers and the
challenges facing his industry at the 2007 Gilder Telecosm conference. He coined the term
‘bitmile’ and shed some light on how application providers such as CDN’s are
adjusting their optical transport architectures to optimize cost.
Equinix provides data centers
for colocation and interconnect. They build their own or lease a property from
companies like Digital Realty Trust and equip it with connectivity and
additional infrastructure. Then they sublet the space to companies looking for
data center space - everyone from Carriers to CDN’s to Web 2.0 service
providers. Google, Yahoo and a few others build their own mega data centers -
for everyone else there is Equinix. Lane used an airline analogy; they are not
a carrier but more like an airport where various carriers meet to exchange
passengers.
Lane indicated that demand
for optical capacity was surging and the backbone being ‘refreshed’ with higher
speed technology, except with a higher focus on cost. The metric Equinix uses
is Bitmiles, defined as the cost of sending a bit a one mile. This is identical
to the speed*distance/cost concept I like to use but Bitmiles is a much better
word.
Equinix data centers face the
same problem as carriers - when you exceed the capacity of a router chassis (or
the square footage of a datacenter) the only option is to mesh chassis
together. Equinix is doing this in a metro area using dark fiber from providers
like AboveNet and multiple 10G wavelengths to virtualize datacenter capacity
across a metro area. They call this IBXLink, and it allows customers to place
servers in separate data centers but have it appear they are locally connected.
This is only possible if optical transport costs can be minimized.
Lane mentioned two approaches
he felt were successfully addressing the bitmile problem....
Learn about
these two approached by reading Schmitt’s complete post:
http://www.nyquistcapital.com/2007/11/06/equinix-proxy-for-the-internet/
|
The Gilder Telecosm Forum To
learn how to join this powerful network of talented, tech-savvy investors and
thinkers online daily to debate, discuss, and decode new and emerging
technologies and share valuable and actionable investment advice, visit www.Gildertech.com today. |
Friday Feature / The
Supply-Side Solution
Stephen Moore, Wall
Street Journal (11/9/07):
I recently spoke with Mart Laar, the former prime minister of Estonia and the
godfather of that nation's flat tax. The major opposition to his tax reform, he
explained, was not the citizenry; rather it came from the economists and the
other Wise Men of government.
"I was told, 'We cannot
do a flat tax. It is untested. It will not work. It will cause budget
deficits," Mr. Laar recalls. However, he believed it would work because of
what he'd read about it in Milton Friedman's classic, "Free to
Choose." And so, in 1994, Mr. Laar ignored the economic pundits and
snapped into place a 23% flat tax. Estonia has since experienced one of the
most rapid growth spurts of any nation in the world.
There's a lesson here for our
country: Revolutionary ideas in economics, especially if they don't leverage
the power of the state, are often resisted by the intellectual elite. Ronald
Reagan discovered this in 1980 when he was ridiculed by the establishment for
proposing cuts in marginal tax rates as a cure for the high inflation and
economic malaise of the 1970s.
Gardner Ackley, a former
chairman of the Council of Economic Advisers, famously told Congress that it
would be "a miracle" if the tax cuts worked to reduce inflation and
increased growth. But reduced inflation (with an assist from Fed Chairman Paul
Volcker) and increased growth is what happened in the 1980s
.
Here we are 27 years later --
with 40 million more jobs and a nearly $50 trillion higher net worth -- yet the
left intelligentsia is still obsessed with discrediting supply-side economics.
In recent weeks, the New York Times, the New Yorker, the New Republic and many
other liberal publications have devoted great space and attention to attacking
the entire theory that lower tax rates can increase incentives for investment,
saving and work.
The original champions of
these ideas, men such as Arthur Laffer and George Gilder, are not just
misguided, they are, according to the New Republic, "deranged,"
"crackpots," and even "possibly insane." James Surowiecki
complains in the New Yorker that supply-side tax prescriptions for the economy
are the equivalent of "saying that the best way to treat sick people is to
bleed them to let out the evil spirits."
The quality of this discourse
rarely rises above the level of trash talk. Nevertheless, some arguments are
repeated with such regularity that they need to be addressed. One is that
supply-siders dishonestly claim that tax rate cuts increase tax revenues. Now,
we can argue forever whether tax revenues would have been higher or lower
without the Bush 2003 tax cuts. But one stubborn fact remains: Tax receipts are
up, not down, by $745 billion in four years since the 2003 tax cuts.
It's one thing for the
supply-side critics to have predicted four years ago that the Bush tax cuts
would increase the budget deficit. But Mr. Surowiecki tells us, today, that
"myriad studies" find that the Bush tax cuts "led to bigger
budget deficits."
Bigger deficits? After the
second Bush tax cut of 2003, the budget deficit tumbled to $163 billion in FY
2007 from $401 billion in FY 2003.
Supply-side economics is also
denounced as a flim-flam whose sole purpose is to give jumbo-sized tax handouts
to corporations and high-income earners. Since so many upper-income and wealthy
Americans are Democrats, however, it's not clear why Republicans would be so
preoccupied with helping them.
In any case, the share of
taxes paid by the top 1% and 5% income earners has consistently risen from 1980
through 2007, even as tax rates declined. Today the highest income tax rate is
half what it was in the 1970s. Yet the share of taxes paid by the top 1% of
income earners is twice (39%) today what it was then (19%).
Regardless of what one
believes about the distributional effects of the Reagan and Bush tax cuts,
there's no expunging the reality that the economic growth rate surged after
each of these changes -- just as they did in the 1960s after President
Kennedy's tax rate cuts….
Read Moore’s complete WSJ commentary:
http://online.wsj.com/article/SB119457501118587478.html?mod=googlenews_wsj
(Note: Stephen
Moore is senior economics writer for the Wall Street Journal editorial board.)
________________________________________
Friday Blogger Bonus / From the Gilder Telecosm Lounge
Gilder Telecosm Forum Member (11/3/07): Start a company, collect some patents and sue the big
companies... Looks like a new and popular business model.
George Gilder (11/3/07): That
Marshall Texas Court was depicted at Telecosm 2007 as an assemblage of
out-of-work asbestos lawyers, fresh from bankrupting some 40 major companies
and destroying much of the US chemical industry.
Now they are after the electronics industry. Watch out below, for falling
objects with large market caps. This kind of patent gotcha-game is going to
lead to a restructuring of the system to require patent holders to implement
("reduce to practice") their inventions, which in turn need to be
"non-obvious".
Hey, wasn't that the original patent law?
Gilder Telecosm Forum Member (11/2/07): November 01, 2007 (Computerworld)
-- Nanotechnology will replace magnetic disk drives in iPods, laptops and
servers within five to 10 years, making them more durable, lighter and faster….
George Gilder (11/2/07): That's
what I have been writing since 1989 (Microcosm), but somehow what
happened is that disk drives drove out all other forms of storage from paper to
records to microfiche to tape drives to cassettes to CDs to floppies, and its
market steadily grew as its technology became more obviously inferior to
silicon devices of all kinds. One could even say that hard drives are now
taking over from the various memories in your computers and film at the TV
station as storage increasingly moves to Google datacenters and other remote
facilities.
The problem is that disk drives are still some 10 thousand times cheaper per
byte than flash or nanoflash or millipedes or molecular memories or ferro
electric memories or phase change storage. A terabyte hard drive is now down
from tens of millions of dollars to $195 at your Apple store. The leading
nanotech memories (FEIC) now depend on the same spintronic effects that are
used in hard drives, but hard drives are still hugely more efficient.
To read more posts by George Gilder and the Gilder
Telecosm Forum members, visit http://www.gildertech.com/ and log on today.
__________________________________________
Readings /
Weekly GTI Index
http://www.gtindex.com/
Everyone Wants
What Qualcomm's Got
Tax Gain Boosts Qualcomm's
Profit
http://online.wsj.com/article/SB119455052171486909.html?mod=technology_main_whats_news
Sprint Nextel, Clearwire
DropPlans for Joint WiMax Network
http://online.wsj.com/article/SB119460952196987883.html?mod=technology_main_whats_news
The Over- and Under-Hype of RFIDs
http://blogs.spectrum.ieee.org/tech_talk/2007/11/the_over_and_underhype_of_rfid.html
With Storage Growing, Cisco Aims for China
http://www.byteandswitch.com/document.asp?doc_id=138540&WT.svl=news1_3
__________________________________________
Friday Letter Editor: Mary Collins George / mcollins@gilder.com
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