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The Gospel According to George

The Herring: What about wireless technology?

Gilder: Well, I think wireless technologies are making similar leaps forward. Broadband digital radio will reduce the average capital costs for an additional wireless customer, from $5,555 to $14 over the next four or five years, as Don Cox of Stanford estimates. As the wireless industry changes from a radio-based industry to a computer-based industry we will have a fundamental transformation of wireless connectivity. Again, you have this tremendous tidal wave of bandwidth that is obscured to most people by this optical illusion created by the Emperor in Washington D.C. and his regulations.

The Herring: Do you think Sun's Java is going to take hold as the standard language for the Net?

Gilder: Contrary to what Bill Gates wants to tell me, Java is fundamental to the Internet, and it will be hard for Microsoft to duplicate using Visual Basic, as it proposes to do. Java has the great advantage of possessing fundamental capabilities equivalent to C++, and therefore is familiar to the entire body of C and C++ programmers. It is also designed to function on the Internet, and these features are going to be difficult to replicate using other languages. So Sun's approach with Java constitutes a kind of inversion in software like the inversion in hardware we discussed earlier. The hardware inversion happens as a result of the bandwidth tidal wave, and this is accompanied by a software transformation where rather than just having information at your fingertips, as Bill Gates used to say, you have programs at your fingertips—executable content that can be accessed from anywhere in the world over the Net!

The Herring: If you can download programs free over the Internet, then who makes money?

Gilder: You will essentially rent software components for a limited period of time and pay for it on a transaction-by-transaction basis. It allows people to use software they might not normally be able to afford. If you think about it, this new approach really helps overcome the piracy issue, which is the software industry's biggest problem today. Software theft does not result from the evil and corrupt nature of all software users, it is just that until now, there has been no reasonable way for users to acquire the use of software for a limited purpose or limited period of time.

The Herring: Do you think the American economy really can handle this exponential increase in computer power and information throughput that you are talking about?

Gilder: That's a real issue. A couple of months ago one of my editors was earnestly told by an AT&T lobbyist that he didn't think America was ready for this onslaught of bandwidth—and this guy was from AT&T! But I really believe that the new fiber-optic networks, where each fiber thread has 25,000 gigahertz in intrinsic capacity, is going to unleash an unlimited amount of bandwidth, because you can put thousands of these fiber threads in one sheaf!

The Herring: And from a social perspective, is there anything to fear?

Gilder: It is crucial that the NSA [National Security Agency] and the various constabularies stay awake on the job. We need to remember that we're still in an arms race, and we've got to win it! Our concern should not be focused on people stealing money over the Net, but on how small teams of terrorists, saboteurs, and violent enemies might use the technologies against the creators of technology.

The Herring: Inevitably, the entrepreneurial class will continue to develop technologies that provide remedies for terrorist activity.

Gilder: That's right! Using various pattern-matching algorithms will make it possible to identify terrorists in crowds, and follow their tracks around the world.

The Herring: What do you think about the Clipper chip?

Gilder: It's the wrong mind-set. There is no mechanical solution to an enormously dynamic environment. I gather there is a real dispute between the NSA and the FBI about this stuff. The NSA has all the encryption technology, but it isn't allowed to share it with the FBI, so the FBI wants to control everybody with the Clipper chip—even at the cost of losing the industry overseas! Well, the NSA understands that it is very desirable to have American companies introducing and controlling these technologies, and the worst thing that could happen to our security in general is for the entire technology industry to move to China. So I think the NSA and the FBI need to get together and share technology, and work this stuff out.

The Herring: Switching gears for a second, what do you think about the consolidation going on in the entertainment business, such as the merger of Disney and Capital Cities/ABC?

Gilder: I take a certain prurient interest in them. You know, dinosaur couplings are kind of exciting, but I don't think these mergers are really where it's at. This fear that big companies such as Disney are going to control all content is really kind of ridiculous. Content is going to proliferate and become more decentralized. So while I think the film studios will continue to prosper because of better distribution, they will also have much more competition. The TV business, for example, is already suffering from the competition of the Internet and the Web, and this competition will become increasingly acute as Java animations and programming become more available
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The Herring: Back to Mr. Gates for a moment. Have you read his new book, The Road Ahead?

Gilder: You mean the book where the cover shows Gates standing in the middle of the road earnestly trying to persuade everybody that he is not going to miss the bus! [Laughs]

The Herring: Or he's gonna be the bus.

Gilder: Right! I actually think that Microsoft is going to figure a lot out and contribute to the triumph of the Internet model. But this new model means that Microsoft will be less menacing and won't be able to control and dominate the computer industry. As a result, Microsoft may never exceed its peak market capitalization of $60+ billion when the stock was trading at $109 per share, with a P/E of 38, or something like that. But I was very impressed with Gates' performance with Java and shifting MSN to a Net-based publishing community. Compare that to IBM!

The Herring: What do you mean?

Gilder: IBM couldn't even get rid of OS/2. It just had too much NIH [not invented here] to get rid of OS/2 and embrace the Mac operating system. If IBM had done that, it would have changed the whole industry, and it would have been a perfectly appropriate strategy for both IBM and Apple. But they were just too obtuse to do that! And now IBM thinks it is so smart because it has a whole division devoted to the Internet! Well, like Bill Gates told me, his whole company is now devoted to the Internet.

The Herring: What about IBM's acquisition of Lotus?

Gilder: IBM was paying $3.8 billion for Lotus when at the time it could have bought the whole Internet for that much!

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