Panel 2
Drivers of the New Economy

INTRODUCTION

Moderator: Ralph Gomory

Alfred P. Sloan Foundation

Ralph Gomory opened the panel by emphasizing the difficulty of prediction. Substantial bodies of experts, he reminded the group, “have at best a mixed record of predicting what matters.” He raised the examples of the collapse of the Soviet Union and the emergence of the Internet, great events that were “invisible in prospect and dominant if you look backward.” Such examples, “should give us some feeling of modesty about what is being attempted today.”

The Difficulty of Predicting New Hardware

Noting that prediction is not uniformly bad, Dr. Gomory described Moore’s Law as an excellent example of prediction that works. Behind this law is a rather orderly process of the reduction of dimensions—in this case, for semiconductors. The predictions flowing from Moore’s Law have been very good. However, not all technical prediction is that easy and or even possible. He recalled the era when it was believed electronic devices would soon replace disk drives, which are mechanical devices. At the time, given the technology of disk drives, this was a credible projection. As recently as 15 years ago the heads of disk drives were flying over the surface at a clearance of about 1 micron. Because the surface is seldom perfectly flat, the heads often touched it. Few people believed it was possible to lower the heads any further. That technical prediction was harder to



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Measuring and Sustaining the New Economy: Report of a Workshop Panel 2 Drivers of the New Economy INTRODUCTION Moderator: Ralph Gomory Alfred P. Sloan Foundation Ralph Gomory opened the panel by emphasizing the difficulty of prediction. Substantial bodies of experts, he reminded the group, “have at best a mixed record of predicting what matters.” He raised the examples of the collapse of the Soviet Union and the emergence of the Internet, great events that were “invisible in prospect and dominant if you look backward.” Such examples, “should give us some feeling of modesty about what is being attempted today.” The Difficulty of Predicting New Hardware Noting that prediction is not uniformly bad, Dr. Gomory described Moore’s Law as an excellent example of prediction that works. Behind this law is a rather orderly process of the reduction of dimensions—in this case, for semiconductors. The predictions flowing from Moore’s Law have been very good. However, not all technical prediction is that easy and or even possible. He recalled the era when it was believed electronic devices would soon replace disk drives, which are mechanical devices. At the time, given the technology of disk drives, this was a credible projection. As recently as 15 years ago the heads of disk drives were flying over the surface at a clearance of about 1 micron. Because the surface is seldom perfectly flat, the heads often touched it. Few people believed it was possible to lower the heads any further. That technical prediction was harder to

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Measuring and Sustaining the New Economy: Report of a Workshop do correctly. Eventually people got the technology right and stopped predicting that semiconductors would displace disk drives. We now know that the progress of disk drives has been at least as rapid as that of semiconductors and in fact they deserve to be given far more credit for their contribution to the present data storage revolution. The Greater Difficulty of Predicting Software Innovations Even more difficult to predict, Dr. Gomory suggested, is the progress of software. He recalled a recent conversation about how the inability to produce software might be a stumbling block to progress. He had heard those sentiments as long ago as the 1960s, when IBM launched the little remembered Future Systems project, or FS. IBM labored for three years because it had come to the same conclusion: that hardware costs would drop and the only route to continued profits would be to generate software more cheaply. The result was FS, a system aimed at making programming easier and more profitable. Future Systems never saw the light of day and cost IBM much of its leadership in technology during the three years it struggled to bring it out. Discontinuous Change What happened to software productivity was that companies discovered “huge levers of productivity in switching from custom to packaged software.” The lesson, he said, is that there are ways around many seeming roadblocks in technology, but they are hard to predict. While arguing that “the record of prediction is awful on the things that really matter,” there are nonetheless a few notable successes. In this context it is especially important to be modest in predicting the social consequences of technological transformations. He doubted that one could predict when the cumulative effect of technological change would suddenly manifest itself. He used the analogy of a bathtub that fills gradually until the accumulated water produces a point of overflow. This point represents a discontinuous change that does not depend on opening the faucet wider. He compared certain elements of technology that can be predicted, such as the software productivity of a programmer, and certain elements of technology that are harder to predict, such as the effects of new standards. He cited the Internet as the most stunning example of this effect, where agreement on a common protocol enabled the system as a whole to function effectively and to have an enormous impact on society. Such a confluence is almost impossible to predict. Even when we think we understand a phenomenon we might not be able to apply our understanding to the next phenomenon. Dr. Gomory closed by reminding his audience of the complexity of the task they were attempting. He urged caution and suggested an effort to segregate what