High Tech Power Law

Brad DeLong offers a graph showing Spending on IT v.s. the Price of IT offerings”. (IT -> Information Technologies) What’s not surprising is that as IT offerings become cheaper then folks buy more of it. Of course what caught my notice is this is a log-log graph and that straight line the symptom of a power-law process at work.

If we buy into the model that power-laws emerge from the connection making patterns in growing graphs graphs then it’s plausable that what is shown here is that as the price falls the number of connections in the graph rise. That suggests there is a lot more leverage in lowering the price of IT products than one’s natural intuition might suggest. That in turn may have some interesting implications about open systems (open-source, open-standards, etc). There is no question in my mind
that much of the vitality of open-source arises out of lowering the barriers to
enabling it’s binding into the various systems that engineers are building.

There seems to be something here worth saying about module boundries and phase transitions but I can’t quite figure out what it is.

That is absolutely not the demand curve encountered in econ 101 courses. That demand curve makes venture capitalists salivate! It let’s them expect to make outragous returns on their investments.

If you poke a hole thru the existing fabric of module (or standards) boundries your reward is a huge burst of new connection making. The resulting build out is a nice opportunity to make money; or better yet – from a rent seeking point of view – maybe you can capture over a long period a toll on the flow over the connections created.

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