Thursday, October 09, 2008


All of Baltimore is now a hot spot. The new Sprint-Nextle-Clearwire system is up and running. High speed Internet is available throughout the Baltimore Metropolitan area. The new wireless world is now a work in progress.

For years we have heard that one day dishwashers, refrigerators and thermostats would be Internet available. It now makes sense for manufacturers to manufacture such devices. Houses will not have to be rewired to add smart appliances. For these and many other reasons, the pace of productivity growth is going to gradually speed up in Baltimore; and, in another dozen cities as other roll outs follow. One of the things that will be great about Internet appliances is not that we will go online to start the dishwasher but that we will routinely set it to run at convenient times. We will set digital thermostats to come on an hour before we arrive home. The ease of changing the settings at a computer console will make these features have considerable value. The ability to check the contents of a refrigerator for items such as milk or eggs will save trips to grocery stores.

The futuristic talk about appliances is all for the purpose of presenting pictures of what can be. The daily routine use will be for a sundry of reasons and regular use will make the cost of service fall dramatically. It is realistic to believe that wireless Internet service will ultimately be offered free of charge, to the user. Visa, among others, is already working with Google and others to develop hand/computer payment systems. Again, the beauty will be the free delivery of valuable services. Google and Visa might sponsor the free connection to the home refrigerator and supermarkets. Enter a supermarket and one's hand computer might display ones pantry and refrigerator contents along with a suggested shopping list over-laid on a layout of the store. No more hunting for the brown rice.

In the short run, the world has to get through the stress of the financial crisis. However, progress toward extremely low cost and very available computing is not slowing down. Innovations are bringing down the future cost of computing electricity and dramatically reducing the amount of computing electricity used.

In one of the quirks of history, Western Union, at the time the most powerful company in the world, was offered the rights to the Telephone. WE turned the offer down because it seemed silly to suggest that a person would come to a telegraph office to speak to someone when the telegraph office was willing to deliver a message directly to the party in question. We ain't seen nothing yet!

At a minimum, our "smart phones" will soon know which questions it is allowed to answer, unassisted. For example, my "smart phone" might be willing to tell my wife's smart phone my GPS location. At a minimum, our new smart phones will know when to interrupt our activities and when to take a message. As sophistication is added, our smart phones will become electronic administrative assistants. Nuance or some other company will add the ability for our "smart administrative assistants" to listen to us and to respond in voice.

There are competing hardware, software and service platforms. There will be winners and losers along the way. The cost to build out systems will delay positive cash flow for many years, but this next wave of innovation is going to be huge. Inflation expectations are extremely low largely because easy communications have opened the market place to great competition. Expanded markets benefit low cost producers and consumers.

In the near term, the banks that can hold onto and realize the profits that will be realized by the "mark up" of deeply discounted securities will make billions. Banks that have purchased massive "extra pools" of deeply discounted assets, companies such as BAC, have later paid through the nose to raise the capital needed to support the ownership. Having raised the capital to support the deeply discounted securities, these banks will be in great condition to expand rapidly as soon as the values of the securities increase. If the Paulson Group pays a fair price next week, the values will start to rise next week. A brave new world is just around the corner. (Dow down 600 plus today, so the short run pain continues.)