OK, Negroponte

A friend of mine at a tech company says that their data centers are running at ~80% capacity; that’s apparently way too hot for comfort – SOP is ~50%. Their telco partners are running out of comm server capacity, and are even (!) borrowing hardware from each other. Clearly the limiting factor today is atoms, not bits.

Nicholas Negroponte said in Being Digital (1995) that “the change from atoms to bits is irrevocable and unstoppable.” I would love to say he was wrong, but I’ll content myself with suggesting that he wasn’t right.

I’m certainly not seeing bits replacing atoms in my own life. I’m still spending more on digital hardware than software. Bit-value is certainly not replacing atom-value. Here's a rough accounting of my personal spending:

• Hardware: ~$2,000/year
• PC and smartphone, depreciated over 5 years: $300/year
• Fixed and mobile service subscriptions, most of it being spent on hardware by the vendors: $1,800 
• Software and media: ~ $400/year
• Business software subscriptions: $200/year
• Personal software/media subscriptions: $150/year

That’s just me. But the economy at large is not seeing bits replacing atoms, either. A list of the 25 Largest Companies in US (by revenue) starts with Exxon Mobil, Walmart, and Chevron. Apple is #16, and IBM #21. Pure software companies don’t make it into the Top 25 at all. It’s a better story for Negroponte if one looks at market cap rather than revenues: software companies are prominent in the Top Ten, though even here I’d contend that Apple and Amazon make their money off atoms, not bits. And if one includes non-public companies, the oilygarchs’ hydrocarbon molecules play a prominent role.

For an even broader view, take a look at Value Added by Industry Group as a Percentage of GDP (BEA, 2019 numbers). Here are a few notable sectors:

• Information: 5.2%
• Manufacturing: 11.0%
• Professional and business services: 12.8%
• Finance, insurance, real estate, rental, and leasing: 21.0%

Now it’s true that 70.3% of private sector value add is from services vs. 17.4% from goods; but services are not digital in the Negroponte sense even though I’d concede that their delivery increasingly is digital, not analog.

Of course, I’m setting up a false dichotomy: it’s not atoms or bits, it’s atoms and bits. And software only became a thing in the Fifties, and before that it was Atoms, period. Digital is undoubtedly growing in importance – but I’d argue it’s a mediator of experiences, not the experience itself (e.g. how you order physical goods, or the channel for getting entertainment). Mary Meeker’s 2019 Internet Trends compendium has some useful factoids in this regard

1. e-commerce is 15% or retail sales in 2019, vs. ~ nothing in 2000
2. adult users spent 6.3 hours/day with digital media in 2018, versus 2.7 hours in 2008
3. online music grew from ~ 0% of total sales to ~80% in 2016

Disclaimer. OK, Negroponte was born in 1943, and so technically isn’t a boomer.