For all of its flaws, the industrial mentality has given us the gift of efficiency, of doing everything we do better, faster and cheaper than we did it yesterday. The machine mentality of getting better by increments has led us to a point where the tools that matter are free. They cost so little that they basically cost nothing. Or, in fact, they actually cost nothing in real terms and are given to us in that the thing of real commercial value comes from the person at the end of the technology, rather than the technology itself. The technology still doesn’t make the decisions that matter. We do. From a commercial perspective the decisions that matter are those that involve expenditure, which is still largely a human decision. Two hundred years of churning and competing on price got us to a point where it almost no longer matters. And we should be thankful because that’s how we reached the age of ‘disposable technology’.

Technology deflation

The default example of how technology is getting ever cheaper and ever more powerful is Moore’s law. For the uninitiated, Moore’s law was an observation made by Gordon Moore, co-founder of Intel, who contended that over the history of computing hardware, the number of transistors on a circuit board would double approximately every two years, effectively doubling the power and halving the price of computing power. But it’s not Moore’s law in itself that’s so defining. It’s that the output capabilities of many digital electronic devices follow closely the pattern of Moore’s law. The principle applies to processing speed, memory capacity, pixels in digital cameras, GPS devices, network capacity, solar panels … and an extensive list of other technology device inputs. And even if we look at the pre-digital era it also remains true for vacuum tube circuit computers. They all follow the law of accelerating returns of technology.

The rate of improvement we see in all of these technologies has been exponential and a key force in the dramatic democratisation of the modern economy. Many previously unattainable technological goods and services — computing and communications devices only affordable to the largest organisations — are now at disposable price points, often even free. This doesn’t just change the kinds of gadgets we own; it changes the entire economic structure. All of a sudden, advantages large firms used to have, barriers to technology, and large financial hurdles begin to diminish. We end up in an economic environment where people can own whatever a company can own. The new game becomes less about the tools and more about the creative adaptation of those tools — that is, the human side of the technology.

Real-world technology deflation

One gigabyte (GB) of external hard-drive memory cost about fifteen dollars to purchase in the year 2000, and only a few cents today, but in real terms it’s free. It’s free because myriad cloud-based computing services will provide anyone with up to 10 GB upon signing up, with no payment plan.

But it’s not just the prices of the technology that are dropping. It’s also the prices of the functional pieces of technology inside the devices. The prices of entire gadgets are rapidly falling. These price declines are also assisted by production-line improvements; that is, globalisation — the opening up of low-cost labour markets in the production of technology products. It’s staggering to observe the law of accelerating returns when we look at it in real terms; in other words, the real things we use every day, not just the techie bits that live inside them. Let’s consider the following examples as reminders of how far we’ve come.

• Television. A 42-inch flat-screen LCD television now costs 10 per cent of what it did 10 years ago. Not only is this a mere fraction of the former price, but the television is better in every way. It’s now high definition, web enabled, thinner, lighter and more energy efficient.
• Laptop. This is the one we’re all most familiar with. I recently bought a new MacBook Pro. It was half the price of the previous model, and all the key specs have twice the capacity of the old one. But it’s also lighter, stronger, and it has better screen resolution, more features and better software.
• Digital camera. In 1990 a 0.077 megapixel camera cost almost $2000.¹ Today, high-resolution digital cameras come free with every smartphone. In fact, the camera as a separate device is becoming a rarity. Like film, it’s becoming redundant, which is not surprising given that smartphones now come equipped with cameras of up to 41 megapixels.
• GPS. The first hand-held GPS receiver, which was launched in 1989 (the Magellan NAV 1000), was the size of a brick and cost $2500 to purchase. These days the GPS is another ‘free’ device we get with our pocket ‘super computer’, the smartphone.

The free super computer

In fact, most of the important technologies we use today are becoming integrated into the smartphone, which isn’t really a ‘smart phone’ at all — it’s actually the most personal of personal computers. While Bill Gates aimed to have a computer on every desk in every home, Steve Jobs put a super computer in every person’s pocket. The evidence is in the number of uses for the smartphone. The telephone function only gets 22 of the more than 150 interactions we have with our smartphones daily.² One of the most amazing things about this super computer is that it’s actually free. The recommended retail price is a bit of a red herring. While there’s an option to buy smartphones outright, the vast majority of us buys them as part of a deal when signing up for mobile-phone contracts, which haven’t changed in price since we first started using mobile phones. The first mobile phone I signed up for, in 2001, cost me $69 a month. I recently got the new model of iPhone and it cost me $69 a month. I have all the benefits of a super computer in my pocket for no extra cost at all. We really are living in the age of free technology that’s disposable because it will end up in a drawer at home once the contract expires and we upgrade.

The crux is human

The reason why ubiquitous and mostly free technology matters isn’t just that it’s so powerful. It’s that it’s so accessible. Early technology was so alienating that it didn’t invite participation and belief in what was possible. It wasn’t just the price points that kept most early computing (and industrial, for that matter) technology out of the hands of the populous; it was the interactions. The technology was difficult to understand, somewhat scary and dystopian. The old, green-screen computers with code-based logins didn’t feel very human so they remained in the government and corporate world. But now that things have changed, now that the geeks have come good with their promise of a technological utopia, what people believe is possible has also changed. Our default position has changed from observation to participation. People have started to want to participate in technology and have a say in how things could be done better in business as both entrepreneurs and intrapreneurs. What businesses must realise is that when everyone has access to the same technology there’s a distinct power flip. All of a sudden there’s no technology gap between people and corporations and this affects the entire structure of the marketplace.

It’s getting quicker

It’s not just the price decreases and relative power increases that are moving at an exponential rate. It’s the adoption rates and distribution of the new communication technologies too. It’s as if technology has its own agenda. And the agenda of technology is to make itself more mobile and diffused for the widest possible audience. And so each form of new technology is taking less time to infiltrate our lives and distribute itself. If we look at the history of each new communication tool and the time it took to be widely adopted, there’s a clear message for business about the rate of change.

This sends a clear message about the ever-shrinking amount of time that business has to adjust to whatever emerges next, and that a wait-and-see strategy probably won’t serve conservative industrialists as well as it may have when technology was expensive.

Technology curve jumping

We need to remember that this is a long-term trajectory, so we can expect technology to continue to improve at an ever-increasing pace. History has shown that even when we reach the end of certain technological capabilities, different innovations have always been uncovered. Even Moore’s law has been observed as having a physical limit. There comes a time when transistors can’t physically be made any smaller and exponential improvements will come to an end.

In fact, this has already happened. In the early computing era, vacuum tubes reached their physical limits. They reached a point where they could no longer be made any smaller and still have a vacuum effect. This was when we jumped the curve to the transistor-integrated circuits we currently use, those to which Moore’s law applies. So when a technology reaches its limit, we jump off that technology and onto a newer technology — a curve jump, if you will. On the new curve we start a new trajectory of exponential growth and the cycle begins again. Moore’s law wasn’t the first accelerating computing power curve; it was the fifth curve. The next phase is likely to be quantum computing, which is currently under development.

Regardless of which technology comes next, history has shown us that something will come. And when it does, it will follow the same principles of greater power at a lower cost. It will give more tools to more people, be smaller and be cheaper than before. It will reduce the cost of access and infrastructure by the mere nature of being new technology. And that’s why it changes the business landscape so much: because each innovation is increasing the rate of change, and there’s no sign of it slowing.

Technology stacking

This new layer of accessible, cheap technology is going to create a technology layer that we’ll all live upon and within. It will be a technology stack similar to the new industrial landscape that began to arrive about two hundred years ago. To understand this we need to consider the idea of technology stacking.

‘Technology stacking’ is a term widely used by computer geeks to describe the layers of components and services that go into creating a software application.

With all forms of technology stacking — not only software or computer hardware, and not only at the digital level, but across all forms of human innovation — new layers are added to the previous elements to create more functionality, utility, depth and meaning. The best way to show this is by using an example we can all identify with. Let’s take the history of roads.

Each layer is needed before the subsequent layer can make any sense or be needed. While the industrial revolution created a machine-based layer of technology in business and lifestyle, we’re now entering a stage where a digital layer is being added. Cheap, disposable technology will give us a new layer that augments both how we live and how we do business. The job of businesses today is to define that new layer in their industry. If it’s not defined by the industry itself — if the industry lags with the new technology stack — it will be added by someone else. There’s no choice.

Omnipresent deflation

But what’s happening to general prices, the non-technological part of everything we own and buy? The cost of living seems to creep up every year, our household budgets seem to get harder to balance and cost cutting by employers reduces the resources at our disposal. In this price-oriented, conspicuous consumption environment it’s easy to believe the actual cost of everything is going up. It turns out that the opposite is true.

Regardless of the message mainstream media try to sell about price rises, almost everything we spend our money on is cheaper than it was last year, and the year before that and the generation before ours, if the item in question existed at all. Inflation, ironically, is a measure that inflates the truth about prices. And the truth is that all prices are going down in real terms.

Consumer price index trickery

Wage growth has outstripped price growth or CPI in every developed nation since World War II.³ When we overlay the growth in wages each year with the growth in prices, the pattern is clear: income growth outstrips price growth, so life is cheaper. People confuse their desired living standards with the actual cost of living.

The confusing part is that consumer price indexes don’t actually measure prices because they don’t measure prices in real terms relative to the increase we see in incomes every year. In addition to this, the items measured are weighted in terms of importance and changing consumption patterns. This basket is changed based on what’s regarded as an expected living standard over time, as is the weighting of the items within it. Items are removed and items are added every four or five years, so it changes the goods and services that are being measured as well.

As time goes by, the CPI, which usually tells us things are more expensive, actually tells us that ‘modern living’ is more expensive because we purchase so much more and have access to new spending options all the time.

We’re wealthier than we know and we’re getting wealthier all the time simply because the dollars we earn stretch so much further every year. It turns out that life is really only more expensive because of how much we want, not because prices are getting higher. And there’s about to be more downward pressure on pricing than we’ve already seen.

Connections and the impact on prices

Access to new sets of information gives buyers deeper knowledge on what fair pricing looks like. Buyers can assess the market accurately and efficiently through technology. This, then, removes the bumpiness we see in prices. There was once a physical limitation to what we could know about the price of something, but this has been removed. We used to have to rely on advertising messages, shopping around and calling up buyers to compare prices. Now we’re a few keystrokes away from knowing where we can get the best price on anything without error. Price comparison sites, or even barcode scanning software, puts perfect pricing knowledge in the hands of us all. This changes things a lot. It puts downward pressure on the seller’s prices and margins. We all now have access to global shopping hubs, the best and cheapest in every category, ensuring we pay the price of the most efficient global operator who sells a common good. But it’s not just knowing where the cheapest price is that will create a further downward pressure; it’s access to lower cost forms of production for all types of work.

Economic border hopping

We’ve already seen how technology prices are in rapid freefall, but the inputs for labour and manufacturing are also being facilitated via the digital revolution. Anyone can now do what once only the most privileged organisations could through democratised access to BRIC-nations labour. You no longer need some kind of special economic licence, or insight into the local geography, language or even culture, to be able to have work done in emerging markets. Once the domain of big business, now small business and independent entrepreneurs have access to a globalised and digitally connected workforce.

The new minimum wage

As the web has emerged as a tool of commerce, socialisation and business tools, a market for labour arbitrage has emerged. Casual staff websites and staffing solutions such as eLance and oDesk ensure that everyone can gain access to labour at a fraction of developed market wages. In developing markets, anyone can have information-based work done for about ten per cent of the rate of a developed market. And I’m not talking about pure administration either. Everything is available: from accounting, to software engineering, to marketing, to legal work.

The new minimum wage for information-based work is whatever the lowest cost market will accept. There’s no such thing as a minimum wage anymore.

Good, bad or ugly, this is the reality of where we’re headed. The technology makes it possible, entrepreneurs open up the doors and the organisations do what they’ve always done and take the cost-cutting opportunities presented. In a connected world, the new minimum wage is the same for everyone. Now that we have the ability to border hop to get large parts of our work done, the value of the work is not bound by geography. Rather, it’s bound by the market dynamics of global labour markets, not local ones. While it’s true that geographic-centric work is less affected, it will reduce the cost structure of many businesses. When it comes to both services and production in a hyper-networked world, access is greater than ownership. And while ownership was previously the only option available, our emerging zero-barrier world will be the catalyst for changing this.