by Archie M. Richards, Jr., CFP^®
April 16, 2001

People who consider themselves experts have been telling us of late that we have more communication technology than we can use. A major reason for the bear market, they say, is overcapacity of the Internet.

They're right about the short term. When the economy suddenly slows down, companies are left with too much inventory. But Internet overcapacity in the long term? Utter nonsense! The Web is just getting started. Venture capital investments made in the 1980s (coupled with reduced tax rates) spawned many new technologies in the 1990s. The surge of venture capital investments in the 1990s will fuel innovations at an even faster pace in the next decade. U.S. patents granted annually numbered 20,000 in the late-1940s, 80,000 in 1985, and about 150,000 now. The prospects for productivity and growth have never been better.

Oh sure, it may seem as if technology is advancing too fast. The number of transistors (tiny electrical switches) that can be squeezed into a square centimeter is doubling every 24 months. The Web's capacity to store data (called "storewidth") is doubling every 12 months. And the amount of data the world's telecommunication systems can carry (called the "broadband") is doubling every 4 months.

But here's the key: When a resource becomes close to infinite, the price becomes close to zero. In 1970, for example, a transistor and its support circuitry cost about $7. They cost seven-millionths of a cent today - a hundred-millionfold decline.

Assume that it's 2011. Here are technologies we would probably be using:

• Streaming audio and video are available from the Web, making radios and televisions unnecessary.

• Your computer files are stored, not in your computer, but on the Web. They're accessible to a computer whose built-in camera identifies your face.

• Personal computers perform about a trillion calculations per second. Supercomputers match the capacity of the human brain - 20, 000 trillion calculations per second. Some computers are tabletlike devices weighing about a pound, with high-resolution displays that can be read as easily as a book.

• Cell phones are the size of wristwatches - cheap and very popular.

• Your glasses have tiny lasers that project images safely onto your retinas. In addition to seeing in the normal way, you also see laser images that appear to hover in front of you.

• Microphones attached to your clothes and narrower than a human hair pick up your speech and transmit it to the Web. You can converse with people almost anywhere in the world, with immediate translation provided by the Web. Synthetic voices sound completely natural.

• Reading equipment speak to the blind. Global-positioning devices tell them where to walk. For the deaf, listening devices display in writing what other people are saying. Paraplegics can walk and climb stairs using orthotic devices. Disabilities are starting to be considered as mere inconveniences.

• Pills that remain in the body release drugs precisely when needed. The convergence of electronics and biology has brought astounding improvements in human health.

• Engines are so small that thousands can fit on the back of a skateboard; some can make billions of revolutions without lubrication.

• Once your car's guidance system locks onto the control sensors of major roads, the driving becomes automatic - safer and faster than you could do yourself.

  Overcapacity? No way! We're just getting started.

We do have plenty of overcapacity . . . in government. Many devices now under development require wireless linkage to the Web. This "last mile" of connectivity is subject to Federal Communications Commission regulation, which slows implementation. The agency does more harm than good and should be dissolved. While we're at it, so should a bunch of others.

The private sector is quite another story. The Internet is only in its infancy. Any temporary oversupply will work off quickly. But even before the factories gear up again, stock prices will begin rising. Never mind just the techs; buy a broad range of stocks. But get aboard!