Then, on 4 May, The New York Times weighed in with an article that looked at the industry’s own views of its "mid life transition."

Some executives, like Larry Ellison, believe that the industry is overbuilt – there are too many firms and there needs to be a thinning of the ranks.

Others point out that information technologies are different from other infrastructural improvements like the railroad or the telegraph because information technology is a general-purpose tool, driven by software and without material constraints.

The unrelenting pace of improvement in processing speeds, data storage and miniaturization means the tools constantly become more powerful and smaller; people can then figure out things to do with them.

………….

Underestimating the potential for computing has been a common pitfall over the years, from Thomas J. Watson at I.B.M. in 1943 ("I think there is a world market for maybe five computers") to Ken Olsen at Digital Equipment in 1977 ("There is no reason anyone would want a computer in their home").

One of the reasons for this comes from a concept complexity theorists like Stuart Kauffman call the "adjacent possible." Each new advance in computing power makes feasible a whole range of new products and services.

Some of these turn out to be attractive; many of them don’t. The innovations that survive create new businesses from which there are new "adjacent possibles."

From where we are today, it’s very difficult to predict the new products two generations out, because so many of this next generation’s crop will fail, and the ones that succeed may do so in ways that are unanticipated. So industry pioneers, like Watson and Olsen, underpredict the usefulness of new I.T. approaches.

As an example of how this can work, consider Netflix, one of my innovations to watch in 2003. If Amazon.com was a pioneer in the e-tail space, then Netflix feels like a second-generation company.

The firm has combined a number of first generation information based technologies into a second generation subscription-based DVD service. Like Amazon.com, Netflix provides DVD rental recommendations based on your previous orders. Like Blockbuster, the company has negotiated a revenue sharing model with movie studios for DVD rentals. These technologies are essential to the existence of the service, but the value of the service comes from the integration of these elements, along with many others.

The result is a total package, built on information technology, which is increasingly attractive to an increasingly large subscriber base. I’m a stockholder in Netflix. The company has grown -- revenues are up 82% quarter to quarter. Its stock price has risen -- more than doubling in the last six months. I wish I had more stocks like Netflix, but that’s another story….

Jim Gray, a computer scientist, has worked in the industry for more than 30 years. For his pioneering research on databases and transaction processing at I.B.M. and elsewhere, he won the 1999 A. M. Turing Award, sometimes called the Nobel of computer science. "I've seen the ‘end’ at least twice in my career — only to be surprised by the next wave," said Mr. Gray, who now works for Microsoft. "My guess is that this computer thing has just gotten started."

Relevant links and references:

1. The table of contents for the May 2003 Harvard Business Review, from which you can order Nick’s article.

2. The New York Times article on Technology’s mid-life bump The quote from Jim Gray comes from the Times.

3. Business Week’s article is called "The E-Biz Surprise."