CPD: When bits meet atoms

May 21, 2018

In this third of a three-part series penned by Epoch Investment Partners, the ‘tech is the new macro’ theme is explored further to consider the implications of the second machine age for corporate profitability.

The Second Machine Age, which has also been called the Digital Age, commenced with the shift from mechanical and analogue electronic technology to digital electronics which began in the late 1950s. The importance of this transformation was highlighted in 1965 by Gordon Moore, who later founded Intel. He believed there would be (at least for a while) an exponential relationship between integrated circuit complexity and time. Although he never stated this verbatim, Moore’s Law has come to imply that integrated circuits would double in performance roughly every 18 months.

The exponential growth of processing power, as aptly expressed by Moore’s Law, has helped drive the digitisation of information. This data is composed of “bits,” not “atoms.” Bits represent the Digital Age whereas Atoms represented the First Machine Age. The key differentiating point is that data in the form of bits can be copied freely, perfectly and instantaneously. As such, they are usable over and over again, unlike goods constructed from atoms.

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