Certain Habits

Morgan Stanley has published an interesting report on the rate of mobile internet adoption and the likely impact on future markets. The statistics alone are interesting. For a sense of the conclusions, here are highlights excerpted from the download page:

Material wealth creation / destruction should surpass earlier computing cycles. The mobile Internet cycle, the 5^th cycle in 50 years, is just starting. Winners in each cycle often create more market capitalization than in the last. New winners emerge, some incumbents survive – or thrive – while many past winners falter.

The mobile Internet is ramping faster than desktop Internet did, and we believe more users may connect to the Internet via mobile devices than desktop PCs within 5 years.

Five IP-based products / services are growing / converging and providing the underpinnings for dramatic growth in mobile Internet usage – 3G adoption + social networking + video + VoIP + impressive mobile devices.

Do you remember all the talk about how “convergence” was coming and was going to change everything? It seemed like in the late 1990’s and early 2000’s, you couldn’t watch Charlie Rose without seeing another media executive, dot com entrepreneur or other master of the universe prattling on about convergence. By which, they meant, “whatever would happen when the internet was integrated with that crack-cocaine-like device and its attendant habits called “television.” “Convergence” even powered one of the biggest mistaken destructions of shareholder value mergers of the 1990’s, the combination of AOL (remember them?) and Time Warner (remember them?).

Anyway, I’ll have to look up who said it later, but we now know what you get when you combine PC’s, the internet and television. You get PC’s. The broadcast, fixed-time, limited-channel nature of television is a quirk of limited technology (specifically scarce distribution with high barriers to entry). When those structural barriers are removed (by the PC and internet part of convergence), what’s distinctive about the “television” part of convergence disappears. Sure, television continues. Out of habit we consume shows through cable. But it’s not hard to replace most of that with Hulu, YouTube, iTunes, and Netflix.

So, if that’s what happened with Convergence 1.0, you have to wonder if Convergence 2.0 will follow the same path. Here’s a hypothesis: When PC and mobile phone convergence happens, what we’ll get is mobile phones (or phone-like devices like the iPhone).

Already I can do most of my normal computing tasks with an iPhone. I can check my RSS reader. I can read and answer email, google, query Wikipedia, buy stuff (Amazon’s app is, if anything, better than their web store), even edit photographs. Does it have the power of a Mac Pro? No, of course not. My phone isn’t going to replace Lightroom and Photoshop. It’s too slow and the screen is too small. But it’s close enough that it could probably replace everything my Grandma does with her computer. Tether it to a keyboard and larger screen, add RAM and you’ve got a nearly feature-complete replacement for how she uses her iMac.

I think an underlying reason interest in the very-real-but-not-yet-announced Apple Tablet (“Slate”?) is so high is that it’s not very hard to envision how a more powerful, mobile-phone-like computer with a larger screen could not just replace a computer in a pinch, but could, in fact, be a better computer, in the same way that Hulu or Youtube is a better TV. Not feature complete, superior in every measure. But good enough in essentials, and better in some dimensions that count for more. That such a device could also be a better magazine or book, in the same ways that a CD was a better record, an mp3 was a better CD track, an iPod was a better Walkman, and iTunes was a better record store—and be better in all those ways simultaneously—is enticing indeed. I don’t like hype. But does anyone today doubt that the hype surrounding Convergence 1.0 was wrong, not for forecasting too much change, but for forecasting too little? It’s helpful to remember that optimism is less frequently a weakness in seers as is poverty of imagination.