AMD vs Intel: Technology, Competition, and Sustainability

AMD vs Intel: Technology, Competition, and Sustainability
Hugh Folk
Georgia Tech Center for International Business Education and Research
Working Paper Series 2007-2008
Working Paper 012-07/08
http://www.ciber.gatech.edu
For further information: email: ciber@mgt.gatech.edu
October 2006
(c) 2006
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AMD vs Intel: Technology, Competition, and Sustainability
Hugh Folk 1
Technology
Computers will influence everything that is do in the future. Now they store,
process, and communicate all of the information of politics, business, education,
medicine, literature, music, telephone calls, science, and technology. They are our
companions and our teachers. They are our untiring associates in research, invention, and
discovery. Just to prove that they are only human, they sometimes err.
Computers are largely composed of microprocessors and memory chips which are
integrated circuits containing millions, sometimes billions of transistors and are made
largely of silicon, one of the most plentiful atoms in the earth’s crust. The complexity or
number of transistors of the average integrated circuit increases by about 58 percent a
year. Average productivity (output per man hour) in the semiconductor industry
increases by about 27 percent a year. Microprocessors are the part of the computer that
performs the mathematical and logical operations referred to as computing. The speed
and power of a particular state-of-the-art microprocessor design (an AMD Athlon or an
Intel Core 2 Duo) depend on the architecture, or design, of the number and size of the
billions of transistors to be incorporated into each of the several hundred identical dies, or
slivers of processed silicon, on the thin, round 300 mm wafer of silicon and the
conductivity of the lines, or narrow, flat, thin copper wires that will interconnect the
transistors. Each design is put together by experts using specialized computer programs
which combine new or previously used modules to make the patterns for masks through
which extreme lasers project high frequency 248 or 193 nm ultraviolet light which forms
tiny interference patterns on the processed silicon wafers which solubilize the
photoresistant compound previously spun on the wafer. A hundred or more similar steps,
each requiring specialized equipment and reagents arranged in separate work stations to
etch channels, deposit metal interconnects and silicon dioxide insulating layers, or
connect the several layers that make up the chip. Each work station will have automated
wafer manipulation equipment to remove each partially processed wafer from a multiwafer
carrier or cassette, and insert each wafer into a dust free vacuum reaction chamber
where it is processed. Each reaction chamber utilizes a unique, corrosive, toxic chemical
or high-termperature vaporized metal generated on site or pipelined through the dust-free
“clean room” where the processing stations are located. At any step, a single grain of dust
can destroy a die that if completed would sell for several hundred dollars. 2
1 Professor of Management, Shidler College of Business, University of Hawaii at Manoa, folk@hawaii.edu.
2 Fab cost accounting is very strange. Yield, or average percentage of good chips from a wafer, is said to be
critical to economic success, but the market price of the chip itself if only a few dollars per square
centimeter of silicon. That is to say, variables costs are quite low. The fixed cost of the completed design
and the fixed cost (in the billions) of an up-to-date fab and the 60 percent gross margin set the multihundred
dollar price of the microprocessor chip. Design and fab costs are sunk and must be recovered for
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No industry has grown as rapidly over the past 40 years as the semiconductor
industry In 2005, $229 billion dollars worth of semiconductors were sold.
Microprocessors are the most important semiconductor product, and most
microprocessors are x86 chips with an augmented instruction set which is backwardly
compatible with the software written for the 8088 chips used in the original IBM PC/XT
of 1981. IBM selected the 8088 chip designed by Intel and required Intel to license a
number of second sources. IBM also selected the Microsoft MS/DOS as the nonexclusive
operating system and paid a lump sum for unlimited copies. 3 Microsoft
retained the right to sell MS/DOS to companies that wanted to clone the PC, thereby
creating the IBM compatible market. The x86 architecture has flourished. Most
Microprocessors in PC’s are x86 architecture. As are more than half of microprocessors
qreAt all levels, PC, server, and supercomputer, microprocessors do most of the
computing.Most x86 microprocessors today are manufactured by Intel (80 percent) and
Advanced Micro Devices (AMD) (20 percent). There other firms, such as IBM and
Transmeta have produced x86’s but do so no longer.
Starting in 1983, Intel designed and introduced new generations of faster x86
chips every four and then every two years. OEM clone customers for the most part were
apathetic about speed increases. Intel announced the more powerful 80286, which IBM
used in its much faster PC/AT. Beset with Japanese competition and dumping, Intel
(which thought of itself as “The Memory Compny”) abandoned the production of
memory chips and became “The Microprocessor Company.” It aimed all of its efforts on
improving and marketing microprocessors and the PC itself. Intel had been unable to
monopolize the 8088. Its market share was about 30 percent for the 8088 in 1984, and 65
percent for the 80286 chips (introduced in 1983). However, Andrew Grove, the CEO,
decided to increase its return on intellectual property and monopolize the chips Intel
designed. This was thought to be a perfectly legal, since a nonexistent product could
hardly be said to constitute “a market.” Intel invested $100 million in designing and $200
in producing the i386 at a time when it had laid off workers in memory (1985) and was
about to book big losses in the next year. However, Intel had licensed AMD and others
to produce the 8088 and 80286. AMD assumed that it had a license to copy the 386
microinstructions, but Intel obtained an injunction barring AMD from using the Intel
microinstructions. AMD used “clean-room” techniques that did not violate the injunction
or use Intel technology to produce the AM 386/40 in 1991. AMD countersued Intel
claiming its license included the 386 microinstructions and was awarded damages. In
1995 the legal dispute was settled. AMD was paid compensation. Intel granted a new
license including everything x86 as far as the 386 technology but no further. Intel had
sold several billion dollars worth of 386’s, and had excluded competition for six years, at
the cost of several hundred million in legal fees and compensation to AMD. It had
successfully monopolized the 386 and had been able to spend $500 million in developing
its successor i486 (1989) which it introduced at $1,500. Intel was able to expand
overseas and build fabs in Ireland and Israel for additional capacity in advance of
profitability. The chips must be produced and sold as long as the price covers variable cost and does not
cannibalize other products.
3 IBM obtained a license, which it used later to develop OS/2 jointly with Microsoft, and then alone.
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demand. 4 If either duopolist developed a more powerful or cheaper chip and increased
demand, the one with greater unused capacity would be able to supply the demand, while
the one without excess capacity could not.
IBM delayed adopting the i386 for a year, and Compaq became the biggest PC
seller. Intel’s slogan of “Intel Inside” led users to identify the microprocessor as the key
part of the PC. What mattered was the brand of chip not the brand of the box. As 386
competition arose, Intel started paying half of its OEM and merchant advertising costs for
Intel-equipped products. Big computer retailers and brands would feature their Intel
products (for which they got rebates and ignore AMD. AMD never seemed to pay
rebates. There were no old x86’s PC’s that could compare with those using the i386. The
part had come to dominate the whole. The clone makers did nothing to improve the PC,
and Intel took increasing control of the computer’s interior, introducing the PCI bus
which increased overall speed by four or five times, and permitted the new, faster chips
to perform up to capacity. Intel began markerting chip sets and mother boards, increasing
its share of value added.
The faster i486 (1989) dominated the PC industry until 1993, even though other
companies later introduced 486s.
In 1993, Intel introduced the faster technologically-advanced Pentium. A math
professor discovered and explained an error in the floating point unit, and disclosed it an
Internet newsgroup whence it rapidly spread to the headlines. Intel had discovered the
same defect earlier, and had decided that it was not bad enough to recall the defective
parts -- an astonishing blunder. The defects were repaired in future steppings of the chip,
but when the “floating point error” became public there was a storm of criticism. IBM
stopped selling Pentiums for the time being. Memories are long, and Intel haters keep up
complaints to this day. Intel finally got it offered replacements, first to serious math
users, and later to every purchaser. Intel took a $475 million charge to cover the recall,
and lost much prestige but had the best year in its history. There was no rival to the
Pentium until AMD’s answered in 1005 with the AMD 586 K5.which some brilliant
design ideas but was poorly executed. Meanwhile, Intel developed the P-6 or Pentium
Pro. AMD acquired NexGen, (started by former Intel engineers who had helped design
the Pentium). The NexGen team developed the AMD K6. It was successful technically
and commercially. It saved AMD. It was superior technically to the Pentium and cheaper
than Intel Pentium II. Capacity limited, AMD contracted to build and operate Fab 30 in
Dresden as part of an integrated semiconductor initiative in former East Germany. It
joined all the right clubs and begged large subsidies as befitting a German Company. The
next years were filled with vigorous competition. Intel introduced the successful Pentium
II, based on the P6 architecture in 19977, Both the PII and AMD’s K6 went through
speed upgrades, as the transistor and line width were reduced, and production moved
from 150 mm wafers to 200 mm wafers in the new fabs that both companies built. AMD
usually lagged a year or so in the new technologies, but its chips drew closer to Intel in
speed and performance. The Pentium III, introduced in 1999 and went through speed
upgrades but suffered from the dot.com collapse in 2001 which set IT spending back. The
Pentium III fell behind the AMD Athlon speed in 2001 and AMD seized the virtual Blue
4 A well-known monopolistic practice pioneered by Alcoa.
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Ribbon for the fastest x86 chip. Intel started an intense sales effort to win back OEMs
prompted the AMD antitrust suit in 2005. The Intel design team had extended the life of
the P6 architecture about as far as it could go¸ and other team introduced the P4
“NetBurst” architecture which developed slowly developed and never got over 3.8 GHz.
Serious mistakes had been made in designing the 64-bit extensions for the Itanium and P4
which made legacy 32 code so slow that Intel lost benchmark comparisons to the AMD
Athlon 64 (1991) and Opteron (1903). The Opteron enjoy wide acceptance in servers,
and AMD became a serious continder, its market share in x86 servers went from nothing
to 25 percent. Intel also had problems with waste heat. The power used by the P4 was
higher than the Athlon, and this became an important issue. Intel had been able to
dominate the x86 microprocessor industry in power and speed and charge price premiums
for fifteen years, and now (2003) things looked as if they were goiog to hell. Intel
introduced the Pentium D with two cores on separate chips in the same package, but
AMD double core chips continued to outperform. Sales increased and profits turned
positive.
In July of 2006, Intel introduced three Core 2 chips, each with two cores for PC’s,
laptops, and servers.. Intel claimed that performance was improved 40 per cent, and heat
dissipation was reduced by 40 percent. AMD claimed that their chips were superior and
that Intel was cheating on supposedly neutral benchmarks, and challenged Intel to a
public contest using a third-party compiler. Apple ported OS X to the Core 2 and
announced its conversion to the church of Intel. Intel promiseded the Core 2 Quad for
November.
Competition and Antitrust
Before 1985, AMD had only a minority share of the x86 market but Intel was not
close to a monopoly. Grove began what turned out to be a long legal struggle with AMD.
Intel i386/16 was introduced in 1985 at $299 and in 1990 cost $171. AMD’s 386DX/40
appeared in 1991 at $281 and fell a year later to $140. AMD stock has performed
irregularly for much of its life (Figure 1) peaking at 45 in 2000, then falling to 3 and
recovering to 42 in 2006, and then dropping to 24. INTC grew rapidly with few
interruptions until the dot.com crash in 2000, when it fell from 72 to 5, and then
fluctuated with a downtrend and recovered until 2005, before dropping in 2006. Intel’s
stock fell after the 2000 peak and never recovered. AMD’s stock trended downward after
2000, recovered after 2003, and then dropped sharply in 2006. Despite recovery in
profits, the stock price dwindled deflecting doubts about the profitability of the industry
and AMD itself.. AMD had large tax losses carried forward which made its after-tax
profits negative until 2000, when its net income was $1 billion, becoming negative from
2001 to 2003, before turning positive in 2004 and 2005.
In July of 2005, with great fanfare, AMD filed a federal antitrust suit in Delaware
(where Intel was incorporated) against Intel accusing it of abusing its monopoly by
threatening to retaliate against customers who violated illegal exclusive dealing
agreements by using or selling AMD products and by using payments and discounts to
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induce manufacturers and dealers to carry or prefer Intel chips. AMD CEO Hektor Ruiz,
ordinarily a calm and reserved man, publicly denounced Intel as unfair and abusive. Intel
CEO Paul Otellini ridiculed AMD’s performance, claiming that its recent successes
showed that when AMD had good parts it could sell them but it was incapable of
producing enough good chips to meet demand when they did have winners. In its answer,
Intel denied any illegal acts and moved for dismissal. A year later, the judge dismissed
those counts that accused Intel of illegal acts in Europe and Japan for lack of jurisdiction.
AMD had filed antitrust suits in those places. AMD had previously sued Intel demanding
discovery of documents to help them in its planned European suit. Intel lost in the U.S.
Supreme Court in 2004, and AMD won the right of discovery of antitrust violations by
Intel. 5
Antitrust law is one of America’s most bizarre and self-destructive gifts to the
world. Justice Abe Fortas said that antitrust law was in the tradition of the old American
west. Every once in a while, a frontier sheriff would pistol whip a citizen at random pour
encourager les autres. He failed to add that the sheriff would then sometimes hand the
pistol to the European commissioner of competition and let her continue to beat and rob
the American citizen. It is a powerful tool with which a foreign government can harass
great American exporters like Microsoft and Intel. The DOJ or FTC get the goods on an
American firm and then had over the results of discovery to the foreign agencies. The
coordinated international antitrust cooperative (or conspiracy) is aimed at American firms
that give good deals and free goods to foreigners. The U.S. DOJ claims jurisdiction over
foreigners’ antitrust violations only when American trade is impacted. The Eureopean
commssioner claims jurisdiction over American firms whenever it wishes. She seems to
have an insatiable desire to redesign American soft-ware packages and steal trade-secret
code to enrich her co-conspirators who would like to sell something separately that
Microsoft gives away as part of Windows. Intel is able to make a better deal for German
companies than AMD can even though Gernany has granted it huge subsidies. Penalizing
Intel for its mercantile acumen and economic strength is protectionism and illegal
discrimination (violating WTO rules). The current Republican U.S. Administration has
violated trade law so regularly in protecting decrepit American industries that it has little
ability to or interest in protecting American high-tech exporters. As a rule, foreign firms
have not been able to compute with American IT firms, so government regulators have
been called in to rescue them. AMD, has outsourced all of its microprocessor
manufacture to its highly subsidized Germany subsidiaries yet the U.S. IRS has allowed
prior tax loss carryforwards to reduce its current U.S. tax obligations even though the
losses were in large part caused by its mismanagement of its German and other foreign
operations. AMD spent only $1 million for U.S. lobbying in 2005, far too little to justify
the favors this Administration has given them.
In the 1990’s the FTC investigated Intel for several years but imposed no
penalties. Intel signed a consent decree that it would not withhold technical data required
by its OEMs to design products for six months before the announced date for release of
the Intel product. Nothing was said about the complaints that Compaq, DEC, and
Intergraph had made that Intel was retaliating against them for filing patent infringement
5 Intel vs AMD. U.S. Reports. (2004)
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suits. It was widely suspected that Intel’s withholding of product specifications was a
way of extorting a cheap license from a patentee. Even were Intel a monopolist, it would
seem to be perfectly legal for one monopolist to exchange legitimate trade secrets for a
legitimate patent license from another monopolist. In 2005, Japan Fair Trade
Commission, acting on a complaint from AMD, recommended that Intel not continue
rebate and incentive payments to OEMs.Bizarre behavior indeed for a country where
many business deals have side payments, secret clauses, and political payoffs. Intel is still
the beneficiary of the 20 percent U.S. share of the Japanese semiconductor agreement.
AMD should not be, since with the sales of its flash facilities it no longer manufactures
semiconductors in the United States on its own account. Korea’s antitrust agency raided
Intel’s offices. In each of these cases, the suit was stirred up by complaints from AMD.
The antitrust agencies in the U.S. have no way of getting information without cause to
believe that the law has been broken. 6 DOJ and FTC have, so far, failed to charge Intel
with monopolization or unfair trade, and the court has dismissed the foreign counts for
lack of jurisdiction.
Armed with subpoena powers, AMD will try to prove a prima facie case of abuse
of monopoly, but first it must prove Intel is a monopoly. If AMD should win, it will have
to prove damages. But AMD was doing quite well by past standards until it started the
price war. The trial is not schedule to start until 2009. It is quite possible that by the time
the trial ends, AMD will be out of money. It will be if the price war continues.
Intel CEO Otellini has publicly claimed that the AMD suit is primarily defensive,
to prevent Intel from starting a price war. But AMD has already started the price war.
Intel has cut Core 2 prices across the board, and AMD has cut back, always seeking a
lower price performance curve than Intel has. As a result, 2006 has been a lousy year for
both Intel and AMD: sales, profits, and stock prices have all fallen. In the past, Intel
would have maintained a substantial differential price over AMD, based on a claimed
superiority of performance. Intel be able to show necessity when it cut prices. Not even a
monopolist is required sell a superior product at a higher price than a competitor charges
for an inferior product unless it is trying to destroy a competitor.
The “rule of reason” applies to most acts. Behavior that a judge finds reasonable
under the circumstances is legal. What is reasonable for a small struggling competitor
like AMD need not be reasonable for a dominant firm like Intel.
History indicates that few startups last very long, and few large firms remain large
for very long. No dominant firm remains dominant for long. High tech firms fade after a
few years when the firm is not able to produce successful follow-up products to the
original innovative product. Dominant firms may innovate and invest in additional
capacity at home and overseas in an attempt to preempt competition. It may merge with
or acquire dominance in related industries. IBM dominated large business computers in
1980 and had been sued by DOJ for monopoly, but it entered the PC industry that already
had many small firms in it. If it had made any serious effort to exclude other firms from
6 On two occasions in which I made specific inquiries of the FTC about a publicly disclosed per se
violation, I was told to find on my own account sworn affidavits from participants or victims. I was told
informally that FTC had not funds to institute investigations (using civil investigative demands) of random
offenses on its own.
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the PC industry, someone would have sued and won. It rose to dominate PC sales but did
not control the industry. Intel designed the 8086, but only grew to dominate the x86
compatible industry by moving up-market, and cutting prices on the newer more
powerful chips. AMD struggled to compete, even though it lost money many years. It
carried out its own R&D program and acquired outside firms and got substantial
subsidies from Germany and Saxony to build Fab 30 in Dresden. It survived, and now
has some superior products. It continues to get huge subsidies from Germany. It can sell
more chips than it can make. so it contracts foundry products from IBM and Chartered.
AMD enjoyed a rise in stock prices from 2003 to 2006 (although though it has since
fallen) while Intel’s stock price has trended down since 2001.
The antitrust suits may have helped preserve competition in mainframe computers
for a while, but could not preserve the industry itself. Antirust and patent suits against
Intel, may have helped preserve competition in the minicomputer industry, but could not
preserve the minicomputer industry. AMD’s antitrust suit against Intel may preserve a
competitor, but it is only German subsidies that keep AMD alive. Without the German
subsidies, AMD would have had ten years of losses, but would not have been able to
manufacture the microprocessors the sale of which kept it alive. The antitrust laws did
not prevent IBM from dominating the mainframe industry in the 1960’s and 1970’s when
IBM sold about three-fourths of mainframes in the world, and the Department of Justice
sued for violating the Sherman Act. Control Data Corporation (one of the “seven
dwarfs”) also sued and shared discovery with DOJ. CDC settled for more than a billion
dollars. IBM was smart enough to avoid signing exclusive deals with Intel and Microsoft
which were able to supply companies making IBM compatibles. It required Intel to
license competitors, so clone makers could buy compatible chips. Antitrust law and
IBM’s forethought prevented Intel from monopolizing the PC chip market. During the
past 25 years, antitrust forbade Intel from acquiring or destroying AMD or from formally
dividing the market with it. There were many times in which a merger or cartel would
have been highly profitable to both corporations. The recent fall in the price of both
stocks and chip prices means that active price competition between them has not
benefited Intel or AMD. A well-behaved duopoly of Intel and AMD would have made
both of them more valuable, but price concessions would have had to be made to the PC
sellers to keep them quiet. Antitrust laws has prevented PC makers from combining and
forming a bilateral monopolies with the hypothetical chip or software monopolists. As a
result, no one in the microprocessor and computer business is making any great amount
of money.
Most of the profit of manufacturing PC’s has been squeezed out over the years by
Intel and AMD’s price structure. It is amazing that both firms in an implicit duopoly can
maintain gross margins of 57 to 60 percent. Intel’s recent price-cutting, discounts and
concessions prompted AMD’s antitrust suit against Intel. Had Intel quietly accepted an
inferior competitive position (as AMD did when it produced inferior parts), AMD could
have charged premium prices, built its capacity, paid down its debt, and piled up profits.
Instead Intel launched a strong defensive campaign. The Core 2 Duo was introduced, and
Apple singed on as a customer. While quality and performance issues remain, Intel is
building two new giant fabs, hardly a sign of resignation. It has sold off money-losing
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divisions, and has cut employment by 13,500. It has sold several billion dollars of
convertible bonds to finance its new construction, and continues to buy back stock. It has
repurchased $56 billion since 1990.
Former CEO Jerry Sanders had earlier refocused AMD on the microprocessor and
flash market and had negotiated Fab 36. AMD enjoyed at remarkable superiority in its
Opteron aned Athlon chips in 2003. Intel’s response was slow. It may not be true,
regardless of what Intel claims, that it has regained operational superiority. Intel’s Core 2
Quad chips has been promised for November will have the top end of the market to itself
for a while. This might permit Intel to regain lost ground in servers. The great game is
far from over, but performance and capacity have moved far enough ahead that a
restoration of stable duopolistic relations may not occur. Acquisition of ATI will reclaim
more of the real estate in the PC for AMD.. The $7.2 billion dollar price may very well
be too much for it to handle, and the debt burden may prevent profits for years, especially
if Intel drives PC and chip prices even lower. It is obvious from recent stock price
movements that the market is not optimistic about the future of the two microprocessor
firms.
The transformed industry will have much larger capacity and much lower prices.
Stock prices may not recover for many years. The struggle for new markets – such as
chips for a billion very cheap student computers – over the next five years may look like
a great opportunity for AMD or Intel, but it is not.
Another example of competition is the 2B1 vs Eduwise struggle. On September 29, Intel
it announced a low-priced ($250) “Eduwise” laptop design with a 900 MHz Celeron D
microprocessor aimed at poor students, which has full features, including an embedded
Windows XP operating system. Mexico has already ordered half-a-million pieces. The
Eduwise is planned to cost $110 more than the 2B1 produced by OLPC (one laptop per
child) developed by Nicholas Negroponte of the MIT Media Lab. The screen is a 7.5 inch
1200 x 900 pixel TFT self-refreshing display with 200 dpi resolution.
There are several potential producers of cheap, slow x86’s, such as Via which has
recently acquired Centaur, or Rise, both of which have x86 licenses and designs. China,
Taiwan, and Singapore all have giant foundries which can crank out huge quantities of
very cheap x86s.
AMD has strategic value to Germany or China that far exceeds its market value.
AMD has already licensed Beijing University for some x86 intellectual property. China
hundreds of billions in foreign exchange lying around unused. It could easily and almost
invisibly acquire control of AMD and present the corporation and the U.S. government
with a fait accompli. If AMD built six or seven fabs with China’s money, and started
producing the hundreds of millions of chips China’s will need the world price of top x86
chips would fall ’s market (protected by a 30 percent tariff) and financial resources
behind it would .
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There has been an implicit live-and-let-live conspiracy between the giant firms of
the semiconductor industries. They are associated in the ITRS. Thousands of employees
exchange information about company plans and what they are working on. The CEO’s
are very open about their plans when interviewers ask pointed questions about products
and technology. Ruthless competition is inconsistent with the widespread practice of
cross licensing. Workers come and go, and not all of them are diligent in avoiding
conflict of interest between employers. In an unregulated industry like semiconductors,
an innovator needs as second source because a canny customer will not willingly lock
himself into a single supplier to form an indeterminate bilateral monopoly. Competition
that results from quality or performance improvement is welcome since most
semiconductors are routine, low margin, products. Profits require that someone innovate,
i.e. make something new, and someone else authenticate the innovation by licensing it
from the innovator. Innovations tend to come in bunches.
One example of contemporary innovation is the 2B1 computer, developed by
Nicholas Negroponte of the MIT Media Lab and the OLPC not-for-profit. OLPC means
“one laptop per child.” The screen is 7.5 1200 x 900 pixel TFT self-refreshing display
with 200 dpi resolution. It has a color mode ( 1 W.), and a high-resolution reflective
mode that can be read in sunlight (0.2 w.). Total power is 2-3 W. It has an eight-hour
battery, and it can be recharged by a hand-powered crank. It has internal video/still
camera, internal speakers with stereo line-out jack, microphone, two USB 2.0 slots, SD
flash slot, 400 MHz AMD Geode processor with 128 MB SLC NAND flash on board,
double wide touch pad and Linux, communication facilities, OS and other custom opensource
software. All users will be able to tie into their neighbors and everyone will be
able to sign onto the Internet. The initial price for the 2B1 will be about $140, but the
sponsors hope that the price will fall to about $50 in time. Nigeria has already ordered
one million of them. Libya has agreed to spend $250 million to buy 2B1s for all Libyan
kids. There does not seem to be any coordinated program for integration of these
computers into the schools. Rather the inborn desire to hack computers will have them
downloading music, movies, and pornography in the first few hours they get their hands
on them.
Intel has a grandiose 5-year plan, called “World Ahead.” Intel hopes to introduce
the “Eduwise” computer at $250, although $200 is the ultimate target. They will be
serious full-powered machines, interconnected and on the Internet. Intel has pledged $1
billion over five years to train 10 million teachers in using computers in the class room,
to teach 1 billion students to use computers in their education. Intel is contributing
100,000 computers for classroom in developing countries.
If either or both of these systems actually improve education in remote third
world villages, they will revolution education. Demand will grow without limit until
ultimately everyone will get a laptop when first they go to school. Intel has pronounced
Ball State University the most computerized campus, and the average student spends
more than 20 hours on-line. When one considers how slow, hot, heavy, awkward, shortlived
and inconvenient today’s computers are, it is easy to recognize that computers will
have to be markedly improved if most students are to accept them. Intel and MIT are not
selling existing computers, but re-inventing them. Kids will put up with today’s laptops if
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they are free, but many wil00l really bond with computers that put them in touch with
their friends, music, sports, and entertainment. A few “mute, inglorious, Miltons” with be
excited by their access to the cultural treasures of the word. A few rural Einsteins who
would never have seen the inside of a physics classroom will make thought experiments
and read (and maybe write) the papers on the physics archive.
The computers that young people need are different from anything now on the
market. It will be small, nanopod size. Or a cool pair of shades with flip up, high
definition 3D display and surround-sound hifi headset. It will be connected broadband
with the Internet, and live class interaction, lectures, exhibits and virtual field trips will be
netcast during the school day, and saved for review. It will be verbally operated in the
user’s preferred or school language, which it will learn as the user-owner trains it.
Limited thought direction will become better as the student learns to control the pointer
on the display. Much improved virtual translators and interpreters will make most of the
world’s literature, history and archives available first in the major world languages –
English, French, Russian, Hindi, Portuguese, Arabic, Japanese and Chinese, and then
with others as speakers of various languages develop them.
Intel’s billion dollars is just a start. The great promise of Intel’s participation and
technological leadership is integration of advanced computer and communications
technology with ethnographic field work and dozens of coordinated projects that it has
used to trained thousands of teachers in Sri Lanka. Intel is committed to educating the ten
million teachers who will teach the 2 billion kids. To support the effective use of
technology in education, Intel will donate 100,000 PCs to classrooms in developing
nations.
Sustainability
Intel and AMD have both supported principles of sustainability. Semiconductor
manufacturer is inherently dirty and polluting. The use of corrosive and toxic chemicals
and vast amounts of water are probably unavoidable. In the 60’s 70’s when American
business dumped waste where they wished, each of the two companies produced
Superfund sites with the cleanup of which they are still burdened. Semiconductor
manufacture also uses vast amounts of water at Intel sites in California, New Mexico,
Arizona and Israel, all of them water-shortage areas. Intel has developed water treatment
programs which reuse water and inject purified waste water into aquifers. Emission
controls require best available technology to prevent release of noxious gases. European
regulations, not matched by American regulations, forbid the use of lead, mercury,
hexavalent chromium, brominated hydrocarbons, chlorinated methyl ethers in chips
themselves and they have been removed from production.
Computers are becoming so numerous that energy conservation has become a
serious issue. The greatest contribution made so far by the semiconductor industry to
survivability is the reduction in waste heat generated by microprocessors. Improvements
in architecture such as dual-core chips and power-off techniques, have reduced energy
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emission by perhaps 40 percent per computer. Thousands of existing rack-mounted
servers each generating more than 100 watts must be cooled, so that a reduction of 40
watts in waste heat in a new server chip will save 80 watts in cooling.
No one familiar with the history of pollution control in the United States or
Germany can imagine that even the limited environmental clean-up was voluntary.
Industry fought to preserve its right to destroy the environment. Coal-fueled power plants
still produce enormous amounts of carbon dioxide, sulfur dioxide and trioxide, and
particulates. The Supreme may decide this term if States can force the Bush
Administration’s EPA to regulate release of carbon dioxide (which it refuses to do). The
attempt was previously denied by the Court of Appeals.
The danger of global warming cannot be exaggerated. It is impossible to reassure
ourselves that some technical development will save us. We are unable to overcome
threats that every rational person knows about. Conflicts of economic interest prevent
our solving the problems we face. Tobacco farmers in North Carolina oppose cuts in
tobacco subsidies. Drivers resist increased taxes on gasoline. Gamblers oppose bans on
on-line poker. Automobile companies in Michigan oppose gasoline efficiecy standards.
For SUVs. When we consider the future level of carbon dioxide that will result from
burning the remaining fossil fuels, and the increases in temperature, atmospheric CO 2 ,
and sea level that will result from a “business as usual.” scenario. The predictions of next
century’s rise in CO 2 in the models in K. Hasselman, et al. 7 show disastrous levels in all
three of the outcome variables -- CO 2 concentration, temperature change, and sea level
change are shown for the next millennium for two scenarios, the first, BAU, “business as
usual” shows disastrous increases in all three. The alternative scenario, C/B, “cost
benefit” shows the effects of an optimal emissions path that minimizes the sum of
economic costs caused by projected CO 2 emissions and the projected costs of reducing
emissions (Table). This involves substantial CO 2 sequestration, development of
renewable energy, and other measures to conserve energy, but within available
resources.and world budgets.
No one will ever be able to construct models of energy and economy that are
credible. Initial conditions vary between versions. Many of the equations are
idiosyncratic, unspecified, nonlinear, unidentifiable, and variable in unknown ways. All
economic, social, and political variables are purely synthetic and their future values are
unavoidably unknown and unknowable, even if past values have been estimated by
expert economic, social and behavioral scientists. 8
7 “The Challenge of Long-Term Climate Change,” (oringally 2003, revised and updated), Donald Kennedy,
ed. Science Magazine’s State of the Planet 2006-2007. Washington: Island Press, 2006
8 This does not mean that I believe models of the future are useless, though I am suspicious of millennial
projections. Suppose the learned bishops at the court of the Saxon emperors in CE 1000 had made
projections of the next millennium? I wonder what they would have gotten right, even if some of them were
divinely inspired. None of people living today will be able to falsify these projections, although I make a
possible exception for Ray Kurzweil. Hence they cannot by Popper’s criterion be considered “scientific.” I
suppose that makes them religious.
.
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BAU
Scenario
C/B
Scenario
BAU Concentration Yr Max Max level C/B Year Max level
Yr 2000
Max
CO 2 ~6 GtC/y ~2300 ~40 GtC/y ~2050 ~8 GtC/y
Emissions
Concentration 400 ppm ~2600 ~4500 ppm ~2250 500 ppm
Temperature ~0.5 deg C ~2800 ~9 deg C ~2350 1.7 deg C
Change
Sea Level
Change
~0 meter 3000 ~14 m ~3000 1.1 meter
Source: K.
Hasselmann
Op. cit. 2006
Many approximations are necessary and the errors involved are very large. At
worst, the uncertainty is so great that we can never make a rational decision to take
precautions until it may be too late to take precautions. We need to take a leap of doubt,
or make an assumption which won’t hurt too much that if it turns out to be false. If it
turns out to be true, we will still be infinitely better off for having taken the decision to
take precautions.
Few ignorant people will suddenly become rational enough to take the
precautions that most people who have taken the time and trouble to study the question
have decided are worth taking. We waste enough time now in school and playing
computer games that if we studied the great game of survival -- environment, science,
and health -- on our smart new laptops we could change attitudes toward saving the
world. We waste enough money now that we have the slack to subsidize solar and wind
energy enough to make a difference. We drive enough gas guzzlers and SUVs now that
if we bought subsidized hybrids instead, we could tip the balance toward survival. We
are smart enough now to build robots to do our dirty work, while many people stay home
and study, shop, talk to their doctors and do their jobs over the the Internet without the
need to commute. In time, if we take the time, we will learn enough about ourselves and
the earth to save it and ourselves.
People rightly feel helpless. There are political parties for them to join and blogs
to read, but they cannot see that anything they say or do makes anything any better. There
are a few people like Bill Gates with enormous amounts of money and an interest in
making things better. Some rich people want to help poor persons, but if the whole world
is to die what is the value of saving a few poor people? Other rich people like to invest
their money and pile up even more. They think they can give away some of their cake
and make a decent return by investing what is left. They think that if they invest in
admirable companies that are committed to saving the world, and if other people do the
same, and even more important, invest in the same companies maybe the world will be
saved. And then there are the executives in great companies who have influence that
might last far beyond their lives. Many of them have built these companies from nothing,
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sometimes doing useful things, building houses, distributing food, providing hospital
services, even inventing microprocessors. They take money, as they must, for the good
they do. There is an American corporate morality in which one plays the hand dealt him,
and justifies himself by the success he wins. To try to construct some kind of stage on
which scientifically ignorant fundamentalist politicians and agnostic climatologists can
debate global warming is a waste of time. Religious disputes cannot be settled by appeals
to reason. The global warming debate will continue until enough climatological disasters
have occurred that their causation by global warming is undeniable, or, in the alternative
events such as a measurable declines in sea level, carbon dioxide concentration, or
temperature. Neither of these trends are likely to occur very quickly. It may take decades
for developments to become definite enough one way or another that all but the most
pigheaded will accept what is indicated by events.
With these uncertainties, what can publicly-held corporations do? At the
minimum, corporations need to act with thorough prudence. They must be protected
against identifiable risks under multiple possible alternative scenarious. With the
uncertainty, no one dare choose anyone of them. Precautionary acts and expenditures that
turn out to be unnecessary make the management look weak and indecisive. Needed
precautionary expenditures that aren’t made make management look blind and careless.
In issues like this strong leaders tend to take a definite choice which they believe in for
reasons of research, ideology, or political preferences. The choice often momentous.
People think back to moments like this the rest of their lives. Authority gradients have
been flattened over the years. Teams, “chains of command, or management structures
like Intel’s “two in a box, ” diffuse authority. The chain of command is a perfect
mechanism for diffusing authority. Each member can recognize the constraints that limit
their superiors and subordinates, and often will reach down a level or two and make a
decision that supposedly was not his to make, and because of the chain he can escape
blame if he is wrong and claim credit when he is right. Rarely or never, does a member of
the chain substitute his own judgment for those of his superiors, but when he is
successful, as Nelson was at Cape St. Vincent and Copenhagen, he is credited with
genius. Strategic disobedience is always rash. Any employee of the U. S. Administration,
federal contractor, or expert on a research advisory committee convinced by the doctrines
of sustainability acted or recommended officially to reduce fossil-fuel usage, carbon
dioxide, or testified in favor of federal subsidies for renewable energy, or hybrid vehicles
or any other of the pennons of environmentalism, paid a premium for renewable energy
The trouble is that nobody who breaks the rules can ever prove that he was
justified in doing so. There is no verdict in our courts of justified disobedience.
PresidentBush has said that he can do anything that pleases him under his powers as
Commander in Chief, powers nowhere specified in the Constitution, although the
Supreme Court has contradicted him in Hamdan. He has permitted, or possibly ordered
the Navy to retire Lt. Cmdr Scott, the lawyer who won Hamdan’s case despite official
orders not to. He has withdrawn American adherence to the Kyoto Protocol. Perhaps no
one man in the history of the world has done more to bring the environmental xxxx to
fruition. Most scientists and educated observers believe that climate change threatens
humanity. They also believe it is caused by people. There are many interests who do not
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accept or believe that human behavior causes the problems, or that environmental threats
should be prevented. Sustainability requires conservation and renewable energy
production. The enemies of sustainability include major corporations, such as petroleum
companies (notably Exxon Mobile), automobile manufacturers, and chemical
manufacturers. There are also ideological opponents of any environmental regulation of
business, most notably President Bush, and his Congressional supporters. As long as
there are these committed ideological opponents of sustainability, there is no hope of
action sufficient to deter the awful future. It is hard to imagine any political events more
important to sustainability than the elections of November 2006 and November 2008.
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