Back in the late 70s, my dad ordered a Heathkit H-89 computer.  It had a 2 Mhz 8-bit Z-80 processor, took months to arrive, cost $1600 (in 1980 dollars!) and we had to put it together.  Now, you can go to the nearest Best Buy and walk out with a ~3Ghz system for a few hundred dollars.  While that’s a staggering increase in price performance, you may not have noticed:  we haven’t seen anything much faster than 3-4 Ghz for a few years.

That’s because we’ve “hit the wall” for single-processor CPU performance, and we’re at the limit for CMOS processes, circuit performance, and instruction level parallelism (ILP).  New processors from Intel and AMD are “spreading sideways”, implementing multiple CPU cores (2, 4 or even 8 processors).  Future processors will have even more cores, and you can “rent” as many additional processors as you need, in the cloud, on the fly.

This is a fundamental change in CPU performance architecture, and it’s forcing software developers to think differently.  For decades, you could speed up your software by just waiting for the next (faster) CPU.  Now, that’s no longer the case.

This leaves us with many large, complicated legacy code bases (e.g. database engines, solid modeling kernels, etc.) that need to be completely redesigned to take full advantage of multiple cores.  That, in turn, will create new opportunities — someone will step in to build multi-core scalable implementations of this stuff.

If you’re one of the five people that read this blog, you know I’ve become negative on many pure-software/Internet/mobile entrepreneurial projects.  Low barriers to entry create a competitive, weedy ecosystem that becomes a lottery for many entrepreneurs.  (Investors have a slightly different situation:  they can pick break-out winners from a field of options, where entrepreneurs have to start from zero).

So, how do entrepreneurs avoid the lottery?  There are a number of ways (this is the first in an ad-hoc series of blog posts).

One way is to have a real asset that’s core to the business, but is hard to copy.  Amazon’s product reviews are a great example:  competing with them means competing with the fact that many buyers go there first to check reviews.  Amazon built their own review database, but I think there are many data & content assets that entrepreneurs could buy or license (exclusively) as the basis for a new business.

Sometimes, IP can be the core asset, when there’s real technology with high-quality, issued, in-force patents, and relevant expertise in the team. Given the time it takes to get patents issued, this means the startup is licensing or acquiring patents to get started — pending applications usually aren’t worth that much.

(Note that software/code is rarely a core asset.  There are lots of smart developers, and software is usually pretty easy to copy.)

The next lottery-avoidance topic:  deep domain expertise (to be continued).

I love turntable.fm.

It’s a well-executed simple app offering virtual music “rooms”.  You can just listen, or be one of 5 DJs selecting songs for that room.  It’s a fun way to share music with friends and co-workers.  It’s taking off fast.

I think we’re entering the next chapter for music, following the iTunes era, and it’s all about social.  Apple’s Ping service has the right social buzzwords, but isn’t quite right. Turntable.fm is dead on for one aspect of social music, and Facebook has big plans for music.

(And if Facebook is smart, they acquire Turntable.fm now or just copy the feature. Unfortunately, I don’t think Turntable.fm lasts independently & competitive long-term; it’s so obvious that it should be part of Facebook).

It will be interesting to see how Apple reacts.  Is the iTunes era ending?

Well, not quite, but it certainly feels that way!  When did marketers stop using their own URLs in ads and start using Facebook URLs?

It’s amusing how this seems to have come full circle.  Many users started out on AOL, a relatively closed ecosystem.  Then, the open Internet came along and AOL’s relevance faded.  Now, we’re cycling back from open to Facebook’s partially closed ecosystem.  (I do think Facebook will settle into a hybrid of open & closed that AOL never seemed to achieve:  they’ll control the ecosystem “backbone”, while providing open APIs for apps.)

Also, we’re starting to see Facebook opportunities analogous to what’s existed for the Internet.  For example, we have content management systems (CMS) and other tools to manage Web sites, and we’ll see analogous tools (and associated apps) for Facebook page content.   Other things to expect for Facebook:

• Analysis tools for the social graph, analogous to Web site analytics tools
• Tools to manage marketing communications (status updates, new content, direct messaging, etc.), analogous to email marketing / campaign management tools
• Individual user analysis (using social graph data) and profiling, analogous to ad targeting/profiling systems
• Systems to manage communications with individual users, analogous to existing Customer Relationship Management (CRM) tools

In some cases, existing Web tools will evolve to include Facebook-specific functionality. In other cases, the Facebook ecosystem will be different enough that we’ll see new tools emerge (I’m expecting this to happen around the social graph).