Close
  • Latest News
  • Artificial Intelligence
  • Video
  • Big Data and Analytics
  • Cloud
  • Networking
  • Cybersecurity
  • Applications
  • IT Management
  • Storage
  • Sponsored
  • Mobile
  • Small Business
  • Development
  • Database
  • Servers
  • Android
  • Apple
  • Innovation
  • Blogs
  • PC Hardware
  • Reviews
  • Search Engines
  • Virtualization
Read Down
Sign in
Close
Welcome!Log into your account
Forgot your password?
Read Down
Password recovery
Recover your password
Close
Search
Logo
Logo
  • Latest News
  • Artificial Intelligence
  • Video
  • Big Data and Analytics
  • Cloud
  • Networking
  • Cybersecurity
  • Applications
  • IT Management
  • Storage
  • Sponsored
  • Mobile
  • Small Business
  • Development
  • Database
  • Servers
  • Android
  • Apple
  • Innovation
  • Blogs
  • PC Hardware
  • Reviews
  • Search Engines
  • Virtualization
More
    Home Applications
    • Applications

    How Now, Dow?

    Written by

    Peter Coffee
    Published April 4, 2005
    Share
    Facebook
    Twitter
    Linkedin

      eWEEK content and product recommendations are editorially independent. We may make money when you click on links to our partners. Learn More.

      In a November 1999 column, I chastised the compilers of the Dow Jones Industrial Average for what I considered the misguided decision to put Microsoft and Intel on that list. Since that change was made, Intel (after adjusting for a stock split in July 2000) is down 39 percent. Microsoft (adjusted for a split in February 2003) is down 47 percent.

      I know that these years have not been one long chorus of “Happy Days Are Here Again,” but ChevronTexaco, removed from the Dow to make room for the high-tech newcomers, is up 27 percent (adjusted for a September 2004 split) since its expulsion. Dow Chemical, which has since merged with DJIA exile Union Carbide, is up 32 percent since the date of the Dow list change (after adjusting for a split in June 2000).

      What-if games with the DJIA are an arcane pastime: To maintain continuity of the value, a divisor has to be adjusted when external events would otherwise kink the trend line. I can tell you, though, what the value would be if usurpers MSFT and INTC had performed as well as DOW (Chemical, not Jones) and CVX during the past five years. Wed have been sitting pretty on Good Friday (when the markets closed to let me work with static figures) at 10,889. Thats 446 points above the actual value—not enough to change my retirement date but worth a respectful moment of silence as we think about the actual nature of IT as an economic good.

      Oil in the ground is an asset. If you leave it in the ground today, you can pump it out and sell it tomorrow. On the other hand, if people want to burn more oil today, the price per barrel will go up as more difficult oil wells must be drilled by more aggressive methods. The supply curve, in short, slopes upward. Economics 101.

      Microsofts coders, despite the label of “human capital,” are an expense. Even if they dont write any marketable code today, Microsoft still has to pay them. Intels chip fabs are booked as capital, but theyre really perishable goods. If Intel doesnt make chips today, process technology moves on—and Intel may not be able to sell the chips that its all-too-soon-obsolete equipment will be capable of making tomorrow.

      On the other hand, if Microsoft can sell the same piece of software to more people, the company can sell it for a lower price per copy—and it had better find a way to do that, since its fastest-growing competition is stuff thats given away. If Intel can sell a greater volume of chips before the next generation of process technology comes along, it can sell those chips at a lower unit price. The direct cost of goods sold is a tiny fraction of the price of a complex chip.

      Whether were speaking of hardware or software, therefore, these supply curves slope downward. What does that make these goods? They dont behave like industrial outputs, and thats why I was immediately hostile to the go-go (or should I say “gaga”?) idea of putting them in the DJIA. I said at the time that these stocks prices were poorly chosen proxies for economic growth; events since then make me look more right than wrong.

      That brings us to some interesting questions: What do you do? And why do people pay you to do it? And what makes your supply curve slope upward so that every unit of your output costs more than the one before? If you can flatten that slope, youll enjoy more demand at any given volume. Economics 101.

      You dont want to make IT vendors rich by playing zero-sum games with your competitors. As I said in the aforementioned column, currency trading is a perfect example: After some adjustment as new tools emerge, the end state is that the same things happen more quickly and the IT vendors have more money. If someone wants to tell me how anyone else is better off, Im listening.

      Your IT investments should be flattening your supply curve. They should be automating tasks so that doing twice as much requires less than, not more than, twice as much effort and expense. They should be leveling out the bumps in your supply chain to reduce the costs of high peak-to-average ratios in manufacturing and logistics.

      And they should be making you, not IT vendors, richer every year. Invest IT into your company, not your money into IT stocks.

      Technology Editor Peter Coffee can be reached at peter_coffee@ziffdavis.com.

      To read more Peter Coffee, subscribe to eWEEK magazine.

      Check out eWEEK.coms for the latest news, reviews and analysis in programming environments and developer tools.

      Peter Coffee
      Peter Coffee
      Peter Coffee is Director of Platform Research at salesforce.com, where he serves as a liaison with the developer community to define the opportunity and clarify developers' technical requirements on the company's evolving Apex Platform. Peter previously spent 18 years with eWEEK (formerly PC Week), the national news magazine of enterprise technology practice, where he reviewed software development tools and methods and wrote regular columns on emerging technologies and professional community issues.Before he began writing full-time in 1989, Peter spent eleven years in technical and management positions at Exxon and The Aerospace Corporation, including management of the latter company's first desktop computing planning team and applied research in applications of artificial intelligence techniques. He holds an engineering degree from MIT and an MBA from Pepperdine University, he has held teaching appointments in computer science, business analytics and information systems management at Pepperdine, UCLA, and Chapman College.

      Get the Free Newsletter!

      Subscribe to Daily Tech Insider for top news, trends & analysis

      Get the Free Newsletter!

      Subscribe to Daily Tech Insider for top news, trends & analysis

      MOST POPULAR ARTICLES

      Artificial Intelligence

      9 Best AI 3D Generators You Need...

      Sam Rinko - June 25, 2024 0
      AI 3D Generators are powerful tools for many different industries. Discover the best AI 3D Generators, and learn which is best for your specific use case.
      Read more
      Cloud

      RingCentral Expands Its Collaboration Platform

      Zeus Kerravala - November 22, 2023 0
      RingCentral adds AI-enabled contact center and hybrid event products to its suite of collaboration services.
      Read more
      Artificial Intelligence

      8 Best AI Data Analytics Software &...

      Aminu Abdullahi - January 18, 2024 0
      Learn the top AI data analytics software to use. Compare AI data analytics solutions & features to make the best choice for your business.
      Read more
      Latest News

      Zeus Kerravala on Networking: Multicloud, 5G, and...

      James Maguire - December 16, 2022 0
      I spoke with Zeus Kerravala, industry analyst at ZK Research, about the rapid changes in enterprise networking, as tech advances and digital transformation prompt...
      Read more
      Video

      Datadog President Amit Agarwal on Trends in...

      James Maguire - November 11, 2022 0
      I spoke with Amit Agarwal, President of Datadog, about infrastructure observability, from current trends to key challenges to the future of this rapidly growing...
      Read more
      Logo

      eWeek has the latest technology news and analysis, buying guides, and product reviews for IT professionals and technology buyers. The site’s focus is on innovative solutions and covering in-depth technical content. eWeek stays on the cutting edge of technology news and IT trends through interviews and expert analysis. Gain insight from top innovators and thought leaders in the fields of IT, business, enterprise software, startups, and more.

      Facebook
      Linkedin
      RSS
      Twitter
      Youtube

      Advertisers

      Advertise with TechnologyAdvice on eWeek and our other IT-focused platforms.

      Advertise with Us

      Menu

      • About eWeek
      • Subscribe to our Newsletter
      • Latest News

      Our Brands

      • Privacy Policy
      • Terms
      • About
      • Contact
      • Advertise
      • Sitemap
      • California – Do Not Sell My Information

      Property of TechnologyAdvice.
      © 2024 TechnologyAdvice. All Rights Reserved

      Advertiser Disclosure: Some of the products that appear on this site are from companies from which TechnologyAdvice receives compensation. This compensation may impact how and where products appear on this site including, for example, the order in which they appear. TechnologyAdvice does not include all companies or all types of products available in the marketplace.

      ×