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Even if Gilder's discussion this month didn't name any specific good stock deals (in fact, the market's immediate reaction to his discussion of two specific companies pretty much launched XLA and TERN prices out of reach), it was an interesting letter nevertheless.

He imagines the world on a Noah's ark, floating in a flood of bandwidth. So, he asks, what comes after the flood?

He seems to envision that what used to be a tiny trickle of bits on the Internet will become a massive, meandering river of data. As we enter the world of abundant bandwidth, it will be ever more apparent that the main problem facing Internet users is not the size of the data payload that the net can carry, but the length of time it takes to get a packet of data from its origin to the place where we can use it.

In other words, after the problem of bandwidth comes the more difficult problem of latency. Bandwidth is only limited by the boundaries of engineering hubris (and we know and hope that companies will lay ever more more miles of optical fiber!), but Gilder proposes that latency is limited by physics: the ultimate constraint is the speed of light.

Bandwidth vs latency is a pretty interesting distinction, and something that surfaces everywhere in the computer business. For example, although your 24x CD-ROM drive may be able to transfer several megabytes per second, it still takes a maddeningly long time to spin up the drive and seek to a specific spot on a disk. So your CD-ROM drive enjoys high bandwidth, but it also suffers from very slow latency. By focusing on latency, you realize that what's needed in CD-ROMs is not a faster SCSI bus, but a more lightweight optical read head that can seek faster, or a way to spin up disks more quickly.

The Internet is the same. My personal experience - I spend a lot of my time working remotely - is that there is a big difference between remote high-bandwidth operations (such as copying one big file) and remote high-latency operations (such a listing a tree of remote files, directory by directory). The high-bandwidth operations are suprisingly speedy on today's already-bandwidth-rich Internet. However, the high-latency operations, limited by repeated round-trips across the continent, are extremely slow.

Gilder suggests XLA's Mirror Image as a company that's tackling the latency problem by caching data closer to the user. But a focus on caching seems incomplete to me: caching techniques simply put a band-aid on the latency problem by dealing with predictable, unchanging data. Eventually users will be frustated by latency when they want to use the ever-changing, delightfully unpredictable parts of the internet. We need to have solutions that attack the sources of latency itself.

Perhaps this is a good starting point for discussion on the board, so I'll stop here.

Can you suggest any investment ideas that come out of technologies or companies tackling the latency problem?
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