Wednesday, February 20, 2008

HD DVD and Economic Development

Those of you who follow the electronics industry probably already know that HD DVD lost the format war to Sony’s blue ray disk. Like the classic VHS vs. Beta battle having one standard format was the likely outcome. This makes it easier for movie studios to put a movie on high def. DVD, since they only have to choose one format, it means video stores and Netflix only have to carry one format, and you only need one player.

This format battle is nicely juxtaposed with a recent article in the Economist on technology adoption in the developing world. Like the new DVD players a new technology in a developing country needs to reach a critical mass, before it becomes widespread. Think about a telephone, it is only useful if others have one two. One reason developing countries have a difficult time implementing technology is that many people can’t afford the initial cost of a telephone, TV, electricity, or internet. Perhaps the most telling quote from the article is that

The World Bank's researchers looked at 28 examples of new technologies that achieved a market penetration of at least 5% in the developed world, and found that 23 of them went on to manage a penetration of over 50%. Once early adopters latch onto something new and useful, in other words, the rest of the population can quickly follow. The researchers then considered 67 new technologies that had achieved a 5% penetration in the developing world, and found that only six of them went on to reach 50%. That suggests that although new technologies are often adopted by a small minority of people in poor countries, they then fail to achieve widespread diffusion, so their benefits do not become more generally available.

As the article concludes the study shows yet again to go high tech (internet and computers) you need low tech (running water and roads) so that people can afford and support the technology.

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