Investing Caffeine

Revenge of David: Technology Empowers Small-Fry

April 30, 2010 at 1:37 am 2 comments

The garage tinkerer’s canvas is manifested through these relatively new 3-D printers.

What happened in the virtual world with software and operating systems over the last 15 or so years is now happening in the bricks and mortar world. Linux, a free open source software operating system, was designed in the early 1990s and initially registered its trademark in 1994. The no cost system takes advantage of charitable brainpower by using programming prowess from others around the globe.

The same phenomenon is happening in the real world, and critically acclaimed Wired writer Chris Anderson wrote about it this trend in a recent article, In the Next Industrial Revolution, Atoms Are the New Bits. With the help of a laptop, free design software, and a few mouse clicks to a manufacturing plant in China, Anderson shows how a small fry entrepreneur with a good idea can become a successful micro-factory in weeks. This same process might have taken traditional manufacturers years in the past. Accelerating production from novel idea to output reality are new 3-D printers, robotic-like equipment that can build real time prototypes from molten plastic (see picture above). Sounds expensive, but these former six-figure devices can be purchased for less than $1,000 thereby allowing state of the art products to be made with relatively little capital and inventory. In other words, the small fry entrepreneur David now has the ability to become a fine tuned Goliath with the help of democratizing technologies. The high barriers to entry have been toppled down by creative, risk-taking entrepreneurs.

In describing this manufacturing marvel, Anderson highlights Local Motors, an open source car company that managed to produce a car in months what would have taken legacy automakers years to build. Rather than hire a host of expensive engineers (the company only had 10 employees), Local Motors relied on a global community of volunteers (also called “crowdsourcing”) to design the original “Rally Fighter” automobile. Utilizing a ratio of 500-to-1 volunteers to employees has allowed Local Motors to leverage the power of atoms to bits. What Anderson calls “garage tinkerers” are slowly taking over the world.

Building Your Dream

On the surface, the micro-factory concept sounds fairly straightforward, but how does one practically pursue this strategy? Anderson has five steps to building your dreams:

1)      Invent: Come up with idea and check U.S. Patent and Trademark office to make sure idea has not been used before.

2)      Design: Use 3-D design tools to model out your idea.

3)      Prototype: Upload your design to a 3-D printer and watch prototype idea grow into reality.

4)    Manufacture: Find manufacturing partner online through sites like Alibaba.com (1688.HK).

5)   Sell: Market your product online to reach the masses.

If you look back in time, the industrialization of America squeezed out the little guys because small time citizens did not have the capital or expertise to keep up with the big boys. Thanks to the internet, the playing field has been leveled and the small-fry David can not only compete with Goliath, but can also defeat him.

Read Chris Anderson’s Famous The Long Tail Article from 2004

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper. 

*DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients own certain exchange traded funds, but at the time of publishing SCM had no direct positions in Alibaba.com or any security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.

Entry filed under: Themes - Trends. Tags: atoms, bits, Chris Anderson, David, Goliath, manufacturing, technology, Wired.