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Moore’s Law redux

Moore's Law, The Fifth Paradigm.
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The Economist writes:

There is strong demand for technologies that do the same for less money, rather than more for the same price.

The focus of the article is on computing and software – obvious and direct beneficiaries of Moore’s Law:

The “good enough” approach also works with software. Supplying “software as a service”, via the web, as done by Salesforce.com, NetSuite and Google, among others, usually means sacrificing the bells and whistles that are offered by conventional software. Google Docs lacks the fancy features of Microsoft Word, for example. But hardly anyone uses all those features anyway, and Google Docs is free. Once again, many users are happy to eschew higher performance in order to save money.

But this is one of the key foundation pillars we look for in the business models of companies we look at in the financial services space as well; ie can you give the same (or better) service at a paradigm-shifting price point. A (successful) mainstream example of this would be ING Direct. However – even in a recession – price is rarely the only, sometimes not even the main driver in a purchase decision. This is especially true when it comes to (many) financial services; often the key driver is trust. And “trust” provided a significant barrier to entry, protecting incumbents irrespective of how anachronistic their business model may have been. How ironic then that it would seem that most large financial institutions played loose and fast with what ultimately was their one true differentiating asset, and largely trashed the trust they had built up (often over decades or even centuries) potentially opening the door for much better adapted new competitors to compete in their markets for their customers.

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