Tech Growth: It’s all about the Arbitrage

Wikipedia defines arbitrage as the practice of taking advantage of a price difference between two or more markets and I’m amazed at how it’s helped the world of tech grow through the decades. Now before I continue I should point out productivity and flexibility are also crucial reasons for tech growth. For example, the PC spreadsheet made it possible to not only perform financial calculations more quickly but more importantly to perform calculations you just couldn’t afford to have humans do.

But really, arbitrage is the hidden gem in the market because quite often it fuels the use of a new technology with paying customers who can justify the expense because they are saving money elsewhere. Perhaps my first experience with tech growth through arbitrage was the computer telephony/CTI market of the nineties where international callback companies were popping up using DSP resource boards from companies like Dialogic to allow international customers to place a call with a single ring to the US and hang up. This action initiated a call back from the States at much lower rates.

These same DSP resource boards advanced over the years to eventually enable them to compress voice in real-time – which in-turn launched the IP telephony gateway market which in turn revolutionized telecom technology and it was mostly paid for with arbitrage. Somewhere around 2004 or fact I felt the tide turn to the point that the communications industry decided if it wasn’t IP, it was legacy.

I had a guest come over the house just now and during the course of the conversation I queried an iPad to answer a question that came up. He asked how we lived without these devices and proceeded to tell me he just redid his kitchen and he took the iPad with him whenever he went shopping with his wife. By doing so he said they were able to ensure they had the best prices possible. He then said, we definitely paid for the iPad with the savings on our new kitchen.

And I thought to myself – wow, arbitrage is everywhere, even in the tablet space.

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