The Old Law of Cloud Computing

Grazed from Who’s Who Legal. Author: Clive Gringas.

To appreciate why the “cloud” is the future of computing, one must understand a law of economics coined in 1890 and learn what happened around the same time at 57 Holborn Viaduct in London, England. In 1890, Alfred Marshall finished a decade’s work. His eight-volume Principles of Economics was finally ready. Those who read the fourth volume were introduced, for the first time, to the concept of “economies of scale”. Marshall’s analysis, then novel, was that in some trades “in which a man gains no very great new economies by increasing the scale of his production, it often happens that a business remains of about the same size for many years, if not for many generations.” These could be contrasted with trades.

“in which a large business can command very important advantages, which are beyond the reach of a small business. A new man, working his way up in such a trade, has to set his energy and flexibility, his industry and care for small details, against the broader economies of his rivals with their larger capital, their higher specialization of machinery and labour, and their larger trade connection. If then he can double his production, and sell at anything like his old rate, he will have more than doubled his profits. This will raise his credit with bankers and other shrewd lenders; and will enable him to increase his business further, and to attain yet further economies, and yet higher profits: and this again will increase his business and so on. It seems at first that no point is marked out at which he need stop.”…

In other words, there are some trades – some businesses – that are better when bigger. They deliver a better service than lots of smaller businesses. They can deliver the same or higher quality at a lower cost than those smaller businesses. At the same time as Marshall was at Cambridge University writing his economics treatise, Lord William Armstrong, the founder of Newcastle University, was “lounging idly about, watching an old water-mill” when it occurred to him how powerful the water would be if “concentrated in one column”. Harnessing this power led Armstrong to build the world’s first hydroelectric power station. In 1878, it lit one lamp in the gallery of Cragside House in Northumberland. Word spread. Other houses and offices, where near flowing water, started to copy Armstrong’s innovation. Each house or office would build their own energy collection system and install their own dynamo, draping wires throughout the house to the one or two lamps that their production could illuminate…

Read more from the source @ http://www.whoswholegal.com/news/features/article/29957/the-old-law-cloud-computing/