Chris Dixon

Nail.  Hit on the head.

Nice post. Cheap infrastructure and lower barriers to entry do seem to usually lead to an explosion of creative activities. (The amazon S3/EC2 infrastructure and open source software example probably applies as well for web development).

So, is this an argument for more government supported basic research and open source projects in general?

That would be very empowering, indeed!

“Someday, for example, we will have “fabless” gadget design and biotech research, enabling a small shop in Brooklyn or SoMa to create an iPhone killer or next-generation cancer drug.”

It’s important to recognize that it is much more difficult to innovate away costs driven by regulation (e.g. Phase III of a clinical trial) than those driven by reality (e.g. the high cost of lots of small batches of parts using modern manufacturing techniques).

Agreed. the ideal ecosystem that we should move towards is where “innovation is democratized”

Companies, small and large, that make gadgets have been operating “fabless” for a while. CE brands in particular have been outsourcing the manufacturing – and even some low-value-add aspects of integration and compliance – for devices in much the same way fabless semiconductor firms draw their lines between the make and the buy. Beyond the critical hardware design, specification, and acceptance disciplines, “fabless” gadget firms can further differentiate with brand, distribution, platforming, and application software/UI/user experience. As an aside, consider that Apple takes “fabless” to an extreme, being “fabless” on manufacturing devices, but also fabless on microprocessor ASICs. Lab126/Amazon is another model of the “fabless” gadget, and indeed it’s aiming in Apple’s direction.Also consider that there are mature CE brands/business, small to medium sized, that leverage the “fabless” gadget business model to scale. These firms typically find it harder to innovate though because their core business can just crank with 9 month or less ROIs and positive, yet fairly slim, margins. Still, some of the longest standing medium sized CE companies understand the need for “intrapreneurship” and can reinvent themselves often enough, and just-in-time, to avoid commoditization, and death.Hopefully, “fabless gadget” startups will be an evermore common reality in years ahead. I’ve found that early stage investors often balk at business models that involve hardware of any kind, even “fabless” approaches, due to a lack of experience with it, or a perceived lack of precedent for a break-thru success – even though cases can be made that Roku, Aliph, Boxee have all leveraged the “fabless” gadget model to get where they are today, and there are plenty of lower tech projects on kickstarter showing signs of life as well. There are both perceived and real risks involved in sourcing from contract manufacturers (CM), but experience with gadget sourcing by an investor, or in the founding team, can mitigate both false perceptions, and real risks. So in some sense, it speaks to the “people” aspect of valuing an opportunity. It also helps when founders/entrepreneurs have actual experience in design, spec’ing, and verification of sourced hardware, as well. Founders who have existing relationships with manufacturers can also greatly help bridge gaps and mitigate risk in the early days.On the other side of sourcing deals lies the CM. It is helpful to work with CMs who have a view/appreciation of innovative, i.e. disruptive product concepts, making such CMs amenable to lower MOQs and less risk-pricing tactics, reducing some of the capital intensive inventory risk for a startup. Adventurous CMs might even accept warrants in lieu of NRE fees! There are also innovations in distribution to be explored that can offer means to reducing working capital, like selling direct, or even (kickstarter-like) advanced orders.Speaking again to lack of strong precedent, maybe we are only a couple shining examples away from increasing the activity in the “fabless gadget” startup sector.As for this happening in NYC area, I see no reason why it can’t, because “fabless” gadgeteering is already here, just not yet in volume in startup form.

If I understand correctly, “garage-ready” essentially means separating design from manufacturing, i.e. “creativity-intensive” processes from capital-intensive ones. This may be an inevitable result of industry maturation and specialization, but there is a downside to it, at least for the so called “developed” nations. The result of differential costs for commodity labor, the fungibility and liquidity of capital, and the ease of transmitting both human and machine-readable information across arbitrary distances, means that capital-intensive processes – i.e. making things – migrate to locations with lower total cost of operations (which, Germany excepted, tend to be locations with lower labor costs). Another way of saying this is that nothing is fabless; the foundry is merely outsourced and moved to a cheaper location. This reality is great for the creative class and for the lower cost locations, but it’s less happy for the residents of the higher class locations that are not so lucky to be part of the creative class. 

I’m not ready to draw the conclusion that this is the cause of the economic inequality in the US and malaise across Europe  and Japan, but there definitely appears to be some correlation. Again, I don’t know if these results of the “garagification” of an industry can be reversed or mitigated in the name of societal stability, but if anyone can find a way to do it it would be the creative class. Unfortunately, b/c techies and entrepreneurs are solidly part of the creative class and perhaps even *the* primary beneficiaries of the separation of design and manufacturing, we generally avoid acknowledging or discussing the negative aspects of this trend.

Note that I said “reversed or mitigated.” Trying to reverse or stop these trends is probably a quixotic goal, but perhaps mitigation is in fact possible. For example, is it possible to create a country in which the entire labor force is “creative”? I myself have trouble seeing how such a possibility could be made real, but I’d like to see more intellectuals and entrepreneurs spend some brainpower on the question.