Byte me

Want to buy a hard-disk manufacturer? I can get three for you, wholesale.

It seems that Hitachi reported a $300M loss in its hard-disk drive (HDD) business last year, and it hasn’t posted a profit since buying the business from IBM in 2002. Now it’s looking to merge with Toshiba’s and Fujitsu’s money-losing HDD divisions, and sell to a private-equity firm. We lose money on every sale but we make it up in volume.

I worked in the HDD business in the mid-1990s. It’s one of those industries (potash, capacitors, O-rings) that’s basically unknown to most consumers, even though they depend on its products every day. What’s different is that it produces the highest-precision mass-produced objects in the world, using technology at the leading edge of scientific research, with decades of unfathomable gains in performance and value. You’d think that’d earn it a bit of credit. Quick—who made the microprocessor in the computer you’re using right now? Ok, now who made the hard drive?

Consumers may not care much about the industry, but B-school professors interested in globalization and market structure do. In The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail, Clayton Christensen wrote:

When I began my search for an answer to the puzzle of why the best firms can fail, a friend offered some sage advice. “Those who study genetics avoid studying humans,” he noted. “Because new generations come along only every thirty years or so, it takes a long time to understand the cause and effect of any changes. Instead, they study fruit flies, because they are conceived, born, mature, and die all within a single day. If you want to understand why something happens in business, study the disk drive industry. Those companies are the closest things to fruit flies that the business world will ever see.”

Indeed, nowhere in the history of business has there been an industry like disk drives, where changes in technology, market structure, global scope, and vertical integration have been so pervasive, rapid, and unrelenting. While this pace and complexity might be a nightmare for managers, my friend was right about its being fertile ground for research. Few industries offer researchers the same opportunities for developing theories about how different types of change cause certain types of firms to succeed or fail or for testing those theories as the industry repeats its cycles of change.

All of the old-timers I knew had been in the industry their entire career, and had moved from one company to the next. It was a wildly competitive industry in which everyone kept trade secrets from their neighbors and golf buddies (almost the entire US industry was in San Jose).

IBM introduced the hard drive (RAMAC) in 1956; it stored 5 MB in an enclosure the size of a refrigerator, and cost $150 thousand. In the next 45 years, hundreds of companies entered the industry and went tits up or were bought out as new formats drove out the old; by 2000 only a handful of companies were in the business. IBM soldiered on, responsible for almost every significant breakthrough (including giant magnetoresistance, for which Stuart Parkin was unjustly denied the Nobel in physics in 2007. But it was losing money on every unit an industry with razor-thin margins and huge capital costs. I was long gone from the Valley by the time Hitachi bought it out, and I don’t know why they thought they’d could make money at it. Turns out, they couldn’t.

So, today you can get a 1 TB drive for $300 . Per MB, adjusted for inflation, that’s about a billionfold improvement in value—and that’s not accounting for huge improvements in data-transfer rates, power consumption and, umm, portability. (That’s an IBM-developed hard drive in your 80 GB iPod you listen to on the plane; here’s a RAMAC being put onto a plane.)

The “end of the hard drive” (when data density reaches its physical limits) has been five years away, for the last fifteen years. It still is. At IBM Almaden, while I was basically a grease monkey working on disks and motors, my data-storage colleagues were working on holographic materials and atomic-force microscopy. The HDD guys are gone, but the mad scientists are still there, and I’ll bet that one day you’ll have them to thank when you have the MGM Films library, in fully-immersive 3-D, on your 1 PB iPod.

Update: Blaze destroys historic IBM lab in San Jose

Researchers working at the building invented the flying head disk drive, which improved a computer’s ability to search its memory and helped make computers smaller.

A report prepared for the city’s historic landmarks commission described Building 25 as one of the earliest architectural examples of the high-tech corporate campuses now scattered throughout Silicon Valley and beyond.

One thought on “Byte me”

  1. The Reality-Based Community: Byte me

    In praise of hard drives: IBM introduced the hard drive (RAMAC) in 1956; it stored 5 MB in an enclosure the size of a refrigerator, and cost $150 thousand. In the next 45 years, hundreds of companies entered the…

Comments are closed.