Subject: Re: A few here may have an opinion on this
From: "Forrest J. Cavalier III" <>
Date: Thu, 24 Oct 2002 10:22:10 -0400 (EDT)

> Yes.  I have a student who has figures that say that in Japan, where
> overall investment has an internal rate of return (IRR) of about 20%,
> IT as a whole has an IRR of 75%, and software has an IRR of 200%.  We
> know that both the IT and software numbers are huge overstatements,
> but we expect the qualitative result (IT is "much more" productive
> than general investment, and software "much more" productive than
> hardware) to hold up.  So ...

I am not even close to being an economist.  I can recall taking
only one econ course (and it wasn't very good.)

Is IRR a metric only for companies that remain in business?  Does
risk get ignored in the calculation?

I would think the numbers can't be true on average, or the only
business left in the world would be software business.  VCs would
only fund software businesses. Besides, the proprietary software
business can't be that great if the prime example MicroSoft usually
fails to have enough profit to pay taxes on.  :-)

My understanding (very non-expert) was that microeconomics and
macroeconomics were separated due to the inability to expand the
tools, measurements, and theories of one branch far enough into
the other branch to be accurate.  Is my understanding wrong or

I find it hard to believe you can estimate the value software
or the Internet provides to users, much less predict the
future value that it leads to.  If you had to try, why is
it appropriate to start by looking at the IRR for
software producers?