5: FEED THE WEB FIRST
Because information trumps mass, all commerce...
...migrates to the network economy.
MIT Media Lab director Nicholas Negroponte guesstimates that the online economy will have reached $1 trillion by 2000. Most tenured economists think that figure is terribly optimistic. But actually that optimistic figure is terribly underestimated. It doesn't anticipate the scale on which the economic world will move on to the internet as the network economy infiltrates cars and traffic and steel and corn. Even if all cars aren't sold online immediately, the way cars are designed, manufactured, built, and operated will depend on network logic and chip power.
The current concern about the size of the online market will have diminishing relevance, because all commerce is jumping on to the internet. The distinctions between the network economy and the industrial economy will likewise blur and fade, as all economic activity is touched in some way by network rules. The key distinction remaining will be between the animated versus the inert.
The realm of the inert encompasses any object that is divorced from its economic information. A head of lettuce today for instance does not contain any financial information beyond a price sticker. Once applied, that price is fixed, too. It doesn't change unless a human changes it. The economic consequences of lettuce sales elsewhere, or a change in the general global economy do not affect the head of lettuce itself. Instead, lettuce-related information flows through wholly separate channels--news programs or business newsletters--that are divorced from the lettuce itself. The lettuce is economically inert.
The realm of the animated is different. It's vastly interconnected. In this coming world a head of lettuce carries its own identity and price, displayed perhaps on an LED slab nearby, or on a disposable chip attached to its stem. The price changes as the lettuce ages, as lettuce down the street is discounted, as the weather in California changes, as the dollar surges in relation to the Mexican peso. Traders back in supermarket headquarters manage the "yield" of lettuce prices using the same algorithms that airlines use to maximize their profits from airline seats. (An unsold seat on a 747 is as perishable as an unsold head of lettuce.) In relation to the net, the lettuce is animated. It is dynamic, adaptive, and interacting with events. A river of money and information flows through it. And if money and information flow through something, then it's part of the network economy.
5: FEED THE WEB FIRST
And what could be more industrial-age...
...than automobiles? Yet, chips and networks can take the industrial age out of cars, too. Most of the energy a car consumes is used to move the car itself, not the passenger. So if the car's body and engine can be diminished in size, less power is needed to move the car, meaning the engine can be made yet smaller. A smaller engine requires a yet smaller engine, and so on down the slide of compounded value that microprocessors followed. The car's body can be reduced substantially using smart materials--stuff that requires increasing knowledge to invent and make--which in turn means a smaller, more efficient engine can power it.
Detroit and Japan have designed cars that weigh only 500 kilograms. Built out of ultra-lightweight composite fiber material, these prototypes are powered by high-tech hybrid engine motors. They reduce the mass of radiator, axle, and driveshaft by substituting networked chips. They insert chips to let the car self-diagnose its performance, in real time. They put chips in brakes, making them less likely to skid. They put microprocessors in the dashboard to ease navigation and optimize fuel use. They use hydrogen fuel cells that do not pollute, and electric motors with low noise pollution. And just as embedding chips in brakes made them better, these lightweight cars will be wired with network intelligence to make them safer: A crash will inflate intelligent multiple air bags--think "smart bubblepak."
The accumulated effect of this substitution of knowledge for material in automobiles is what energy visionary Amory Lovins, director of the Rocky Mountain Institute, calls a hypercar: an automobile that will be safer than today's car, yet can cross the continental United States on one tank of hydrogen fuel.
Already, the typical car boasts more computing power than your typical desktop PC. Already the electronics in a car cost more ($728) than the steel in the car ($675). But what the hypercar promises, says Lovins, is a car remade by silicon. A hypercar can be viewed as step toward a vehicle that is (and behaves like) a solid state module. A car becomes not wheels with chips, but a chip with wheels. And this chip with wheels will drive on a road system increasingly wired as a decentralized electronic network obeying the network economy's laws as well.
Once we visualize cars as chips with wheels, it's easier to imagine airplanes as chips with wings, farms as chips with soil, houses as chips with inhabitants. Yes, they will have mass, but that mass will be subjugated by the overwhelming amount of knowledge and information flowing through it. In economic terms, these objects will behave as if they had no mass at all. In that way, they migrate to the network economy.
5: FEED THE WEB FIRST
Bit by bit, the logic of the network...
...will overtake every atom we deal with.
The logic of the network will spread from its base in silicon chips, to infiltrate steel, plywood, chemical dyes, and potato chips. All manufacturing, whether seeded with silicon wafers or not, will respond to network principles.
Consider oil--the quintessential atom-based resource. The classical theory of diminishing returns was practically invented to explain the oil industry. Easy oil is extracted cheaply at first; then at a certain point the expense of extraction doesn't justify the cost unless the price goes up. But by now the oil industry is so invaded by chip technology that it is beginning to obey the laws of the new economy. Sophisticated 3D viewing software allows geologists to map oil-yielding layers to within a few meters; computer-guided flexible drills can burrow sideways with precision, reaching small pockets of oil. Superior pumps extract more oil with less energy and maintenance. Diminishing returns are halted. The oil flows steadily at steady prices, as the oil industry slides into the new economy.
5: FEED THE WEB FIRST
The wholesale migration from mass to bits...
...began with the arrival of computer chips. This subtle disembodiment was first viewed as a unique dynamic of the high-tech corridors of Silicon Valley. Software was so strange--part body, part spirit--that nobody was surprised when the computer industry itself behaved strangely. The principles of the net, such as increasing returns, were seen as special cases, anomalies within the larger "real" economy of steel, oil, automobiles, and farms. What did such weirdness have to do with, say, making cars, or selling lettuce? At first, nothing. But by now every industry (shoe retail, glass manufacturing, hamburgers) has an information component, and that component is increasing. There is not a single company of consequence that does not use computers and communication technology. All U.S. companies (low as well as high-tech) together spent $212 billion on information technology in 1996. Often, the digital component of the firm, say the IT or MIS department, or the wizards running the technology, will be the first to feel the influence of the new rules and network dynamics. Consultants Larry Downes and Chunka Mui say, "Even though the primary technology of many industries may not be in transition ... every industry is going through a revolution in its information technology." As more of a company "goes online" nerd ideas begin to seep into the whole organization, reshaping the firm's understanding of what it is doing. Over time, more and more employees will chase the opportunities that intensive information and communication networks bring.
New network technology and globalization accelerate the disembodiment of goods and services. The new dynamics of information will gradually supersede the old dynamics of industrialization until network behavior becomes the entire economy.
5: FEED THE WEB FIRST
The net is moving irreversibly to include...
...everything of the world.
As the net takes over, many observers have noted the gradual displacement in our economy of materials by information. Automobiles weigh less than they once did and yet perform better. Industrial materials have been replaced by nearly weightless high-tech know-how in the form of plastics and composite fiber materials. Stationary objects are gaining information and losing mass, too. Because of improved materials, high-tech construction methods, and smarter office equipment, new buildings today weigh less than comparable ones from the 1950s. So it isn't only your radio that is shrinking, the entire economy is losing weight too.
Even industrial objects like atuomobiles follow new rules. An automobile's average weight is dropping and will continue to drop as information replaces its mass.
Even when mass is conserved, information increases. An average piece of steel manufactured in 1998 was vastly different from an average piece of steel made in 1950. Both pieces weighed approximately the same, but the one made recently is far superior in performance because of the amount of design, research, and knowledge that went into its creation. Its superior value is not due to extra atoms, but to extra information.
5: FEED THE WEB FIRST
To prosper, feed the web first.
The web is underfed right now. It is small compared to the rest of the world. In 1998 the internet boasted of an estimated 120 million people with access. But that means only 2% of human adults have a direct line to the online network.
But the net is growing exponentially fast. If current rates continue, by early in the new century, 1 billion people will have internet access, 75% of adults will access to some kind of phone, and, according to Nicholas Negroponte, there will be 10 billion electronic objects connected together online. Every year the net engulfs more of the world.
5: FEED THE WEB FIRST
The network economy is a meta-country.
Its web of relationships differ from those of a country in three ways:
- No geographical or temporal boundaries exist--relations flow ceaselessly 24 by 7 by 365.
- Relations in the network economy are more tightly coupled, more intense, more persistent, more diverse, and more intimate in many ways than most of those in a country.
- Multiple overlapping networks exist, with multiple overlapping allegiances.
These hyperconnections can either strengthen or weaken traditional relationships. The extremely personal, highly trust-bound relations in a family stand to be strengthened, while the diffuse and nearly contractual relations in a nation-state are liable to weaken. Yet, as Peter Drucker points out, "The nation-state is not going to wither away. It may remain the most powerful political organ around for a long time to come, but it will no longer be the indispensable one." In its stead we'll rely on nongovernmental agencies such as the Red Cross, ACLU, HMOs, insurance giants, the net and the web, and UN-like entities. These parapolitical organizations will supplement the embedded nation-state. They will be the indispensable networks we care about.
In both country and network, the surest route to raising one's own prosperity is raising the system's prosperity. The one clear effect of the industrial age is that the prosperity individuals achieve is more closely related to their nation's prosperity than to their own efforts. Lester Thurow, an MIT economist, has pointed out that enabling the lowest paid to earn more is the best way to raise wages for the highest paid--the theory being that a rising tide lifts all boats. The network economy will only amplify this.
To raise your product, lift the networks it ties into. To raise your company, lift the standards it supports. To raise your country, increase the connections (in quality and quantity) that allow others to prosper.
5: FEED THE WEB FIRST
Eventually technical standards...
...will become as important as laws.
Laws are codified social standards; but in the future, codified technical standards will be just as important as laws. Harvard Law professor Lawrence Lessig says, "Law is becoming irrelevant. The real locus of regulation is going to be (computer) code." As networks mature, and make the transition from ad hoc prestandard free-for-alls to fluid hot spots of innovation, and then into full-fledged systems with deeply embedded standards, standards increasingly ossify into something like laws.
Standards also harden with age. They become resistant to change and they descend into hardware. Their code gets wired into the backs of chips, and as the chips spread, the standard infiltrates ever more deeply.
An elaborate process of legal overview monitors and analyzes our lawmaking. So far we have little of the sort for our standard-making, although these agencies, such as the ITU (International Telecom Union) will soon be as influential as courts. Standards are not just about technology. They are about soft and fuzzy things such as options and relationships and trust. They are social instruments. They create social territory.
A network is like a country in that it is a web of relationships regulated by standards. In a country citizens pay taxes and adhere to laws for the benefit of all. In a network, netizens feed the web first for the benefit of all.
5: FEED THE WEB FIRST
I was associated with the genesis of the Well,...
...one of the first public computer conferencing systems to be plugged into the internet. The Well was conceived and built by others, but as director of the poor nonprofit that owned it, and as one of the first participants to join when it opened, I was involved in creating its policies. It became clear almost from day one that the technical specifications of the software that the Well used directly shaped the kind of community growing within it. Other models of conferencing software used elsewhere produced different kinds of communities. The Well's software--as implemented by the Well--encouraged linear conversations and community memory; it discouraged anonymity, but encouraged responsibility for words and topics; it permitted limited forms of dissent and retraction, and it allowed users to invent their own tools. It did all this primarily by means of Unix code--by the software standards set up within the Well--rather than by posted rules. The community it shaped was distinctive and long-lived. In fact the community, with all its quirks, is still going, even though the software that runs it has evolved into a web browser interface. The behavior-changing standards remain. The power to mold a community by code rather than regulation was eventually articulated by Well users into a serviceable maxim: Peace through tools, not rules.
The internet and the web also contain toolish standards that invisibly shape our behavior. We have ideas about ownership, about accessibility, about privacy, and about identity that are all shaped by the code of HTML and TCP/IP, among others. Currently only a small portion of our lives flow through these webs, but as cyberspace subsumes televisionspace and phonespace and much of retailspace, the influence of standards upon social behavior will grow.
5: FEED THE WEB FIRST
As more of the economy migrates to intangibles...
...more of the economy will require standards.
But consumers will groan under the load of decisions. There is a yin-yang tradeoff in the new economy. The yin, or positive side, is that consumers keep most of the gains in productivity that are earned by technology. Competition is so severe, and transactions so "friction-free," that most of each cycle's betterment goes not to corporate profits but to consumers in the form of cheaper prices and higher quality.
The yang, or downside, is that consumers have a never-ending onslaught of decisions to make about what to buy, what standard to join, when to upgrade or switch, and whether backward compatibility is more important than superior performance. The fatigue of sorting out options and allegiances, or recovering from them, is underappreciated at the moment, but will mount. The joy of the new economy is that the next version is almost free; the bane is that no one wants the hassle of upgrading to it, even if you pay them to do it.
The fatigue will only worsen. The net is a possibility factory, churning out novel opportunities by the screenful. Unharnessed, this explosion can drown the unprepared. Standardizing choices helps tame the debilitating abundance of competing possibilities. This is why the most popular sites on the web today are meta-sites that sort the abundance and point you to the best.
Since the network economy is so new, we as a society have paid little attention to how standards are created and how they grow. But we should notice, because once implemented, a successful standard tends to remain forever. And standards themselves shape behavior.