The panel I was on was entitled "The Internet and Globalization". The other panel members were Carolyn Buck-Luce of Ernst & Young, John Sculley of Sculley Brothers (and Pepsi/Apple Computer fame), and Anthony Giddens who is the director of the London School of Economics.
The panel was put together and led by Jim Dougherty of Intralinks, Inc. Jim, a member of the FPA board, mainly called on us to speak, since time was tight.
I'll list here much of what is said. It's in a pretty raw form.
Jim, front and back (as seen from my seat)
I posted a full copy of what I planned to say on my web site, and it's pretty much what I said. You can read it there. The two parts of my speech that seemed to get the most mention afterwards were (1) showing the "toys" -- Palm VII, Stowaway keyboard, RIM, digital camera, MiniDisc recorder, and Fast-Lane/EZPass -- to demonstrate that there will be more to the Internet than browsers running on PCs, and most importantly (2) pointing out how much of the use of the Internet and technology will be for personal and mundane things. The second point is based on my essay "What will people pay for?".
Here's some of what Carolyn said:
Thinking about extraprises as opposed to enterprises. Today, it extends its boundaries by making alliances. Something like 25% of the revenue from Fortune 500 companies is coming from the revenue generated from its alliances. Booz Allen says that with the 25 largest alliance makers, Cisco and others, 40% of their equity value is the value of their relationships. Managing huge numbers of relationships hard. Enterprise: internal optimization, extraprise: market clearing mechanisms. From command and control decision making to adaptive. Suspicious "us vs. them" to collaborative. The law of diminishing returns instead is "law of diminishing firms". What's most important is what's intangible, not what's tangible. Assets that used to be the barriers to entry are now the barriers to exit, they are the albatrosses which used to protect them. The rules are changing. We're an accounting firm. What do we count today? What's going to drive value? Risk, controls. Whose counting that stuff? Where do I stop and you start in this ecosystem where we have to trust each other? There aren't standards of measurement. For example, raising financing on what you own: 15 years from now Wall Street will be raising money based on the value of the relationships on these extraprises. Pricing is like moving from a fixed rate, single currency world to a floating multi-currency world. Brand: how do we price for brand, being a trusted 3rd party? Culture, of the extraprise is a value. The biggest issue is talent. We used to think we had to recruit, attract and retain. Now recruit, remember and reattach. The challenge is how to operationalize in the new rules.
Here's some of what John Sculley said:
Customers are now in control. I want the best possible product at the best possible price customized exactly as I want it and I want it now. There is no way to make money doing that unless you find new ways of working -- which you can do with the Internet, like Cisco and Dell have done. Everybody takes credit for productivity. But the reality is that productivity in the New Economy model is the reinvention of work. Old-co's have been downsizing expenses by outsourcing old-co expense. The old-co's expense has become the new-co's revenue. The old-cos are valued in the stock exchange by their Price to Earnings, so reducing expense can increase profits, which is positive. The new-co's are not valued on profits in most cases because they have no profits -- they're valued on their revenue. Their revenues are the old-co's expense. Internet is an enabler so companies can work with business partners. Speed and flexibility are at a premium, not self-sufficiency as we've seen in the past. You never know if your workforce are your employees, your partner's employees or are free agents. The Internet allows all those people to co-mingle in a virtual sense. A transforming trend: Every product industry is looking for the analog of itself in a service industry model. Meaning that there is a parallel universe that is emerging that says that if you can transform your product benefits into a service deliverable that you have a model for doing business, that as Carolyn was pointing out, where systems are the essential perspective of the new economy, where services are easier to deliver in a systems model than products are. It's not totally surprising that the market capitalization of General Motors, if you extract out Hughes, and just look at the automobile business, is something less than $30B and the market capitalization of AOL is $140B. One is a system and the other is a product.
But the Internet is just beginning because it is mapped upon an old public switched telephone network that was designed for 10% of the population to be connected concurrently for an average of 4 minutes... So you see huge investment being made in the infrastructure to deal with what we'll need.
When I joined the PC industry it was a relatively primitive product and yet it came out to be a far more important metaphor for the economy then I ever realized when I joined the PC industry. I think the simple cell phone...will be far more important than the personal computer. There are 200 million PCs and 500 million cell phones, and in 2005 there will be 1 billion cellphones, at least half data capable. I see the use of a voice interface, hi-res color screens. Sensors. It's a service industry and I think the cell phone will be the base of the camera industry. Every cell phone will have a GPS chip in it. Location sensitive commerce. Time sensitive commerce. Cell phones have caught on much faster in less developed countries than personal computers have. Descendants of the cell phone will be showing in many less developed countries long before we'll see personal computers connected over wires showing up in those countries. UIs will be easier to assimilate like Walkmans are easy to assimilate.
Finally, Anthony Giddens, Director of the London School of Economics, spoke (I'll write this in the third person though some of the working is his):
15 years ago "globalization" was not a term used much by anybody. He had to struggle to get Mr. Blair [whom he advises] to take it on. When a word comes from nowhere to be everywhere you can be sure that something extraordinary is going on. This history of the term globalization really reflects what it's about because he hasn't been anywhere in the world where there isn't a discussion of what globalization is. But the concept is quite poorly understood. He sees it identified with the marketplace, despite the extraordinary role financial markets have, the driving force is not primarily economic no matter how important those forces are. For him, the key driving force is the communications revolution. It got underway when the first commercially viable communications satellites made global communications instantaneous. Then everything changed. It's similar to when industrialization started and had a shakeout in institutions. From the family to nature of government, economy, transnational systems, we are going through such an institutional shakeout. "Globalization for me is really a sort of transformation in the basic institutions of our lives." Changes to things like the family are just as much part of it as the big events which are ordinarily discussed. The driving force is technology. Need to put them in context. Over last 30 years information technology has been completely revolutionizing manufacturing, retailing and distribution. You can see it very easily, just go back a generation in the US, when something like 40% of the population at that point were working in manufacturing. It was as if it were a working class. Now in the US and EU countries, too, only an average of 16% of the populations works in these occupations. Even though information technologies are not the only thing to cause this, it is the major one. This is a truly staggering transformation. Look at Fedex to see how this would not have been possible in the past because of the enormous detail and the amazing short time that is involved in getting the packages where they are supposed to go the next day. So Internet technologies are building upon the process of a very fundamental transformation.
So what is specific impact of the Internet? With the advent of the new economy you can be flipped out of the water almost overnight. That now forgotten figure, Karl Marx, said "All that is solid vanishes into air" and this can happen in the most solid of businesses. Probably the most famous example is the fate of the Encyclopedia Britannica which was for 200 years a solid set of volumes. It looked like one of the most stable features of our society as it were. Then when Encarta and other CD based encyclopedias came out it just knocked the market out. Now it is a kind of struggling Internet-based service, all 40M words of it. He runs the London School of Economics, old like the Britannica, will the LSE be around in 30 years time? He thinks it will because there is a need to be somewhere. Sociologists call it the compulsion of proximity.
Another thing is the breaking down of the boundaries between industries. Like between insurance and banking. Or education and a company -- both knowledge based institutions.
After our talks there was some Q&A:
Q: How can the Internet keep new powers accountable and stable?
Comment from John Sculley: The nation-state is a relatively modern creation around 1870 by Bismarck so who's to say that there won't be other institutional inventions as time goes on that are shaped by the technologies and the events of its time. I think we know that the Internet has shifted an incredible amount of empowerment over to individuals and that the ability of individuals to be connected is really unparalleled.
Anthony thinks: Nations are still more important than corporations, because nations still control territory and corporations don't, nations control the apparatus of law and corporations don't, nations either collectively or individually control the access to military power and military violence and corporations don't. You wouldn't just look to a technology to cope with the problem we all have which is to create a decent global economy which is inclusive -- you have to look to the role of government, to some extent a transnational government which we've known, not just a national government. The Internet plays both ways. Look at the telephone ladies in China. They hire out mobile phones. They tell the local peasants the world prices of their commodities and thereby they are able to avoid the middle person and get a decent price. But these technologies can be exploited for unpleasant ends, such as surveillance. No technology is neutral with one thrust.
Carolyn sees the buyers having a judicial system -- the Fortune 500 buyers not sellers -- which will be able to have power and speed things ups.
Q: What about Encyclopedia Brittanica? Wasn't that people stopped wanting to read that way?
A few of us answered. Mine included: There was another thing that happened with Encyclopedia Britannica. At that very time, because they had children who were hitting the right age, parents had the choice of spending $1500 on a computer that came with Encarta free, vs. buying Encyclopedia Britannica and the shelf to put it on for about the same price. They opted to go with the thing that would give them not as good an encyclopedia, except it was easier to use for children, but it gave them the potential that gave them the chance to go to America Online and then that gave them the potential of having machines that you could stick the Internet on which then gave them machines that gave them Napster...
Q: The pressure is on governments to be more efficient and speedier. But what about the process of political debate? That's not very speedy. Do you think it will get more efficient. That ministers instead of meeting in Westminister will get on their cell phones and have a conference call across Britain and have a knee-jerk reaction? Do you think politics will get more efficient without having knee-jerk reactions?
A: Anthony: I think there is a subtleness to that question. I think some of this has already happened. You (the questioner) come from Romania, and the transformations in Eastern Europe already reflect the way this global economy uses the communications system. The Soviet Union couldn't compete in that kind of economy. It was very productive and competitive until then, so you already have sort of impact from these technologies on politics, and famously television and electronic communications were crucial in the kind of domino effect in Eastern Europe, probably extending through South Africa.
When you look at contemporary politics, I'd look at it dialectically, because you get the good and the bad and a mixture. Tony Blair's Downing Street web site, which they felt "Ah ha!, we'll have nice democratic discussions." Well it was immediately flamed out and you got all these mad people. It hasn't exactly led to informed discussions. Technologies will always be shaped by wider social influences. Don't suppose that those collection of objects on the floor [my "toys"] are simply going to determine our life. They won't. It will depend how we make use of them and whether we can develop political discourse by way of the subtle use of those technologies.
John Sculley: The general observation I'd make about all of this is that there is nothing neat or orderly about the future. This is going to be constantly in motion, constantly changing, unexpected consequences of what is going to happen as new technology is going to be introduced. And we don't know where they are going to come from. We don't know who the winners or losers are going to be. But we do know that it's going to be fast moving. So whatever direction it's going in will be very quickly.
Dan: The founding fathers of the United States debated their political things in pamphlets and with their little printing presses. They would pass them out. (This also came from England where they were doing that.) It was very similar to today's use of flame wars -- they used to argue back and forth a lot. It was the same thing as individuals putting up their expression, not in a chat-type thing but in reasoned, long descriptions on their own web sites or web sites of places that they care about. And I think that's going to help a lot. It basically lets people who care and are passionate express it to the people who care and want to listen to it. We now have the tools to do that.