Introduction by Jim Koch -
I have had had the good fortune of working with Bill here at
Santa Clara University Bill Davidow is as many, many of
you probably know a partner with Moore Davidow Adventures.
Prior to that he has been associated with the industry for thirty
years now in a variety of positions at Intel Corporation, Senior
Vice President of Marketing and Sales Vice President of the Microcomputer
Division and Vice President of the Micro Computer Systems Division.
Bill is also one who has very strong background in engineering
with a Ph.D. In electrical engineering from Stanford and a master
of science in electrical engineering from California Institute
of Technology. He is the author of three books his most
recent being the Virtual Corporation and prior to that a book
on Total Customer Service and Marketing High Technology.
He is on a number of different boards including chairman of the
board for Rambus Corporation and Advanta Corporation as well he
serving on a number of community boards. I will mention
he is a trustee of Cal Tech He is a member of the board of advisors
to the Community Foundation of Silicon Valley, a member of Stanford
University Institute for economic policy and a member of the technology
museum in San Jose as well as a member of the board for the Center
for Science Technology Society in which several of us in this
room are a part. thank you very much for being with us today
and it Delightful to have you.
BILL DAVIDOW
Thank you Jim. I was just fascinated by what Dave Thompson had to say and I am glad he spoke before me because I really think we are talking about a incredible technology its definitely changed computing its changed our lives its changed society. I have been for a number of years studying how technology has transformed society and I have been asked to talk today a little bit about that phenomena and I am really unconcerned about the privacy issue that Dave mentioned because I consider it to be a minor issue compared to all the other transformations that are going to take place. So what I would like to do is have you think a little bit about the implications of that technology. I can not ever talk about them but that I can point to some patterns of other things that are going on in society to help maybe expand you mind so maybe you can give me the answer to that. I would like to point out that approximately eleven hundred years ago the stirrup made its way to Europe. Now that may not seem like a particularly important technological invention but if you follow what happened to the stirrup through medieval society it lead directly to feudalism
I have no way of knowing where free storage is going to lead. I am going to be talking today about computers but it is clear computers couldn't exist in an important fashion without magnetic storage anymore than they could exist without the transistor. I am going to address the question of what could a civilization look like if we designed it for computers or for that matter magnetic storage which is precisely what we are doing in the process of designing this society or civilization. Existing forms of government are going to go under dramatic transformations. Democracies are going to be enhanced and threatened and new forms of business are going to emerge and many existing forms of business will become obsolete. The meaning of community and nature of work is going to change and socialization with all of these borgs running around is going to take on a totally new meaning I don't think any of this is going to surprise any of us in the Silicon Valley as a matter of fact man's tools have been restructuring our social system, for really millions of years man's efforts to effectively use the tools of the industrial revolution greatly improved our standard of living and spawned the slum in cities that housed the workers close to factories. The automobile gave us unprecedented freedom to travel and commute and in the process it hollowed out cities created the suburbs polluted the environment and captured land, by some estimates seventy percent of the surface area of Los Angeles is occupied by roads garages parking lots and freeways so one would expect the computer, the basic tool of the information revolution, to have a similar effect.
However I think that is very seriously under estimating the impact of the computer and its social implications because we assume the historical patterns of the past apply to what is going to happen and this is patently incorrect. In the past society has been predominately dominated by a very rock solid foundation, a physical one; tangible objects and assets for the benefit of society governments that draw their strengths from geography - mountains, rivers and oceans define both their reach and protected them. Business was based on physical assets factories inventory and natural resources. As man's knowledge increased and he developed and improved means of communication and better ways of storing and processing information society's physical infrastructure has been continually eroded. Intangible assets have become increasingly important for example as man developed more sophisticated and accurate means and methods of navigation and gained knowledge of worlds markets country’s were no longer dependent on raw materials located within their borders. The knowledge of where these materials were located and the ability to navigate replaced the actual physical presence of the material. The trend has been accelerating for centuries as communication technologies have improved. We used to move information by foot then by horse then by ship by carriage by carrier pigeon by semaphore by telegraph by phone and now we are even caching information right were we need it. In a few decades we are going to be caching it in out of our heads. Information technology has turned the gradual replacement of physical assets by a intangible ones. To understand why requires a closer examination of the tangible bases of civilization what I have chosen to call the tangible society is the society that is based primarily on physical assets and the infrastructure that those assets are built from.
Tangible society depended on physical infrastructure for two distinctly different purposes the first of these was a purely physical one for example a city to house workers near their jobs, factories provided places for workers to work, streets provided for the movement of goods but the cities infrastructure also provided another very important purpose or function, it acted as a information storage and transmission device office buildings facilitated communication and the exchange of information between workers file cabinets located in those buildings stored information, its streets carried information as well they transported people to meetings they carried letters and newspapers. Putting our most important institutions under a microscope exposes the fact that the physical infrastructure often serves in part of a information proxy business social organization and institutions that developed over the centuries were constrained by the inflexibility of physical infrastructure. They develop organizational forums to transmit information and carry out transactions as efficiently as they could bounded by these constraints. Businesses located factories and administrative facilities near one another to facilitate communication many, sold their products exclusively in the countries in which they were located in part because they needed knowledge of local markets. The reach of information technology is so broad that it is impossible to talk generally about its impact or it is only possible to talk generally about its impact or deal more specifically with a more limited number of examples and I have chosen two.
These are aspects of government and the central question in each of these examples is whether government has the ability and desire to influence the direction of society in order to make the effect of accommodating the information technology as possible as positive as possible. Now what I would like to suggest to you is we have got to think about these types of social structures when we deal with any of these technologies. The first thing I would like to talk about is communities in a democratic society. The kinds of information storage advances definitely effect communities, anything that alters the nature of communities has far reaching effects. I would like you to consider a local ethnic or religious community that in many cases makes up possibly a few percent of the population. The adversity enriched community fosters common bonds they preserve culture and religious values and they protect the interest of their members all extremely important things to do. When they act to further their own interest at the expense of others though they are subject to a great deal of pressure. Neighbors and other community groups may push back. These communities may be confronted by editorials in a local newspaper, angry opponents and a meeting in city hall or opposition that shows their principles. Virtual communities are expanding at a very rapid rate they can have very positive effects on a democratic society. Empowered virtual communities can be used to protect the legitimate rights of minorities. Citizens will have unprecedented access to information and will be able to act more intelligently but there is a dark side to virtual communities. Information technology will amplify the power of special interest groups and enable them to corrupt the democratic process, a national or international special interest group is a very different institution then a local one in a community supporting the same causes.
Five percent of a local community maybe only a few thousand people but five percent of the population of the United States is over 12 million people and think of what would happen if this virtual community just collected a few dollars in dues to spend on a political issue. It would have over a hundred million dollars that it could use to influence congressional agendas. Such a virtual community would be substantially less sensitive to the interests and feelings of others. It would probably make others seek to pay as much to further their interests as possible special interests pursued by powerful organizations without adequate sensitivity to the interests and feelings of others undermine democratic institutions. These groups that pursue their agendas undermine trust and encourage cronyism and do a great deal to further corruption. Democracy dominated by special interest groups will not be a very effective form of government if it is the inescapable conclusion that information technology will lead to a flowering of special interest organizations. These will undermine the democratic process. I would like to suggest that one powerful way to deal with the problem is not through laws at all or laws that congress may think of, one very powerful way to deal with the problem is to return as much authority to the local level in society where a virtual community would then be forced to face the same local pressures that a local community would be forced to interact with. This would require a total redefinition if the authority of both the federal government the state governments and the community governments. A look at how information technologies effect tax systems is also instructive.
Taxes depend on the constraints imposed on individuals and corporations by the physical infrastructure in our society. These constraints make it expensive and bothersome to avoid taxes today. Information technology has freed both business and individual from the burdens of physical infrastructure, one of the fundamental requirements of tax thieves is the knowledge of where money is earned and transactions take place and value is added. A second is the ability to exert authority over those activities and those locations and finally either government has to trust taxpayers to voluntarily comply to this system or have methods of determining when they chose to ignore it. Information technology makes it more difficult to determine where a transaction occurs, acquire knowledge about it or exercise control over location. I would like to give you a example of perfectly legal hypothetical transaction to illustrate my point. Suppose a customer in the United States orders a product using e mail from a company located in a tax free haven in the Caribbean and uses funds from a offshore bank to pay for the purchase. Assume the company in the Caribbean sends a electronic message to a factory in Mexico to manufacture the product and ship it to the customer. With a good little bit of financial engineering this is a transaction that would be almost impossible to tax. In the first place it is not clear where the transaction takes place, did it take place at the customers site or did he order the goods in the Caribbean, where they were paid for or in the location that wrote the check or in Mexico where the product was shipped to the customer or at the location where the good were received if you think it took place in all of them we have a pretty viable tax system because everybody can just collect their 15 or 20 percent of the transaction and they would all be happy. It would be extremely difficult though for any government to determine if the product had been ordered at all because they would have to audit massive amounts of E-mail that would make it very difficult to collect a sales tax. Due to Nafta there would be no duty in a shipment from Mexico into the United States. The company located in the Caribbean could do enough financial engineering to make sure it paid the Mexican company only what it cost to produce the product therefore there would be no taxes in Mexico either.
In general income taxes, whether they be on individuals or corporations, are going to become extremely difficult to collect. Multi national corporation will have the easiest time of all to legally avoid taxes but domestic corporations and individuals have many options as well the easiest taxes to collect. In the information age are going to be taxes based on activities based on consumers that take place locally on real estate and on services. Gasoline has to be delivered locally, water and electricity have to go to homes and businesses gas and oil have to be delivered to the point of consumption. Many services have to be rendered locally as well. It would be difficult to avoid taxes on restaurants, transportation, entertainment, hotels rooms, legal and consulting services, health care and ever university tuition’s for the most part. The least volatile portion of the tax base is the part that generates large amounts of income for the federal government the least volatile portion of the tax base is that portion of the tax base that generates large amounts of income for the states and local governments and cities. Income taxes, which generate most of the federal income is the most vulnerable information technology and is going to force government to re-conceptualize its tax base. Its easy for me to imagine the federal government trying to steal the states tax base and the state trying to do the same to the cities. Many of the taxes that will be easiest to collect are extremely regressive in nature, taxes on most form of consumption form most heavily on the poor who spend a disproportionate amount of their income on consumables and energy. Now if a government wished to get ahead of the tax problem they would end up shifting the tax burden to precisely the place where the federal government and the state government doesn't want to do it, they would shift it back to the individual and then have some kind of rebate system in place to eliminate the regressive nature of what is going on. This is a horrible thing to consider, congress trying to deal with it is impossible for me to predict how civilization is designed for computers is going to look. One of the things that I learned today is that I am going to take my augmented memory in to meetings with me because I am the only who forgets.
At this point the effects are too broad reaching but one way to get an idea about what our technology is going to do to society is to think how society looked before we became dependent on the automobile. Individuals lived closer to where they worked there were no suburbs cities were the center of commerce and there were no shopping centers, cities had narrower streets, there were no freeways and there were no parking garages, families and communities bound together by geographic constraints were stronger per capita. Energy consumption was less, the automobile gave us unprecedented amounts of freedom, we could live where we pleased and go shopping with ease. We could go where we wanted when we wanted. It is so changed our lives that few of us could imagine life without it. The automobile brought us both good and bad much of the bad could have been avoided if some of the problems could have been anticipated and acted upon early on, for example, if government had decided to create affordable and excellent mass transit and if at the same time constructed a super byways bridges and garages our society would have a very different structure today. Many people would have chosen to live near public transportation and business would have relocated as well along transportation routes. Fewer people would have been employed in supporting the automobile; autoworkers, mechanics, parking lot attendants, the result would have been less pollution and less traffic congestion and most of us all could have enjoyed the freedom provided by the automobile today. There are many choices for government, business, education and individuals in all the other areas in information All of these area can either react after the fact as we did with the automobile or try to anticipate changes and make structural changes in society today that will enable us to get most positive benefits from our technology. Many businesses and individuals and other organization are already transforming themselves. These groups understand that it is a matter of survival. they are going to be the beneficiaries of a civilization designed for computers. The reaction of many other groups that will not survive the information revolution will be to narrowly employ the technology to improve the status quo to make things a little bit better. Government will be one of these groups that will be least effective in coping with the change. They will try to preserve the status quo by passing laws to support the winners. In a civilization designed for computers will be those who seek new structures for government business and society that will control accommodate and exploit information technology in the most optimal fashion
Thank You