Brian Arthur: IFTF

Wonderful chat with Paul Saffo and Brian Arthur, the keynote of the Institute for the Future Conference. Here's an impressionistic transcript.

Father of the notion of inceasing returns, worked in complexity theory, recently and economic historian, now in the Valley working on a book. Skipped breakfast with the Dalai Lama to be here.

On the bubble: Puzzled with an interview with Drucker saying technology crashed because IT was going nowhere, was a small business and will remain so. Looked back at the railroad revolution, 1845 mania, 1847 crash. Week of terror when the bank of england nearly went bankrupt in 1847. Characters like george hudson were like ken lay, had to flee the country. But it was the beginning, not the end of railways. No investment for a while, a lull and then built by 800% and began to transform the economy. We are at the beginning of the digitalization of everything.

On IT Doesn't Matter -- Nick Carr doesn't matter. Just because everybody has something doesn't mean it doesn't have strategic value. Its how you put it together and what you do with it.

When a major technology is created, its not the adoption, but becoming deep infrastructure. Adding machines to the Internet. What's important in business is everything is becoming connected: networks, people, processes, machines. Transfoming into a series of digital conversations among things that execute things. Financial derivatives, genomics, proteomics, CGI, are all new industries impossible without digitization. Charles DeLy (sp?), dean of engineering at boston university is and expert in genomics: 0% of genomics is possible without computation. Decode in Iceland is a mostly a server farm. Banking plus computation enables derivatives, a $1 trillion dollar a day industry. Creates new industries.

Creative Destruction -- was on a train with his biographer. Schumpter's nephew went to India and learned about mythology, Cali, goddess of creation and destruction. Autos displace not just horses and carriages but blackmiths. Most powerful lobbying firm in 1904 was against autos. Early red flag regulation of autos. Disney executives looking at the new VCR and someone says what if somebody just walked into the room they could watch this thing for free, no box office! Same thing happening in with digital content.
Incumbents are a constant. Some are so consistent you can use it as an indicator that something is inevitable. Music industry opposed Radio, creation of EMI over Aspect. Some people are so wrong invariably -- everything Jack Valenti opposed was a success. Track people who are really good at being wrong.

Becoming very connected, not just distance doesn't count -- expertise and skills are becoming important, even localized. When Im connected I can get it from different locations cheaply. Volvo isn't just Sweden. Ultility computing is just part of the larger trend of outsourcing.

US Individualistic opportunisitc form of capitalism, Europe as Community based form of capitalism and China is confusionist family based (which is retarded). Beginning to see globally, lots of things can be made everywhere so what's important is your local economy but where things are going to be made. Puzzle of engineering cultures in germany and sweden and england, but why aren't they leading high tech. Core of europe is badly happened by regulations that came into being with industrial economies, and they are socialist oriented it protects groups which is good but is terribly difficult to make agile. Why is hightech on the periphery of Europe? Ireland shifted to become the leader in outsourcing (recently superceded by India), Scotland, Finland -- goeing down into Eastern Europe: Poland, (Estonia!), etc. These places had nothing, no manufacturing to speak of, greenfield. Government can be nimble. In Ireland, government official said they brought Intel in, catholic church kept birth rate down till recently now a boom of young people, and said tour isn't ready but please stay in a castle and play golf. Deal was done. People in Sweden asking how to go high tech when he thought it already was high tech, but their PM was proud of having 2.4 people depending upon every worker.

If its pure manufacturing for commodity basis, watch China, not India. China is the next Japan. India for outsourcing, periphery of Europe for lower high tech. China and India are already outsourcing to south east asia to ensure they can continue their leading growth. Infosys outsourcing to Iranians, Iran 50k CS degrees per year
(funny, its almost as though we could say that the winner in the end of the industrial revolution is China)

Effect on organizations? Models of expertise do not respect boundaries of companies. Fuction of the company diffusing outwards?
** The large conglomerates of the 1960s will either dwarf or is a dinasour. Will see very agile small configurations and reconfigurations of functions. Changing business every year. Agility, configuration and re-configuration. Fast intermediated by digitalization
**Rising tide automate some things and takes them over. In services and manufacturing, some of them going abroad. Taking over human functions bit-by-bit. Places where you need human touch and empathy. But he is always suprised when something like doctors and lawyers and the like are doing work without human touch (e.g. telemedicine). If you have things done outside its outsourcing, if in a foreign country except canada its offshoring. Those offshore companies will import, have sympathy for displaced plant workers. Usually its tetonic and looks like nothing is happening. Digitalization change is deeper than industrialization or printing, largest changes to date.

Lingering question: Big myth of our age is the impact of the empowering nature of our technology.

Favorite piece of technology is a Harley Davidson or Movies. Movies have a dominant theme these days, that technology is coming, its a threat, its taking us over, we may be cogs in the machine, a huge underground fear running through society, manifested in movies. Dominant myth of making us cogs, fear isn't of death, its of loss of will, that something is taking over our will. The good guys in these myths have technology. Like Chewi, they are wierd. Enemies with primative technology, good guys have good technology and they blend with it. To contemplate the budda without the presence of motorcycles is not to complement the budda. The answer is technologies that bring out humanity.