Tuesday, February 15, 2011

Can History Repeat Itself, Again?

Ok, this post really isn't about history, it rather is about economics and innovation. Here is an interesting article pronouncing doom and gloom of the internet (maybe it's not that bad). But it takes a rather gloomy outlook on what happens when corporations try to stifle and control. Here's a relevant excerpt from the end.
"The supposed freedom of the Internet works only if one can gain access. Browsers promise to allow access to the world of Internet sites, but only if the browser will work on the device, and only if the device will allow the media tools that provide the rich textual, graphics, photographic, musical and video formats to operate. Service providers will impose their own tariffs and restrictions. Will communication applications work properly, or will they, too, be restricted by the combined forces of the device manufacturers and the service providers? Current trends are not reassuring.
Tim Wu's book The Master Switch: The Rise and Fall of Information Empires, demonstrates how this process works. Wu's major theme is the inevitability of proprietary controls as large corporations discover the market value of exclusivity. All of our modern communication and transportation industries started off in similar ways -- whether telephone or film, radio or television, video or websites, Internet conferencing or blogging. At the outset, technologies are deployed to anyone who can be both providers and recipients of the powers of the medium. For example, the first phonographs could both record and play back. Telephone systems proliferated, run by cities or small companies. Radio amateurs and university groups freely developed radio stations. On YouTube, people can both produce and view streaming video. Amateurs and innovative inventors expanded the horizons. Then, as the business potential became obvious to corporate warlords, they struck, buying up small businesses, getting willing governments to enact rules, regulations and laws to protect corporate interests and turning the experimental two-way publications into one-way broadcasts within closed walls. The stories are remarkably similar whether one talks about the phonograph or movies, the telephone or radio, television or newspapers, music or book publishing. (For more, see Wu's interview with the New York Times.)
Why do we all meekly allow the speed at which we access the Internet to be much slower when we send than when we receive? Service providers will claim it is because, on average, people receive more than they generate. So what? Why would it harm companies to provide equal access? Or perhaps, is it because they want us to be consumers, consuming material sent to us rather than producers, creating our own content -- whether text, voice or visual? This asymmetry reinforces the view of the service and content providers; that we consume whatever they produce. All this in the face of great creativity by amateur musicians, photographers and videographers: Where would YouTube be without the everyday creator? Oops, that might be a good question but it might be too late. Where will YouTube be in the future when corporations decide to dominate?
I fear the Internet is doomed to fail, to be replaced by tightly controlled gardens of exclusivity. The Internet has extended beyond the capabilities of its origins: the trusting, open interactions among a few research universities. Today it is too easy for unknown entities to penetrate into private homes and businesses, stealing identities and corporate secrets. Fear of damaging programs and the ever-increasing amount of spam (some just annoying but more and more deadly and malicious), threatens the infrastructure. And so, just as previous corporate warlords used the existence of real inefficiencies and deficiencies in other media to gain control, equipment, service and content providers, large corporations will try to use the deficiencies of the Internet to exert control and exclusivity. All the better, they will claim, to provide safe, secure and harmonious operation, while incidentally enhancing profits and reducing competition. Similar arguments will apply to governments as well, invoking the fears of the existing Internet in order to exert control for the benefit of the existing ruling parties.
I have seen the future, and if it turns out the way it is headed, I am opposed. I fear our free and continual access to information and services is doomed to be replaced by tightly controlled gardens of exclusivity. It is time to rethink the present, for it determines the future."

Of course, the 'control' of the internet is disconcerting. However, I think this article fails to account for how innovation drives the market. History has shown big power hungry corps who wall themselves up with command and control of what they perceive as 'their domaine' can be outdone by the emerging entrepreneur who can function in the market with guerrilla warfare efficiency. The whole rise of media 2.0 is precisely because of the monolithic control that arose from a few over media 1.0. The real question is what will be media 3.0? I'm not a utopian optimist, but the facts emerging markets and human innovation do not leave me quite as stuck and pessimistic as this article ends. He acknowledges the role of innovation in the rise of the internet but never asks the next logical question: why can't it happen again?

The basic problem is that this article discounts any future reality (that as of yet unrealized) for human freedom and entrepreneurship to out-think and thereby undo and undermine the alleged monopolization that is developing over the internet. This is the genius of democratic capitalism. Those who have or are of the verge of developing monopolies are often outdone and undone rather quickly by the innovation of an unseen small competitor who breaks out and creates a new emerging market. (For an introduction to this basic phenomenon see among many: George Gilder's Wealth and Poverty and Michael Novak's The Spirit of Democratic Capitalism).

The basic point is this: the author acknowledges the wonder of innovation in the emergence of the internet itself. He even acknowledges the similarity of the developing control of the internet and media 1.0:  "The stories are remarkably similar whether one talks about the phonograph or movies, the telephone or radio, television or newspapers, music or book publishing." But each one of these was undone by new innovation. Those who monopolized in one generation with one form were undone in the next. Why should we think it will be different with the internet? Those companies that are seeking to command and control will face downfall just as quickly as companies that controlled or sought control of the previous media. Just as the internet unbridled the power of previous forms of monopolies on information, the real question we should be asking not can history repeat itself but what will it look like when history repeats itself, again. That is assuming we have not lost the human spirit and the will to innovate.

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