During 2009 I frequently heard people ask “What will be the impact of the NBN on the digital economy?” In 2007 when the ALP first launched their bold Broadband strategy they were focused on lowering the telecommunications costs for small business and reversing the decline in economic productivity.
Now as we enter 2010 it is becoming rather meaningless to continue to specify the ‘digital’ economy as being separate or distinctive from the economy as a whole. Whilst it was sensible to label Internet mail as email in the 70’s the time for labelling things digital or ‘e’ this or that has now past.
The economy is the labour, capital and land resources, and the economic agents that socially participate in the production, exchange, distribution, and consumption of goods and services and in 2010 all of that is driven by electronic and digital technology.
Or as the 1992 campaign slogan hung in Bill Clinton’s campaign headquarters “It’s the economy, stupid” must keep us all on message to direct our efforts to where it really counts – the economy.
Following the tumultuous adjustments in all economies after the collapse of Lehman Brothers in 2008 the GFC illustrated just how little we understand about how our economies really work. Writers such as Eric Beinhocker and Robert Shiller have questioned traditional assumptions and examined the extent human behaviour is taken into account in economic models. This has highlighted for me the importance of trust and its role in creating economic value. See my earlier post discussing the relationship between trust and GDP.
Therefore if the NBN is to provide a major fillip to the Australian economy, then those that govern NBN Co must understand how applications will drive substantial value creation in the real economy. In my contribution to the book Melbourne Global Smart City published by Fast Th!nking I was asked to describe how technology had contributed to what makes Melbourne special. In this essay I argued that Melbourne is a city of knowledge and ideas and that our openness in all our endeavours creates a special personality of place that makes Melbourne a wonderful place to live. Technology has magnified our capacity to create value by enabling us to create better ways of working, learning and living. The NBN has the potential to accelerate this innovation and make Australia an even better place to live.
It is not that difficult to imagine a truly connected world; houses, offices, people, automobiles, roads, rail, retail, distribution, manufacturing, resources and the environment. Analysing collected data to utilise past trends with real time events to optimise decisions. What is the optimal route to work at 7:30am Monday morning? What is the lowest cost or carbon footprint, shortest distance or least time? There has been a crash on the freeway with real-time traffic data which route should you now take? If vehicles communicate with other vehicles in close proximity safety can be improved. Connections between shoppers, retail outlets, distribution channels and factories will optimise choice, cost and profits. By monitoring soil moisture content, weather conditions and forecasts ensure agricultural production will be maximised and water usage reduced. With every person or connection providing information about a place, an event, an action or condition effort can be captured and shared. Augmented reality can provide an overlay of information about a place, the building in the place or the service operating out of the building. Information can come from anyone; government, owners, customers or tourists.
All this data provides the means to gain enormous insight into what engages, motivates and influences human behaviour. If such insight is the purview of a select few or used by the majority to dictate to the minorities then the foundations of our democratic society will be threatened. However the very power of ubiquitous connections and an open internet should provide the means to enhance our democracy and not be the seeds of its destruction.
The powers I speak of are the ability for individual to contribute and participate and for the individual to control who accesses and assesses their contributions and participations. In this way people must be able to protect their privacy, property and safety. An improved political economy will need to:
- Establish and enhance trust; trust in data, applications and people. If people have little trust in these things then the potential for any investment in a national broadband network to improve the way we work, learn and live will be severely limited.
- Establish and maintain a reliable means of exchange for value. Such a system must provide an economic, efficient, safe and secure way for making all payments both large and small. Just look at the iTunes App Store for the iPhone. With small payments like $1.99 for applications it changes buying behaviour and people buy millions of dollars of games and applications. Apple has just announced that revenue from their Apps Store is 28 times the revenue this Christmas compared to last Christmas. Australia should set the policy framework so that Banks (or others) can provide efficient payments for information, applications and services in a safe and equitable commercial setting.
- Establish an equitable globally system of taxation and funding for public services and the operation of nation states and international trade. This is going to be difficult as smart operators move their capital, resources and means of production to the lowest cost economies whilst servicing the highest cost economies where their margins are maximised. This complex, global, political system must be resolved in a fair and equitable manner.
- Enhance the systems that protect property especially intellectual property and copyright to ensure equity in order to encourage investment in property. When people have little confidence in the probability that they will be rewarded for their investment they do not invest. Without investment innovation stops and the economy collapses. When a $1,000,000 invested in physical property (house) can remain in the family for generations and a similar investment in creating and marketing music that relies on copyright will disappear 70 years after creator’s death. When so much of our economy is based on knowledge and intellectual property a much more consistent property system must emerge.
The future prospects for our planet threatened by climate change (man-made or otherwise) and the complexity of our globalised economy make any future projections foolhardy. Whether the seeds of our destruction have already been sown or if the combined genius of the world can overcome any obstacles to create a better place to work, learn and live we shall just have to wait and see.
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A bit of a confused post I think. I agree with the comment that the digital economy is not an adjunct to some other economy but a description of an economy that has been transformed by the general purpose technology that is the suite of ICTs incorporating high speed transmission, IP standards and any-to-any connectivity.
I also get the point that part of this transformation is the greater capacity to measure “stuff” and to proces that data. I’m not so sure it is inherently “democratic”, but nor do I share the fears that it creates greater means for control.
In geo-politics the three probably greatest effects we could label to date are (1) the collapse of communism as the people in those states could see that the description of the West peddled by their rulers was false – but that was as much television sgnals as anything else (2) the reporting of war wherein “citizen journalists” can report from inside the battle zone (be that external war or civil war) and finally (3)the development of international terrorism as practiced by Al Qaeda. You need to see my blog for some of these latter comments.
The four critical issues you mention are relativelt minor in the grand scheme of things, and ultimately will need to be resolved by the IETF and like bodies not necessarily Governments.
1. Trust in the Internet needs to be built from the standards of the Internet. At the moment the Internet standards are still mostly controlled by the children of the 1968 students movement and similar European outbreaks. It is all peace, love and trust, with a good measure of cynicism and hence caveat emptor. The Internet is thus far designed for the digital literati, not the masses.
2. The reliable means of exchange will evolve. “Beans” were simply too early. You can’t create the payment system before there are things to pay for, money follows trade not the reverse. Visa and Mastercard will either develop something or suddenly wonder where their market went. It might also rely on some of the developments in 1 above, that is far more reliable means of end user authentication. It cannot be too far away from the days when biological data is used by the ICT to actually identify the individual – no more magnetic strips or chips. But retinal scans will be the go because they don’t give law enforcement information that universal fingerprint IDs would.
3. The tax system will look after itself. What won’t is the “nation state” – see my blog to read about Philip Bobbitt’s books. In reality the digital ecoomy just makes taxation easier as more and more transactions occur through an ICT system.
4. This is the bit that caught my attention. We don’t need necessarily stronger copyright laws we just need different ones. The US in its various trade agreements has kept extending the duration of copyright (referred to as the Mickey Mouse clause) way beyond the limits necessary to maintain the incentive to create. Greed usually results in theft, so in part that has been the global response. But where better distribution occurs the system works better. iTunes works, Kindle works. Even YouTube is now running a really good model of copyright management. It will be interesting to see how IPTV is implemented in the NBN. It is not too hard to suggest that datacasting servers operating in the NBN could add the kind of functionality YouTube does now on copyright material.
As to your conclusion, the simple answer is both. The seeds of our destruction have already been sown – but that “destruction” is still a long long way away. Even with the most catastrophic of climate change outcomes a few million humans can be sustained. The “combined genius of the world” will create a better place etc…but there might be hiccups along the way, and the benefits may not be equitably distributed.
Thanks David for sharing your ideas.
It seems you have a rather simple and technical view of what trust is and have not considered how trust in data, applications and most of all people will drive the economy. Whilst standards are important (we all need to know that it is safer to drive on the right in the US and left in the UK) it is the culture of respect for life that ultimately makes it safe to use the roads. Trust in an online economy is about stimulating collaboration at a distance and creating an environment that inspires innovation. Standard bodies cannot do this and government alone cannot either. But nevertheless for the NBN to achieve the lofty objectives being discussed will require this to be addressed. You are entitled to your view that these are relatively minor issues in the grand scheme of things but that makes me conclude you have missed the essential point.
On payment systems I would argue that there are many elements to getting this right and that consumer protection, contract law, international trade law etc etc are essential and whilst the banks will provide the products such as debit and credit cards the success of payments systems does require new policy settings especially internationally.
If the tax system could look after itself then Australia would not have nearly 10,000 pages of tax legislation! Most tax systems are in a mess. The challenge for all governments is substantial. Google pays too much of its tax bill in Ireland and too little in the UK as just one example.
Thanks for your support for different copyright laws.
Russell
I would not agree that I have a “simple and technical” view of trust. I share with you the observation that no amount of law of property and contract substitutes for the trust necessary to make most commerce work – that I give you money and expect the goods in return, or that I do not need to spend all my time protecting my resources from theft.
But in the bulding of trust in the online world I still maintain that there is more to be done by the “designers of the Internet” (which happens to be a standards boby) than by Government. And as your LinkedIn reference to the post was headed “Has the Government got the focus for the NBN right” I thought it worthwhile reflecting that trust in the online world is still more about architecture than Government regulation.
As an example the designers of the Internet could eradicate SPAM by changing the rules.
Payment system law has always followed innovation, not led it. Money came into being before it was regulated. Cheques came into being before it was regulated. Payment cards (American Express) came into being before they wre regulated. No amount of multilateral financial negotiation will create the system from nothing. By the same token I don’t know of anything in the law that currently is impeding the creation of any other payment system. I’m still fascinated by some of the innovations, such as the fact that Amazon now quotes me prices in $AUS – and the process by which iTunes runs a “mini-account” of purchases over one day before debitting either the credit card or your store account.
By the way, linking the two above I blieve that the bulk of credit card fraud still occurs from credit card details handed over physically with the card (in bricks and mortar shops) not from details obtained online. They are, however, still mostly used in transactions online.
David you make several very valid points. Thanks.
Whilst I agree with you the WC3 has a significant role in building trust online through the rules of the Internet. Spam as you say is a good example. But I would contend that just as the role of government has been fundamental in building trust in commerce (often as you say through regulation of emerged practices) the role of government in regulating the online economy will increasingly play a more important role in building trust for the broader community. An example might be as Ralph Nader and his contribution that stimulated government regulation in designing safer cars, we will see similar campaigns for government action because people feel unsafe online.
I know this can be sort of off matter nevertheless I am just thinking of beginning my own, personal blog and was thinking about just what is actually needed put in place? I am thinking creating a blog similar to your own http://www.russellyardley.com/opinions/2009/12/how-will-the-nbn-impact-the-digital-economy would cost a lot of cash? I’m not quite web savvy so I’m not really entirely positive. Any specific recommendations or help and advice can be considerably highly valued. Thanks!.