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Date: Sat, 2 Dec 95 06:50 MET
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To: if@duplox.wz-berlin.de
From: Pit Schultz
Subject: A Magna Carta for the Knowledge Age R.1.2 (1/2)
Magna carta from PFF
Cyberspace and the American Dream:
A Magna Carta for the Knowledge Age
Release 1.2 // August 22, 1994
This statement represents the cumulative wisdom
and innovation of many dozens of people. It is based
primarily on the thoughts of four "co-authors": Ms.
Esther Dyson; Mr. George Gilder; Dr. George
Keyworth; and Dr. Alvin Toffler. This release 1.2 has
the final "imprimatur" of no one. In the spirit of the
age: It is copyrighted solely for the purpose of
preventing someone else from doing so. If you have
it, you can use it any way you want. However, major
passages are from works copyrighted individually by
the authors, used here by permission; these will be
duly acknowledged in release 2.0. It is a living
document. Release 2.0 will be released in October
1994. We hope you'll use it is to tell us how to make
it better. Do so by:
- Sending E-Mail to PFF@AOL.COM
- Faxing 202/484-9326 or calling 202/484-2312 -
Sending POM (plain old mail) to 1250 H. St. NW,
Suite 550 Washington, DC 20005
(The Progress & Freedom Foundation is a not-for-
profit research and educational organization
dedicated to creating a positive vision of the future
founded in the historic principles of the American
idea.)
----------------------------------------
PREAMBLE
The central event of the 20th century is the
overthrow of matter. In technology, economics, and
the politics of nations, wealth -- in the form of
physical resources -- has been losing value and
significance. The powers of mind are everywhere
ascendant over the brute force of things.
In a First Wave economy, land and farm labor are
the main "factors of production." In a Second Wave
economy, the land remains valuable while the
"labor" becomes massified around machines and
larger industries. In a Third Wave economy, the
central resource -- a single word broadly
encompassing data, information, images, symbols,
culture, ideology, and values -- is _actionable_
knowledge.
The industrial age is not fully over. In fact, classic
Second Wave sectors (oil, steel, auto-production)
have learned how to benefit from Third Wave
technological breakthroughs -- just as the First
Wave's agricultural productivity benefited
exponentially from the Second Wave's farm-
mechanization.
But the Third Wave, and the _Knowledge Age_ it
has opened, will not deliver on its potential unless it
adds social and political dominance to its
accelerating technological and economic strength.
This means repealing Second Wave laws and
retiring Second Wave attitudes. It also gives to
leaders of the advanced democracies a special
responsibility -- to facilitate, hasten, and explain the
transition.
As humankind explores this new "electronic
frontier" of knowledge, it must confront again the
most profound questions of how to organize itself
for the common good. The meaning of freedom,
structures of self-government, definition of property,
nature of competition, conditions for cooperation,
sense of community and nature of progress will each
be redefined for the Knowledge Age -- just as they
were redefined for a new age of industry some 250
years ago.
What our 20th-century countrymen came to think
of as the "American dream," and what resonant
thinkers referred to as "the promise of American
life" or "the American Idea," emerged from the
turmoil of 19th-century industrialization. Now it's
our turn: The knowledge revolution, and the Third
Wave of historical change it powers, summon us to
renew the dream and enhance the promise.
THE NATURE OF CYBERSPACE
The Internet -- the huge (2.2 million computers),
global (135 countries), rapidly growing (10-15% a
month) network that has captured the American
imagination -- is only a tiny part of cyberspace. So
just what is cyberspace?
More ecosystem than machine, cyberspace is a
bioelectronic environment that is literally universal:
It exists everywhere there are telephone wires,
coaxial cables, fiber-optic lines or electromagnetic
waves.
This environment is "inhabited" by knowledge,
including incorrect ideas, existing in electronic form.
It is connected to the physical environment by
portals which allow people to see what's inside, to
put knowledge in, to alter it, and to take knowledge
out. Some of these portals are one-way (e.g.
television receivers and television transmitters);
others are two-way (e.g. telephones, computer
modems).
Most of the knowledge in cyberspace lives the most
temporary (or so we think) existence: Your voice, on
a telephone wire or microwave, travels through
space at the speed of light, reaches the ear of your
listener, and is gone forever.
But people are increasingly building cyberspatial
"warehouses" of data, knowledge, information and
_mis_information in digital form, the ones and
zeros of binary computer code. The storehouses
themselves display a physical form (discs, tapes, CD-
ROMs) -- but what they contain is accessible only to
those with the right kind of portal and the right kind
of key.
The key is software, a special form of electronic
knowledge that allows people to navigate through
the cyberspace environment and make its contents
understandable to the human senses in the form of
written language, pictures and sound.
People are adding to cyberspace -- creating it,
defining it, expanding it -- at a rate that is already
explosive and getting faster. Faster computers,
cheaper means of electronic storage, improved
software and more capable communications
channels (satellites, fiber-optic lines) -- each of these
factors independently add to cyberspace. But the real
explosion comes from the combination of all of
them, working together in ways we still do not
understand.
The bioelectronic _frontier_ is an appropriate
metaphor for what is happening in cyberspace,
calling to mind as it does the spirit of invention and
discovery that led ancient mariners to explore the
world, generations of pioneers to tame the
American continent and, more recently, to man's
first exploration of outer space.
But the exploration of cyberspace brings both greater
opportunity, and in some ways more difficult
challenges, than any previous human adventure.
Cyberspace is the land of knowledge, and the
exploration of that land can be a civilization's truest,
highest calling. The opportunity is now before us to
empower every person to pursue that calling in his
or her own way.
The challenge is as daunting as the opportunity is
great. The Third Wave has profound implications
for the nature and meaning of property, of the
marketplace, of community and of individual
freedom. As it emerges, it shapes new codes of
behavior that move each organism and institution --
family, neighborhood, church group, company,
government, nation -- inexorably beyond
standardization and centralization, as well as beyond
the materialist's obsession with energy, money and
control.
Turning the economics of mass-production inside
out, new information technologies are driving the
financial costs of diversity -- both product and
personal -- down toward zero, "demassifying" our
institutions and our culture. Accelerating
demassification creates the potential for vastly
increased human freedom.
It also spells the death of the central institutional
paradigm of modern life, the bureaucratic
organization. (Governments, including the
American government, are the last great redoubt of
bureaucratic power on the face of the planet, and for
them the coming change will be profound and
probably traumatic.)
In this context, the one metaphor that is perhaps
least helpful in thinking about cyberspace is --
unhappily -- the one that has gained the most
currency: The Information Superhighway. Can you
imagine a phrase less descriptive of the nature of
cyberspace, or more misleading in thinking about its
implications? Consider the following set of
polarities:
Information Superhighway / Cyberspace
Limited Matter / Unlimited Knowledge
Centralized / Decentralized
Moving on a grid / Moving in space
Government ownership / A vast array of ownerships
Bureaucracy / Empowerment
Efficient but not hospitable / Hospitable if you customize it
Withstand the elements / Flow, float and fine-tune
Unions and contractors / Associations and volunteers
Liberation from First Wave / Liberation from Second Wave
Culmination of Second Wave / Riding the Third Wave
The highway analogy is all wrong," explained Peter
Huber in Forbes this spring, "for reasons rooted in
basic economics. Solid things obey immutable laws
of conservation -- what goes south on the highway
must go back north, or you end up with a mountain
of cars in Miami. By the same token, production and
consumption must balance. The average Joe can
consume only as much wheat as the average Jane
can grow. Information is completely different. It can
be replicated at almost no cost -- so every individual
can (in theory) consume society's entire output. Rich
and poor alike, we all run information deficits. We
all take in more than we put out."
THE NATURE AND OWNERSHIP OF PROPERTY
Clear and enforceable property rights are essential
for markets to work. Defining them is a central
function of government. Most of us have "known"
that for a long time. But to create the new cyberspace
environment is to create _new _ property -- that is,
new means of creating goods (including ideas) that
serve people.
The property that makes up cyberspace comes in
several forms: Wires, coaxial cable, computers and
other "hardware"; the electromagnetic spectrum;
and "intellectual property" -- the knowledge that
dwells in and defines cyberspace.
In each of these areas, two questions that must be
answered. First, what does "ownership" _mean_?
What is the nature of the property itself, and what
does it mean to own it? Second, once we understand
what ownership means, _who_ is the owner? At
the level of first principles, should ownership be
public (i.e. government) or private (i.e. individuals)?
The answers to these two questions will set the basic
terms upon which America and the world will enter
the Third Wave. For the most part, however, these
questions are not yet even being asked. Instead, at
least in America, governments are attempting to
take Second Wave concepts of property and
ownership and apply them to the Third Wave. Or
they are ignoring the problem altogether.
For example, a great deal of attention has been
focused recently on the nature of "intellectual
property" -- i.e. the fact that knowledge is what
economists call a "public good," and thus requires
special treatment in the form of copyright and patent
protection.
Major changes in U.S. copyright and patent law
during the past two decades have broadened these
protections to incorporate "electronic property." In
essence, these reforms have attempted to take a body
of law that originated in the 15th century, with
Gutenberg's invention of the printing press, and
apply it to the electronically stored and transmitted
knowledge of the Third Wave.
A more sophisticated approach starts with
recognizing how the Third Wave has fundamentally
altered the nature of knowledge as a "good," and
that the operative effect is not technology per se (the
shift from printed books to electronic storage and
retrieval systems), but rather the shift from a mass-
production, mass-media, mass-culture civilization
to a demassified civilization.
The big change, in other words, is the
demassification of actionable knowledge.
The dominant form of new knowledge in the Third
Wave is perishable, transient, _ customized_
knowledge: The right information, combined with
the right software and presentation, at precisely the
right time. Unlike the mass knowledge of the
Second Wave -- "public good" knowledge that was
useful to everyone because most people's
information needs were standardized -- Third Wave
customized knowledge is by nature a private good.
If this analysis is correct, copyright and patent
protection of knowledge (or at least many forms of
it) may no longer be unnecessary. In fact, the
marketplace may already be creating vehicles to
compensate creators of customized knowledge
outside the cumbersome copyright/patent process, as
suggested last year by John Perry Barlow:
"One existing model for the future conveyance of
intellectual property is real-time performance, a
medium currently used only in theater, music,
lectures, stand-up comedy and pedagogy. I believe
the concept of performance will expand to include
most of the information economy, from multi-
casted soap operas to stock analysis. In these
instances, commercial exchange will be more like
ticket sales to a continuous show than the purchase
of discrete bundles of that which is being shown.
The other model, of course, is service. The entire
professional class -- doctors, lawyers, consultants,
architects, etc. -- are already being paid directly for
their intellectual property. Who needs copyright
when you're on a retainer?"
Copyright, patent and intellectual property represent
only a few of the "rights" issues now at hand. Here
are some of the others:
* Ownership of the electromagnetic spectrum,
traditionally considered to be "public property," is
now being "auctioned" by the Federal
Communications Commission to private
companies. Or is it? Is the very limited "bundle of
rights" sold in those auctions really property, or
more in the nature of a use permit -- the right to use
a part of the spectrum for a limited time, for limited
purposes? In either case, are the rights being
auctioned defined in a way that makes technological
sense?
* Ownership over the infrastructure of wires, coaxial
cable and fiber-optic lines that are such prominent
features in the geography of cyberspace is today
much less clear than might be imagined. Regulation,
especially price regulation, of this property can be
tantamount to confiscation, as America's cable
operators recently learned when the Federal
government imposed price limits on them and
effectively confiscated an estimated $___ billion of
their net worth. (Whatever one's stance on the
FCC's decision and the law behind it, there is no
disagreeing with the proposition that one's
ownership of a good is less meaningful when the
government can step in, at will, and dramatically
reduce its value.)
* The nature of capital in the Third Wave -- tangible
capital as well as intangible -- is to depreciate in real
value much faster than industrial-age capital --
driven, if nothing else, by Moore's Law, which states
that the processing power of the microchip doubles
at least every 18 _months_. Yet accounting and tax
regulations still require property to be depreciated
over periods as long as 30 _years_. The result is a
heavy bias in favor of "heavy industry" and against
nimble, fast-moving baby businesses.
Who will define the nature of cyberspace property
rights, and how? How can we strike a balance
between interoperable open systems and protection
of property?
THE NATURE OF THE MARKETPLACE
Inexpensive knowledge destroys economies-of-scale.
Customized knowledge permits "just in time"
production for an ever rising number of goods.
Technological progress creates new means of serving
old markets, turning one-time monopolies into
competitive battlegrounds.
These phenomena are altering the nature of the
marketplace, not just for information technology but
for all goods and materials, shipping and services. In
cyberspace itself, market after market is being
transformed by technological progress from a
"natural monopoly" to one in which competition is
the rule. Three recent examples:
* The market for "mail" has been made competitive
by the development of fax machines and overnight
delivery -- even though the "private express
statutes" that technically grant the U.S. Postal
Service a monopoly over mail delivery remain in
place.
* During the past 20 years, the market for television
has been transformed from one in which there were
at most a few broadcast TV stations to one in which
consumers can choose among broadcast, cable and
satellite services.
* The market for local telephone services, until
recently a monopoly based on twisted-pair copper
cables, is rapidly being made competitive by the
advent of wireless service and the entry of cable
television into voice communication. In England,
Mexico, New Zealand and a host of developing
countries, government restrictions preventing such
competition have already been removed and
consumers actually have the freedom to choose.
The advent of new technology and new products
creates the potential for _ dynamic competition --
competition between and among technologies and
industries, each seeking to find the best way of
serving customers' needs. Dynamic competition is
different from static competition, in which many
providers compete to sell essentially similar
products at the lowest price.
Static competition is good, because it forces costs and
prices to the lowest levels possible for a given
product. Dynamic competition is better, because it
allows competing technologies and new products to
challenge the old ones and, if they really are better, to
replace them. Static competition might lead to faster
and stronger horses. Dynamic competition gives us
the automobile.
Such dynamic competition -- the essence of what
Austrian economist Joseph Schumpeter called
"creative destruction" -- creates winners and losers
on a massive scale. New technologies can render
instantly obsolete billions of dollars of embedded
infrastructure, accumulated over decades. The
transformation of the U.S. computer industry since
1980 is a case in point.
In 1980, everyone knew who led in computer
technology. Apart from the minicomputer boom,
mainframe computers _were_ the market, and
America's dominance was largely based upon the
position of a dominant vendor -- IBM, with over
50% world market-share.
Then the personal-computing industry exploded,
leaving older-style big-business-focused computing
with a stagnant, piece of a burgeoning total market.
As IBM lost market-share, many people became
convinced that America had lost the ability to
compete. By the mid-1980s, such alarmism had
reached from Washington all the way into the heart
of Silicon Valley.
But the real story was the renaissance of American
business and technological leadership. In the
transition from mainframes to PCs, a vast new
market was created. This market was characterized
by dynamic competition consisting of easy access and
low barriers to entry. Start-ups by the dozens took on
the larger established companies -- and won.
After a decade of angst, the surprising outcome is
that America is not only competitive
internationally, but, by any measurable standard,
America dominates the growth sectors in world
economics -- telecommunications, microelectronics,
computer networking (or "connected computing")
and software systems and applications.
The reason for America's victory in the computer
wars of the 1980s is that dynamic competition was
allowed to occur, in an area so breakneck and pell-
mell that government would've had a hard time
controlling it _even had it been paying attention_.
The challenge for policy in the 1990s is to permit,
even encourage, dynamic competition in every
aspect of the cyberspace marketplace.
THE NATURE OF FREEDOM
Overseas friends of America sometimes point out
that the U.S. Constitution is unique -- because it
states explicitly that power resides with the people,
who delegate it to the government, rather than the
other way around.
This idea -- central to our free society -- was the
result of more than 150 years of intellectual and
political ferment, from the Mayflower Compact to
the U.S. Constitution, as explorers struggled to
establish the terms under which they would tame a
new frontier.
And as America continued to explore new frontiers -
- from the Northwest Territory to the Oklahoma
land-rush -- it consistently returned to this
fundamental principle of rights, reaffirming, time
after time, that power resides with the people.
Cyberspace is the latest American frontier. As this
and other societies make ever deeper forays into it,
the proposition that ownership of this frontier
resides first _with the people_ is central to
achieving its true potential.
To some people, that statement will seem
melodramatic. America, after all, remains a land of
individual freedom, and this freedom clearly
extends to cyberspace. How else to explain the
uniquely American phenomenon of the hacker,
who ignored every social pressure and violated
every rule to develop a set of skills through an early
and intense exposure to low-cost, ubiquitous
computing.
Those skills eventually made him or her highly
marketable, whether in developing applications-
software or implementing networks. The hacker
became a technician, an inventor and, in case after
case, a creator of new wealth in the form of the baby
businesses that have given America the lead in
cyberspatial exploration and settlement.
It is hard to imagine hackers surviving, let alone
thriving, in the more formalized and regulated
democracies of Europe and Japan. In America,
they've become vital for economic growth and trade
leadership. Why? Because Americans still celebrate
individuality over conformity, reward achievement
over consensus and militantly protect the right to be
different.
But the need to affirm the basic principles of
freedom is real. Such an affirmation is needed in
part because we are entering new territory, where
there are as yet no rules -- just as there were no rules
on the American continent in 1620, or in the
Northwest Territory in 1787.
Centuries later, an affirmation of freedom -- by this
document and similar efforts -- is needed for a
second reason: We are at the end of a century
dominated by the mass institutions of the industrial
age. The industrial age encouraged _conformity_
and relied on _standardization_. And the
institutions of the day -- corporate and government
bureaucracies, huge civilian and military
administrations, schools of all types -- reflected these
priorities. Individual liberty suffered -- sometimes
only a little, sometimes a lot:
* In a Second Wave world, it might make sense for
government to insist on the right to peer into every
computer by requiring that each contain a special
"clipper chip."
* In a Second Wave world, it might make sense for
government to assume ownership over the
broadcast spectrum and demand massive payments
from citizens for the right to use it.
* In a Second Wave world, it might make sense for
government to prohibit entrepreneurs from
entering new markets and providing new services.
* And, in a Second Wave world, dominated by a few
old-fashioned, one-way media "networks," it might
even make sense for government to influence
which political viewpoints would be carried over
the airwaves.
All of these interventions might have made sense
in a Second Wave world, where standardization
dominated and where it was assumed that the
scarcity of knowledge (plus a scarcity of
telecommunications capacity) made bureaucracies
and other elites better able to make decisions than
the average person.
But, whether they made sense before or not, these
and literally thousands of other infringements on
individual rights now taken for granted make no
sense at all in the Third Wave.
For a century, those who lean ideologically in favor
of freedom have found themselves at war not only
with their ideological opponents, but with a time in
history when the value of conformity was at its
peak. However desirable as an ideal, individual
freedom often seemed impractical. The mass
institutions of the Second Wave required us to give
up freedom in order for the system to "work."
The coming of the Third Wave turns that equation
inside-out. The complexity of Third Wave society is
too great for any centrally planned bureaucracy to
manage. Demassification, customization,
individuality, freedom -- these are the keys to success
for Third Wave civilization.