Last Modified: ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?



Homepage / Publications & Opinion / Archive / Articles, Lectures, Preprints & Reprints

Freedom In An Unreal World
No Reference March 2000
Peter Cochrane
Collier Chair for The Public Understanding of Science & Technology @Bristol
ConceptLabs CA Founder

At this millennial epoch two magical realisations look set to nudge the future economic climate of the UK in the right direction. The first, and probably the most important, is a growing acceptance by society that making money and getting rich is now more or less OK, and it might even turn out to be good. The second is both a relief and perhaps our saviour in the long term, with the media's recognition that being online is advantageous. So the geeks were right all along, and will most likely slip into journalistic obscurity. It has been some time coming but at last we seem to have grasped the realisation that without wealth generation we can do nothing, and if we are not online we will be disadvantaged and out of the race. But there is another realisation yet to come; the ability to accept and respond to continual change as the absolute essential for a vibrant economy. To slightly misquote Charles Darwin: "It is not the strongest or smartest who survive, but those most adaptable to change." The last time all of this was considered to be axiomatic was during the Victorian era when the telephone started to transform our ability to communicate and organise. Since the incredible damage and cost of WWII, and the demise of the empire, we seem to have suffered 50 years of political economic, social and managerial confusion. In the education and social sectors this is still in evidence and proving to be a key limiter to positive change.

In contrast, in most industries their has been a stark realisation that globalisation means tough competition, and a fight to the death, or at the very least a continual and tough a fight for survival. But unlike any previous period in our history, management and operational people face a world that is becoming an increasingly fast, counter intuitive and commercially more dangerous. Consider, for example, the polarised perception of eCommerce between the USA and Europe exemplified by recent events in the entertainment industry. European headlines and reports recently went along the lines; Time Warner buys OAL, and within a week it became, Time Warner buys AOL and EMI. This was followed by reports expressing some sense of relief that real bricks and mortar money had overcome the unreal and inflated world of Internet stocks. Meanwhile, on the other side of the Atlantic, the headline was; OAL buys Time Warner and EMI. And further, unreal money does it again. What is happening?

You may think that money is money, and this may have been the case a long time ago, but it seems that money is actually perception. Are today's investments in the dotcom world any less credulous and long lasting than the purchase of an Old Master - just paint on canvas - with no intrinsic value, or indeed antique furniture - just a few sticks of wood. Here we have items fundamentally worth nothing valued in $Ms used as inflators and stores for future purchasing power. In contrast the dotcom world has customers, a service base, knowledge and a growing influence over the lives of everyone on the planet. The only uncertainty hinges on their real value, and it comes down to what people are prepared to spend, which we generally count in money terms. A wiser choice of metric may turn out to be time. How many people, and how much time they are prepared to devote to a site or service seems to be the key to calculating the value of a dotcom business.

Richard Feynman was one of the most incredible physicists that ever lived, a Nobel Laureate, and a founding father of our most fundamental atomic understanding. During his life, which was dedicated to seeking the truth and understanding, making a number of seminal discoveries and key pronouncements on the way. One of my favourites is; "I think we can safely assume that no one understands quantum mechanics". Today this is probably even more correct than the day it was made. Unfortunately there has never been a Richard Feynman of economics, or indeed any theories that come remotely close to explaining what is happening within markets. But, "I think we can safely assume that no one understands the Internet and the dotcom world".

Why is it we lack any models or theories of economics that are worth a dime? My guess is the stochastic nature of the relationships. Unlike quantum mechanics where we are dealing with a physical system that largely stabilised after the first 3 minutes of the big bang that created the universe, economics does not seem to have reached a point of stability yet. It is both probabilistic and dynamic (stochastic) at the same time, and involves the emotions, creativity and greed of humans - ergo it is highly unpredictable and fundamentally chaotic.

When a Feynman of Economic Theory does turn up I suspect the key formulae for value will include knowledge, information, access, reach, relationships, time, products and customer base as wholly stronger parameters than raw money. If we could understand all of this it would be easier to predict the future. But just looking at dotcom stocks and their rate of growth, where companies are amassing $Bns in less than five years, it is clear that many of today's bricks and mortar megaliths face a buy out risk within the next 18 months. Banks, insurance, telcos, and cable companies are all at risk, but I'm not at all sure many of them see it coming.

It seems to me that technology is a bit like sex. You can read about IT, you can look at the pictures, you can even watch the movies, but until you have tried IT you can't decide if it is for you or not. So I watch with interest as the technologically celibate pontificate on the pros, cons, and dangers of something they never experienced. The innovation of the Internet and the enthusiastic embrace by the USA seems to promote one European talking shop after another. Interestingly, the predominate focus seems to be on the use and abuse by people and not the commercial or societal advantages. Well there is much more to come, and insufficient time to consider all the implications in advance.

So what is the next big deal? Well as far as I can see it has to be the notion of zero government involvement and intervention. Two of the States in the USA are actively considering a total move out of control and regulation on all forms of trade. Could this be the end game? After all we started with total freedom and migrated through dictatorship, communism, and capitalism in cycles that now sees capitalism the current victor. In fact the only system to create most change and benefit in terms of standard of living and basic freedoms has been capitalism. But is it sustainable in the grand context of the use of raw materials and the Eco-System of the planet? I think not. Rampant commercialism will ultimately fell all the trees, burn all the oil and coal, and gradually destroy the environment to a level where we cannot survive. The rise in the number of cancer deaths, allergies, overcrowded cities, and the possibility that we have triggered global worming are but a few issues already evident in this context. So how could total freedom work - will it not be even more damaging to the planet than capitalism or communism?

Broadly speaking we are seeing a commercial focus gradually traversing the industrial Economy, to the Internet/.com and the e.Conomy, to be followed by the corporate conscience and the ECOnomy. Ultimately, this results in a freedom of trade and action that borders on anarchy, but in a constructive and dynamic manner that may realise the maximum benefit to society and the players. What is surprising is the length of time that it has taken for government to recognise that they not only have no role, indeed they are now the most probable and effective impediment to progress. IT not only changes the speed and manner in which we can trade and do business, more radically IT changes the fundamental paradigm and mode of societies.

The population concerned with start-up businesses is around 3% in the UK, 5% in Israel, 7% in Canada and 9% in the USA. In each case about 30% of new economic growth is generated by start-ups, and most of those involved are <45 years old. The UK resides in the lower quartile of the league table with a discouraging tax system and an inadequate infrastructure that discourages the exploitation of our primary wealth generator - ideas. It is impossible to rent floor space by the day, or week, and support services are expensive. Today we have a sub-critical scattering of start-ups operating at a subsistence level and nothing remotely approaching the USA model where incubators are being developed on a massive scale. Unfortunately we seem to have few people who recognise the need, a grudging delay in the acceptance that failure is OK, and taking risks deserves greater reward. As a matter of economic survival we have to fix all of this fast to ensure our future prosperity.

So can this freedom really work? Consider a Fortune 500 company that didn't exist 15 years ago. They manage the expenses for over 20,000 staff with only 2 people. Everyone is trusted, and electronic screening, with few spot checks on exception reports lying off the norm is all that is required to police the system. Now consider governmental or old company approach -no one is trusted and hundreds are employed to watch and police the activities of the rest. The cost is huge and the benefits negative. People feel untrusted and unloved, whilst those wishing to defraud the operation do it anyway and largely escape because of insufficient resource devoted to detecting and tracking crimes. IT, the internet, and freedom really works - but it is more about mindsets and behaviours than technology.

All materials created by Peter Cochrane and presented within this site are copyright ? Peter Cochrane - but this is an open resource - and you are invited to make as many downloads as you wish provided you use in a reputable manner