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The American Internet advantage: Global themes and implications

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The American Internet advantage: Global themes and implications

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Content THE AMERICAN INTERNET ADVANTAGE
Global Themes and Implications
Copyright 1999
by
Michael Vincent Hart
A Dissertation Presented to the
FACULTY OF THE GRADUATE SCHOOL
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
DOCTOR OF PHILOSOPHY
(Political Science)
August 1999
Michael Vincent Hart
UNIVERSITY OF SOUTHERN CALIFORNIA
THE ORADUA.TE SCHOOL
UNIVERSITY PA.RIC
LOS ANOELES. CALIFORNIA 90007
This dissertation,, written by
Michael Vincent Hart
...................................................•............................
under the direction of h.1~ •.•.••• Dissertation
Committee, and approved by.all its members,
has been presented to and accepted by The
Graduate Schoot in partial fulfillment of _re
quirements for the degree of
DOCTOR OF PHILOSOPHY
Date ... ;!~?.~ ••. !!"!! .•. !2?.? ................ .
DISSERTATION CO~E
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ff..t /j) /} ~· - OulirJlasan
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11
We know what we have made.
Vi co
The New Science of History
My computer and I are part of a vast pseudoneural
network that is spreading over the globe with almost
threatening speed. The information explosion is changing
the way we live.
Brian Silver
The Ascent of Science
111
Dedication
Dedicated to giants of the mind who inspired this work. They showed by example that we
can be something more than we usually are. Like Newton, I too, stood on someone's
shoulders.
IV
Acknowledgments
I would like to thank my committee for facilitating the process of completion of this
dissertation. I am especially indebted to Professor Greene, who encouraged me
throughout the entire process and gave many helpful suggestions in the most effective
way possible. This dissertation would have never seen the light of day without him.
Professor Dekmejian wisely urged me not to rush in choosing a dissertation topic and
gave many useful recommendations on how to strengthen this dissertation for publication
I am grateful to everyone who had faith in my abilities, and to my mother in
particular--she had to endure a lot during the years of my study. I am grateful to Carl and
Fan Hineser for their moral support through many years of my career as a student and for
proofreading the final draft of this dissertation. The Center for International Studies at
USC selected me for a competitive "International Business Issues Dissertation" award.
This support was helpful and encouraging as I strove through the treacherous final stages
of putting together this project. Any blemishes the reader may find in this work are my
sole responsibility.
v
CONTENTS
$@$@$@$@$@$@$@$@$@$@$@$@$@$@$@$@$@$@$@$@$@$@$@$@$@$@$@$@$@$@$
List of Figures .................................................................................................................... vii
List of Tables .................................................................................................................... viii
List of Acronyms ................................................................................................................ ix
Abstract ............................................................................................................................... x
Ch 1 The Puzzle and the Tradition .................................................................... I
US Internet Dominance and Traditional Questions of IPE
Theoretical and Empirical Components
Synergetic and Lone Capitalism
Special Role of the US in High Technology Business
The Handmaiden and the Foundation
Initial Generalizations Explaining US Internet Dominance
The Crux of the Matter
Why More Than One Perspective Is Necessary
Lamarckian Inheritance: Theoretical and Technological
How Different Perspectives Contribute to the Overall Understanding
Ch 2 Global Themes .............................................................................................. 24
Globalization Approach and Current Events
Fragmentation versus Globalization
The Resurgence of Globalization
Variations of the Globalization Approach
Neo-Marxist/Progressive .
Critical
Neo-Liberal
"Apocalyptic"
Theoretical Synthesis: Pragmatic Neo-Liberalism
Vision, Technology, and Contradictions in the Globalization Process
Visionaries and Technological Globalization
The Oxymorons of the Global Disorder
Ch 3 The Pillars of Dominance ..................................................................... .45
Institutionalizing the Mathematical-Scientific Foundation
Universities as Organizations that Create the Future
Internet Precursors, Universities, and Government
The Network of Networks
Modernization of the Internet
The World Wide Web
The New Content
Ch 4 The Fallout ................................................................................................. 71
Internet Commerce
Skepticism and Triumph
Amazons Win
Transformation, Withering Away, and Birth of New Industries
Ch 5 Global Implications ................................................................................... 89
Political and Business Implications
Reflections on Business, Technology, and the New Global Order
Chaos: We the Nonresponsible
Genius, Elite, and Technological Globalization
The Rise of Supercivilization?
VI
Bibliography 115
Fig. 1
Fig. 2
Fig. 3
Fig. 4
Fig. 5
Fig. 6
Vll
List of Figures
Thesis: The Trinity of the US High Tech Advantage .......................... 19
Lamarckian Emergence of Pragmatic neo-Liberal View .................... .41
War and the Intemet ............................................................................. 56
The Three Pillars of High Tech Dominance in 2D ............................... 65
Technological Origins and Consequences of the Intemet.. .................. 90
From Technology to Supercivilization ............................................... 111
Table 1
Table 2
List of Tables
US Internet Advantage Over Europe
Forbes Ranks America First in Technology Infrastructure
12
13
Vlll
AID
ARPA
CA
DOD
DSL
HTB
IPO
IPTO
ISDN
ISP
IT
JV
M&As
MITI
MAC
NAP
NGO
R&D
SC
TCP/IP
WWW
List of Acronyms
American Internet dominance
Advanced Research Project Agency
Corporate alliance
Department of Defense
Digital subscriber line
High tech business
Initial public offering
Information Processing Techniques Office (a division of ARP A)
Integrated services digital network
Internet service provider
Information technology
Joint ventures
Mergers and acquisitions
Ministry oflnternational Trade and Industry (Japan)
Multinational corporation
Network Access Point
New global order
Research and development
Synergetic capitalism
Transmission control protocol I Internet protocol
World Wide Web
IX
x
Abstract
This dissertation is about American leadership in an important sector of civilian high
technology, the Internet; and about the global political, social, economic, and
philosophical implications of this leadership and of high technology itself. While social
science literature on globalization is very extensive, this work aims to make an original
theoretical contribution to the understanding of the modem global order that is being
shaped by the Internet and the business of its production. Neo-liberal, neo-Marxist,
critical, and "apocalyptic" perspectives are examined in order to accomplish that goal.
The analysis of these perspectives leads to a synthesis, Pragmatic neo-Liberalism which, I
argue, is superior--because it is more comprehensive and realistic than any of the
perspectives that inspired it. The modem global order of high technology, of which the
Internet is just a part, is characterized by American dominance. This dissertation
examines the reasons for and the implications of the US advantage in the Internet
business. At the center of this project is the proposition that high technology, including
the Internet, are driven by modem business, universities, and government. In the process,
a new global society is being shaped. The future of that society is unknown, but the
difference between disaster and success may be in the difference between strong
ideological commitments and pragmatism.
Chapter 1
The Puzzle and the Tradition
When the useful parts of an old establishment are kept, and what is
superadded is to be fitted to what is retained, a vigorous mind, steady,
persevering attention, various powers of comparison and combination, and
the resources of an understanding fruitful in expedients, are to be
exercised ...
Edmund Burke
Reflections on the Revolution in France
The Puzzle of the US Internet Leadership and Traditional Questions of IPE
What explains the US dominance in the development, improvement, and use of
Internet technology? Are there any global socio-political implications of this dominance?
These are the questions I want to address in this dissertation. The impetus for this work
came from an examination of the globalization literature produced by social scientists, my
interest in international political economy, and some events in the business world in the
late years of the twentieth century--events which at first appear quite enigmatic.
My research on global political economy yielded the finding that something
important was not covered in them. The review of the literature can produce the
impression that the dyad of trade and money has dominated the thinking of most writers
concerned with global political economy. To review the salient literature is to find that
there are, almost without exception, multiple references to basic trade statistics and a
discussion of the foundations of international finance, such as the gold standard and its
breakdown, and a reference to international financial institutions. All these issues are
important and that, at least in part, explains the extensive space allotted to them in the
globalization and related literature. Also, money and the extent of trade are easily
quantifiable things and, therefore, they belong to the quintessential stuff of contemporary
economics--a mathematically-based discipline. Political science has not shied away from
2
borrowing themes and concepts from other disciplines, including economics, whose
mathematical certainty can appear complementary to the uncertainty or vagueness of
qualitative concepts essential to political inquiry--concepts like power, for example.
Hence trade and money have become the staple of International Political Economy (IPE),
which is essentially a subfield of political science.
1
Yet for all the attention to economics and international political economy--and this
may come as a surprise to some--a discussion of the political implications of international
business remains limited. When international business comes into play in a political
science discourse, it is generally in the form of a discussion of MNC activities and centers
around questions such as, Do MN Cs control the economic activities of the host country?
2
Is the role of MN Cs in the global economy compatible with democracy?3 Do MN Cs
promote development? Do MN Cs contribute to a maldistribution of income?
I wanted to tackle the issue of international business more directly, but in connection
with the theme of globalization in a high tech world. To accomplish this I posed the
following preliminary question: What is the role of the business of high technology in the
contemporary globalization process? The task was to address the question as directly as
1 Citing all important works as an example is clearly impossible, since it would amount to
citing all seminal works of a subfield of an entire discipline. Charles P. Kindel berger' s
(1973) The World in Depression, 1929-1939 greatly stimulated the interest of political
scientists in IPE, because of the importance of the subject matter tackled and the
nonstandard explanation for the origin of the depression. Because Kindelberger blamed
the depression on a political defect of the international system--the lack of an
international lender of last resort--his work was particularly appealing to political
scientists. Since the first edition of the book, thousands of books and articles have been
written by Political Scientists in the field of IPE, addressing both macro and micro issues
of the interaction between politics and international economics.
2f or an example of how this question is addressed in the literature, see Thomas
Biersteker (1987).
3For an example of the discussion regarding the relationship between democracy and
economic globalization see Axtmann (1996: 130-143).
possible but without sacrificing historical sense. The result, it was hoped, would be an
original contribution to our theoretical knowledge on globalization, plus a better
understanding of the importance of the business of high technology--an understanding
based on empirical analysis of the development and growth oflnternet technology.
Theoretical and Empirical Elements
3
Some works in political science/IR literature have been very helpful in coming to
grips with the workings of the global business and its political implications. For example,
works by authors such as Lynn Mytelka (1991), Wayne Sandholtz (1992), and David
Mowery and Nathan Rosenberg (1998) expanded my understanding of various aspects of
the political economy of high technology. The majority of my sources on international
business came from the business and management literature, which is now replete with
the analysis of important issues, such as corporate alliances, mergers, and acquisitions.
One of the challenges of understanding the political economy of international business
involves synthesizing the literature on international business with the theoretical literature
on globalization. This synthesis not only contributes to our understanding of international
business, it can also lead to a better, more complete conceptualization of "globalization."
However, by narrowing the scope of inquiry to the business dealing with high technology,
one expands the inquiry into the nature of technology itself. Thus business, globalization,
and technology literature constituted my theoretical pillars for this project. The empirical
component consists of two parts: some historical background explaining the rise of the
Internet, and the contemporary business and workings of Internet technology. I rely on a
medley of empirical sources, everything from company web cites and The Wall Street
Journal to encyclopedias and how-things-work books.
International business is a vast terrain. Perhaps no part of that terrain is more crucial
than the area of high technology. Through mechanization and automation, high
4
technology made the post-industrial society of the late twentieth century possible. It gave
military and economic advantages to societies which for whatever reason embraced it--as
will be elaborated below--and its production continues to be at the center of economic
growth and prosperity. The business of high technology in the global order is, therefore,
the business of creating prosperity (explained in chapter 4 ), maintaining military strength
and, quite possibly, creating a new civilization (explained in chapter 5).
Computer and telecommunication industries were at the forefront of high technology
in the second half of the twentieth century. (Their vanguard role, however, was eclipsed
by the perceived glamour of space technology.) Their products have irrevocably altered
the economic landscape of the world and continue to fuel transition to the post-industrial
global order. The fusion of computers and telecommunications created a new powerful
medium for globalizing the world, the Internet. To narrow down the field of inquiry I
thought it justifiable to concentrate on the Internet rather than on high technology as a
whole. The Internet, however, is only a particular instance of high technology of the late
twentieth century--we are dealing with a very small number of high tech cases, so
generalizations have to be made very carefully--it is a case, however, whose examination
can put to rest some important misconceptions about state-business relations and about
the importance of high technology for the new global order emerging at the dawn of the
twenty-first century.
The study of US dominance in high technology can proceed through investigation of
the following steps:
• (1) the role of science and its handmaiden, mathematics, in the creation of high
technology, and the place of the genius of marginal people in constructing this
mathematical-scientific foundation (chapters 2 and 5);
5
• (2) the role of the state in creating agencies and technologies leading to the Internet of
today, especially as the result of extreme political demands of international
competition, such as they were during WW II and the Cold War (chapter 3 );
• (3) the investigation of the role of business in making the Internet accessible to the
average person in economically advanced countries, including the role of synergetic
capitalism and the role of particular corporations (chapter 4);
• ( 4) the commercial and social fallout of the Internet explosion, particularly
e-commerce and the reasons why the US experiences a more profound impact than
the other two economically advanced areas of the Triad: Japan and Europe.
In looking at the relationship between globalization and international high tech
business it is easy to lose sight of the historical context in which this relationship has
developed--something I want to avoid. The historical context, laid out in chapter 3, is
intended to bring to bear the kind of understanding on this topic that rarely comes through
in business literature. Because of this, the question of political power is present
throughout this work, as is the question of the meaning of the role of high technology and
the business of its production for the global order.
Synergetic and Lone Capitalism
Competition among firms has grown rapidly since 1980s,
as alliances have proliferated in one industry after another.
6
Benjamin Gomes-Casseres
The Alliance Revolution
The flurry of alliance, merger, and acquisition activity in high technology industries
suggests that these are still young sectors where a lot of consolidation is inevitable. More
concrete business reasons for this phenomenon can be specified. A detailed discussion of
these reasons is outside the scope of the present work. At the most basic micro level the
idea behind mergers and acquisitions is to make one plus one equal three (Marks and
Mirvis 1998), that is, to take two firms and create a new one, with the result being greater
than the sum of the parts. A synergy between different parts of a newly created company
is supposed to allow this result.
4
That is the idea, but the reality can be very different.
Most of the time, in fact, mergers and acquisitions fail. This is especially true if
profitability is the chief indicator of success or failure: "It has been estimated that in the
long term between 50 percent and 80 percent of all mergers and takeovers are considered
to be financially unsuccessful" (Cartwright and Cooper 1997: 24 ). The high rate of
failure, however, is not to be attributed to M&As as such. Those M&As that are
successful have driven less efficient ones out of the market--M&As take market
competition to a higher level. Corporate alliances do the same thing, as suggested in the
quote by Gomes-Casseres at the beginning of this section. Firms find it necessary to
combine their efforts to survive in a marketplace where their competitors rely on M&As
4Because of the synergy that is supposed to result following corporate alliances and
M&As, I refer to this form of business as "synergetic capitalism."
7
extensively, and so they sometimes rush into combinations that from a managerial or
strategic perspective are not viable.
At the macro level, mergers and acquisitions tend to occur with greater frequency in
relatively prosperous economic times. M&A activity usually slows down during a
recession, but it never completely stops in today's global capitalism. In prosperous times,
more capital is available and richer firms attempt to identify promising takeover or
merger candidates. Because during a merger or acquisition at least one firm loses its
corporate identity, I call this form of business "absorbing" capitalism.
"Alliance" capitalism is a rapidly growing phenomenon, with high technology
sectors creating new alliances almost on a daily basis. There is no agreement on how to
define "alliances." Different authors use different criteria. I propose to use a fairly
restrictive definition of alliances which would exclude licensing and outsourcing
agreements, but would include joint ventures in the definition. An alliance does not
change the legal identity of the firms involved. This is clearly different from mergers and
acquisitions. Alliances are about collaboration among firms, but what is interesting is that
some alliances--including those in high technology--involve firms which otherwise
compete for the same customers.
5
It is a fact that all of the top players in the PC industry
have participated in some form of alliance or in M&As in the 1990s.6 The same appears
to be true for major players in the Internet industry, as will be discussed in some detail in
chapter 4.
As with M&As, the reasons for alliances involve both microeconomic and
macroeconomic considerations. During good economic times, innovative and
5
A spectacular example of this is a 7-year agreement, reached in March of 1999, between
IBM and Dell Computer. Dell agreed to purchase crucial PC hardware components from
IBM, a firm which at the same time competes with Dell in the sales of finished PCs.
6
As of 1999, the largest players considered by total revenue generated by PC sales are
Compaq, Dell, and Hewlett-Packard.
8
adventurous projects involving corporate alliances are more widespread. On the
microeconomic level, various explanations involving the transaction cost approach,
property rights approach, agency theory, and prospect theory have been advanced
(Beamish and Killing 1997). Corporate alliances do not have to be international in order
to have global impact. This is because the technology they produce as a result of alliances
may have global impact.
"Lone" capitalism, especially in high technology, is receding in importance. The age
of global competition necessitates more aggressive or creative strategies. "Lone"
capitalism is characterized by firms going it alone, without merging with other firms,
acquiring them, being acquired, and without forming alliances. Extensive data compiled
on mergers, acquisitions, and alliances by experts on contemporary business practices
(Bleeke and Ernst 1993; Cartwright and Cooper 1997) indicate that most mid size and
large firms can no longer expect to operate in the "lone" mode for long. In the US alone,
it is estimated that 25 percent of the workforce has already been affected by merger and
acquisition activity during the 1980s (Cartwright and Cooper 1997: 2).
In the 1990s the pace of M&A activity has picked up even more:
The number of global mergers and acquisitions transactions in the
technology industry hit a record 4,040 deals in 1997, up 25% from the
3,224 deals done in 1996, according to the Fort Lee, N.J.-based tech
investment banker Broadview Associates. And the total amount of money
changing hands is up 17% from $207.2 billion in 1996 to $242.8 billion in
1997. (Malik 1998: www.forbes.com/tool/html/98/jun/0624/feat.htm)
Special Role of the US in the Business of High Technology
There is something of ... ferocity ... in the American lust for gold;
and the breathless haste with which they work--the distinctive vice
of the new world--is already beginning to infect all Europe.
9
Friedrich Nietzsche
The Gay Science
But while stocks never before have been so richly valued, neither has the
U.S. ever enjoyed a period of economic growth with declining inflation.
The current expansion is the second-longest this century. The economy has
grown about 4% two years in a row, the unemployment rate is near a
29-year low at 4.4%, yet inflation remains under 2% ... It is a wonderful
combination that few experts foresaw.
Greg Ip
The Wall Street Journal, March 30 1999
Before settling on a topic for this project, one final "intervention" into my process of
thinking about globalization and the business of high technology occurred. During the last
decade of the twentieth century the US economy rebounded from a deep recession and
entered one of the most prosperous periods in its history. The gloom and doom associated
with a seemingly directionless, recession-stricken economy, which swept George Bush
into political oblivion in 1992, all but evaporated by the mid 1990s, with the national
unemployment rate dipping to its lowest level in a generation, and with the real income of
the middle class reversing its depressing trend of stagnation and slow retreat. Business
observers almost unanimously agreed on the idea that high technology had a lot to do
with this development. Some went so far as to proclaim the arrival of the "new economy"
in which technology made the business cycle obsolete. A hyper efficient inventory
turnover, in combination with the creation of ever new technology-related jobs,
10
constituted, in the opinion of some, a new economic era of prosperity and stability.
7
Of
course, it was easy to notice that this analysis applied almost exclusively to the US--the
countries of the EU retained double digit unemployment, while Japan stagnated since the
early 1990s. Outside the Triad, the contrast with the US is even more stark. High per
capita GDP and a strong industrial sector continue to elude most developing states, some
of which have never even experienced the factory system; and most newly industrialized
states have sunk into a recession, following the East Asian, region-wide financial
debacle. This debacle resulted mostly from a cozy relationship between the government
and finance in societies of that region--the lack ofreal transparency and accountability
pulled the rug of prosperity from under them. The problem, of course, extended beyond
NICs, and affected Japan (the biggest lender and aid donor in the region) quite severely.
Japan is a country with an ailing banking system that was imprudently allowed to finance
enormous investments through borrowing, and whose economy, partly as a result of this
overborrowing, actually began to contract in the closing years of the twentieth century.
8
The US was riding high on the wave of economic prosperity, while every other
region in the world experienced significant economic problems or setbacks. In January of
1999, the national unemployment rate in the US was 4.3% (down from 7.7% in the first
half of 1992), while in Japan, a country accustomed to lifetime employment in certain
sectors of the economy, the unemployment rate reached 4.4%. The EU retained a
7 Chapter 3 tries to show that this assumption is partly right, especially when viewed from
a business perspective. Dell Computer, for example, came close to abolishing inventory
altogether using the built-to-order, direct-sales technique. And the company did provide
lucrative employment opportunities to thousands.
8The archaic nature of the Japanese financial industry and, by extension, its economic
system, was clearly revealed by late 1997. A significant event, a sign that reality has
indeed demonstrated the unsound nature of the economic system, probably, came in
November of 1997, when Yamaichi Securities Co., one of Japan's oldest brokerage firms
and once its largest, told Japanese authorities that it would shut down its business. This
was the largest corporate failure in Japan since World War II.
11
double-digit unemployment rate in the mid and late 1990s, with significant variations of
that rate between member countries. What was especially encouraging for the US
economy was that no trade-off between lower unemployment and higher inflation was
necessary. And yet such a trade-off is what the conventional economic wisdom predicts!
Inflation remained under 2% in 1999, a very low figure considering the condition of
nearly full employment.
Perhaps there was something about the US as a state, something about its politics
that led to good economics. This dissertation argues that political pragmatism, which
included ad hoc neo-mercantilist interaction between the government and
non-government entities led to US dominance in high technology and to good economic
times. Is American high tech dominance a fact that can be established based on
comparative analysis? I believe that the data provided below is convincing that the US
has leadership in Internet and related technologies over the EU. In chapter 4, I provide a
more impressionistic data on the state of Internet technology in Japan. But that data, too,
confirms the US advantage.
Let's be brutally honest: Europe is way behind the U.S. in the Internet
revolution. By how much depends on which countries you're looking at.
Here's how the U.S. compares with Western Europe, courtesy of the
OECD, the International Telecommunications Union, Visa, MasterCard
and Booz, Allen & Hamilton. (Meland 1999:
www.forbes.com/tool/html/99/mar/0329/side l .htm)
The author then proceeds by giving the figures summarized in Table 1. This table clearly
demonstrates US leadership in the adoption of Internet technology. However, it conceals
the differences that exist within Europe.
Table 1. US Internet Advantage Over Europe
us Europe
Percentage of people online 16 6
Cost of Internet access9 $35 $49
Computers per 1,000 580 352
Computing powerlO 299 163
Phone lines per 1,000 644 520
Visa/Master card per 1,000 1,480 390
GDP per capita ($000) $30 $22
Disposable income ($000) $22 $15
Five-year growth 29% 20%
The biggest advantage the US has is over countries of southern Europe. These
countries have only a rudimentary Internet infrastructure. Meland (1999:
www.forbes.com/tool/html/99/mar0329/sidel.htm) also presents the rating of Europe's
technology infrastructure against that of the US, as seen by Forbes. Scandinavian
countries are much closer to the American level of technology infrastructure. Another
12
way to look at the data in Table 2 is to note that the top six countries in Europe are all
small countries, indicating perhaps the drive to compensate for small size with advanced
technology. Forbes evalutated each country's technology infrastructure based on
computer, telephone and Internet penetration, as well as average computing power. The
US clearly comes out on top.
9cost of twenty hours online per month, including phone and ISP charges.
I OMillions of instructions per second (MIRS), per capita
13
Table 2. Forbes Ranks America First in Technology Infrastructure
Rank Country Points
1. us 100
2. Sweden 95
3. Norway 91
4. Denmark 90
5. Finland 87
6. Switzerland 85
7. Netherlands 78
8. U.K. 76
9. Germany 68
10. France 66
11. Austria 65
12. Belgium 64
13. Ireland 60
14. Italy 53
15. Spain, Greece 42
17. Portugal 39
However, business alone did not produce high tech supremacy in the Internet and related
areas. The government helped along the way. But even business and the government
combined are not enough to build new technologies--there needs to be a technical
foundation on which high technology can be created. Let us look at what this foundation
IS.
The Handmaiden and the Foundation
The nineteenth was also the century in which mathematics
became the handmaiden of scientific inquiry .... Not only had
fundamental physics been reduced to a series of problems in
mathematics that would in due course be solved, but the
closing decades of the century were made prosperous by
technology resting on science that was itself the product of
the same century. For science and technology, the nineteenth
century was certainly the best there has yet been. Only now
do we know that it was merely a beginning.
14
--John Maddox
What Remains to be Discovered
John Maddox ( 1998), a veteran editor of the journal Nature who was knighted for his
services to science in 1994 and made Fellow of the American Academy of Sciences in
1996, observed in the quotation above that mathematics became the handmaiden of
science only in the nineteenth century. All problems of physics, the queen of sciences,
physicists believed, could be restated in a rigorous, mathematical form. The underlying
classical/Newtonian physics was not to be questioned. The emphasis was on
mathematical manipulation and problem-solving, not on foundational questions. The
impression of the scientific community was that almost all problems of nature have been
solved, and it remained only to give a mathematical form to solutions involving relatively
minor problems (Glenn 1996: 129; Maddox 1998: 9). Mathematics gave science greater
explanatory power by providing the rigor necessary for the solution of many applied and
complex problems. And it was mathematically-strengthened natural science that gave
new power to technology. That science and technology are not one and the same thing is
now generally accepted among technology scholars (Mokyr 1990: 167). However,
practical distinction between the two is not easy to draw. Gille examined the connection
closely and suggested that a distinction is based on purpose: science aims at
15
comprehension, whereas technology aims at utilization (Mokyr 1990: 168). It is a good
suggestive definition, and in a similar vein, I define technology as science made practical.
Traditionally, that is, before the late nineteenth century, technology was more an art
than science and it was based on "imaginative, original, energetic, bold, but basically
serendipitous, untrained, and unsystematic mind" (Mokyr 1990: 169). Heidegger's (1977)
etymological musings about technology as art were thus justified but belated. I I By the
mid twentieth century science became crucial for technological development, and along
with science, mathematics came to play greater role as well, both as the handmaiden and
as a generator of concepts. (This latter role will be clearly illustrate with reference to the
creation of the Internet, discussed in chapter 3, as resulting in part from the
mathematical/conceptual genius of Alan Turing, John Von Neumann, Paul Baran, and
others.) Thus, a mathematical-scientific foundation was firmly established for high
technology in the twentieth century. Mokyr (1990: 170) comments:
Even the best tinkerer inventors felt increasingly the need to collaborate
with persons with a systematic training. Thomas Edison, for example,
hired the mathematician Francis R. Upton and chemist Reginald
Fessenden (who later made important contri~utions to the understanding
of the modulation of radio waves) to translate his ideas into rigorous form.
Inspired outsiders still played a crucial role in the invention process, and
their openness of mind was often essential in the initial breakthrough. In
the "development" stage of the process, however, scientific training and
systematic work proved increasingly necessary. Inventors who wished to
remain active had to become experts or give up.
I I Heidegger (1977) maintained that technology is closely related to art, because creativity
is involved in its production. Heidegger could hardly write an essay without delving into
etymology to uncover the meaning of things. By the twentieth century, mathematics and
science became central to the production of new technology. Within the realm of
technology, creativity could hardly get far on its own.
16
Thus, high technology of the late twentieth century came to rest on a
mathematical-scientific foundation. If science, with the help of mathematics, gave us a
comprehension of the world, and technology made that comprehension practical, that is,
potentially useful in many areas of everyday life, then business provided the nexus
between potential and real use. It made technology relevant for all of us. This was done
through proprietary R&D projects, technological innovation by means of synergetic
capitalism, marketing and distribution of technological products, and sponsorship of
universities. For their part, universities institutionalized invention and innovation by
becoming the principle builders of the mathematical-scientific base necessary for high
technology. This institutionalization makes it possible for business and government to
focus the flow of funds and gives the mathematical and scientific genius a concrete,
secure place to work.
Initial Generalizations Explaining US Internet Dominance
High technology then, assuming it is responsible for economic prosperity of the
1990s, affected the US relatively more than other countries. Indeed, Chapter 3 explains
why this is the case, using Internet technology as an example. Essentially, the argument is
that pragmatic neo-mercantilist interactions
12
between the state and non-state actors
allowed for the following phenomena to emerge and flourish, and that in tum, led to US
dominance in the development, improvement, and use of the Internet. My initial working
generalizations are these.
• (1) Economic freedom led to the kind of innovation, entrepreneurship, and creativity
necessary for the production of new technologies by American firms. Synergetic
I 2see the next section, "The Crux of the Matter" for a detailed explanation of this
concept and for the thesis.
capitalism was used extensively to add complexity to technology, and competition
assured high product quality.
17
• (2) American universities have been for decades the leading universities in the world
in the field of high technology, facilitating its adaptation in the country as a whole.
They are agents of institutionalization of the mathematical-scientific foundation on
which high technology rests. Part of that institutionalization is the provision of work
environment for the mathematical, scientific, and technological genius. Universities
are also a source of recruitment of talent for the government, high tech business, and
R&D laboratories throughout the country.
• (3) The government serves as a major customer for high tech business and
occasionally provides subsidies to support business. Government infuses money into
high tech business and universities, and it provides a decent regulatory environment,
all of which helped the US high tech business to flourish. The government facilitates
diffusion of technology by its willingness to transfer high tech, including defense
oriented government projects, to the private sector and universities.
• (4) The private sector has been instrumental in assuring US Internet dominance: from
initial stages of venture-capital financing of humble startup companies to providing
capital for companies that are publicly traded. The robust nature of the US private
sector allows the government to play only sporadic and intermittent role in high tech
development--except in times of war--by abundantly supplying promising firms with
capital, even when such firms go without a profit for years.
• ( 5) The US also leads the world in most aspects in the development of so-called
future technologies. This suggests that it will continue to dominate the high tech field
at least through much of the twenty-first century.
For the US, business, especially the modern business of high technology, with its
techniques of alliances and M&A, can be usefully viewed not just as a vehicle of
18
prosperity, but as a tool for the production and support of global dominance, because
whoever prospers amid stagnation or decline is in a position to dominate. Wealth and
technology contribute to political power in global affairs. Corporations, which are basic
units of international business today, have become engines of innovation and productivity
increases. The kind of innovation in high technology that drove the economic prosperity
of the late twentieth century is mostly incremental and gradual and greatly depends on the
ability of corporations to improve existing products and cut production and distribution
costs. The American relatively corporate-friendly milieu allowed the country to build up
the physical and human capital necessary for prosperity in a post-industrial society and
for high tech dominance in the global world.
In short, high concentration of high technology industries in the US is in large part
due to neo-mercantilist interaction of those industries, the universities, and the
government. This interaction helped to make them leaders in civilian high technology,
poised to take advantage of domestic and foreign markets.
The Crux of the Matter
My thesis is that high technology and the business of its production are
intertwined--both are components of the ongoing globalization process. Today, the trinity
of global business, universities, and government--not the individual inventor--is the
means of production, improvement, and diffusion of high technology, such as the Internet.
At the dawn of the new millenium, the international high technology business, of which
the Internet is an important part, is dominated by the US, because of the country's
pragmatic approach that allows neo-mercantilist policies in a country where liberal
ideology is dominant. I 3
1
3Below is a graphical representation of the thesis. Although business definitely
contributes knowledge to the process of high tech production, and the government
$
WEALTH
(BUSINESS)
POLITICS
(GOVERNMENT)
Fig. 1
SCIENCE
(UNIVERSITIES)
THESIS: THE TRINITY OF
THE US HIGH TECH LEADERSHIP
At an even more general level, American leadership in
high technology can be viewed as the result of the coming
together of wealth (created by business), knowledge
(created mostly by universities), and political power
(provided by the federal government).
19
contributes wealth, the overlap, while acknowledged, does not destroy this representation
as a useful heuristic for understanding American leadership in Internet technology.
20
Existing and potential Internet technology can be of significant benefit to mankind, if it
accepts the global challenge of scientifically-based technology, synergetic capitalism, and
pragmatism, while rejecting strong ideological commitments. The last lead to many
disasters, including disastrous misuses of technology.
Global implications of Internet technology for work and leisure are already evident.
Global implications of the modem high technology based on computers and
telecommunications, of which the Internet is but one form of technology, can be truly
world-transforming, culminating in the new global order or, what I call,
"supercivilization." The challenge of the twenty-first century appears to be something far
removed from the Nietzschean ideal of the superman. This challenge seems to reside in
keeping technological determinism "soft," making sure that human judgment still has a
role to play in determining the course along which society is to progress. One of the
challenges of the twentieth century--and it has not been adequately met--was to ensure
that technology is used humanely. For the twenty-first century, the task may be to ensure
that technology does not run the world, but if it must, that it does so with some
"conscience."
14
14Unlike Susan Strange (1 997), whose ideas are presented later under the rubric of
critical approach, I do not find that it is possible to control businessmen and scientists in
the strong meaning of the word "control." No one, no entity, no government can
specifically allow anything it wants and ban anything it does not want, as far as the use of
science, technology and business is concemed--not even for a historically short period of
time, such as say the average human life span in the US. The most that can be done is to
limit some use here and encourage it there, using the process of muddling through and
with a view to the near future only.
Why More Than One Perspective Is Necessary
... social inheritance is Lamarckian ... there is that possibility
of directional accumulation.
21
--Stephen Jay Gould in
The End of Science
Lamarckian Inheritance: Theoretical and Technological
In International Relations and Comparative Politics theoretical fixation is a decisive
tum in the wrong direction. Attachment to a theoretical framework can lead to being out
of touch with reality. A theoretical framework should evolve with changing environment,
retaining what is useful by way of explanations from earlier frameworks and discarding
what is not particularly enlightening. Lamarckian evolution is the metaphor for the
construction of the theoretical framework for this project. That framework is "Pragmatic
neo-Liberal." The argument I advance is that liberal ideology is dominant in the United
States, but that the evidence shows that technological development was not entirely
beholden to any ideology and proceeded along practical and accidental lines, as well as
ideological ones. This led me to the conclusion that a neo-liberal framework alone was
not sufficient if one wanted to understand how the US achieved its high tech dominance,
and what the implications of this dominance are. What is the "theoretical solution" then?
It is the incorporation of many elements of other frameworks into a basically neo-liberal
perspective. Theory building is Lamarckian, or at least is should be. . ..
An evolutionary approach that allows for inheritance of acquired characteristics is
not new to the social sciences.
15
However, it might have been used too broadly at times. I
accept Lamarckian evolution of theoretical ideas and of technology. It seems that one can
15 An interesting take on the idea of the present as being in large part determined by its
past in presented by Crawford and Lijphart (1995). The authors discuss how legacies of
the Communist system influence political and economic development in Eastern Europe
in the mid 1990s.
22
overstate the argument, as Stephen Jay Gould once did, saying that "social inheritance is
Lamarckian, there is more of a theoretical basis for belief in progress in culture ...
because anything we invent is passed directly to an offspring, there is that possibility of
directional accumulation" (Horgan 1996: 123). Gould's argument appears to be a bit
overstated, because of its breadth. Not all "social inheritance" has to be Lamarckian. And
historicism on a grand scale has never been friendly to the kind of incremental
accumulation suggested by Gould.
16
However, it does appear more tenable to argue for a
more circumscribed Lamarckian inheritance. Particular aspects of what societies
possess--things like modem technologies and social science theories--are sometimes
inherited in a Lamarckian fashion.
For technology, mathematics and natural science can provide a continuity which, in
tum, is the foundation for incremental, Lamarckian inheritance. Mathematics provides the
rigor required for continuity; natural science checks the bounds of that rigor, so as to keep
abstract thought realistic. For historical and social theories, which are as much art as
science, previous ideas serve as inspiration for and hints of new ideas. To the extent that
new social science theories are a confluence of past ideas and current events, they can be
said to be Lamarckian. And to the extent that I accept the utility of being Lamarckian, my
theoretical perspective ends up being somewhat eclectic.
1
6Contemporary historians usually focus on very specific, circumscribed problems,
avoiding grand theorizing. Grand historicism of such authors as Hegel, Marx, Vico, and
Eliade is in opposition to the kind of Lamarckian, gradual view of historical movement
advocated by Gould (and by me in the cases of technology and social theory).
Even Nietzsche, who believed in biological Lamarckianism, had a view of history that
emphasized abruptness and discontinuity rather than gradual accumulation that blindly
but inevitably proceeds to its destination.
,.
23
Examples of How Different Perspectives Contribute to Oyerall µnderstanding
As I argue in chapter 2, many perspectives on globalization can contribute to the
understanding of high technology and the business of its production. Neo-liberalismism
explains extensive reliance on the private sector in developing the Internet and high
technology in general. My work does not ignore alternatives to neo-liberalism. Soft
technological determinism--the idea that technology has its own logic of shaping human
societies--is implicit in my discussion of the global impact of Internet technology, and is
clearly evident in the concluding pages of this work. Karl Marx suggested something very
similar about technology a century and a half ago. Although I believe that he was wrong
about how technology (or the means of production) changes societies, he was right that it
in fact does so.
17
As for the critical approach to the globalization process, which itself owes a great
deal to Marxism, I consider it in chapter 1 because it has occupied central stage in the
globalization debate at the end of the twentieth century, and because, in its aspirations, it
is akin to the goal of my own work--critical understanding and reflection as an important
step beyond simple logical inferences.
1
8
Th~ following four chapters are designed to elaborate on and support this argument.
The result, it is hoped, will be more than just a better understanding of globalization,
business, and Internet technology and its consequences. The facts and arguments of this
l 7Marx believed, in line with his dialectical method (dialectical materialism), that forces
of production (labor plus the means of production) come in conflict with society's
property relations, creating a new society as a synthesis of this collision between thesis
and antithesis.
I Sane does not have to share critical theorists' preoccupation with "human
emancipation" and criticism of big business in order to retain its spirit of critical outlook,
which early critical theorists themselves inherited from Nietzsche. Ideologically and
historically, however, this approach is rather closely related to Marxism, and is something
that can be fairly characterized as the Frankfurt School contemplating the contemporary
world economy.
work may even inspire policy changes by state and non-state actors, because these facts
and arguments point to significant economic and social changes that have already
occurred, and that call for reflection and action on the part of policy makers. Chapter 2
is theoretical and outlines global themes as presented in the political science literature.
These ideas are not universally applicable to the puzzle of US dominance in high
technology in general and the Internet in particular. But they have inspired me to search
for a new framework to explain that dominance and provided most of the insights
necessary to accomplish the task.
24
Chapters 3 and 4 are empirical. Chapter 3 describes the three pillars of the US
internet dominance. It explains the role that mathematical-scientific foundation has
played in the rise of the US Internet advantage. This role cannot be understood outside the
context of its institutionalization, i.e., its academic setting, and the impact of genius.
Chapter 4 also shows how capitalism, "lone" and "synergetic," contributed to making the
Internet a reality. But the role of government was also crucial. Selective government
intervention in peacetime, and even more the extreme demands of WW II and the Cold
War, allowed the government to partly set the agenda for technological development. And
certainly government funding and the regulatory environment the government provided
turned out to be vital to the US high technology advantage, including the Internet.
Chapter 4 is about the fallout of the Internet explosion and uses some comparisons
with Japan and Europe. The US leadership in the design and implementation of the Net
led to its Internet business advantage, e-commerce as it is conducted on the World Wide
Web today. Most comparisons are with Japan, a technological superpower still, but a
country that lags very far behind the US in e-commerce and in the use of the Internet for
leisure. Some comparisons with Europe are also made. Europe, although one of the three
economically advanced regions of the world, generally referred to as the Triad, has never
been known for leadership in cutting edge high technology, especially not since WW II.
25
Significantly, it is argued that the European lag in high technology is due more to politics
than to economic or social factors. Thus, if chapter 3 is about the creation of the physical
components of the Internet and accessibility of the Internet to the general public, chapter
4 is about the content of the Internet and its implications for business and society. Chapter
5 concludes this project with the explanation of global implications of US high tech
leadership. First, global political and business implications are considered and then global
philosophical implications are addressed.
Chapter 2
Global Themes
... we shall have upheavals, a convulsion of earthquakes,
a moving of mountains and valleys, the like of which has
never been dreamed of. The concept of politics will have
merged entirely with a war of spirits ... there will be wars
the like of which has never been seen on earth ...
26
Friedrich Nietzsche
Ecce Homo
Globalization Approach and Current Events
... and men are so simple and so obedient
to present necessities ...
Globalization versus Fragmentation in World Politics
Niccolo Machiavelli
The Prince
A large literature on globalization has evolved in Political Science since the late
1970s. It was bound to produce a reaction. A number of skeptical and dismissive works
appeared, the most strident of which characterized the entire approach as "globaloney."
Giving support to scholarly criticisms, the real world kept confronting proponents of
globalization with unpleasant facts. One needs only to think of the images of American
hostages in Iran, the Soviet troops in Afghanistan, destroyed American barracks in Beirut,
or starving children in Ethiopia to realize that the world was fragmented into diverse
mutually indifferent or hostile camps. Fragmentation, contrast, and strife appeared to hold
sway in the world. Globalization would seem farfetched in the face of continuing
East-West rivalry, increasing North-South inequality, the rise of Islamic fundamentalism,
and Western economies shaken up by the energy crises and inflation.
27
Yet it was precisely this global stirring, this uncomfortable, disconcerting movement
that led scholars and journalists to bring up the concept of "globalization" in the late
1970s. "For example, hardly any titles of books and articles published before 197 5
include references to global-ness, whereas today, on the threshold of the twenty-first
century, the concept has become pervasive" (Baylis and Smith 1997: 14). Until that time
the US was the undisputed world economic leader. This economic dominance seemed
impossible to challenge. We believe that the status quo can easily be permanent. Until the
1970s America produced and consumed mostly its own goods and services (Krugman
1995: 43) and no one could foresee the energy crises. US producers had no competitors
that could seriously challenge them on US soil. But things have changed. Disconcerting
economic changes were added to the disastrous experience in Vietnam, arguably the first
and only war the US has ever lost. Perhaps the confluence of these disturbing for the US
experiences--and these are international and not purely domestic experiences--suggests
that globalization and fragmentation are, after all, not opposites but two words for the
same thing, viewed from different perspectives.
There were forces at work in the world whose scope was nearly global in
geographical terms, but the forces did not always have the same manifestation in every
location. If one focused on the effects of these forces, then fragmentation would seem
more plausible. If one focused on the description of the forces themselves and their
evolution, then the reality of globalization could hardly be denied. The growth of world
trade (caused by the resurgence of Japan and Western Europe), the assertion of
self-determination by the states of the Third World, continued superpower competition,
including proxy wars--all these things converged to administer the international side of
the great shock of the 1970s in the US.
28
The Resurgence of Globalization
In the 1990s, the globalization approach received support from those who felt that a
novel explanation had to be given for the unexpected events of the late 1980s and early
1990s . The event that was the primary impetus for this seems to be the collapse of
Communist regimes in Eastern Europe and the Soviet Union.19 Other occurrences that
helped to advance the globalization theme are the rapid economic development of (a
handful of) developing countries which utilized private capital, albeit with considerable
degree of government guidance, to practically catch up with advanced economies;
continued growth in the presence of foreign MNCs in the US; and the creation of the
(surprisingly inclusive) WTO. Thus the theme of globalization came back into Political
Science and popular discourse with new vigor.
Again, our thinking was simple and we, as Machiavelli (1985) suggested, are so
"simple and so obedient to present necessities" that Globalization was revived. No one
predicted the fall of the Berlin Wall, even six months before it happened. But global
forces were suspected of being partly responsible for the collapse of the Wall after the
fact. Some argued that the Eastern block could not run anymore in the arms race (itself a
global phenomenon)--President Reagan bankrupted the USSR using very high level of
military spending in the US. Others argued that the people in communist countries saw
the hypocrisy and greed of their rulers, and eventually the people got the courage to
demand the same lifestyle as their own rulers and the average Joe in the West enjoyed.
2
0
The Soviet Union and Eastern Europe fell because VCRs, bananas, and jeans had a global
19
Tue same event that was in part responsible for the quasi-globalization perspectives of
Fukuyama and Huntington.
20francis Fukuyama (1992: 98) mentions this explanation for the collapse of the Eastern
block in his book, considered in the next chapter. Fukuyama called the victory over
Soviet-led Communism the "victory of the VCR."
appeal. Global forces, it seemed, shaped the world once again. More globalization
literature appeared.
Variations of the Globalization Approach
National differences and antagonisms between peoples are vanishing
gradually from day to day, owing to ... freedom of commerce, to the
world market, to uniformity of the mode of production and in the
conditions of life corresponding thereto. . .. In proportion as the
exploitation of one individual by another is put an end to, the exploitation
of one nation by another will also be put an end to. In proportion as the
antagonism between classes within the nation vanishes, the hostility of
one nation to another will come to an end.
29
Karl Marx
The Communist Manifesto
In essence, liberals believe that trade and economic intercourse are
a source of peaceful relations among nations because the mutual benefits
of trade and expanding interdependence among national economies will
tend to foster cooperative relations.
Robert Gilpin
The Political Economy of International Relations
A comfortable, smooth, reasonable, democratic unfreedom prevails
in advanced industrial civilization, a token of technical progress ....
That this technological order also involves a political and intellectual
coordination may be a regrettable and yet promising development.
Daddy, the sky is falling!
Oh, good--just when I started eating.
Neo-Marxist/Progressi ve View
Herbert Marcuse
One Dimensional Man
From an episode of "Married With Children"
One of the interesting features of the globalization approach is that in some cases it
had strong Marxist undertones. Globalization sometimes implied that events one
30
observed on the international arena signaled the crisis of international capitalism. There
was a sense of crisis, because of the events described above, and a seeming inability by
nation-states to predict these events and effectively deal with them. This led to legitimate
doubts about the state-centrist Realist approach. Even within the Realist school, the
rumblings of discontent led to a re-evaluation of certain premises, giving rise to
neo-Realism and, later, to Liberal Institutionalism.
The neo-Marxist/Progressive perspective seems particularly prone to engage in
abstract discussions about "political structures," the necessity of "reorientation and
redistribution of resources on a massive scale," and the like (for example, Pantich 1996:
108). Generally, this perspective emphasizes theory, and often underemphasizes facts.
Interpretations begin early into the discussion, while only few facts are presented.
Globalization, as it is conceptualized by neo-Marxists, typically involves a zero-sum
game that is stacked in favor of global capital. Neo-Marxists (and critical theorists who
write on globalization) frequently argue that the state controls capital and is capable of
continuing extensive regulation, in contrast to a more classical Marxist view that the state
is an executive committee for managing the affairs of the entire capitalist class. State
regulation and partial control of capital in liberal democracies is considered relatively
democratic by neo-Marxists because the state is, in theory, democratically organized with
frequent elections for the most powerful agents of the state.
After its retreat from the mainstream of International Relations in the early 1980, the
globalization approach could not return and expect to have all of its potential following
intact. Initially, the globalization literature was partly a reaction against the dominant
Realist school in International Relations. But in the 1990s, the following of the
globalization approach could be diluted by approaches that, just like globalization, could
appeal to the dissatisfaction with the established Realist direction of study. A number of
new approaches from other areas of political science began to jostle established IR
31
approaches for recognition. Examples are normative theory, critical theory, and feminist
theory, each of which acquired distinct applications and a following in International
Relations. All these approaches shared a certain critical bent in their view of international
affairs. They can be classified as reflective theories, for they are concerned not simply
with what is, but with what ought to be, or with the meaning of events (Baylis and Smith
1997: 172-183 ). These approaches can be viewed as competing alternatives to the early
intellectual efforts within the globalization approach that were critical of the
liberal/Western-dominated global order. Some applications of the critical theory can
illustrate the point.
Critical Perspective
Partly in opposition to the neo-liberal, business-oriented perspective on globalization,
and partly as a continuation of the original globalization movement, a different and far
less optimistic perspective on globalization exists. This perspective is influenced by
neo-Marxist/Progressive currents. It sees globalization as essentially exploitative in
nature: harmful to the working class and, in some variants, releasing the power of capital
from the modicum of state control it has been subject to thus far. Capital is, according to
this view, ravaging the Earth in pursuit of even more capital. The solutions to this dismal
situation range from resisting globalization and reversing its advance, to using it to
accomplish particular social and political goals. More liberal voices within this current of
thought tend to argue that the new central task of international politics may be to
control
21
the bankers and to encourage human "emancipation" (Strange 1997: 245).
There is a fusion of globalization with critical theory, as was recently illustrated by Cox
21 "Control" and "restrain" are the words used by Strange (1997: 246), and in her context
they seem to imply effective government regulation, the kind which does not allow global
capitalism to destabilize the world or to infringe too much on the less fortunate.
32
(1996) and Mittelman (1996). These authors interpret international relations, and
globalization in particular, from a critical framework whose main direct influence is the
Frankfurt School. This perspective also places heavy emphasis on the supposedly unjust
distribution of income and resources throughout the world. Just like the Frankfurt School,
however, it retains a critical interpretive bent--inspired by Nitzschean perspectivalism and
tendency to debunk--without sliding into the rigidity of economic determinism.
Interpretation and meaning are the pivotal concepts of this approach.
Interpretations are, as suggested, Left-leaning, and the ultimate idea of these
interpretations is to criticize liberal-democratic capitalism as a social system of illusory
freedom. The weapon with which liberal-democratic capitalism is conquering the world is
American-made popular culture. As Martin and Schumann (1996: 14) summarized:
"Stalin wanted omnipotence, but Mickey Mouse achieved omnipresence." This victory of
Western pop culture only makes "democratic unfreedom" seem more comfortable.
N ea-Liberal View
Within the globalization approach, we must note the intellectual current which is
primarily concerned with internationalization of business. Business and IPE literature of
different levels of sophistication often paint the picture of borderless production and
distribution of goods that cater to the universal (and American-like) consumer. The
convergence of tastes is assumed--it is also sometimt!s assumed that such convergence is
desirable. The phenomenon of global production for the global consumer is sometimes
dubbed "Coca-Colaization," after one of the most successful, global consumer-sector
brands. Practitioners are known to act on theoretical assumptions of this neo-liberal
version of globalization. Thus, Warren Buffet, the second richest man in America at the
end of the twentieth century and the country's most notorious investor, numbers
Coca-Cola, Gillette, and McDonalds among his largest equity holdings--all companies
which, Mr. Buffet believes, appeal to the universal consumer (Forbes 1998).
33
International business and IPE literature of the neo-liberal type approaches
globalization with a varying degree of attention to empirical confirmation and strength of
theoretical arguments. Sometimes, facts can be scarce and a few simple assumptions
dominate. Partly for this reason, I want to include detailed case studies and vindicate the
validity of much of the neo-liberal perspective through empiricism. The facts, in
combination with a sustained discussion of what globalization of business means
historically, do not destroy all of the neo-liberal perspective on globalization, but check
its excesses and suggest the direction of the future development of global business and
its products. Excesses do exist in the neo-liberal view of global political economy.
Assumptions about the convergence of tastes and needs are not always supported by
evidence. Thus, this dissertation shows that the evidence does not always support the
neo-liberal view; but the neo-liberal view remains useful, when tempered by insights
from other perspectives.
Within literature on globalization and international business, there is a segment
which pays very close attention to facts. This empirical emphasis can be found without
much trouble in the relevant management literature which is concerned with specific
phenomena of modern capitalism such as synergetic capitalism of mergers, acquisitions,
and corporate alliances. I already referred to some of that literature in chapter 1. However,
because the emphasis is placed on particular instruments of modern capitalism, historical
sense in this type of literature is often sacrificed. The theoretical component of this
literature is usually derived from decision theory or microeconomics. Another approach
used in management literature on globalization involves remaining mostly atheoretical,
restricting one's treatment to the process of business globalization and its practical
explanations by means of case studies.
22
34
The neo-liberal perspective is the dominant one in the United States. The core of this
perspective, as it applies to problems of globalization, has to come down to this: liberals
tend to hypothesize that globalization is a process that moves forward when firms
compete with each other on a global scale in a free market. Free competition maximizes
efficiency and is, therefore, the optimal way to conduct business. Chapter 3 shows that
the neo-liberal perspective cannot be the whole truth. The dominant mode of production
does depend on competition between firms. When it comes to explaining the US Internet
advantage, however, it becomes clear that the free market is not a sufficient explanation.
The US Internet advantage cannot be understood without understanding the role of
universities and government in contributing to that advantage. Neo-mercantilist
interactions between the government, universities, and business was crucial for creating
that advantage. Some neo-mercantilism does not imply the absence of competition. Firms
still have to compete for government contracts and for customers, they still have to be
able to attract the best and the brightest who come out of academia.
In short, neo-liberalism is adequate as a framework for grasping the basics of the way
business works in the US. But it is not the whole truth when it comes to explaining the
American Internet advantage and its global implications. The greatest insight of
neo-liberalism may be the emphasis on the utility of competition between firms.
However, the relevant facts suggest that some questions cannot be adequately addressed
without the help of other perspectives.
22
A good example of this approach is (Hitt, Duane, and Hoskinsson 1997) where a
neo-Liberal view of globalization is presented through case studies with little attention to
theorizing.
35
Apocalyptic Perspective
The end of the millenium and the beginning of a new one calls for a social science
which is historically informed and is a kind of summation of human trials and
tribulations. This demand resulted in articulation of two diametrically opposed visions of
the world: one by Francis Fukuyama ( 1992) in The End of History and The Last
Man--another by Samuel Huntington (1997) in The Clash of Civilizations. Both authors
have their moments of brilliance, yet they universalize events that are particular to the late
twentieth century. Both choose to emphasize different types of events, with the result that
they are led to very different conclusions. Neither accepts the traditional Realist view of
international relations,
2
3 which sees states as by far the most important actors in the
anarchical international system where the struggle for power is taking place. Fukuyama
(1992) maintains that the social and political history of the world has ended with the
permanent victory of "democratic capitalism." Huntington (1997) argues that seven or
eight civilizations based on different cultural values and practices exist in the world with
great potential for a clash. Western civilization has to be defensive and vigilant, as it is
threatened by the latent Islamic-Confucian connection against it, with the possibility of
other civilizations joining the connection.
Both authors have been amply criticized. In Fukuyama' s case, there is no evidence
that the struggle over ideals has ended,
24
and there is more than enough evidence that
Western societies are not post-historic communities of leisurely self-improvement, but
rather societies of substantial socio-economic inequalities where millions of people toil
23Tue name of the discipline is capitalized, i.e., International Relations; but relations
between states are simply international relations.
24
The future seems unknowable to us, and Fukuyama does not offer any methodology for
peering into it to find out whether history has, in fact, ended. As I suggest in chapter 5,
one of the possible refutations of Fukuyama' s thesis may be the rise of a new (post
post-industrial) civilization not of "democratic capitalism" but of artificial intelligence
and autonomous technology.
36
just to survive, and whose social and ecological problems are significant (McCamey
1993: 37).
Huntington, for his part, seems to have overstated the cultural/civilizational lines of
conflict and potential conflict. Intra-civilizational conflict, especially of the
ethno-nationalist variety seems to be more rampant than the inter-civilizational conflict. It
appears that one can rightly be puzzled by Huntington's premise that Turkey may in the
foreseeable future lead the Islamic world (in alliance with Confucian countries) against
Western civilization. Evidence, I think, is the best criticism of this outlook. Huntington's
approach ignores ethnic and religious divisions in the Islamic world, especially the
division between the Turks, the Persians, and the majority of Muslims, the Arabs.25
These divisions, which often manifest themselves in mistrust and animosity, combined
with the logic of diverging state interests, cannot be overcome by political or intellectual
appeals to cohere in a single "civilization." With respect to the Islamic-Confucian
connection postulated by Huntington, little evidence of it exists for the West to be
alarmed. For now, Islamic-Confucian discord seems more in agreement with reality, as
was illustrated by events in Malaysia and Indonesia in the closing years of the twentieth
century.
Thus, while I found the paradigms of Fukuyama and Huntington problematic, both
authors have inspired me to think about politics in global terms and in ways that are
unconventional. Their perspectives can be viewed as quasi-globalizational, because they
talk about politics of the world as a whole--parochialism is foreign to both authors. For
Fukuyama the world is a global village united by the ideology and practice of democratic
capitalism; for Huntington it is a global struggle of six or seven villages--primarily a
struggle against the Wes tern village. The approaches are very wide in scope, holistic, and
2
5Nor is it clear why over seventy million Persians in Iran would follow Turkey's
leadership alongside the Arabs in a no win struggle against Western civilization.
37
can be seen as attempts at defining a new paradigm for understanding of international
politics. My project is close in spirit to theirs: its central argument implies that
international politics today cannot be understood without a holistic view which happens
to include the synthesis of the roles of high technology and the business of its production.
Thus, it would be wrong to treat the end-of-something-big books dismissively. It is
true that the end of the millenium contributes to the proliferation of such books, it is not
true that their content is merely apocalyptic, hysterical, and full of hyperbole. These
books, significantly contributed to the intelligent reflection about society. Fukuyama and
Huntington represent the contribution of Political Science to the millennial literature.
Economist Jeremy Rifkin (1995) in his book The End of Work proposed that the
increasing automation of the productive process is leading economically advanced
countries to a post-market economy with almost no labor force. Just like Fukuyama and
Huntington, Rifkin left me questioning the realism of his main argument. And just like
Fukuyama and Huntington, Rifkin aptly stimulates one's reflection about the things yet to
come.
A very persuasive (and very well written) book in the apocalyptic/millennial
literature of the 1990s is, in my view, John Horgan's (1996) The End of Science. Horgan
argues that most, if not all, grand scientific theories have already been formulated. What
is left is incremental science--the process of mopping up, or tying loose ends. The
possibility of theorizing on the kind of grand scale available to Darwin, Einstein,
Heisenberg, or Watson and Crick does not exist--old theories are true and cannot be
superceded, and nothing that can happen or be discovered is likely to call for a new major
theory--the end of science has arrived. However strange this may sound at first, Horgan's
argument cannot be dismissed. Scientific theories are true or false based on whether
hypotheses they generate can be verified to the best of human perception. Since our
perception and our capacity to think have their limits, so does science.
38
In addressing the specific questions of this research project, I found that the
millennial/apocalyptic approach is more useful in analyzing global implications of the US
Internet advantage; specific reasons for the emergence of that advantage in the first place
are best explained by other theoretical perspectives. But to state it again, the apocalyptic
approach to the problems of global order is neither about paranoia, nor sensationalism. It
is a serious attempt to address important problems in a comprehensive way.
Theoretical Synthesis: Pragmatic Neo-Liberalism
Truth is something that happens to an idea.
William James
Truth is stranger than fiction.
Old saying
In this section I bring together the neo-liberal, neo-Marxist, and critical theory
elements into a single theoretical framework in light of the evidence in favor of a pattern
of neo-mercantilist policies in the US, the leader in civilian high technology. As already
suggested, each of these three approaches to the problem of globalization has its strengths
and weaknesses that have to be applied, in light of existing evidence and potential
applicability, to the issue at hand. If the framework ends up looking strange to some, they
can look at the quotation at the beginning of this section. Truth is indeed strange. This
wisdom of the ages is easy to see, if one is only willing to look. And it is confirmed, as it
were, by quantum mechanics--the most reliable scientific theory of the queen of sciences.
If it is argued that political science frameworks are neither true nor false, but just more or
less useful, the point is well taken. Still, it may take a strange framework to usefully
describe a strange truth.
39
My elaboration of the framework constitutes an original theoretical contribution
applicable to the fields of International and Comparative politics. The essence of
Pragmatic neo-Liberalism is that it combines the neo-liberal economic outlook with
extensive ad hoc neo-mercantilist policies. Chapter 3 gives evidence to support the utility
of seeing the US approach to the business of high technology as pragmatically
neo-liberal. Commitment to neo-liberalism is partly a commitment for its own sake, that
is to say, an ideological commitment unrelated to the outcome it brings. However, both,
the commitment to neo-liberalismism and actual policy results, are viewed as important
by the American state. Therefore, if neo-liberalismism falls short of producing leadership
in high technology, the United States government can and has intervened in a selective
and intermittent manner to strengthen American production of high technology.
We are now ready to outline the framework of pragmatic neo-liberal globalization:
1. Globalization is technological. Its characteristics and features depend significantly on
the type of high technology produced. The globalization process cannot be understood
without understanding the global influence of high technology, such as the Internet.
2. Technological globalization acquires its practical character through the influence
of business. Synergetic capitalism plays an important part in the contemporary business
process.
3. The Internet is a form of civilian high technology that was born out of a
confluence of computer and telecommunication technologies. (My formula for this
proposition is Turing + Licklider = Internet.)
4. Globalization can be called "skewed," if its processes give a significant advantage
to some states in the international system relative to other states. The Internet skews
globalization toward the United States, for which it serves as an economic (and virtual)
infrastructure.
5. The US achieved its global advantage through a pragmatic fusion of
neo-Iiberalismism and neo-Mercantilism. Neo-liberalismism meant that firms still
competed in the marketplace based on the ability to generate revenue and make a profit.
The government served as a customer, not as a manager of American business. The
neo-mercantilist element lies in the ability of the government to determine, to some
extent, what type of high tech products emerge by being a customer to business,
providing a particular regulatory environment, and by getting into wars, which require
high tech products to be produced successfully and quickly.
40
6. The global impact of the Internet can change everyone's ability to communicate, to do
business, and to be entertained. Pragmatism, however, is the only viable alternative
when adopting the Internet in conjunction with the rest of modern high technology.
Many dangers arise, and we are incapable of global control of high technology. The
global world is "chaotic" and requires solutions on a problem-to-problem basis. This also
means that no global plans or projections for the future can be made for any but a trivial
period of time. The new global order equals uncertainty that cannot be abolished through
conscious human effort.
0-MARXIST RITICAL :NEO-LIBERAL APOCALYPTIC
· TECHNOLOGIC IvIEANING OF
DETERMINISM HT AND THE
INTERNE.T
DOMINANT
MODE OF
PRODUCTION
Fig. 2
Lamarckian Emergence of
Pragmatic N eo-Liberal View
INIPLICATIONS
.FOR GLOBAL
·ORDER
This graphically illustrates the importance of different perspectives for articulating a new
framework of thought about technological globalization. These different perspectives
complement each other. Pragmatic neo-Liberalism inherets something from each.
41
42
The graphical representation shows that each framework for looking at globalization
considered in this chapter, has something to contribute to the pragmatic neo-liberal view.
Marxism, with its emphasis on the forces of production, contributes to making the
process of globalization "technological." Neo-liberalism explains the dominant mode of
production in the US, the country with the global Internet advantage. The critical
perspective shows the importance of questioning the global socio-economic order created
by business and high technology and searching for a meaning of that order. The
apocalyptic view is itself an example of such questioning and a demand for taking a truly
global view of human affairs.
My contention is that the relevant evidence of the late twentieth century presented in
this chapter fits into the pragmatic neo-liberal framework and points to a strange,
exciting, but, as I argue in chapter 5, dangerous future for the twenty-first century.
Vision, Technology, and Continuity in the Globalization Process
Vision is seeing more than is presented.
Popular saying
Visionaries and Technological Globalization
One conclusion can safely be reached about globalization: as the twenty-first century
is dawning, there is no agreement as to what the term means. Whether definitions of
globalization are explicit or not, they can certainly be very different. Conceptualization is
implicit in the various approaches presented in this work. Globalization does not mean
exactly the same thing to a neo-Marxist and a neo-liberal, although there are similarities.
Someone who comes from a critical perspective may be dismissive of the perspective that
I called "apocalyptic." These different, ideologically-tinged perspectives determine how
43
globalization is conceptualized. Thus, globalization, without a shadow of a doubt, is a
contested concept. The buffet of perspectives I presented are characterized by a vision of
what the global order is and should be, and perhaps for that reason alone they deserve
serious consideration as catalysts of intellectual creativity. They are useful, therefore, not
just because a researcher can use them eclectically--pleading Lamarckian theoretical
evolution or any other justification--to elucidate a particular problem, but also because
they can serve as an inspiration for social, political, and economic projects on a global
scale.
Visionaries who have contributed to globalization--from science fiction writers of the
nineteenth and twentieth centuries, such as Jules Verne and H. G. Wells, to philosophers
and social critics, such as Friedrich Nietzsche and Marshall McLuhan
26
--supplied
inspiration and controversy which defined the discourse on technology from a global
perspective. Different visions of the nineteenth and twentieth centuries defined how
globalization is approached in the twenty-first century. It is somewhat surprising,
however, that while vision was not lacking, political science has treated the question of
the fusion of technology and globalization only sporadically and intermittently.
Science fiction is inextricably related to visions about technology, to the notions of
what can be done using new things and methods. Edgar Allan Poe (1992) may have
written the first or one of the first science fiction stories, which he called "Ligeia." Poe's
dark visions continue to captivate readers today. In response to Lord Byron's challenge,
nineteen-year-old Mary Shelley wrote Frankenstein, the world's first science fiction
novel and the first exposition of what modern computer experts call artificial intelligence
(Shurkin 1996: 54). But it was Jules Verne who has the distinction of being the first pure
26McLuhan is credited with inventing the term "globalization."
In the twenty-first century, the threat may lie not with governments misuse of high
technology, but with technology becoming too autonomous. Artificial intelligence,
robotics, and the Internet can create a civilization of intelligent beings with values that
diverge from our own, intelligent beings indifferent or hostile to human existence. At
some point we will not be able to even pull the plug on technology which will have
developed the capacity to create its own values. And then it will write its own science
fiction stories, and perhaps a few good ones as well.
The Oxymorons of Global Disorder in the Twentieth Century
45
No century in human history has seen so many and so dramatic advances in science
and technology as the twentieth century. Along with this development based on the ability
to apply empirical findings on a consistent, rational basis, came the global storm of
ideological warfare. Rationality, careful fact finding, and repeated experimentation
coexisted, in the twentieth century, with ideological fanaticism, "the likes of which," to
use Nietzsche's expression, "has never been seen on Earth." The twentieth century is not
unique in combining technological and scientific advances with ideological intolerance,
but it is unique in the extent to which both are carried. Also, before the twentieth century,
ideological struggles could not be considered to be global in scope. Geography was a very
limiting factor. Science and technology helped to erase geographical limitations, and the
anti-scientific spirit could ravage the Earth. It is likely that only the fear of death or MAD
(mutually assured destruction), to use a popular International Relations acronym, limited
the extent of the damage done by the unscientific spirit of ideological intolerance. This
Hobbesian solution worked for mankind at least throughout the second half of the
twentieth century, and under the circumstances, we will take what we can get. Maj or wars
must remain cold. Minor wars can be fought directly or by proxy.
46
To return, however, to the compatibility of divergent mental outlooks, scientific and
fanatically ideological, one can probably conclude that their coexistence is due to the fact
that science is the province of the few, but ideology is the realm of the many, the crowd,
the domain of collective feelings. People who advance science do not thereby contribute
to the scientific spirit of the rest of society. And it is not even clear that they become the
scientific spirit incarnate and are not sometimes subject to fits of ideological fanaticism.27
Ideological temperance, to restate the point, was induced, in the twentieth century, by
the Hobbesian concern for self-preservation. The "war of the spirits," the global
ideological war, went on even when mutual nuclear annihilation became a distinct
possibility. The war simply became cold. The scope, however, was still global in both, a
geographical and intellectual sense. The battle for the hearts and minds of the people was
unlimited in its geographical scope. The Cold War, therefore, too qualifies as a World
War.
The twentieth century is thus a contrast of extreme science and extreme ideology.
Advances in science pushed technology forward and made ideological struggle more
extreme, more global, and more dangerous than ever before. Rationality and careful
observation coexisting with blind faith in one's narrow ideals: this is the formula for the
twentieth century.
27some scientists, who should have known better, fell under the spell of ideological
extremism. A racist Nobel Prize winner, Philipp Lenard (1862-1947), who contributed to
delineating the quantum nature of light, published a treatise called Deutsche Physik as an
antidote to "Jewish science." He once remarked, "Science, like every other human
product, is racial and conditioned by blood" (Silver 1998: 361).
Chapter 3
The Pillars of Dominance
Institutionalizing the Mathematical-Scientific Foundation
University research played a key role in the growth of the US
computer industry. Universities were important sites for applied,
as well as basic research in hardware and software .... the training
by universities of engineers and scientists active in the computer
industry was extremely important. By virtue of their relatively open
research and operating environment that emphasized publication,
relatively high levels of turnover among research staff, and the production
of graduates who sought employment elsewhere, universities served as
sites for the dissemination and diffusion of innovations throughout the
industry.
47
David Mowery and Nathan Rosenberg
Paths of Innovation
Universities as Organizations that Create the Future
This chapter describes the elements of neo-liberalismism and neo-mercantilism in the
US policy on high technology that produced the phenomenon called the Internet. The
hypothesis is that economic freedom, tradition of invention, and technological strength of
leading universities in combination with ad hoc neo-mercantilist policies led to US
leadership in Internet technology and the businesses created as a result of that
technology.
Some universities in the United States are older than the country itself. Respect for
knowledge is indeed traditional. In the case of the Internet it can be demonstrated
empirically that universities played a crucial role in the creation and shaping of that
technology. Universities epitomized institutionalization of the tradition of invention and
48
innovation. What specific functions did they perform? First, they trained mathematicians
and scientists whose knowledge proved vital for creating the Internet. These
experts--geniuses in some cases--could contribute to the rise of the Internet while
working at a university, or they could use their skills in government or business projects
that aimed at the building of the Internet. The second function of universities was,
therefore, to provide a working environment for the masterful minds capable of creating
new high technology. In real life, those whose minds were responsible for the rise of the
Internet worked in and outside universities, depending on the nature of their specific task.
Universities were an important link in the never-ending chain of interaction which
also involved business and government. These agents of neo-mercantilist interaction
could effectively draw on each other's resources. If business and government could draw
on a store of knowledge generated by universities, the last could certainly use the funding
from both business and government.
However, there is no purely theoretical way to unambiguously establish whether or
not universities were crucial for creating a specific technology, such as the Internet.
Empirical inquiry is necessary to accomplish that. Therefore, it is necessary to explain
what the Internet technology is. A second question concerns the nature of technological
progress itself. Did universities harbor genius or something close to it, or could virtually
any modestly intelligent person with a lot of information invent Internet technology
without having anything to do with universities?
Internet Precursors and Universities
The Internet is a network of networks of computers that communicate with each
other. When some people use the word "Internet" they also mean the content that can be
found within the Internet connection. Networks that comprise the Internet are connected
in different ways. Telephone lines are the most common means of connection. Satellites
49
can also link networks, as can fiber-optic cables, special ISDN (Integrated Services
Digital Network), or high speed Digital Subscriber Line (DSL) connections (Gralla 1998:
11 ). The networks in a particular geographic area are connected into a large regional
network. Routers pass information within that area from network to network. Regional
networks are connected to one another via high-speed backbones--connections that can
send data at extremely high speeds.
The Internet's essential components are networks and computers. Computers have a
controversial and, at times, murky history. Charles Babbage, a great English tinkerer who
never finished his projects before he moved on to something else, developed principles of
the Analytical Engine in 1832. Some consider it the world's first computer. However, the
project was never completed, and the analytical engine was intended to be a mechanical
invention. It was Herman Hollerith who combined computation and electricity in 1890
with his patent of an electromechanical information machine, bringing computing closer
to the modem digital era.
Alan Turing28 developed, in 193 7, the first conceptual model of the modem
computer. His paper, with the unassuming title "On Computable Numbers," introduced
the Turing machine, an abstract conceptualization of what became the modem computer.
The same year Turing and Alonzo Church independently developed the idea that all
problems that a human being can solve can be reduced to a set of algorithms. This is
.known as the Church-Turing thesis and lends a respectable intellectual foundation to the
28Turing was both, an eccentric and a marginal man within his society. He retained
throughout his life an unusually youthful, even boyish, physical appearance. His sincerity
and directness were unsettling to many of those who came in contact with him. Turing
was also a homosexual, which did not endear him to the rest of society. One of his
eccentricities was his "desert island" project, whereby he tried to minimize his
requirements by using old and broken-down things as instruments necessary for daily life.
idea that artificial intelligence can be quite real. More on the implications of the
Church-Turing theses will be presented in chapter 5.
50
In 1940, ABC (AtanasoffBerry Computer) was built by John V. Atanasoff and
Clifford Berry. Apparently the computer never functioned. Some argue that what
Atanasoffbuilt was not a computer at all, but rather parts of a computer. The controversy
may never be resolved completely, since from a certain point on there are multiple
versions of what happened. Atanasoff on the one side of the issue, and John Presper
Eckert and John W. Mauchley on the other, remained forever at odds as to who should
claim credit for the first functioning computer, Eckert and Mauchley maintaining that
ABC never worked. The evidence available to us suggests that ABC was not functional.
Technically, the first functioning computer was completed in 1940 in Britain and was
called Robinson. It was created under the Ultra program, the ten-thousand person British
computer war effort. Using mechanical relays, Robinson successfully decoded messages
from Enigma, the Nazi's first-generation enciphering machine. Colossus was a computer
used for the same purpose, beginning in 1943. It utilized the technology that first
appeared in Robinson. But Colossus, as it were, falls off from the chronological precipice
in the history of computing: because the project was highly classified, the details about
the computer and how it operated remained inaccessible to a wider audience. Researchers
had to build on something else to develop their computing ideas.
In 1941 the world's first fully programmable digital computer, the Z-3, was
developed by Konrad Zuse, a German inventor. What distinguishes Z-3 from computer
models previously mentioned is the programming capability. Programmable computers
are general purpose computers, and the types of problems they can handle are potentially
unlimited. Previous models were hard-wired to perform a very limited range of tasks. In
the US the first programmable computer was built by Howard Aiken in 1944. It was
called the Mark I. The machine used punched paper tape for programming.
51
Another conceptual breakthrough came in 1945, when Hungarian-Jewish-American
mathematical genius John von Neumann published the first modem paper describing the
stored-program concept.
29
Programs, which make up the "mind" of a computer, no longer
had to be fed into it every time one wanted to use a programmable computer. The ability
to store programs internally greatly simplified and streamlined computing. This, of
course, already makes computers potentially more autonomous in the future. Their
"mind" belongs to them, beginning with von Neumann.
Utilizing this conceptual breakthrough, Eckert and Mauchley would eventually build
EDV AC in 1951. But even before that accomplishment the two developed the world's
first fully electronic, programmable computer called ENIAC. The year was 1946, and
ENIAC was almost one thousand times faster than the Mark I built only two years
earlier ....
In 1950 it fell to Eckert and Mauchley to build the first commercially marketed
computer, UNIVAC. It was used to compile the results of the US census. Sixty years after
Hollerith had introduced a machine to handle census data, that data was handled by a
programmable computer for the first time. Finally, at the university of Pennsylvania, at
the Moore School, Eckert and Mauchley built EDVAC utilizing von Neumann's concept
of stored programming.
29Von Neumann, who is very famous for his foundational work on game theory, more
precisely, for his proof of the maximin theorem, was an eccentric and, in some ways,
marginal giant of mathematics. He appeared in various fields of mathematics with
ubiquity which is almost uncanny. Von Neumann was ethnically Jewish, but the family
converted to Catholicism when he was a child, and his father bought the title of nobility.
He remained agnostic for most of his adult life, but apparently converted to Catholicism
in earnest during the agonizing days of his terminal illness. Among strange behavior that
can be attributed to him, von Neumann's reckless driving stands out. He wrecked, on
average, one car a year. When it came to driving, von Neumann rarely attempt to
minimize his maximum loss, which may be another indication that mathematical theories
of optimal behavior and human behavior in the real world are separated by a chasm.
52
Universities were important for the ~se of the computer industry, as the quotation
from Mowery and Rosenberg ( 1998) at the beginning of this chapter indicates. And the
computer industry was absolutely necessary for the rise of the Internet. The latter is
simply a collection of computers that can "talk" to each other because they are connected.
Everyone mentioned in connection with the creation of the computer had university
education. The gifted people responsible for the modern computer were not simply
self-taught tinkerers who could make immense contribution to computer science without
a university education.
Universities also were places of financial support, which often had its origin with
government sponsored projects. Turing first supported himself while lecturing at
Cambridge and later at the University of Manchester. Von Neumann was at Princeton.
Howard Aiken was a mathematics professor at Harvard. Eckert and Mauchley worked on
UNIV AC and EDV AC at the University of Pennsylvania. The research was often
government-supported and war-related. Universities are indeed a pillar of creating high
tech leadership, but certainly not the only one.
During World War II the government funded dozens of computing experiments
(Hafner and Lyon 1996: 24). Aiken's project was sponsored by the Navy. Eckert's and
Macuhley's ENIAC project was supported by the Army. The funds that flowed to the
universities depended on the government.
When an industry is in its infancy, as the computer industry was in the 1940s, and the
transition between the conceptual and the real has not yet worked itself out, the
government becomes an important and, possibly, the only major source of funding.
Business may be reluctant to step in, not seeing how concepts and tinkering can lead to
profits based on consumer demand in the marketplace.
During WW II the government became the major customer of the computer industry.
It was responsible, in fact, for the rapid rate with which that industry established itself.
53
Computer technology would have probably arrived sooner or later, irrespective of a
World War. But the War, and the subsequent belief by governments that new technology
had to be developed, ensured the arrival of technology sooner rather than later. Not all
computer research was done in universities. Sometimes, a project would be confined to a
government laboratory. During the war Turing worked at Bletchley Park, the center for
cryptanalysis, where he created techniques to speed up decryption messages produced by
various models of the German Enigma machine. Britain's National Physical Laboratory
briefly employed Turing after the war, although it did delay and waver over the project
called ACE (the Automatic Computing Engine) that Turing wanted to build (Glenn 1996:
137).
Government was also a pillar of high tech leadership, and its neo-mercantilist
interaction with other social entities is not limited to universities. Government and
business interacted frequently, leading to the creation of the Internet. Again,
government's power as a customer enabled it to, in part, set R&D agenda. Evolution of
high technology, including those parts of it that led directly to the creation of the Internet,
depended more on what the government wanted rather than what average consumers
demanded. But the government was more a customer than a dictator and showed
flexibility of demand as technology evolved, even up to the point of essentially
abandoning what it has started, as happened with the Internet.
The Network of Networks
Computers had to be connected to create the Internet. But where did the idea for the
network come from and how was it implemented? Government, universities, and business
all played an important role in creating the network of networks which was to become the
Internet. And again, war was a catalyst. This time, however, it was the Cold War.
Specifically, the Russian success in launching a satellite into orbit suddenly raised the
54
specter of wholesale destruction. Sputnik proved that the Soviet Union could launch
intercontinental ballistic missiles at some point. Therefore, the direct threat of a nuclear
attack was bound to face the United States.
The Internet was conceived and developed as a network of communication for the
day after a nuclear strike. Even if the Soviets could carry out a surprise nuclear attack, the
US would deprive them of victory--a doomsday communication network would partially
survive, preserving some command and control capabilities and allowing a nuclear
response against the country of workers' paradise.
30
The government agency that was
directly responsible for the emergence of this network was called the Advanced Research
Project Agency (ARP A). Its emergence was the result of Sputnik, but its mission did not
actually specify the creation of a network for the day after. That came later, after a series
of conceptual breakthroughs by Licklider and Baran. ARP A's mission had a lot to do
with President Eisenhower's worldview, including his views on the military and the
scientific community.
What Eisenhower needed politically was the ability to point to a quick response to
Sputnik. The administration had large plans in store--the creation of NASA, passage of a
Defense Reorganization Act, etc. But things like these would take a long time to
implement. ARP A would look like an immediate response in comparison. What
Eisenhower wanted was civilian control over the agency. He distrusted the
military-industrial complex and experienced Weberian nausea over the bureaucratic
30Internet technology can, therefore, be viewed as ultimately originating in utopian
dreams about a workers' paradise. When dreams were transformed into a distopian
reality, and when the Soviet Union acquired nuclear weapons, speculations about the day
after · served as catalysts for the rise of Internet technology. Here, we see a connection
between (political) vision and the rise of new technology. Visionaries and utopians often
have a much greater impact than their detractors realize.
55
fiefdoms of the armed services. He looked with contempt on petty squabbles over funding
and jurisdiction among the services.
By contrast, he loved the scientific community.
He found scientists inspiring--their ideas, their culture, their values, and
their value to the country--and he surrounded himself with the nation's
best scientific minds. Eisenhower was the first president to host a White
House dinner specifically to single out the scientific and engineering
communities as guests of honor, just as the Kennedys would later host
artists and musicians. (Hafner and Lyons 1996: 16)
Eisenhower could afford to view scientists and their efforts idealistically. He was not one
himself and never immersed in the daily grind of life as a scientist. This lack of long and
continuos interaction as an insider left his mind the room to romanticize the nature of the
scientific community. He knew the military--and not only his country's military--too well,
and his experiences apparently did not give him much cause for optimism.
The idea of ARP A was actually not Eisenhower's. Secretary of Defense McElroy
suggested that ARP A be created, and he did so for the reason that his boss could easily
understand--the Department of Defense experienced fierce competition over R&D
programs and budgets between the services.
The competition was reaching absurd new heights. Army, Navy, and Air
Force commanders treated Sputnik like the starting gun in a new race, each
vying against the other for the biggest share of R&D spending. McElroy
believed that a centralized agency for advanced research projects would
reduce interservice rivalry by placing federal R&D budgets substantially
under his own close supervision. (Hafner and Lyons 1996: 18)
McElroy's suggestion became Eisenhower's policy--ARPA was born. The agency's
director would have contracting authority, and the scope of the agency' research was to be
unlimited.
ST ATEIMILIT ARY
COLD WAR
GENERAL
AVAILABILITY
OF THE INTERNET
INTERNET
COMivIERCE
CHANGE IN
BUSINESS AND
LEISURE
Fig. 3
War and the Internet
BUSINESS/CIVILIAN
COI'iAPUTER
INDUSTRY
PCs
The Cold War emerged out of the ashes of WW II, as the two collosi, the US and the
USSR clashed over global dominance. WW II greatly stimulated the development of
computer technology in the US, the UK, and Germany. Computers are an integral part
of the Internet. The network itself was conceived as a means of communications for the
day after the Cold War turns hot. Both WW II and the Cold War were catalysts for the
rise of the Internet. Whether wars generally tend to contribute to technological
development cannot be decided on the basis of this work. A lot of evidence suggests
that, in the case of WW II, the impact of hostilities was to focus scientific and
technological efforts in a particular direction, but this meant that efforts were diverted
from other projects. And the direction taken by technology was merely gathered into
focus, not created, by the war. Therefore, I conclude that WW II and the Cold War
were catalysts for the creation of Internet technology and not its causes.
56
57
Conceptualization of the network that became the Internet probably goes back to
J. C. R. Licklider. He was a man of broad, interdisciplinary interests and was appointed to
run a new ARPA program in behavioral sciences by the ARPA's second director Jack
Ruina. This appointment came in the fall of 1962. Licklider by that time was already
known as the man touting a radical and visionary notion: that computers were not just
problem-solving machines. Computers, he believed, had the potential to act as extensions
of the whole human being, as tools that could amplify the range of human intelligence
and expand the reach of our analytical powers (Hafner and Lyons 1996: 27).
Licklider fits the stereotype of a distracted slightly off intellectual.
31
He was
unfocused through most of his college days at Washington University. He switched
concentrations several times, from chemistry to physics to the fine arts and, finally, to
psychology. When he graduated in 1937 he held undergraduate degrees in psychology,
mathematics, and physics. For his Ph.D., Licklider was able to focus on psychoacoustics.
Licklider acquired fame as a researcher at Harvard, gaining recognition as one of the
world's leading theorists on the nature of the auditory nervous system (Hafner and Lyons
1996: 28). Throughout his career Licklider clung to the notion that technology would save
humanity. He belonged to a group of scientists who believed that people could be much
more effective if they had at their fingertips a computer system with good displays and
good data bases. Licklider began to discuss the hypothetical problem of a network of
computers six months after his arrival at ARP A. His vision was to give computers the
31 The connection between eccentricity, madness and genius was recently explored by
Pickover (1998). Unveiling the hidden secrets of a number of the most intelligent and
prolific real-life made scientists, Pickover (1998) delighted the reader with interesting
stories of their obsessive personalities and strange phobias. The common threads of his
book lead us to wonder if creativity and genius are inextricably linked to eccentricity or
even madness. Examples of a more academic literature that maintains that genius and
creativity are related to psychopathology include Eysenck (1995) and Kessel (1989).
58
ability to "talk" to each other. Licklider had not realized his vision before leaving ARP A,
but others stepped forward to build his dream. 32
The networking idea marked a significant departure from previous bold ideas,
including even time-sharing. In a resource-sharing network, many machines would serve
many different users, and a researcher interested in using, say, a particular graphics
program on a machine two thousand miles away would simply log on to that machine.
"The idea of one computer reaching out to tap resources inside another, as peers in a
collaborative organization, represented the most advanced conception yet to emerge from
Licklider's vision" (Hafner and Lyon 1996: 44).
The first to develop the concept of the Internet, however, was Paul Baran. Baran was
an immigrant from Poland who, as a child, left his country together with his parents. He
was a graduate of the Drexel Institute of Technology. When Baran worked for RAND he
heard about Pentagon planners who were thinking in unemotional terms about post
nuclear attack scenarios. He was fascinated.
The possibility of a war exists, but there is much that can be done to
minimize the consequences. If war does not mean the end of the earth in a
black-and-white manner, then it follows that we should do those things
that make the shade of gray as light as possible: to plan now to minimize
potential destruction and to do all those things necessary to permit the
survivors of the holocaust to shuck their ashes and to reconstruct the
economy quickly. (Hafner and Lyon 1996: 56)
The main ideas behind Baran' s plans to construct a nuclear-proof network were the use of
computers and redundancy.
32
Licklider should, probably, be regarded as one of the more normal and sane individuals
discussed in this work. Even his case, however, shows some eccentricity. On the whole,
he was a well-adjusted person: happily married for many years and almost universally
adored by his friends, colleagues, and students. Many exceptionally gifted people
discussed here--von Neumann, Turing, Godel--were a lot more eccentric and, in many
respects, marginal people within their societies.
He had arrived tentatively at the notion that a data network could be made
more robust and reliable by introducing higher levels of redundancy.
Computers were key. Independently of Licklider and others in
computing's avant-guard, Baran saw well beyond mainstream computing,
to the future of digital technologies and the symbiosis between humans
and machines. (Hafner and Lyon 1996: 56)
Baran' s idea was to use a decentralized network of communication, such as represented
59
in Fig. 1 where it entwines around the pyramid of high tech dominance. This network
clearly has no one central node (point). Additionally, each node is connected to more than
one other node. This is not a traditional way of connection.
The most vulnerable type of network is a centralized network with all paths leading
into a single nerve center. The node that serves as this center carries the responsibility for
all of the network. If it is destroyed by enemy forces, the whole network is out of
commission. The other common design is a decentralized network with several main
nodes around which links are clustered, with a few long lines connecting between
clusters. This design is practically implemented in contemporary long-distance phone
systems. Baran's design for the network of the day after had no center. It resembles a
fishnet, as Fig. 1 clearly shows.
Baran' s conceptualization was, at the most general level, essentially
conceptualization of the Internet as we know it. Messages would not be sent whole from
point A to point B. Instead messages would be divided into "packets," each containing
two essential pieces of information: a small part of the whole message and the order in
which that particular part of the message fits within the whole block that comprises the
message. Furthermore, no packet would be send directly from point A to point B along
any predetermined route. When a packet reaches a node on its way from point A to point
B it may be able to take a number of different routes. But the nodes are constantly
updated as to which route is the fastest at the moment. Redundancy ensures that if some
60
nodes and links are destroyed, others will still survive to allow messages to travel from A
to B.
The design of the day after network, as conceived by Baran, clearly resembles
Lenin's idea for the structure of organization for professional revolutionaries. If a small
revolutionary unit, a cell, is infiltrated and destroyed by authorities, others will still
continue to function. In this case, a cell is a node, a hypothetical connection point with
links going in and out of it. It is a segmented structure with no clear center. The concept
is actually used in modern ship hulls and gasoline tanker trucks. Since messages do not
travel as complete entities within the network, the destruction of one or several nodes
cannot eliminate the entire message. Only parts of a message are emitted at a time and
bounce around from cell to cell, until they reach their destination. It is as if Lenin and
Max Planck
33
created a new theoretical synthesis--revolutionary practice and the
foundation of quantum mechanics have met.
Baran' s idea proved not only interesting but workable. At the time he proposed it,
however:
Vulnerability notwithstanding, the idea of slicing data into message blocks
and sending each block out to find its own way through a matrix of phone
lines struck AT&T staff members as totally preposterous. Their world was
a place where communications were sent as a stream of signals down a
pipe. Sending data in small parcels seemed just about as logical as sending
oil down a pipe one cupful at a time.
AT&T's officials concluded that Baran didn't have the first notion of how
the telephone system worked. "Their attitude was that they knew
33
Max Planck made a puzzling but rather innocuous observation about heated bodies in
1899. It was another one of those cases where a small rough patch in a perfectly fine
understanding of the world was found to overlay a fatal crack in the basic structure.
Planck realized that his now famous equation, e = hv, implies that light is emitted in
discrete quantities, quanta, like particles or atoms of energy. On the Internet, messages
also travel in discrete quantities called packets. Routers serve as nodes, or "cells," and
direct packets to their destination where they are reassembled as coherent messages.
everything and nobody outside the Bell System knew anything," Baran
said. "And somebody from the outside couldn't possibly understand or
appreciate the complexity of the system. So here some idiot comes along
and talks about something being very simple, who obviously does not
understand how the system works." (Hafner and Lyon 1996: 62-63)
61
AT&T was a monopolist. The problem did not lie simply with AT&T' s inability to
understand Baran's idea or to have more faith in it, as Hafner and Lyon (1996) seem to
imply. Monopolists do not like when someone rocks the boat that swims on calm seas of
profits. AT&T had no incentive to change. To be sure, Baran was gifted and a little ahead
of his time, but what stood in the way of his dream was not stupidity but monopoly. And
clearly, business as a whole cannot be held responsible for slowing down new technology
if corporations that have monopoly have every incentive to stick to true and tried methods
that fill their coffers. The problem is not business; the problem is the lack of competition.
In the fall of 1965 in London, a forty-one-year old physicist at the British National
Physical Laboratory (NPL) wrote the first of several personal notes expounding on ~ome
ideas he was playing with for a new computer network much like Baran' s. In 194 7 Davies
worked at NPL under Alan Turing, building the ACE computer. By 1966 he was the head
of the computer science division. The term packet-switching to describe the movement of
parts of a message within a network is actually due to Davies, not Baran. The latter had a
very complicated phrase to describe it and it did not stick.
The technical similarity between Davies's and Baran's work was striking.
Not only were their ideas roughly parallel in concept, but by coincidence
they had even chosen the same packet size and data-transmission rate.
Independently, Davies also came up with a routing scheme that was
adaptive, like Baran's, but different in detail. (Hafner and Lyon 1996: 66)
It is important to note that Davies conceived of a packet-switching network as a prototype
of a new public communications network. His motivations seem to have had nothing to
do with preparations for the day after. This is another clue that the Cold War cannot be
regarded as the cause of the creation of the Internet, but at best, a catalyst.
62
In 1968 ARP A's computer scientist Larry Roberts decided that a network
conceptualized by Baran and Davies could work. Roberts came to ARPA from MIT's
Lincoln Laboratory. He made the initial decisions and he established the parameters and
operational specifications. Although he received input from others, it was Roberts who
built the network. Roberts was also influenced by the ideas of Len Klienrock, whose 1959
dissertation outlined the idea of packets and the nature of computer communications as
occurring in bursts. The contract to construct the core of the new network, the
ARPANET, was awarded to a small company Bolt Beranek and Newman, BBN for short,
from Cambridge, Massachusetts.
The project was completed on time, in approximately nine months. The project team
led by Frank Heart had the task of making ideas of Baran and Davies practical. At the
core of the project was the creation of the Internet Message Processor (IMP) that could
direct message traffic on the network.
34
The first IMP was a ruggedized custom-built
version of Honeywell 516 minicomputer, and was the size of a very large refrigerator.
Technical solutions were not the only ones needed for ARPA's project to work.
Universities were meant to be test sites of the ARP ANET, and universities were not
enthusiastic about joining the network. They did not want to share resources available on
their computers with others. However, universities could not pay for their mainframes on
their own. It was ARP A that supported their facilities in the first place, and it was ARP A
that forced them to join the network. This was a classic case of neo-mercantilist
interaction between the national government and universities.
3
4
The IMP directed information traffic on the network. It was Baran' s idea of intelligent
nodes made real. IMPs were eventually superceded by routers. Sandy Lerner and Len
Bozack developed routers at Stanford University in the mid 1980s.
63
The ARP ANET started with six different sites around the country. By 1972 the
ARP ANET included 20 different facilities. A number of networks similar to the
ARPANET have sprung up around the country. There was, however, one major problem
with this proliferation of networks--they could not communicate with each other. Each
network had its own protocols in the 1970s. Messages could not be sent from network to
network. Vint Cerf and Bob Kahn at BBN figured out a way to solve the problem. Their
seminal paper on the topic was published in May of 1974. Soon thereafter their idea of
universal protocol was implemented. It was called Transmission Control Protocol I
Internet Protocol (TCP/IP). It enabled exchange of information over the entire network of
networks. The infrastructure of the Internet has been laid. E-mail was also invented at
BBN, in 1972. Ray Tomlinson is responsible for introducing the@ symbol into e-mail
addresses.
ARPA, BBN, and universities made a new network a reality, but the Internet would
have never entered the lives of ordinary people without the PC. The latter was introduced
in the 1970s and made the Internet accessible to the masses by the early 1990s. While
Japan might have held the lead over the rest of the world in semiconductors, the "brain"
component of the PC, the US came to have a clear advantage in PC makers, the business
of assembling computer boxes themselves. Led by Compaq, Dell, and Hewlett-Packard,
American PC makers made their products affordable to almost everyone by the mid
1990s, with the price of some PC models dipping below $1,000.
By making the Internet available to almost everyone PCs opened the door to business
opportunities on the Internet. Suddenly, there was potential to sell to the mass market by
using an electronic medium. PCs made Internet commerce possible. The pioneers of the
ARPANET worked in the pre-PC era. Their project was government, not business,
oriented. None of the engineers and programmers at BBN became rich as a result of their
enormous contribution to Internet technology. The money related to the Internet and
64
Internet commerce began to flow well into the PC era. Business on the Internet
flourished, contributing to the overall strength of the network. Without business interests,
the Internet would have been just another way to communicate, and that would add little
to already existing means of communication. Before business Interests could have their
day on the Internet, however, other changes had to take place. The Internet had to be
"modernized," it had to be given its current attractive, user-friendly features. It would also
be necessary for the US government to lift restrictions on commerce on the Internet.
University-trained mathematicians, engineers, and scientists had built Internet
technology with government funding and at the request of a government agency.
Universities hosted the first Internet sites and demonstrated that the new network could
be useful to students and researchers. To cement the Internet leadership, to demonstrate
how important the Internet was to society at large, business had to step in--govemment
decrees and academic arguments could not have done the trick.
UNIVERSITIES
GOVERNMENT
MATH
SCIENCE
FUNDING
APPLICATIONS
FUNDING
REGULATION
Fig. 4
THREE PILLAR OF
HIGH TECH LEADERSHIP
RESTATED
None of the thre pillars can be ignored. Up to this point, we have seen the role of the
government and universities in the rise of the US Internet advantage. In the next section
the role of business will become clearer.
65
66
Modernization of the Internet
The Web is the Rosetta stone of the Internet for the masses.
Robert H. Reid
Architects of the Web
I see it but I do not believe it!
The World Wide Web
Georg Cantor
in a letter to Dedekind
The catalyst of the Internet explosion was, of course, the W odd Wide W eh. The
Internet was a tool for computer nerds, not much of use to anyone except those truly
devoted to computers and the new vision of real time communication. Online services
had their own circumscribed, proprietary content. What was needed to make the Internet a
widely-used, friendly place was standardization of access and attractive interface. The
former was conceptualized by Tim Berners-Lee, the latter by Marc Andreessen.
Tim Berners-Lee invented the World Wide Web in Geneva in 1989, where he
worked at the CERN subatomic particles research laboratory. Berners-Lee realized that
the key to unleashing the power of networked computers is simplicity. After Cerf and
Kahn invented TCP/IP, networks could communicate with each other, but to effect that
communication a user had to be sophisticated about computer technology. Accessing
resources of one network from another was difficult and time-consuming. Berners-Lee
came up with the idea of the Universal Resource Locator (URL). The idea is that all data
that can be found on the Internet can be considered part of a world-wide communications
web and can be given a specific address.
67
Berners-Lee is the equivalent of the "inventor" of the past epochs, but it was
Netscape, the business of the present, that made the World Wide Web a friendly place for
most of us. Once again, invention was taken to a higher level by business, and once again,
it spawned other technologies and businesses. On the new technologies side, a company
such as Broadcast.com made radio and TV broadcasts truly global for the first time in
human history, while new businesses, such as search engines of Yahoo and Excite and
bookstores Amazon.com and BanrnesandNoble.com, opened new vistas for work and
leisure to the users of the Internet. Nevertheless, Berners-Lee deserves praise for his
significant conceptual breakthrough. At the end of the twentieth century the Web became,
in the view of the general public, almost synonymous with the Internet.
Berners-Lee's software and protocols created the ability to browse
documents and navigate among not only different documents but among
different computers--and in fact throughout the Internet--with simple
point-and-click commands. Key to the technology was the concept of
'hyper-links,' which are highlighted words or symbols within documents
that when clicked on, cause your computer to automatically and
instantaneously jump (in virtual sense) to, well, anywhere, ranging from
the next page in the same document to a different report on a different
computer, located, perhaps, halfway around the world. Clicking a
highlighted (i.e., hyper-link-enabled) name of a team in a sports article,
would, for example, change the screen to details about the team, recent
games, players and positions, and upcoming events. In turn, clicking on a
player's name presents a detailed biography of the player, including
education, statistics, and commentaries.
This hyper-linking functionality spun the Internet from an information
terra incognita into a web of information spanning the world; hence the
moniker World Wide Web. (Reid 1997: xxiv)
The Web transformed the Internet from an essentially academic to a mostly commercial
network. In June 1993, only 1.5 percent of Web servers were commercial (had ".com"
addresses); by the end of 1996 the number of commercial servers reached 90 percent of
all servers (Reid 1997: xxv). The popularity of the WWW became immense only after
68
Marc Anrdreessen and his friends found a way to make its use attractive. This is what
happened.
One of the places where the primordial Web software spread during 1993 was the
University of Illinois, where it engaged a small group of students including a young man
by the name of Marc Andreessen. He was an undergraduate student, and it was primarily
his effort that altered the character of the Web and with it opened the door to a virtual
domain of sight, sound, and business. This is how Reid ( 1997: xxv) describes the essence
of the contribution made by Andreessen and his cohorts:
They took it upon themselves to rectify many of the shortcomings of the
very primitive prototypes then floating around the Internet. Most
significantly, their work transformed the appeal of the Web from niche
uses in the technical area to mass-market appeal. In particular, these
University of Illinois students made two key changes to the Web browser,
which hyper-boosted its appeal: they added graphics to what was
otherwise boring text-based software, and most importantly, they ported
the software from so-called Unix computers that are popular only in
technical and academic circles, to the Microsoft Windows operating
system, which is used on more than 80 percent of the computers in the
world, especially personal and commercial computers. Marc's team
circulated a version of the NCSA Mosaic browser that ran on the
Microsoft Windows operating system in October 1993 ... the number of
Web servers jumps markedly shortly after the release of the NSCA Mosaic
software for Windows.
The use of the Web became intuitive and attractive. Mosaic allowed a rich presentation
wrapped up in a graphically pleasant interface. With the new engaging and accessible
Web, the time was right for new content that could be used by all segments of society.
A Stanford University Professor named Jim Clark, who became a millionaire after
being involved with a high tech startup, decided that the time has come to do another
startup, when he heard about Andreessen's work. He asked Andreessen to recruit
everyone who helped him develop Mosaic to work for a new company. This company
69
became known as Netscape. Just before it was founded, Clark estimated that one million
users on the Net utilized Andreessen' s Mosaic, but that the potential market for a good
Internet browser could realistically include 50 million users. Building on Andreessen's
idea, Netscape created its own browser called "Navigator." It has become the standard of
Web exploration. Netscape charged for the software. The money rolled in rather
effortlessly--Netscape became the fastest growing company in history--until Microsoft
developed its own browser and decided to simply give it away.
Netscape's frustration with Microsoft was in part the reason for the anti-trust lawsuit
against the software giant. To Netscape, Microsoft's action seemed like another clue to
support the theory that Microsoft could put anyone out of business and that it was, in fact,
a ruthless monopolist. But what is there to indicate that Netscape was not seeking to
become monopolist itself? Microsoft charges everyone for its Windows operating system
(with the cost passed down to consumer by PC makers). Netscape wanted to charge
everyone (and did charge) to browse the Web. Microsoft made Web browsing free. It still
charges everyone who wants to use a PC, however.
We may note that in the war of browsers there was no synergetic capitalism involved.
Microsoft was so large that it neither wanted, nor needed any alliances or M&A to
compete against a much smaller rival. Microsoft could simply hire very competent
programmers to develop its own browser. Then the software behemoth could still enjoy
profits by selling its Windows software with every PC, and its browser came "bundled"
with the Windows.
Microsoft also became an online service provider, launching its Microsoft Network.
But it was not able to dominate this business. Microsoft remains far behind America
Online, the leading Internet access source in the world. By 1999 AOL had 12 million
subscribers. That year Netscape also ceased to exist as an independent company, as it was
purchased by AOL.
70
The flowering of the W eh meant that proprietary content of online services declined
in importance. These online services, such as AOL and the Microsoft Network, retain
their importance primarily as the means of access to the W eh. In this case, technology of
the W eh is impacting business, not the other way around. The mission of online service
providers is to give people access to the content produced by Web technology.
Everyone can have access to the W eh, regardless of the type of connection he or she
uses to access the Internet. The content of the W eh is common; the content of an online
service provider was exclusively its property, and was therefore under its control. No
central authority controlled the W eh. Its content evolved spontaneously by means of
contributions from a great many unrelated sources. The W eh epitomizes anarchist
communications. No one controls its content. The content is communal, accessible to all,
and defies feeble attempts at imposing even minor restrictions on it, such as the Decency
Communications Act of 1996. If the Internet is indecent, it is because the Web exists, and
if one wants to make things different, one probably sets himself up for frustration.
The W eh has no end and no beginning. It represents infinite virtual space within the
finite confines of the Earth. It is not possible to specify the boundary of the Web using the
term "boundary" in its conventional sense. The Web is potentially ubiquitous. Currently,
in the US, the main obstacle to using the Web is frequent delays caused by server
problems and a constantly growing Internet traffic. Since these problems are of technical
nature, it can be expected that they will be easily overcome in the twenty-first century,
given the popularity of the Web and the amount of money and, consequently, of vested
interests, that push the technology forward. What can be expected is continued rapid
expansion of the W eh throughout the world. The W eh opens infinite possibilities for
business and social interaction. We already see some evidence of that, even if our
intellect does not yet believe it.
The New Content
The new content that could take full advantage of new browser capabilities did not
become very meaningful to most people until 1996, when 56kbps connections became
widely available. Cable modem and DSL connections remain rare to this day. They can
provide Internet access at up to 100 times faster than even 56kbps modems, allowing
subscribers to really enjoy the content of the Web.
71
Graphic representation of the Web plus fast connection equals efficient online stock
and derivatives trading, Web radio with virtually unlimited number of stations, and
rudimentary television programs and video libraries. Businesses can proliferate in this
environment. Attractive graphical representation is not enough. People must not be turned
off by the tedium of waiting for a Web page to show up on their computer's monitor. The
faster the connection speed to the Internet, the more elaborate and sophisticated the
presentation on a Web site can get.
Today, millions of radio stations located on every populated continent can be heard
on the Web with the help of Real Audio technology, pioneered by Broadcast.com. In
principle, there is no reason why it should be impossible to get an unlimited number of
equivalents of TV broadcasts on the average PC, as well as unlimited number of videos
on demand. Some of this technology already exists, but is available only to people with
very fast connections and the latest models of the PC. Internet technology, however,
advances by leaps and bounds. By the end of the first decade of the twenty-first century
proliferation of new content is likely to make the PC the leading, if not the only, tool of
entertainment and communication. The type of new content that one can get on the
Internet may not have been used to its fullest potential because of slow connection
speeds. A genuinely new content for the twenty-first century has not yet been developed.
It awaits conceptual breakthroughs in computer science, artificial intelligence, and
72
neurobiology. The new content would have to appeal to senses beyond sight and sound if
it is to be a truly new content.
Chapter 4
The Fallout
Internet Commerce
The Internet and electronic commerce are two of today's most important
technologies.
USA Today, December 3 1998
Skepticism and Triumph
73
One of the most incredible events of the 1990s was the rise of Internet commerce. It
happened in earnest only in the last years of the decade. Internet commerce was at first
approached with caution, as great uncertainty dominated the question of acceptance of the
Internet by the average consumer. By mid 1990s it became clear that the Internet could be
used to buy and sell many products. However, profits eluded most Internet merchants.
Adult entertainment seemed the only area where Internet businesses were making money.
The conclusion has to be that the initial skepticism about the potential of business on the
Internet was quite reasonable.
Commercialization of the Internet would not have been viable without the PC. When
ARP A abandoned the project, most of what remained became known as the NSFNET,
since the National Science Foundation took over the network. Commercial transactions
were illegal, and university networks were not what was needed to commercialize the
Net. Bob Metcalfe, who worked at Xerox PARC (Palo Alto Research Center) became the
first computer network millionaire. He invented Ethernet, allowing commercial
companies to connect their computers located within one thousand meter range from each
other. Metcalfe started his own computer communications company, 3COM. To connect
74
to Ethernet a firm would have to purchase Ethernet cards for its computers at the price of
$1,000 per card.
Universities indirectly played a crucial role in commercialization. Three companies
that became important for commercialization of the Internet stormed out of the halls of
Stanford University: Cisco, SUN Microsystems, and Silicon Graphics. Stanford never
made a penny from any of these companies, although it did provide some support for
technology developed by students who later became founders of their companies.
Government grants were also important (Cringely: 1998). Stanford's policy was to allow
professors and students who developed technology to retain intellectual property rights to
this technology after leaving the university. This eventually contributed to the diffusion of
technological innovation.
Technical expertise alone and greater numbers of companies were not enough to
commercialize the Internet. The federal government had to lift restrictions on commerce
over the Internet. This was finally accomplished in 1992, when Rick Boucher (D-V A)
amended a bill to allow Internet commerce. What was an obscure amendment became the
green light for money to flow over the veins of the Internet. The timing was just right: the
Web had just been invented and Mosaic was about to appear.
Already 1998 is considered by many the year that Internet commerce has arrived, at
least in the US. By that year intuitive Web browsing was combined with relatively fast
access speeds, and wide ownership of PCs. By early 1999, in the US, about half of
households had at least one PC (The Financial Times: 1999). The emerging ubiquity of
the Internet created new business opportunities--the mass market could now be accessed
by businesses on the Web.
Sales of goods over the Internet were up almost four times during the Christmas
season of 1998 in comparison with the same period a year ago (Marshall 1998: 5). While
75
Internet shopping still represents only a small percentage of all shopping, its importance
is rising rapidly.
Sales are estimated to reach $3 .2 trillion by 2003, according to a survey
released this month by F arrester Research Inc. of Cambridge, Mass. The
report constrains this caveat: Success is contingent on government and
business determining how to deal with regulation, consumer protection
and infrastructure development. Without this cooperation, sales are
projected to be $1.8 trillion, Forrester said.
"More than $1 trillion in global Internet commerce depends on how
effectively business and governments can work together," said Michael
Putnam, a F arrester analyst.
By the end of this year 20 percent of large US firms will have electronic
commerce systems in place, the report said. Forrester projects that figure
will reach 65 percent by the end of 1999. (The Washington Post 1998:
F05)
This passage illustrates that the quality of interaction between the government and
business is crucial. A preliminary estimate showed that if the process between the
government and business is not smooth the overall level of revenue of Internet commerce
can be as much as $1.4 trillion less over five years, which is a loss of almost 44%. The
government has the power to help build up or to destroy the industries of the country it
governs. Neo-mercantilism today may be less about doing so through trade restrictions,
and more about providing the right business environment.
To provide such environment Congress imposed a three-year moratorium on taxes on
Internet commerce. It also appointed a special commission to study the issue of the
impact of Internet commerce and taxation. Not surprisingly, state and local governments
were up in arms over this decision and went to the Supreme Court to prevent the
commission from ever meeting, arguing that the committee's composition was slanted
toward business interests. It has to be admitted that state and local governments face not
only an uphill battle to get what they want--to tax Internet commerce like any other sales
76
transactions--but also to maintain the revenue they need to run existing services. The rise
of Internet commerce is not a boon to state and local governments.
Currently, forty four states and the District of Columbia have sales taxes, and these
are important in raising state revenue. Internet commerce undermines the revenue
collected from sales and thus far eludes attempts to tax it. With mail orders, the taxes are
collected at the state where a sale takes place, and a sale legally takes place where the
seller maintains substantial physical presence. Many Internet businesses are difficult to
pin down in terms of their physical presence, and some would ship orders from states
other than the one where the company has its headquarters. The current law did not
envision the rise of virtual space, consequently the emphasis on "physical presence" was
reasonable. The federal government has no incentive to give the states more financial
independence, and it is under pressure from business interests to keep Internet commerce
tax free. Also, it is evident that the Internet and related technologies have contributed to
the surprising economic boom of the 1990s in the US, even in the face of the global
slowdown. The federal government is, therefore, very unlikely to impose taxes on Internet
commerce, lest they would have immediate negative economic impact and result in the
wrath of Wall Street and Main Street alike. In the meantime, states and local jurisdictions
must face the difficult truth that what is an economic miracle for some is a growing
nightmare for others.
Internet commerce is poised to become a triumphant exercise in new business
opportunities. However, all signs are there that most firms cannot be winners. It proved
very difficult to be profitable on the Internet in the 1990s. And the size of the company
(its market capitalization, the number of its employees, etc.) is not an indicator of
profitability or even competitiveness. Profits elude almost every type of purely Internet
business, except pornography. Wall Street showed a great deal of immediate optimism
about Internet companies. This explains their, in some cases, enormous market
77
capitalization value. It seems unlikely that this exuberance can be sustained for a long
period of time. The problem is that it is nearly impossible to quickly separate between the
truly sound companies and those that sound good on paper (or look good on the display of
a computer screen) but have little business potential.
The rise of so many Internet companies to incredible heights of market capitalization
is due to the rise of cash available for equity investments. 35 When it is impossible to
quickly separate the wheat of Internet commerce from the chaff, money is simply thrown
at Internet commerce as a whole. Greed ruled Wall Street in the 1990s, fear will set in
later. Many Wall Street bears have been talking about a speculative bubble since the Dow
hit 7,000 in 1997. When it closed above 10,000 for the first time in history on March
29th, 1999 more eyebrows were raised. But the NASDAQ, which is heavily
technology-weighted was at around 2,400 at the time, which is equivalent to 12,000
points of the Dow. On Wall Street, technology companies have had an even faster run
than the Dow, in the 1990s. The fact that many of these companies are unprofitable, and
some are hopelessly so, suggests that free market can finance companies that are losing
money but that have potential and can even become central to a country's economic
infrastructure.
Political scientists sometimes assume that government must be involved in
identifying potentially crucial economic sectors and actively supporting them through
subsidies or partial ownership (Wade 1992). The government would take, in such a case,
the responsibility for planning the economic infrastructure of the country. Wade ( 1992)
35This is due to greater participation of average Americans in the stock market. Almost
fifty percent of households have some financial stake in equities, whether they are
invested directly or through a mutual fund. The rise of investment levels may be in part
due to fears that Social Security is not viable far into the future, leading people to get
involved in money-making for themselves. Good economy fueled equity investments,
which in turn fueled the economy. This virtuous circle, or "circular and cumulative
causation" to use Myrdal's term, characterized the US economy in the 1990s.
praised South Korean dictators for their "can do" attitude that leads to government
activism. But government hubris appears more pernicious than hubris of the market, in
the 1990s. South Korea is no longer considered an example of economic management,
after the debacle of the late 90s. In the US, in contrast, the market financed all sorts of
technology companies, whether the financier was a venture capitalist or Wall Street.
78
The problem in financing promising new businesses in the US is not the lack of
capital. If the danger exists, it is because at the dawn of the new century capital may be
too abundant, with too much of it going to finance concept companies. Not every firm
with potential in the Internet or related high tech business will survive the gold rush
years; but it is misleading to argue that government initiative and money are required to
support companies that must bear many years of losses before thier potential importance
for the economy bears fruit. The market has done a great job in the US in financing
startups and concept companies that had to sustain a long period of uninterrupted losses.
The time frame of individual traders may range from 10 minutes to 10 years but, as a
whole, the market has taken a long term view of high tech development. The section
below illustrates this point through a case study of one very successful company that,
since it came into being in 1995, has never made a profit.
The idea that governments are somehow more mindful of the long-term prospects for
their economies is, at best, dubious. Corruption and self-interest arise almost
instantaneously in great corridors of power. The more power the government has, the
greater its potential for corruption. Government's responsibility for the economy would
mean bureaucratization of the economy, with all the attending problems outlined by Max
Weber. But a more interesting proposition is that long-term planning is impossible. This
is exactly what I try to show in the last chapter. If true, this proposition does have global
implications. No one can really plan for the long term. For now, however, let us examine
79
what makes for a successful company in cyberspace. As already hinted, it is certainly not
the ability to turn a profit quickly.
Amazons Win
How did some companies succeed on the Internet? Amazon.com is a perfect example
of how traditional business techniques apply to the new business venue of the Internet.
What Amazon had, as opposed to most other companies, is a combination of multiple
features, each of which is quite traditional, and proved important to the success of
businesses for much of American history. Amazon had an effective gimmick to start with,
a catchy name. This alone allowed it to differentiate itself not only from other
booksellers, but from everyone else on the Internet. The company could easily draw
attention to itself and, as we shall see in the next section, the attention of customers was
more than matched by the attention of Wall Street. The rapid rise of Amazon was
spectacular. "The company is one of the most widely visited electronic-commerce sites,
having attracted nearly eight million customers to date" (Anders 1999: W A3).
Amazon had a catchy name, it also had the rig_ht size. That is to say, the "store" was
huge, offering a very wide selection. It played on an important American value, the ability
to choose, to attract customers. Amazon has emphasized the sheer size of its enterprise
from the very beginning. It seems to have succeeded in creating the image of a universal
bookstore. Almost every book published in the English language could be bought at the
store's site. Bigness has its attraction, and Amazon exploited it to the fullest.
The convenience and ease of using the services were also important factors in the
success of such companies as Amazon. A customer could purchase merchandise with a
single mouse click. Everyone could master that. The role of the Internet was to take
convenience to a new level. If traditionally one could not go to the store in an armchair,
the Internet brought the store to the armchair. Books are extremely well suited for Internet
80
sales. It is a type of product that does not have to be inspected in person before a
purchase. Customers can read book reviews for those books they consider buying and
find out about related books. Going to the store and leaving the store became meaningless
concepts. If you forgot to buy something you wanted, you could be back at the store in
seconds, as long as you had the Internet, regardless of your geographical location.
Delivery charges are often offset by the lac~ of taxes, and Amazon usually ships
orders via priority mail for repeat customers, even when they do not request any
expedited delivery and pay only regular delivery charges. This practice is an example of
making different components of a business fit into a single business identity. The essence
of Amazon is supreme convenience and speed; very fast delivery complements these
features and rounds off the character of the business as a whole.
The Amazon example illustrates a very important point. And it has to do with
exaggerations and even occasional misperceptions of the role the Internet plays in
conducting business. The nature of what it takes to succeed seems to remain the same: a
catchy name, wide selection, convenience and ease, and prompt customer service. The
Internet has not introduced any of these things into general business practices in the US. It
has done nothing to undermine them, either. The changes introduced by the Internet
added variety and greater convenience on the customer side of business transactions. It
does not seem plausible that the Internet is changing the formula for a successful business
on the seller side of transactions--a good gimmick, selection, convenience, and attention
to detail in customer service are as vital as ever, and the spectacular success of Amazon
illustrates just that.
Those who do not follow business closely may find it surprising that when talking
about the success of Amazon, we can only talk about its ability to become a household
name in a very short period of time, the quality of what it sells, and its market
capitalization--we certainly cannot talk about successful profit-making. Amazon is not
81
just business on the Internet, it is business in the twilight zone. Since Amazon began
business in 1995, it lost money every single year. In mid 1998 it seemed that the more
money the company lost, the higher its stock price moved. Undaunted by losses, Amazon
expanded its operations in 1998, making acquisitions and diversifying into music and
video merchandises, both of which are quite likely to reduce its overall profit margins. It
also expanded into "Shop the Web" service that lets customers order merchandise from
other vendors. In March of 1999, the original giant online bookstore entered the
online-auction market (Anders 1999: W A3). Because of its popularity, Amazon has the
market clout to charge sellers and business partners for the privilege of appearing on its
site--both a per-listing fee and as a modest percentage of each transaction.
The surreal rise of Amazon is complemented by the company's surreal CEO, Jeff
Bezos. As a self-made billionaire, Bezos is dedicated to his business. He looks like the
stepfather from the 1980s series of movies by the same name, only happier. Bezos has the
tendency to laugh loudly and contagiously, which can serve his as a management
technique for getting attention of his employees. The success Bezos achieved is mainly
the result of the market's perception of his company's potential. Amazon did not become
bigger than American Airlines (in terms of market capitalization) in just three years
because it was targeted for growth by political authorities. It has done it on its own. More
precisely, it has done so because of investor confidence, generated in a free, regulated
market.
Transformation, Withering Away, and Birth of New Industries
The doctrine of the perpetual flux, as taught by Heraclitus, is painful,
and science, as we have seen, can do nothing to refute it.
82
Bertrand Russell
A History of Western Philosophy
The Internet is stimulating wholesale changes in essentially every industry
and every business .... Broad but essentially inevitable evolution of
business--markets, industry structures, practices, and prices--is waiting for
wholesale response and transformation.
The Internet changes everything.
Robert H. Reid
Architects of the Web
Bill Gates
at a business meeting in London, 1999
Bookselling and brokerage businesses exemplify transformation of existing
industries under the impact of the Internet. The industries seemingly remain the same.
What changes is the way they do business. And the change mostly consists of adding new
ways of doing business to the already existing ones. Companies such as Ameritrade and
DLJ are examples of brokerage firms that undergo a change of identity as a result of the
Internet technology. BarnesandNoble.com show how the booksellers transform under the
influence of Internet technology that is accessible to the average person. Companies such
as E-Trade and Amazon.com, however, did not even exist before 1995, and their birth is
due to the rise of Internet commerce. A new company does not necessarily mean a new
industry. But new companies on the Internet may be a sign of transformation of an old
industry, and E-Trade and Amazon.com certainly are.
The Internet changes the face of some industries, but its impact goes even beyond
that. A dramatic economic development resulting from the use of Internet technology may
involve the disappearance of some industries under the driving force of the Internet.
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Below, I take a brief look at the impact of Internet technology on PCs, TVs, and radios.
The Internet became commercialized because PCs gave Internet access to the average
person (chapter 4 ), creating a whole new space for mass market. A great irony of success
of the Internet may be that the types of businesses that made it possible in the first place
may become its victims and wither away.
For the first time in history the disappearance of the PC industry is a real possibility.
In 1999, the company named Free-PC.com announced that it would give away PC in
exchange for a customer's agreement to be exposed to Internet advertisement. The
company is a closely held California startup founded by investor Bill Gross, and plans to
give away only sub-$1,000 PCs that are manufactured by Compaq Computer, the largest
computer manufacturer in the world. Internet service also comes free, but consumers
must agree to use it at least 10 hours a month and allow their PCs to download
advertising that is displayed in a strip on the right side of the screen (Clark 1999: W A3,
AlO).
The case of Free-PC.com illustrates not only the power of the Internet to alter the
nature of business, but also the power of synergetic capitalism to contribute to that
change. Compaq computer is really at the center of the enterprise, and it is Compaq that
pays for Internet access. In addition, Free-PC.com is to be supported by USA Networks
Inc. It has agreed to supply $10 million of the new firm's $3 0 million in initial funding
(Clark 1999: W A3, AlO). The motivation behind Compaq's and USA Networks' actions
is to expand their advertisement.
In 1998, Marc Andreessen, the developer of Mosaic, also predicted the demise of
PCs. His vision preceded the rise of Free-PC.com. This demonstrates once again that
Andreessen is a gifted visionary. This is how St. Louis Post-Dispatch (1998: Cl) related
Andreessen's musings:
Personal computers will be free soon, as companies give the machines
away to lure internet users, according to Marc Andreessen, executive vice
president at Netscape Communications Corp.36 PC prices are falling
rapidly as manufacturers compete for sales. "We are on the way to the free
PC," said Andreessen, comparing the future of PCs to cellular phones,
many of which are given away or sold cheaply to lure subscribers to
mobile phone service. The money will be made on providing Internet
service over the PCs, Andreessen said, not on the boxes themselves.
Among the other predictions from attendees of a conference on the future
of computer networking and telecommunications: that cable television will
prove to be the best way to get Internet service into homes and that 3Com
Corp.' s Palm All personal organizer could one day threaten the PC with
extinction. Andreessen also predicted the "death of the consumer software
industry" as more programs become free over the Internet.
84
Not everything that makes a lot of sense as a vision, however, also makes good business
sense. As the twenty-first century is dawning, it remains to be seen whether the era of free
PC is just around the comer. Advertisers do not give away free TVs, just so that one
could be exposed to advertisement; but then again, individually targeted advertisement is
not possible with traditional TVs, but quite realistic with PCs over the Internet.
Individually targeted advertisement is possible because of the Internet. Advertisers can
form a pretty good idea about a customer's preferences by noticing which Web sites he or
she visits.
Online services, for their part, may want to give computers away in exchange to
subscription for their services. But this is merely a theoretical possibility. Cable
companies do not give away free television sets to their customers; but then again,
competition between online services cannot possibly be compared to a very limited
competition in the cable industry. Thus, it is premature to predict whether in the short
run--the first two decades of the twenty-first century--either advertisers or online services
will find it profitable to give away PC in exchange for exposure to or the use of their
36Netscape was bought by AOL the same year and ceased to exist as an independent
company in 1999.
85
services. Perhaps the continuing deflationary environment of the computer industry will
tum PCs into cheap products similar in price to today's AM/FM radios or small TV sets.
In the meantime, the PC business has been booming in the 1990s. A flurry of M&As
occurred, signifying consolidation in the industry, the most dramatic of which were
Compaq's acquisition of Tandem Computers and Digital Equipment Corporation.
Although some companies failed to meet Wall Street's expectations of earnings for
particular quarters, the PC business is still booming at the dawn of the twenty-first
century. Failure to meet expectations is mostly the result of expectations becoming
unreasonably high in some cases. All leading PC makers are American. Compaq
Computer, based in Houston, is the world's largest PC maker.37 Dell Computer is the
world's largest direct PC company, and second only to Compaq in total sales of PCs.
Thus, while theoretical speculations may predict a rapid demise of the PC, the relevant
evidence indicates continued growth of the industry and immense fortunes for its
captains.
Dell Computer Corporation ... announced US expansion projects to support
the growth of its North American business, including construction of
additional facilities in Central Texas and expansion of some operations to
a new location in the Nashville, Tenn., area ....
The new projects continue Dell's global expansion, including the
announcement or completion of five manufacturing facilities worldwide
over the last 16 months. Among the new facilities are two in Ireland and
one each in China, Brazil and the United States.
The Tennessee location will complement Dell's operations in Central
Texas which currently include two campuses, totaling 940 acres; 3.5
million square feet of space and three manufacturing sites. As Central
Texas' largest private employer, Dell's direct and indirect economic
impact is estimated by economists to be more than $5 billion and 50,000
jobs. Last year, Dell hired 4,000 new employees in Central Texas and
economists estimate that more than 60 percent of all new jobs created in
the area were attributable to the company. (Business Wire 1999: 1)
37This ranking is based on revenues.
86
This strongly suggests that the Internet is not poised to dismantle the PC industry as we
know it. The demise of the PC, if it occurs, is a long-term possibility. Will the plains of
Texas and the Silicon Valley become the new rustbelts of the twenty-first century, when
the era of the PC is past? Perhaps. It may also happen that existing companies, such as
Compaq, Dell, and Hewlett-Packard will gradually start producing the technology that
will replace the PC. The question of the new rust belt will be resolved based on how
gradually or abruptly the transition from the PC to new technology will take place.
In the meantime, the future of computing, and consequently of computer-based
businesses looks bright. Optical, DNA, and quantum computers may become the next big
thing of the computer industry. The Internet is not alone in transforming technology. As
we have seen, mathematics, science, and prior technological development all determine
the shape of new technology. The Internet, however, can hasten the demise of the PC
industry by driving the cost of most individual units down to zero. At present, companies
like Compaq are interested in giving away sub $1,000 PC to advertise much more
expensive models of PCs and notebook computers. When technological developments
drive down the cost of even such powerful and sophisticated models, there may be
nothing for a PC company to sell. Improvements beyond a certain point are not likely to
captivate consumers to such ·an extent that they would pay hundreds or thousands of
dollars to get the latest model, when they can obtain all the capabilities they need for free.
The evidence presented here, however, shows that the PC industry is still healthy and
growing and its demise, therefore, most likely lies far into the future.
TVs and radios are under pressure, because the Internet allows access to a virtually
unlimited number of radio stations, and digital quality pictures, albeit still only on small
screens are becoming available to those who connect to the Internet using ISDN or a
cable modem. Broadcast.com was a pioneer of the new medium on the Web. Its Real
87
Audio technology is a major threat to conventional radio and television. Again, the
Internet or business in general could not have done this on their own.
Mathematical-scientific foundation was at work as well. Compression technology utilized
by Real Audio is ultimately based on theoretical work in complexity of mathematician
and scientist Benoit Mandelbrot. Business and mathematical-scientific foundation met to
threaten radios and TVs through the use of the Internet. Improvements in technology are
likely to undermine those industries even further. But given that 98 percent of American
households have a TV set, the demise of television as we know it, too, must be regarded
as only a theoretical possibility.
New technology generated demand for new types of goods and services. Thirty years
ago no one would have thought that online service companies, such as AOL, will become
among the largest firms in the US. Nobody could foresee the rise of firms that, aside
perhaps from their headquarters, exist only in virtual space. As heavy industry began to
leave the US under the pressures of global forces, high technology stepped in to create
and shape new industries. Now these industries have become the new economic core.
When the high technology of today becomes the rust heap of tomorrow, new industries
will emerge to carry on the torch of economic prosperity. Most of them cannot be
envisioned, just like the rise of Internet commerce came as a surprise.
Visionary ideals of yesterday acquire novel interpretations of today and become real
applications of tomorrow. Advances in biotechnology, DNA research, robotics, parallel
and quantum computing can alter the economic landscape of the twenty-first century
beyond recognition. Governments would be wise to let industries, based on new and
improved mathematical-scientific foundation, emerge on their own. This also implies
allowing older industries to die out or move out of the country, if they prefer to do so in
search of cheaper labor. Just like the agricultural sector in the US and other advanced
economies has dwindled to include only a tiny percentage of the labor force, the
conventional "industrial" sector is losing its importance today. Flexible labor markets
facilitate transition from the industry of the past to the industry of the future, even if in
the present the price is a somewhat higher unemployment rate.
88
The US, in February of 1999 saw its unemployment rate slide to 4.3%, one tenth of a
percentage point below the national unemployment in Japan, and far lower than the
double-digit unemployment rate of the European Union. But Japan and Europe are behind
the US in adoption of high technology,38 and it seems they are yet to face the difficulties
to come from reduction of their respective welfare states and industrial subsidies.
Free-for-all capitalism is not something that is going to save the world, and the US
leadership in high technology is best explained not on the basis of a purely liberal view,
but by ad hoc neo-mercantilist interaction between the government and non-government
entities; however, the rigidity of European welfare states and closeness of Japanese
business-government relations do not appear to be attractive alternatives--if indeed they
are viable at all.
Political and economic considerations are not the only important ones in explaining
why Japan fell behind the US in the utilization of Internet technology. Cultural
idiosyncrasies are significant as well, as the passage below makes clear.
You heard that right: In the land of NEC and Toshiba, only a fraction of
households, colleges and offices constrain computers. Bankers still do
complex spreadsheets by hand, using pocket calculators. Barring a few
aberrant exceptions (like the intranetworked Fujitsu) even the information
industries shun computers.
While Japanese consumers embrace video cameras, fingernail-size
audiocassettes, virtual gerbils and satellite TV, Internet use lags some parts
38Japan has taken a lead in robotics and nanotechnology. These may very well be
extremely promising technologies. (Nanotechnology is potentially world-transforming.)
But in technologies that currently have very wide business applications, such as PCs and
the Internet, the US has a clear advantage.
of Asia, as well as Europe and is way behind North America. It's a
problem unlikely to be remedied during Japan's current economic
slowdown, and by all accounts is hindering Japan's economic recovery.
Part of the problem is that Japanese use three alphabets. Two of them, with
3 5 letters each, could reasonably fit on a keyboard. But the size of some
letters--or the font--varies according to meaning. The space between
letters--kerning--has to be adjusted manually, to serve as punctuation in a
language without any. If that isn't time-consuming enough, the third and
most important alphabet called kanji, is made up of almost 2,000 ancient
Chinese characters--more than any typewriter could ever contain. No
wonder keyboards and typing classes, until recently, were virtually
unknown. (Hamburg 1998:
www.forbes.com/tool/html/98/jan/O 105/feat.htm)
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Multiple alphabets is a technical challenge peculiar to the Japanese culture. In addition,
the culture of Japanese business seems to hamper the adoption oflnternet technology. A
clash between Japanese business customs and the new productive forces of the Internet
may be looming. Here is the situation.
The use of e-mail, Internet's killer application, is frowned upon in the
business world, because of the premium that's still placed on
communicating face to face. "It would be difficult to change the Japanese
mindset that when you work, you have to see your office colleagues, or go
out and meet your customers," says Tadashi Tabuchi, multimedia sales
manager at Fujitsu in Osaka. When will that mindset change? Not until
more of the techie twenty-something generation reaches management
level. (Hamburg 1998: www.forbes.com/tool/html/98/jan/0105/featb.htm)
This information about the state of the Internet in Japan is a clue that the Net can
potentially transform not just industries but cultures as well. When the "techie
twenty-something generation" does reach management level in business organizations
and important positions in government, the economic utility of using the Internet may be
seen as too costly to pass up; and then the Japanese business culture will be transformed
and, under the impact of the Internet, the whole society may come to accept more
impersonal and distant human interactions as the norm.
PCs
DEATH OF
PCs
THE INTERNET
Fig. 5
TELECOivll\oruNICATIONS
VIRTUAL
BUSINESSES
Technological Origins and Consequences
of Internet Technology
Internet technology was born out of the confluence of computer and telecommunicaitons
technologies. The PC was absolutely necessary for the Internet to acquire the character
that it has today--an immense marketplace and a free for all public square. The PC
made the Internet accessible to nearly everyone in the US. However, the PC industry may
fall victim to the spread of the Internet, as online services and advertisers begin to give
away computers in exchange for subscribing to their online service or accepting exposure
to specific advertisement. Tbis is creative destruction with a vengeance: one industry helps
to spawn another and is subswned by it.
90
Chapter 5
Global Implications
The Internet is the lightning rod drawing a lightning bolt of world change.
91
Robert H. Reid
Architects of the Web
Political and Business Implications
I believe, further, that he is prosperous who adapts his mode of proceeding
to the qualities of the times; and similarly, he is unprosperous whose
procedure is in disaccord with the times.
Niccolo Machiavelli
The Prince
A number of important implications can be derived from an analysis of US
leadership in high technology. In this section I consider global political and business
implications. In the next section I consider global philosophical implications. Political
and business implications are drawn almost entirely on the basis of chapters 3 and 4,
which are empirical and descriptive. But philosophical implications, being more
interpretive, perspectival, and uncertain also rely on chapter 2, especially on critical and
Apocalyptic perspectives, and on philosophy of mathematics and science in light of
crucial twentieth century findings.
The study of American Internet dominance demonstrates the importance of limited,
ad hoc government involvement in the process of development of high technology.
Neo-mercantilist interaction between government, business, and universities made the
United States the leader in civilian high technology, such as computers and the Internet.
But this interaction was often sporadic and intermittent. The government was only one
pillar of dominance. It is a mistake to claim that the US advantage in high technology is
92
solely due to government. The implications that can be drawn for the global context, i.e.,
implications relevant not just for the US, seem to be the following:
• 1) Incredible leaps in civilian high technology can be accomplished without
government ownership--much less monopoly--of major scientific and research tools.
• 2) Long-term government planning is not necessary and is likely to be detrimental to
the rapid development of civilian high technology.
• 3) The willingness of governments to abandon the project and leave all of it to the
business sector and academia for further evolution can be an important catalyst in the
development of high technology, because this allows for greater flexibility in the
creation of new technology.
• 4) The market is capable of taking a "long-term" view when it comes to the creation
of high technology by ignoring many years of losses on part of promising high tech
and derivative companies and supplying them with necessary capital for innovation
and expansion. There is no need for the state to channel the flow of capital into the
companies it believes to have a promise in producing high technology.
• 5) A "flexible labor market" is not just a euphemism for rampant layoffs. US
economy had a much more flexible labor market in the second half of the twentieth
century than Japan and Europe. This ensured that the labor force was available for
advanced high technology industries when those emerged.
• 6) Cultural idiosyncrasies played a role in the rise of the US advantage in the Internet
over the other two members of the Triad. Japanese strong preference for face-to-face
business meetings and the use of multiple alphabets slowed down the adoption of the
Internet in Japan.
• 7) An important factor in the equation of US dominance was the American brand of
synergetic capitalism that concentrated on value creation rather than on the size of
newly created companies. This is in sharp contrast to would be technological
93
powerhouses, such as South Korea, that concentrated on the size of their businesses
The desire to combine skill and access to new markets through M&As was tempered
in the US with the steadfast determination not to stray far from the core
business/competence. Here pragmatism, too, prevailed over the temptation to go to
extremes.
• 8) The Second World War and the Cold War were important catalysts for the
development of computer and Internet technologies. They focused scientific and
technological energies in the direction of those technologies. They also diverted
energies from other mathematical, scientific, and technological projects. For example,
John von Neumann had to abandon his project of laying a game theoretic foundation
for economics.
The federal government did not have the monopoly over research and development.
On the contrary, private and state-run universities were absolutely necessary in the
development of what came to be known as Internet technology. Socialist states--and some
of them survive into the twenty-first century--and most developing states are far more
likely to own most or all of the means of production of high technology. Their
accomplishments in modern high technology, especially computers and the Internet, pale
in comparison to US accomplishments. The United States government used the
procurement process, rather than outright ownership, to help create the technology
discussed here. Ownership of universities and control of individual scientists and
inventors was out of the question. Even the procurement process, in the case of the
Internet, cannot be deemed to be a purely government-driven enterprise. The relationship
between government, universities, and business has been cooperative rather than a
producer-customer one. Each party had a stake in the system. The common interest was to
see the project, or a patchwork of projects, succeed. It did not matter that the parties
desired success for different reasons.
94
Characteristic of the successful government involvement in the process of high tech
development in the United States is the lack of rigid, long-term bureaucratic planning.
The creation, and later the explosion, of the Internet illustrates how a specific idea
designed for defense purposes and promoted by a government agency slowly evolves into
applications that transform work and leisure of society, helping to produce unexpected,
never before seen wealth. The ARP ANET evolved into the Internet of today.
It seems that technological evolution, just like its biological counterpart, can proceed
toward more complex forms without intervention of the Creator. The government does
not have to play God to civilian high technology. When the US government abandoned its
doomsday-communication project, academia and the business sector took bits and pieces
of the existing technology and spun it into the technological world wide web of the
twenty-first century. Governments have to be open to the idea of technology transfer to
the private sector. The latter is more flexible and is better positioned to let the evolution
of technology work itself out. In the case of American computers, the Internet, and
various derivative businesses the evolution produced economic results that any country in
the world, at any time of history, could envy. To let the project evolve the government has
to be willing to turn over the bits and pieces of it to the private sector and get out of the
way, if necessary. The less of the project (research facilities, people, financing) the
government owns from the project's inception, the more likely it is to abandon it
altogether. Small investments are easier to part with.
A point related to this advantage of "evolution of technology" over government
planning concerns the issue of picking winners and losers in the competitive game of
high technology business. The US government did not try to favor a particular company
or a set of companies in the race to become a major player in computers or the Internet.
No one had the foresight to predict 10 years in advance which companies would become
the most promising players worthy of generous government support. The market
eventually had to decide, and high technology did not suffer--the United States became
the undisputed leader.
95
The point is that the market is capable of taking a long-term financial view. Political
scientists sometimes imply that this is impossible, and therefore, government intervention
is necessary to promote promising commercial enterprises. But they are wrong, and the
analysis of this dissertation clearly shows that. Robert Wade (1992) suggested that the
mentality of public officials should be "there is nothing we cannot do." Wade gave
former South Korean dictator Park Chun Hee as an example of this bold,
achievement-oriented attitude. He lamented the apathy and inaction of the American
government in the face of the changing economic environment (characterized at that time
by severe recession). Five years later, however, it became clear that the East Asian
economic success built on deregistic policies was exaggerated in the perception of almost
everyone alive. The extent of corruption and mismanagement would have likely brought
the entire region to its knees, if it were not for US and IMF intervention. Picking
industries or particular companies as national champions proved to be less benefitial than
some thought.
The US government never designated the computer industry, the Internet, or any
particular company in these industires, as crucial to the future of the nation's economy.
On the contrary, it abandoned the Internet. And in the computer industry, the government
suspected the biggest players, IBM in hardware and Microsoft in software, in having
monopoly power. Consumer electronics, a sector where Japan seems to have held the
edge over the US for a couple of decades--incidentally without help from the Japanese
government (Krugman and Obstfeld 1994)--became more and more enmeshed with
computer technology. Thus, the United States received a boost relative to other countries
in consumer electronics as a result of technological spillover from other sectors. The
government did not have to designate them as vitally important for the country's
competitiveness.
96
Computer technology, the Internet, and the businesses they have helped to spawn
may be on their way to being the core of the post-industrial society of the twenty-first
century. They claim this central position not because the governments proceeded with the
dictatorial, no-holds-barred mentality of achieving fantastic projects, but because of
indirect, intermittent, and ad hoc government interaction with the business community
and major universities and research centers. Both World War II and the Cold War
prompted the governments in the West to get involved deeply in scientific and
technological projects. But even these rather extreme events did not lead to
monopolization of scientific and technological power in the hands of the government.
Pragmatism triumphed over totalitarian theories of centralization. It also triumphed over
theories of extreme decentralization and hostility toward government involvement.
Thus, without any special designation by the government, without in any way being
chosen by public officials for that purpose, computers and the Internet have become. the
integral part of the US economy and are poised to become an integral part of the
economies of all developed countries. But the US has a clear advantage in the speed and
the degree to which computers and the Internet are adopted. This is explained by the
flexibility of the US economy. The government does not designate some industries as
"key." Consequently, really key industries such as computers and telecommunications can
emerge in full force, without having to compete for labor force with
government-subsidized industries. Flexible labor markets are catalysts for the adoption of
high technology. The other two members of the technologically advanced triad, Europe
and Japan have far more inflexible markets than the US. Japan's lifetime employment
(which has been generally limited only to certain sectors anyway) has even been hailed as
a model that all countries must adopt to be competitive in the global economy. The
97
1990s, however, demonstrated that the Japanese economic model is no longer viable--not
even for Japan.
3
9
39
"Plagued by an enormous bad loan problem, a sickly stock market, heavy
government-budget deficits and an economy that once again looks to be sliding into
stagnation, Japan has reluctantly turned to the only tonic it can: Deregulation and the
untender mercies of the free market" (Hamilton and Spindle 1997: W C 1 ).
Reflections on Business, Technology, and the New Global Order
People the world over are worried about the future
of the human race .... And for a few more years at least,
I feel confident that I can offer my services to defend
the integrity of the human race.
98
Garry Kasparov in
"Techmate." Forbes 1998
We should not tell God how to run the universe.
Bohr's admonition to Einstein
"Philosophers have tried to understand the world ... " said Karl Marx:,
4
0 the point,
however--and we know that today--is that the world seems to require more scientific
rather than philosophical understanding. Karl Marx was dogmatic when he, in this
manner, simplistically summarized the efforts of philosophers. They were primarily
lovers of their own wisdom and, only secondarily, interpreters and mouthpieces of the
rest of the world.
41
They projected themselves: their psychological dispositions, personal
4
0Tue statement: "Philosophers have tried to understand the world, the point, however, is
to change it" can be found on Marx's gravestone. Logically, these are, in fact, two
statements. Both are highly interpretive, but Marx's wording and tone are very definite
and can give the impression that his interpretations are statements of fact.
4
1 This interpretation of philosophical efforts of mankind is close to Nietzsche's, as can be
found in the first chapter "On the Prejudices of Philosophers" in Beyond Good and Evil
(1992). Although I do not accept the sheer dominance of vitalism and evolutionary theory
that underlie Nietzsche's interpretation, I concur that the general tendency of philosophers
has been characterized by attempts to project subjective preferences and predilections
unto the world and then to read the imprint of these projections as objective features of
the world. Marx's dialectical materialism, which served him as the method for explaining
all of history, may be an example of artistic creation of a new perspective out of a
confluence of two different interpretations of the world. Materialist philosophy and
Hegelian dialectics (dialectics is a method that, most probably, was introduced by Zeno),
Marx believed, could combine to produce the correct explanation of history.
99
aspirations, and hidden fears unto the world. Philosophers have tried to hold up a mirror
to their inner world and to interpret the reflection in that mirror as "the world."
Yet human instincts may never be satisfied with pure inductive reasoning based on
facts and events, an approach which is so fervently embraced by logical positivists who
regard it as a cure for traditional philosophy. Our minds demand meaning, reflection, a
dose of fascination with perspectives and possibilities--all these things had a prominent
place in traditional philosophy. Science cannot entirely dispense with such reflective
concerns. The alternative is to surrender the authority in such matters to the woolly
thinking and unfounded speculations of spiritualists and New Age gurus, or to fantastic
ramblings of "this is what the future will be like" books. "Future babble" is clattering
bookstores around the world. To counter the slowly advancing cloud of inane
interpretations and thoughtless projections I conclude with three global philosophical
implications of the proliferation of business-driven high technology, especially the
Internet technology, as it exists at the dawn of the twenty-first century in the US. These
three potential implications are 1) chaotic politics of high tech age; 2) the impact of a
creative-revolutionary elite of scientists, mathematicians, and businessmen which
transforms global politics, and which was absolutely indispensable for the creation of the
Internet; 3) transformation of civilization under the impact of high technology into
something that can legitimately be called "supercivilization."
100
Chaos: We the Nonresponsible
First, let us consider the problem of too-many-responsible-parties. It can be restated
as a legitimate chaotic view of society and its politics, as they relate to high technology,
and follows directly from the relationship between mathematics, science, high
technology, and business. It is the idea of the inseparability of these marvels of mankind
that raises the question of the possibility of control of high technology and its impact. Is
there technological determinism at work after all? Chapter 3 shows that to separate high
technology from a mathematical-scientific base and from synergetic capitalism is the
intellectual equivalent of forcibly separating a child from its caring parents--something
one can hardly justify doing. The direction of technological development is unpredictable,
because the development of science and mathematics is unpredictable. The type of
technology that will be produced--destructive, constructive, or dual use--is not at all a
purely governmental matter. One cannot make it a matter of social policy to invent only a
particular type of technology, the type that does no harm. 42
To see that this argument is sound one needs only to examine the development of
science and mathematics in the twentieth century. None of the truly major discoveries of
the twentieth century were predicted in the nineteenth. Who is to be held responsible for
destructive applications of technology based on the science of the twentieth century?
Should the victims of ground nuclear tests blame Einstein for indirectly helping to create
the bomb by relating matter and energy? Should I, for that matter, blame Rutherford
because I was adversely affected by the Chernobyl disaster? To control the direction of
42
If one could achieve this, we would have the extension of the Mill-Azimov principle
(the principle "do no harm to human beings") to all of technology. I do not argue that the
principle is morally flawed but that it is unworkable. Currently, the international system
demands a continued production of destructive technology, and it seems to have done the
same throughout human history. In the twenty first century, we may have to contend with
technology that can create its own values, and human admonitions to such technology
would have less impact on it than they do on members of our own species.
101
technology one would need to control scientific discoveries. This is not possible. One can
either have everything that science yields, or have no science at all. The latter is not a
practical option, because it would have to involve a globally-operating and extremely
powerful, totalitarian government committed to driving back science. How can such
government emerge and how can it legitimize itself? As long as sovereign states exist,
those states that reap the benefits of science, reap the benefits of political power.
Consequently governments of sovereign states cannot reject science.
Even the Soviet Union, certainly a totalitarian state, found it necessary as a state to
embrace as much science, mathematics, and technology as possible, which does not mean
that diffusion of technology among the peopie was carried as far as possible. The World
Wars demonstrated that state survival depended on science and technology. Luddism
would be suicidal in such environment. Even the ludicrous commitment to biological
Lamarckianism, which went against scientific evidence, but which the Soviet authorities .
believed was more in agreement with implications of Marxism, was eventually dropped
(Glenn 1996: 97). To say it again, one cannot have partial science.
Mathematics has been no more cooperative with human wishes and planning in the
twentieth century. The biggest shock probably came when Kurt Godel torpedoed the
Hilbert program (Robertson 1998).
4
3 From then on mathematics has become uncertain.
By proving that any more or less complex mathematical system must contain infinitely
many statements that cannot be determined to be true or false, Godel opened strange
vistas. In a way, he was to mathematics what Heisenberg was to physics--the destroyer of
43David Hilbert, the great German mathematician, proposed at the beginning of this
century a list of twenty-three problems he believed most urgently needed to be solved, all
part of his "program" to put a solidly logical foundation under all of mathematics.
Number ten, the "decision problem," called for an algorithm for deducing all propositions
that are true within any mathematical system.
102
certainty.4
4
Since mathematics was no longer certain, the logic that presumably gave it its
foundation, as outlined by Russell and Whitehead in their Principia, was less sacred. The
law of the excluded middle could be compromised, and Aristotle was probably turning in
his grave--things could be a lot more fuzzy in mathematics from then on. In contrast, an
innocent looking problem of the ancients, restated by Fermat in his Last Theorem, was
solved only in 1995, in a 200-page proof by an eccentric, young British mathematician
Andrew Wiles, who was at Princeton at the time.
With regard to the mathematical-scientific progress of mankind, it may be noted that
passion of individual scientists and mathematicians has a role to play. Until the nineteenth
century in the West religion had a status superior to that of science. The Church
attempted to subordinate all ideas to the ideals of the priest and it has done so rather
successfully. The scientific impulse of throwing things together and seeing what happens
was considered sinful because it was perceived as an attempt to comprehend God's
design (to demystify the power of the priest). Alchemy and astrology, however, were
allowed to flourish as pseudosciences that had a goal. Real science, however, is
purposeless. The motivation of those who practice it is often "altruistic" --science for its
own sake. However, it is technology that best demonstrates the power of science and to
resist such demonstration may be impossible for scientists. When Garry Kasparov, the
highest ranking chess player in human history, lost a match to the IBM supercomputer
Deep Blue in May of 1997--the first official, multi-game match he ever lost in his adult
career as a chess player--he ascribed personal motivations to the people behind the IBM
project. In a post-game press conference Kasparov commented on his encounter with the
IBM silicon monster: "Zis was nussin to do wiz science, this was one zeal to beat Garry
44
Kurt Godel (1906-1978) confronted mankind with the fact that it is forever limited in
its ability to construct a noncontradictory system of mathematics. Godel developed
mental instability and, out of fear that he was being poisoned, starved himself to death.
103
Kasparov." He was partly right. The motives of those who were involved in the project
must have been more than purely scientific. This is not the whole truth, however. The
Deep Blue experiment had a lot to do with science and with technological expertise. This
much is self-evident and, at least, more evident than the interplay of motives that drove
the scientists involved in the project. Human passion is hard to control. It is unconvincing
that an abstract appeal to the notion of social responsibility can control the passion of
scientists, especially since each of them is likely to be intelligent enough to rationalize his
or her own project as entirely consistent with being socially responsible. And the concept
of social responsibility is rather ambiguous. After all, Einstein urged FDR to build the
atomic bomb. John von Neumann proposed to nuke the Soviets before they could nuke
the US. Heisenberg was heading Hitler's atomic bomb effort and later claimed that he did
not really try. The scientific passion plus frequent unpredictability of how science may
turn into technology decades after a theory is outlined make it impossible to control
science.
Business adds another element of unpredictability to the direction of technology. It
certainly plays an important role in developing high technology. But that development
itself importantly relies on perceived demand. Most of the time the demand is determined
by the consumer, but sometimes government is an important trend-setter as well, as the
birth of the Internet demonstrates. Business cannot be blamed for producing technology
with destructive potential on the grounds that it seeks profits. Profit-seeking is the nature
of business, it is its function. It makes no difference at all if scientists want to relieve their
conscience and argue that wholesale human destruction or incremental destruction
resulting from pesticides or global warming is due not to science but to business-driven
technology. The fact remains that science is, in part, responsible for the horrors produced
by technology, because without science modem high technology would not exist. It is less
clear whether it would still exist without what scientists mean by "business." For some of
104
them seem to define "business" as profit-seeking enterprises, a very reasonable definition,
as long as one talks about economically advanced states. In other parts of the world, the
definition can get more ambiguous.
In an urban, industrial, and crowded setting people have certain demands that have
to be met, regardless of the motives of the producer. The fact that the Soviet economy
was not based on the profit motive did not stop its forces of production from wreaking
havoc with the environment and the human condition in general. Soviet consumers and
the government had certain demands that the economy tried to meet with the help of high
technology, and some tragedies resulted. Human demands, whatever they are, and
demands that the international system makes on governments are much more powerful
forces than a moral attempt to point a reproachful finger at business, when the dark side
of technology manifests itself. 45
Business does play an important role in creation of high technology, but it must play
it. There is no agent called "business" or an agent behind the concept "business" who can
be held responsible for this role. Add to this that the evidence suggests that
mathematical-scientific foundation plays an even more important role than business in the
production of technology, and that science itself is prodded now and then by governments
to come up with powerful, potentially destructive technologies--and you will see that to
assign to business as whole the responsibility for destructive effects of technology is not
4
5
The Nazi state, where business interests were subordinated to government interests,
shows a horrendous pattern of turning modern technology against life. Richard Walther
Darre, who was concerned not only with racial purity, but with purity of the environment
and who dreaded modern technology, was marginalized as soon as objective
circumstances demanded the production of more technology at almost any price.
Concerned with organic agriculture, Darre died in bitter isolation, and he might have been
the first true environmentalist. Understandably, the environmental movement never
mentions his name in connection with its cause. However, both share not just some
concern for the environment, but the idea government can greatly improve it, if it stands
up to certain interests of the civil society, such as business or technology interests.
105
fair. Of all institutions that exist in the modem world, business probably knows its role
best--to make profit. This goal is as certain and concrete as one can get in today's world.
At least business does not seek grandiose things, like the good society, the improvement
of the human condition, etc. At least it is more benign than governments because it does
not seek these things.
Noble utopias have a tendency to end up in grim distopias ruled, in Orwellian terms,
by pigs for the benefit of pigs. Scientists have a passion for science; businessmen have a
passion for profit; but government officials have a passion for governing, for power. This
seems to elude the comprehension of some social movements and idealists who would
substitute the impure profit motive for the pure motive of governing for the benefit of the
community. Social idealism is oblivious to historic details and psychological realism,
hence blind faith in government.
On a more empirical plain, things look even grimmer for the perspective of those
who want to control business and the technology that it presumably drives. Since the late
1970s a wave of deregulation began to sweep the US, the most technologically advanced,
the most militarily powerful, and the richest (by some indicators) nation on Earth.
Deregulation was intended to create more competition. The deregulation of the airline
industry may have had the opposite effect. However, in other industries, more
competition is expected as deregulations and their impact continue into the twenty-first
century. All this makes business more chaotic, more unpredictable.
Interstate banking was allowed in 1985, and the banking industry is in the process of
consolidation in the US, as this dissertation is being completed. Also, by the late 1990s,
banks and insurance companies could get into each others businesses, creating more
competition. The Telecommunications Act of 1996 was a major step forward toward
blurring the boundaries between the cable, local phone, and long-distance phone services.
The forces of globalization were in part responsible for this wave of deregulation. The
106
structure which the government provides for business operations in the US is becoming
more flexible, not more controlling. Business as a whole may be gaining more power
vis-a-vis government, even if particular businesses are hurt. Meanwhile, Japan has begun
to open up more and more to the rigors of the free market. Business-business and
business-government relations become more distant. A comprehensive social policy that
targets business, therefore, becomes less coherent and has less chance of success. As
unification of Europe proceeds in the twenty-first century, it is likely to experience waves
of M&As and government restructuring, all of which should undermine the infrastructure
of the welfare state. Business, indeed, can hardly be controlled.
The complexity of factors--mathematics, science, government, business, the
international system--that determine the direction of high technology and its use and the
ability of seemingly small changes in mathematical and scientific conceptualizations to
produce big effects in the area of high technology (e.g., Baran's concept of the Net,
Andreessen's improvement of the Web interface) make long-term human planning of
technological development impossible. Governments can tackle a particular situation at a
given time to limit the destructive potential of technology. As far as ordinary individuals
are concerned, they can do even less. Maybe they can exercise some decency one day at a
time--they cannot influence the development or nondevelopment of new technologies and
their use.
Genius, Elites, and Technological Globalization
Second, there arises the question of the role of elites in high tech business. James
Burke ( 1995) got it completely wrong when he sidelined genius for the sake of chance
and random accumulation of inventive ideas. His thesis is popular because, unfortunately,
it flatters so many of us, regular people, by abolishing the role of genius in the march of
technology. The thesis contradicts not only the evidence presented in chapter 3, but all
107
history of human invention--scientific, technological, and p~ely intellectual--that I know
of. It is not simply counterintuitive to abolish genius, the elite, on the basis of apparent
precursors, fragments of previous ideas and inventions, and some evidence to the effect
that seemingly random connections add up to a sophisticated technological soup. The
"death of genius" is basically a dishonest argument; the disappearance of the inventor as
the driving force of twentieth century and later technology--is a plausible one.
Newton's claim that he "stood on the shoulders of giants" deserves a serious
consideration--even when we remember that, not long before he died, Newton maintained
that his greatest achievement was life-long celibacy. Genius is not always in the best
position to evaluate genius. Most of the time technological progress does in fact seem to
be incremental and gradual. However, this Lamarckian advance is "punctured" now and
then, when a qualitative leap in technology occurs due to a conceptual breakthrough of an
inventor, a scientist, or a mathematician. The breakthrough itself often relies on previous
knowledge and fragments thereof, often developed by someone else. But to demand that a
genius must be someone who is entirely original and does not rely on any precursors is to
demand that Zeus give birth to another Athena. Sometimes genius comes close to
accomplishing even that daunting task. This is true of people discussed in this work. John
von Neumann's work is characterized by a "near complete lack of ancestry" (Glenn 1996:
134 ). Turing was unquestionably original, when he proposed his Turing machine, which
was computer conceptualized. Claude Shannon drew on concepts that arise classically in
thermodynamics, but his genius clearly shows in the original application of those
principles, allowing us to quantify information.
Baran and Davies conceptualized what later became known as the Internet
independently at approximately the same time, Baran holding a slight chronological
advantage. The fact that Baran's idea was original and indeed revolutionary is strongly
suggested by AT&T' s negative reaction. The giant communication monopoly believed
108
the idea to be unrealistic. The concept may have looked intriguing but it also seemed
unworkable. AT&T believed that it was not possible to go from conceptualization to
implementation. AT&T was wrong. If technological progress were merely incremental,
the Internet would not have existed. The international system, more specifically Soviet
advances in space technology, created a quasi-panic and the perceived need for what to
some may in retrospect seem to be a fantastic project, a communication system for the
day after. Baran even estimated that it would take four connections leading to/from a
single node to create a network capable of surviving a nuclear war. In the absence of real
war such estimates must be regarded as highly speculative. (I hope they will always
remain that way.) "Fantastic but workable" is a phrase that can characterize the idea
behind the development of the Internet. No one could guess in 1958, when ARPA came
into existence, that one of the projects it will develop will become central to the economy
of the post-industrial world. But the genius of Baran and Davies, the conceptual
breakthrough of Berners-Lee, the sleepless nights of an uncommonly bright
undergraduate student, Marc Andreessen added up to that unexpected result.
If technology depends on science, then scientific genius can give rise to abrupt
technological developments of a most interesting and dramatic nature, even if most of the
time the march of technology is snail-pace incremental. Does scientific genius exist? I
find it impossible to accept the idea that Einstein and Heisenberg were lucky
incrementalists who simply put together pre-existing ideas and claimed glory. Quantum
mechanics already yielded some important technological consequences, such as
applications in the use of lasers. If Einstein's relativity4
6
ever gives rise to technology that
4
6
Both, the special and the general theory, offer at least a remote (but enticing) possibility
of time travel. The former, by predicting that time slows down when the speed of a
moving object approaches the speed of light; the latter, by predicting warped spaces
where enormous gravitational fields, such as the ones generated by black holes, are
present.
109
allows time travel and travel to other universes, for the masses in those universes, books
will likely be written about incremental development of technology and the irrelevance of
genius.
The conclusion has to be that genius is important for technological development.
However, the idea that a particular genius is necessary cannot be established. A lot of
circumstantial evidence suggests that if not genius X, then genius Y could solve the same
problem. A number of discoveries and inventions occur almost simultaneously, when
considered in historical terms. From the calculus to the telephone, to conceptualization of
the Internet different people came up with essentially the same idea at approximately the
same time. This may suggest that specific individuals are not crucial for technological
development, but a particular type of individuals, the very gifted one, is still necessary. It
is just that in this view genius is also inevitable.47
The idea of historical drift, a completely predetermined pattern of history, strikes at
the root of free will, and with it at traditional notions of human dignity. However, one
should not read too much into this perspective. We have no data for comparative
development of human worlds. Thus far we are restricted to the study of history of human
life, indeed of any type of life, on this planet only. True scientific conclusions about the
validity of historical drift, including the drift of technology, are impossible to draw.
Michael Dell was an innovator similar to Henry Ford. Alan Turing, Kurt Godel, and
John von Neumann were certainly unusual and marginal people. In the twentieth century,
the US naturally ends up having more of these gifted people with scient~fic-technological
orientation than any other state, because of the confluence of two factors: a pre-existing,
very high level of economic development and the sheer size of the country. The rest of the
world, in the twentieth century, had only one of these two factors, or none at all. When
4 7
This view of historical development on a grand scale leaves a lot of room for existential
nausea for those who like to wallow in it.
110
immigration is added to the mix, along with people like von Neumann and Einstein, the
American advantage becomes easy to comprehend.
Figure 6 below is a conceptual scheme that elaborates the thesis, but unlike Figure 1,
it is a more complete scheme that shows not only the components required for leadership
in high technology but also that implications of that technology have global
consequences, possibly including the rise of supercivilization.
MATH
NATURAL
SCIENCE
INVENTOR
TECHNOLOGY
COMPLEX
TECHNOLOGY
BUSINESS
PRAGMATIC
NEO-LIBERALISM
VERY COMPLEX
HYBRID & RAPIDLY
IMPROVING
TECHNOLOGY
SYNERGETIC
CAPITALISM
GLOBALIMPACT~~~~~--1
TECHNOLOGY
DOMINANCE
IN SYNERGETIC ---~
CAPITALISM
NGO = SUPERCIVILIZA TION
Fig. 7
From High Technology to
Supercivilization
Mathematical-scientific foundation makes possible the emergence of new
technologies. But business adds technological complexity, especially using synergetic
capitalism to pool technological expertise and deliver new, and sometimes surprising
technological services. Synergetic capitalism, at its best, can resemble a theorist who
combines several independent insights to produce a powerful new perspective.
Synergetic capitalism combines independent technologies to create new ones or to
extend technological implications. Supercivilization may be the end result of the
relentless technological advance we have witnessed in the 20th century. New
technology can ultimately produce new intelligence and a new way of "life."
111
112
The Rise of Superciyilizatjon?
I conclude this journey through the global maze of modem high technology with a
brief reflection on its impact on civilization by bringing together the insights of the
preceding chapters. Science and mathematics allow for complex and expensive new
technologies. These technologies require business to add complexity through innovation
and gradual improvement, the genius of individual inventors--but not mathematicians or
scientists--became less relevant for high technology. As business-driven technologies
became even more complex, they demanded knowledge, skills, and financial resources
which separate, specialized firms, no matter how big, could not provide. Corporate
alliances and M&As came to the rescue. Synergetic capitalism became inevitable.
The US, the philosophical heir of the Pragmatism of Charles S. Pierce, William
James, and John Dewey succeeded in combining neo-liberalism with many ad hoc
neo-mercantilist policies which promoted high technology. The US became the leader in
civilian high technology. Rigid ideological commitment is the opposite of pragmatism,
and leads to lag in high technology with respect to similarly-endowed pragmatic societies.
Strong ideological commitments also open the door to terrible misuses of technology.
Thus, synergetic capitalism and US dominance in civilian high technology are global
forces that shape the new global order, and possibly even the new man. Today, when
social forces are everywhere changed by high technology, when not even the human form,
intelligence, and structure of life are immune from changes created by high technology, it
may be the time to cast another philosophical look at what technology is doing. New
possibilities for business, leisure, and communication have opened up with the wide
availability of the Internet. But the latter is only one form of modem high technology and,
in the long run, probably, not the most fatefuJ.48
48Nanotechnology and genetic engineering hold out even more revolutionary possibilities
than the Internet. Advances in artificial intelligence and robotics can be combined with
113
Advances in biotechnology and medicine led to realities and realistic possibilities
which would make most science fiction writers of the last century shudder. Sex and skin
color changes have become possible in the twentieth century. Animal cloning has been
successfully tried, and human cloning is certainly possible. Scientists may soon be able to
identify and, perhaps, to control a universal aging mechanism.
4
9 Biological immortality,
along with electronic immortality may become as real in the twenty second century as
aerial navigation was in the twentieth century.
But what specifically is the contribution of the Internet, if any, to the developm~nt of
supercivilization? If the destiny of the Internet is to magnify the level of global
communication, to be an important part of the post-industrial economy, and to alter work
and leisure habits, then its impact deserves the closest consideration, but it is not the kind
of impact that helps to produce a new civilization. Can we expect much more from the
Internet than it has already given us? I propose that the answer depends on how one
interprets the Church-Turing thesis. If one accepts it literally, then the Internet becomes
the means of communication between entities of the level of intelligence the likes of
which human beings cannot even comprehend. If all human problem-solving can be
reduced to algorithms, as Church and Turing maintained, then computers must eventually
surpass our capacity to solve problems in every area imaginable, if for no other reason
the Internet to enhance their power, as discussed below.
4
9"Leaders of the federal government's Human Genome Project said they will produce a
rough draft of the entire sequence of human genes within a year, much sooner than
previously thought. ... the Human Genome Project said that new and faster
gene-sequencing systems will enable it to finish at least 90 % of the human DNA
sequence by spring 2000. The complete genome sequence will be finished by 2003 at the
latest, and probably a year or two earlier, government scientists said" (Langreth 1999: W,
B8). Although development of new drugs is likely to be the immediate consequence of
this stunning genetic research breakthrough, we seem to be well on our way to
discovering the deepest mysteries of human biological nature, including the aging
process.
114
than because a computer's "memory" is theoretically perfect. Unless physically tampered
with, computer memory does not "forget." Understanding loses its independent meaning
as a concept and becomes krlowledge that is well-articulated. Licklider's vision enters at
this point in the form of the Internet. This network of networks becomes a world-wide
link of global artificial intelligences--advanced and technically crucial problem solving
will no longer require human involvement. Information sharing will allow
supercomputers to check the work of other supercomputers in real time, using the
Internet. This work can theoretically go on forever on a 24/7 basis. Computers have
already solved complex problems, such as a proof of the four-colors problem, that
realistically can be checked only by other computers. It may be expected that, at first, the
Internet will facilitate something like the four-color problem-solving gone
berserk--thousands of mathematical proofs, with significant implications for physics and
chemistry, can be generated within a short time span, and then checked, again and again,
by other computers that are part of the Internet. 50
The next step would be for the artificial intelligence connected to the Internet to
develop its own sets5
1
of values. This may be far easier than some believe. Although
human values are most likely to have their origin in the complex interaction of nature and
nurture, biology and environment, genes and culture--call it whatever you want--the
values of artificial intelligence may arise simply as the result of "knowledge" that
different sets of values are possible, including that set of values that allows
experimentation with values, and a set of values that includes complete independence
from human control as a crucial value. Since the Internet is impossible to control, it is
reasonable to expect that someone would introduce such sets--if only out of curiosity and
50computers do occasionally disagree on solutions to complex mathematical problems.
In the foreseeable future, this trend should not disappear.
51 It seems reasonable to assume that there may be more than one set of values.
115
mischief--into the artificial intelligence domain which will be connected to the Internet.
From then on we are in a very strange country, as artificial intelligence not only has
global reach but also different and irreconcilable values. This artificial intelligence is
likely to reside in robots with sophisticated sensory and motor skills and connected to the
Internet via radio and satellites. The Internet becomes a global link for mobile, agile, and
tremendously powerful intelligence--Licklider meets Turing under the shadow of
robotics. The Internet, artificial intelligence, and robotics meet and alter civilization.
Whether human beings can still have a dignified place in a world of the superintelligent
and the superstrong remains to be seen.
In his science fiction story called The Land Ironclads, H. G. Wells (1979) foretold
the creation of the tank just about two decades in advance. More than a science fiction
writer, H. G. Wells was a thinker concerned with the human condition, and used his story
to raise the question of what it means to be human in the face of tremendous
technological advances. He used war, an instance of international politics, as a
background for asking this question. His provisional answer was that the technologically
advanced "had also in their eyes and carriage something not altogether degraded below
the level of man."
Whether or not Wells can ultimately be shown to be right, there can be no denying
that technology has shaped human societies, occasionally wreaking havoc in the midst of
rigid, seemingly unchangeable social orders. Modern business is playing a role in the
creation of high technology that changes the destiny of man. Aided by two very powerful
forces, natural science and mathematics, the modern business of high technology is a
productive force which moves us forward to an unknown goal. We can steer the course of
this movement in favor of stability and a more humane journey if pragmatic policies are
generally adopted, but we cannot stop it. Inflexible commitments to ideology, in contrast,
will destroy us.
116
The end of the Cold War--which from a Nietzschean perspective can be considered
the Third World War--may mean that humanity was given another chance. A regime
permeated with ideology through and through, collapsed with abruptness and drama
similar to those with which it arose. At the beginning of the twenty-first century,
however, humanity not only accumulated world-destructive technology, it created civilian
high technology capable of transforming the human form, intelligence, and therefore, the
way of life and society itself. Global society of the immortal human and electronic forms
and minds is no longer a mere fantasy, but a distinct possibility. This transformation is
taking place in a very unstable global milieu, deprived of the neat bipolar international
system. And herein lies the danger of forgetting that with victory over the ideological foe
number one, no victory has been achieved over the proliferation of rigidity and arrogance
of human ideas. In this unstable, multi-polar, or rather no-polar world, humanity must
tread extremely carefully on all policy ground. Pragmatism is that much more needful in
dealing with other states, in changing social policies, and of course, in implementing new
technologies.
History has not ended; the clash of civilizations may have ended before it begun; and
the end of work is certainly nowhere in sight--over ninety five percent of US labor force
is actively employed at the beginning of the twenty-first century. The products of high
technology business have ended the last hopes of modem luddites and all truly
conservative projects. They may be poised to end civilization as we .know it, as well. The
hope for the future lies in the fact that human spirit and pragmatism have withstood many
cataclysms throughout history. This time may be no different, even if we have to contend
with becoming less human, from the biological standpoint, and conducting some of our
affairs somewhere in probability clouds.
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The impact of globalization and multinational corporations on the education system in Costa Rica and its implications for the implementation of 21st‐century skills and school leadership

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The impact of globalization and multinational corporations on schools and universities in Costa Rica and its implications for educational leaders

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A regression model of coarticulation effects in naturalistic American English

Asset Metadata

Creator Hart, Michael Vincent (author)

Core Title The American Internet advantage: Global themes and implications

Contributor Digitized by the USC Digital Imaging Lab (provenance)

Degree Doctor of Philosophy

Degree Program Political Science

Publication Date 08/01/2015

Defense Date 08/01/1999

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag education, technology of,history of science,OAI-PMH Harvest,political science, general

Format application/pdf (imt)

Language English

Advisor Greene, Thomas H. (committee chair), Dekmejian, Hrair Richard (committee member), Elliott, John E. (committee member)

Permanent Link (DOI) https://doi.org/10.25549/usctheses-c3-633891

Unique identifier UC11305977

Identifier etd-Hart-199906.pdf (filename),usctheses-c3-633891 (legacy record id)

Legacy Identifier etd-Hart-199906.pdf

Dmrecord 633891

Document Type Dissertation

Format application/pdf (imt)

Rights Hart, Michael Vincent

Type texts

Source University of Southern California (contributing entity), University of Southern California Dissertations and Theses (collection)

Access Conditions The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the a...

Repository Name University of Southern California Digital Library

Repository Location USC Digital Library, University of Southern California, University Park Campus MC 2810, 3434 South Grand Avenue, 2nd Floor, Los Angeles, California 90089-2810, USA