Cyberspace and the American Dream: A Magna Carta for the Knowledge Age
Release 1.2, August 22, 1994
This statement represents the cumulative wisdom and innovation of many dozens of people.
It is based primarily on the thoughts of four "co-authors": Ms. Esther Dyson; Mr. George
Gilder; Dr. George Keyworth; and Dr. Alvin Toffler. This release 1.2 has the final
"imprimatur" of no one. In the spirit of the age: It is copyrighted solely for the
purpose of preventing someone else from doing so. If you have it, you can use it any way
you want. However, major passages are from works copyrighted individually by the authors,
used here by permission; these will be duly acknowledged in release 2.0. It is a living
document. Release 2.0 will be released in October 1994. We hope you'll use it is to tell
us how to make it better. Do so by:
o Sending E-Mail to MAIL@PFF.ORG
o Faxing 202/484-9326 or calling 202/484-2312
o Sending POM (plain old mail) to 1301 K Street Suite 650 West, Washington, DC 20005
(The Progress & Freedom Foundation is a not-for-profit research and educational
organization dedicated to creating a positive vision of the future founded in the
historic principles of the American idea.)
Preamble
The central event of the 20th century is the overthrow of matter. In technology,
economics, and the politics of nations, wealth -- in the form of physical resources --
has been losing value and significance. The powers of mind are everywhere ascendant over
the brute force of things.
In a First Wave economy, land and farm labor are the main "factors of production." In a
Second Wave economy, the land remains valuable while the "labor" becomes massified around
machines and larger industries. In a Third Wave economy, the central resource -- a single
word broadly encompassing data, information, images, symbols, culture, ideology, and
values -- is actionable knowledge.
The industrial age is not fully over. In fact, classic Second Wave sectors (oil, steel,
auto-production) have learned how to benefit from Third Wave technological breakthroughs
-- just as the First Wave's agricultural productivity benefited exponentially from the
Second Wave's farm-mechanization.
But the Third Wave, and the Knowledge Age it has opened, will not deliver on its
potential unless it adds social and political dominance to its accelerating technological
and economic strength. This means repealing Second Wave laws and retiring Second Wave
attitudes. It also gives to leaders of the advanced democracies a special responsibility
-- to facilitate, hasten, and explain the transition.
As humankind explores this new "electronic frontier" of knowledge, it must confront again
the most profound questions of how to organize itself for the common good. The meaning of
freedom, structures of self-government, definition of property, nature of competition,
conditions for cooperation, sense of community and nature of progress will each be
redefined for the Knowledge Age -- just as they were redefined for a new age of industry
some 250 years ago.
What our 20th-century countrymen came to think of as the "American dream," and what
resonant thinkers referred to as "the promise of American life" or "the American Idea,"
emerged from the turmoil of 19th-century industrialization. Now it's our turn: The
knowledge revolution, and the Third Wave of historical change it powers, summon us to
renew the dream and enhance the promise.
The Nature of Cyberspace
The Internet -- the huge (2.2 million computers), global (135 countries), rapidly growing
(10-15% a month) network that has captured the American imagination -- is only a tiny
part of cyberspace. So just what is cyberspace?
More ecosystem than machine, cyberspace is a bioelectronic environment that is literally
universal: It exists everywhere there are telephone wires, coaxial cables, fiber-optic
lines or electromagnetic waves.
This environment is "inhabited" by knowledge, including incorrect ideas, existing in
electronic form. It is connected to the physical environment by portals which allow
people to see what's inside, to put knowledge in, to alter it, and to take knowledge out.
Some of these portals are one-way (e.g. television receivers and television
transmitters); others are two-way (e.g. telephones, computer modems).
Most of the knowledge in cyberspace lives the most temporary (or so we think) existence:
Your voice, on a telephone wire or microwave, travels through space at the speed of
light, reaches the ear of your listener, and is gone forever.
But people are increasingly building cyberspatial "warehouses" of data, knowledge,
information and misinformation in digital form, the ones and zeros of binary computer
code. The storehouses themselves display a physical form (discs, tapes, CD-ROMs) -- but
what they contain is accessible only to those with the right kind of portal and the right
kind of key.
The key is software, a special form of electronic knowledge that allows people to
navigate through the cyberspace environment and make its contents understandable to the
human senses in the form of written language, pictures and sound.
People are adding to cyberspace -- creating it, defining it, expanding it -- at a rate
that is already explosive and getting faster. Faster computers, cheaper means of
electronic storage, improved software and more capable communications channels
(satellites, fiber-optic lines) -- each of these factors independently add to cyberspace.
But the real explosion comes from the combination of all of them, working together in
ways we still do not understand.
The bioelectronic frontier is an appropriate metaphor for what is happening in
cyberspace, calling to mind as it does the spirit of invention and discovery that led
ancient mariners to explore the world, generations of pioneers to tame the American
continent and, more recently, to man's first exploration of outer space.
But the exploration of cyberspace brings both greater opportunity, and in some ways more
difficult challenges, than any previous human adventure.
Cyberspace is the land of knowledge, and the exploration of that land can be a
civilization's truest, highest calling. The opportunity is now before us to empower every
person to pursue that calling in his or her own way.
The challenge is as daunting as the opportunity is great. The Third Wave has profound
implications for the nature and meaning of property, of the marketplace, of community and
of individual freedom. As it emerges, it shapes new codes of behavior that move each
organism and institution -- family, neighborhood, church group, company, government,
nation -- inexorably beyond standardization and centralization, as well as beyond the
materialist's obsession with energy, money and control.
Turning the economics of mass-production inside out, new information technologies are
driving the financial costs of diversity -- both product and personal -- down toward
zero, "demassifying" our institutions and our culture. Accelerating demassification
creates the potential for vastly increased human freedom.
It also spells the death of the central institutional paradigm of modern life, the
bureaucratic organization. (Governments, including the American government, are the last
great redoubt of bureaucratic power on the face of the planet, and for them the coming
change will be profound and probably traumatic.)
In this context, the one metaphor that is perhaps least helpful in thinking about
cyberspace is -- unhappily -- the one that has gained the most currency: The Information
Superhighway. Can you imagine a phrase less descriptive of the nature of cyberspace, or
more misleading in thinking about its implications? Consider the following set of
polarities:
Information Superhighway / Cyberspace
Limited Matter / Unlimited Knowledge
Centralized / Decentralized
Moving on a grid / Moving in space
Government ownership / A vast array of ownerships
Bureaucracy / Empowerment
Efficient but not hospitable / Hospitable if you customize it
Withstand the elements / Flow, float and fine-tune
Unions and contractors / Associations and volunteers
Liberation from First Wave / Liberation from Second Wave
Culmination of Second Wave / Riding the Third Wave
The highway analogy is all wrong," explained Peter Huber in Forbes this spring, "for
reasons rooted in basic economics. Solid things obey immutable laws of conservation --
what goes south on the highway must go back north, or you end up with a mountain of cars
in Miami. By the same token, production and consumption must balance. The average Joe can
consume only as much wheat as the average Jane can grow. Information is completely
different. It can be replicated at almost no cost -- so every individual can (in theory)
consume society's entire output. Rich and poor alike, we all run information deficits. We
all take in more than we put out."
The Nature and Ownership of Property
Clear and enforceable property rights are essential for markets to work. Defining them is
a central function of government. Most of us have "known" that for a long time. But to
create the new cyberspace environment is to create new property -- that is, new means of
creating goods (including ideas) that serve people.
The property that makes up cyberspace comes in several forms: Wires, coaxial cable,
computers and other "hardware"; the electromagnetic spectrum; and "intellectual property"
-- the knowledge that dwells in and defines cyberspace.
In each of these areas, two questions that must be answered. First, what does "ownership"
mean? What is the nature of the property itself, and what does it mean to own it? Second,
once we understand what ownership means, who is the owner? At the level of first
principles, should ownership be public (i.e. government) or private (i.e. individuals)?
The answers to these two questions will set the basic terms upon which America and the
world will enter the Third Wave. For the most part, however, these questions are not yet
even being asked. Instead, at least in America, governments are attempting to take Second
Wave concepts of property and ownership and apply them to the Third Wave. Or they are
ignoring the problem altogether.
For example, a great deal of attention has been focused recently on the nature of
"intellectual property" -- i.e. the fact that knowledge is what economists call a "public
good," and thus requires special treatment in the form of copyright and patent
protection.
Major changes in U.S. copyright and patent law during the past two decades have broadened
these protections to incorporate "electronic property." In essence, these reforms have
attempted to take a body of law that originated in the 15th century, with Gutenberg's
invention of the printing press, and apply it to the electronically stored and
transmitted knowledge of the Third Wave.
A more sophisticated approach starts with recognizing how the Third Wave has
fundamentally altered the nature of knowledge as a "good," and that the operative effect
is not technology per se (the shift from printed books to electronic storage and
retrieval systems), but rather the shift from a mass-production, mass-media, mass-culture
civilization to a demassified civilization.
The big change, in other words, is the demassification of actionable knowledge.
The dominant form of new knowledge in the Third Wave is perishable, transient, customized
knowledge: The right information, combined with the right software and presentation, at
precisely the right time. Unlike the mass knowledge of the Second Wave -- "public good"
knowledge that was useful to everyone because most people's information needs were
standardized -- Third Wave customized knowledge is by nature a private good.
If this analysis is correct, copyright and patent protection of knowledge (or at least
many forms of it) may no longer be unnecessary. In fact, the marketplace may already be
creating vehicles to compensate creators of customized knowledge outside the cumbersome
copyright/patent process, as suggested last year by John Perry Barlow:
"One existing model for the future conveyance of intellectual property is real-time
performance, a medium currently used only in theater, music, lectures, stand-up comedy
and pedagogy. I believe the concept of performance will expand to include most of the
information economy, from multi-casted soap operas to stock analysis. In these instances,
commercial exchange will be more like ticket sales to a continuous show than the purchase
of discrete bundles of that which is being shown. The other model, of course, is service.
The entire professional class -- doctors, lawyers, consultants, architects, etc. -- are
already being paid directly for their intellectual property. Who needs copyright when
you're on a retainer?"
Copyright, patent and intellectual property represent only a few of the "rights" issues
now at hand. Here are some of the others:
o Ownership of the electromagnetic spectrum, traditionally considered to be "public
property," is now being "auctioned" by the Federal Communications Commission to private
companies. Or is it? Is the very limited "bundle of rights" sold in those auctions really
property, or more in the nature of a use permit -- the right to use a part of the
spectrum for a limited time, for limited purposes? In either case, are the rights being
auctioned defined in a way that makes technological sense?
o Ownership over the infrastructure of wires, coaxial cable and fiber-optic lines that
are such prominent features in the geography of cyberspace is today much less clear than
might be imagined. Regulation, especially price regulation, of this property can be
tantamount to confiscation, as America's cable operators recently learned when the
Federal government imposed price limits on them and effectively confiscated an estimated
$___ billion of their net worth. (Whatever one's stance on the FCC's decision and the law
behind it, there is no disagreeing with the proposition that one's ownership of a good is
less meaningful when the government can step in, at will, and dramatically reduce its
value.)
o The nature of capital in the Third Wave -- tangible capital as well as intangible -- is
to depreciate in real value much faster than industrial-age capital -- driven, if nothing
else, by Moore's Law, which states that the processing power of the microchip doubles at
least every 18 months. Yet accounting and tax regulations still require property to be
depreciated over periods as long as 30 years. The result is a heavy bias in favor of
"heavy industry" and against nimble, fast-moving baby businesses.
Who will define the nature of cyberspace property rights, and how? How can we strike a
balance between interoperable open systems and protection of property?
The Nature Of The Marketplace
Inexpensive knowledge destroys economies-of-scale. Customized knowledge permits "just in
time" production for an ever rising number of goods. Technological progress creates new
means of serving old markets, turning one-time monopolies into competitive
battlegrounds.
These phenomena are altering the nature of the marketplace, not just for information
technology but for all goods and materials, shipping and services. In cyberspace itself,
market after market is being transformed by technological progress from a "natural
monopoly" to one in which competition is the rule. Three recent examples:
o The market for "mail" has been made competitive by the development of fax machines and
overnight delivery -- even though the "private express statutes" that technically grant
the U.S. Postal Service a monopoly over mail delivery remain in place.
o During the past 20 years, the market for television has been transformed from one in
which there were at most a few broadcast TV stations to one in which consumers can choose
among broadcast, cable and satellite services.
o The market for local telephone services, until recently a monopoly based on
twisted-pair copper cables, is rapidly being made competitive by the advent of wireless
service and the entry of cable television into voice communication. In England, Mexico,
New Zealand and a host of developing countries, government restrictions preventing such
competition have already been removed and consumers actually have the freedom to choose.
The advent of new technology and new products creates the potential for dynamic
competition -- competition between and among technologies and industries, each seeking to
find the best way of serving customers' needs. Dynamic competition is different from
static competition, in which many providers compete to sell essentially similar products
at the lowest price.
Static competition is good, because it forces costs and prices to the lowest levels
possible for a given product. Dynamic competition is better, because it allows competing
technologies and new products to challenge the old ones and, if they really are better,
to replace them. Static competition might lead to faster and stronger horses. Dynamic
competition gives us the automobile.
Such dynamic competition -- the essence of what Austrian economist Joseph Schumpeter
called "creative destruction" -- creates winners and losers on a massive scale. New
technologies can render instantly obsolete billions of dollars of embedded
infrastructure, accumulated over decades. The transformation of the U.S. computer
industry since 1980 is a case in point.
In 1980, everyone knew who led in computer technology. Apart from the minicomputer boom,
mainframe computers were the market, and America's dominance was largely based upon the
position of a dominant vendor -- IBM, with over 50% world market-share.
Then the personal-computing industry exploded, leaving older-style big-business-focused
computing with a stagnant, piece of a burgeoning total market. As IBM lost market-share,
many people became convinced that America had lost the ability to compete. By the
mid-1980s, such alarmism had reached from Washington all the way into the heart of
Silicon Valley.
But the real story was the renaissance of American business and technological leadership.
In the transition from mainframes to PCs, a vast new market was created. This market was
characterized by dynamic competition consisting of easy access and low barriers to entry.
Start-ups by the dozens took on the larger established companies -- and won.
After a decade of angst, the surprising outcome is that America is not only competitive
internationally, but, by any measurable standard, America dominates the growth sectors in
world economics -- telecommunications, microelectronics, computer networking (or
"connected computing") and software systems and applications.
The reason for America's victory in the computer wars of the 1980s is that dynamic
competition was allowed to occur, in an area so breakneck and pell-mell that government
would've had a hard time controlling it _even had it been paying attention_. The
challenge for policy in the 1990s is to permit, even encourage, dynamic competition in
every aspect of the cyberspace marketplace.
The Nature of Freedom
Overseas friends of America sometimes point out that the U.S. Constitution is unique --
because it states explicitly that power resides with the people, who delegate it to the
government, rather than the other way around.
This idea -- central to our free society -- was the result of more than 150 years of
intellectual and political ferment, from the Mayflower Compact to the U.S. Constitution,
as explorers struggled to establish the terms under which they would tame a new
frontier.
And as America continued to explore new frontiers -- from the Northwest Territory to the
Oklahoma land-rush -- it consistently returned to this fundamental principle of rights,
reaffirming, time after time, that power resides with the people.
Cyberspace is the latest American frontier. As this and other societies make ever deeper
forays into it, the proposition that ownership of this frontier resides first with the
people is central to achieving its true potential.
To some people, that statement will seem melodramatic. America, after all, remains a land
of individual freedom, and this freedom clearly extends to cyberspace. How else to
explain the uniquely American phenomenon of the hacker, who ignored every social pressure
and violated every rule to develop a set of skills through an early and intense exposure
to low-cost, ubiquitous computing.
Those skills eventually made him or her highly marketable, whether in developing
applications-software or implementing networks. The hacker became a technician, an
inventor and, in case after case, a creator of new wealth in the form of the baby
businesses that have given America the lead in cyberspatial exploration and settlement.
It is hard to imagine hackers surviving, let alone thriving, in the more formalized and
regulated democracies of Europe and Japan. In America, they've become vital for economic
growth and trade leadership. Why? Because Americans still celebrate individuality over
conformity, reward achievement over consensus and militantly protect the right to be
different.
But the need to affirm the basic principles of freedom is real. Such an affirmation is
needed in part because we are entering new territory, where there are as yet no rules --
just as there were no rules on the American continent in 1620, or in the Northwest
Territory in 1787.
Centuries later, an affirmation of freedom -- by this document and similar efforts -- is
needed for a second reason: We are at the end of a century dominated by the mass
institutions of the industrial age. The industrial age encouraged conformity and relied
on standardization. And the institutions of the day -- corporate and government
bureaucracies, huge civilian and military administrations, schools of all types --
reflected these priorities. Individual liberty suffered -- sometimes only a little,
sometimes a lot:
o In a Second Wave world, it might make sense for government to insist on the right to
peer into every computer by requiring that each contain a special "clipper chip."
o In a Second Wave world, it might make sense for government to assume ownership over the
broadcast spectrum and demand massive payments from citizens for the right to use it.
o In a Second Wave world, it might make sense for government to prohibit entrepreneurs
from entering new markets and providing new services.
o And, in a Second Wave world, dominated by a few old-fashioned, one-way media
"networks," it might even make sense for government to influence which political
viewpoints would be carried over the airwaves.
All of these interventions might have made sense in a Second Wave world, where
standardization dominated and where it was assumed that the scarcity of knowledge (plus a
scarcity of telecommunications capacity) made bureaucracies and other elites better able
to make decisions than the average person.
But, whether they made sense before or not, these and literally thousands of other
infringements on individual rights now taken for granted make no sense at all in the
Third Wave.
For a century, those who lean ideologically in favor of freedom have found themselves at
war not only with their ideological opponents, but with a time in history when the value
of conformity was at its peak. However desirable as an ideal, individual freedom often
seemed impractical. The mass institutions of the Second Wave required us to give up
freedom in order for the system to "work."
The coming of the Third Wave turns that equation inside-out. The complexity of Third Wave
society is too great for any centrally planned bureaucracy to manage. Demassification,
customization, individuality, freedom -- these are the keys to success for Third Wave
civilization.
The Essence of Community
If the transition to the Third Wave is so positive, why are we experiencing so much
anxiety? Why are the statistics of social decay at or near all-time highs? Why does
cyberspatial "rapture" strike millions of prosperous Westerners as lifestyle rupture? Why
do the principles that have held us together as a nation seem no longer sufficient -- or
even wrong?
The incoherence of political life is mirrored in disintegrating personalities. Whether
100% covered by health plans or not, psychotherapists and gurus do a land-office
business, as people wander aimlessly amid competing therapies. People slip into cults and
covens or, alternatively, into a pathological privatism, convinced that reality is
absurd, insane or meaningless. "If things are so good," Forbes magazine asked recently,
"why do we feel so bad?"
In part, this is why: Because we constitute the final generation of an old civilization
and, at the very same time, the first generation of a new one. Much of our personal
confusion and social disorientation is traceable to conflict within us and within our
political institutions -- between the dying Second Wave civilization and the emergent
Third Wave civilization thundering in to take its place.
Second Wave ideologues routinely lament the breakup of mass society. Rather than seeing
this enriched diversity as an opportunity for human development, they attach it as
"fragmentation" and "balkanization." But to reconstitute democracy in Third Wave terms,
we need to jettison the frightening but false assumption that more diversity
automatically brings more tension and conflict in society.
Indeed, the exact reverse can be true: If 100 people all desperately want the same brass
ring, they may be forced to fight for it. On the other hand, if each of the 100 has a
different objective, it is far more rewarding for them to trade, cooperate, and form
symbiotic relationships. Given appropriate social arrangements, diversity can make for a
secure and stable civilization.
No one knows what the Third Wave communities of the future will look like, or where
"demassification" will ultimately lead. It is clear, however, that cyberspace will play
an important role knitting together in the diverse communities of tomorrow, facilitating
the creation of "electronic neighborhoods" bound together not by geography but by shared
interests.
Socially, putting advanced computing power in the hands of entire populations will
alleviate pressure on highways, reduce air pollution, allow people to live further away
from crowded or dangerous urban areas, and expand family time.
The late Phil Salin (in Release 1.0 11/25/91) offered this perspective: "[B]y 2000,
multiple cyberspaces will have emerged, diverse and increasingly rich. Contrary to naive
views, these cyberspaces will not all be the same, and they will not all be open to the
general public. The global network is a connected 'platform' for a collection of diverse
communities, but only a loose, heterogeneous community itself. Just as access to homes,
offices, churches and department stores is controlled by their owners or managers, most
virtual locations will exist as distinct places of private property."
"But unlike the private property of today," Salin continued, "the potential variations on
design and prevailing customs will explode, because many variations can be implemented
cheaply in software. And the 'externalities' associated with variations can drop; what
happens in one cyberspace can be kept from affecting other cyberspaces."
"Cyberspaces" is a wonderful pluralistic word to open more minds to the Third Wave's
civilizing potential. Rather than being a centrifugal force helping to tear society
apart, cyberspace can be one of the main forms of glue holding together an increasingly
free and diverse society.
The Role of Government
The current Administration has identified the right goal: Reinventing government for the
21st Century. To accomplish that goal is another matter, and for reasons explained in the
next and final section, it is not likely to be fully accomplished in the immediate
future. This said, it is essential that we understand what it really means to create a
Third Wave government and begin the process of transformation.
Eventually, the Third Wave will affect virtually everything government does. The most
pressing need, however, is to revamp the policies and programs that are slowing the
creation of cyberspace. Second Wave programs for Second Wave industries -- the status quo
for the status quo -- will do littl
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