Cronk Ministries

Archive for November, 2009

This new global situation is turning the world economy upside down. The CEO of Alcoa wakes up one morning to find that Russia is now dumping aluminum on world markets at half the current price. The first major survey of Chinese people shows that the top priority for two-thirds of the country is to get rich through hard work, whereas only 4% want to continue the revolution. Economist Lester Thurow asked his audience in a recent speech to U.S. business leaders, “Who do you think has more high school graduates— the United States or China?” He replied: “If you guessed China, you’re right—by a couple of hundred million. Now why would I hire a graduate in the U.S. for $30,000 per year when I can get an equivalently educated person in China for $100 per month?” Many U.S. businesses have already answered that question with a resounding, “We don’t.” Millions of so-called virtual aliens are clicking away on keyboards in Shanghai, New Delhi, and Hong Kong—fully netwotked and employed as members of the U.S. economy. Except that they don’t pay U.S. taxes or live in the United States.
The bipolar world has become a multipolar economy. In the 1960s, East Asia accounted for only 4% of the world’s economic output. Today, that region accounts for 25%. At the same time, the GNP in the United States has been growing at a not-bad 3% annual rate, but the Pacific Rim has seen rates that have been more than twice that high. Taiwan and South Korea, not so long ago low-cost countries themselves, now find that they have to ship some work to lower-cost places like China.
The economy for the Age of Networked Intelligence is a digital economy. In the old economy, information flow was physical: cash, checks, invoices, bills of lading, reports, face-to-face meetings, analog telephone calls or radio and television transmissions, blueprints, maps, photographs, musical scores, and direct mail advertisements.
In the new economy, information in all its forms becomes digital— reduced to bits stored in computers and racing at the speed of light across networks. Using this binary code of computers, information and communications become digital ones and zeros. The new world of possibilities thereby created is as significant as the invention of language itself, the old paradigm on which all the physically based interactions occurred.
The technological whirlwind sweeping us into the digital economy is relentless. Patrick Stewart, the great Shakespearean actor who played Captain Jean Luc Picard in the Star Trek: The Next Generation TV series, points out that the original Star Trek communicator—the device used to transmit the famous phrase, “Beam me up, Scotty”—now has a parallel in the cellular flip-phone. In the follow-on series, The Next Generation, the character Wesley Crnsher, teenage son of the ship’s doctor, received his education via individualized on-line sessions through the ship’s computer—not so much different from how engineers learn today through the networks of the National Technological University (NTU). John Seely Brown, head of the Xerox Palo Alto Research Center (PARC), talks about the shift from tools that support the mind to tools that support relationships. All these future shocks have come in less than a generation. David Ticoll, Alliance for Converging Technologies (Alliance) president says:
“The pace of innovation and onslaught of new technologies is accelerating so fast we have to have regular discussions in our research teams to define and maintain consistency of neologisms.” As Nicholas Negroponte says in his lucid book being digital: “Early in the next millennium your right and left cufflinks or earrings may communicate with each other by low-orbiting satellites and have more computer power than your present PC. Your telephone won’t ring indiscriminately; it will receive, sort, and perhaps respond to your incoming calls like a well trained English butler. Schools will change to become more like museums and playgrounds for children to assemble ideas and socialize with chikfren all over the world. The digital
planet will look and feel like the head of a pin.”
The new economy is also a knowledge economy based on the application of human know-how to everything we produce and how we produce it. In the new economy, more and more of the economy’s added value will he created by brain rather than brawn. Many agricultural and industrial jobs are becoming knowledge work. Already almost 60% of all American workers are knowledge workers and eight of ten new jobs are in informa(ion-intensive sectors of the economy. The factory of today is as different from the industrial factory of the old economy as the old factory from the craft production that preceded it. Farms are operated with agricultural eqinpment brimming with chips. Cargo is shipped in containers loaded by giant computer-controlled cranes or in jumbo jets loaded with software. Products themselves have knowledge content. There are smart clothes wHli chips in the collar; smart vehicles brimming with microprocessors (lint do a hundred new things every year; smart maps that tell a trucker’s l4)(ation and automatically change tire pressure according to the weather and road conditions; smart radios that store the traffic report for you when yon want it; smart houses that manage energy, protect you from intrusion, and run a bath for you before you arrive; smart elevators that phone in when they’re getting sick; and smart greeting cards that sing to you. These are only a few examples.
More than that, the knowledge content of dumb products is increasing in new ways. In the new economy, adding ideas to products and turning new ideas into new products is what the future is all about. Whether people act as consumers or producers, adding ideas will be central to wealth creation in the new economy. Take something as low-tech as bread. There are now boutique bakeries where you can specify the ingredients for your own custom bread, order it over a computer network, and have it delivered that afternoon. Your ideas, culture, knowledge, and tastes about bread become part of the loaf. The bread increases in knowledge content and is mass-customized rather than mass-produced to meet your individual needs. And the gap between you as consumer and as producer narrows.
The existence of “virtual aliens” points to the role of networks in this new age. In the agricultural age, what mattered was the plow and the mule. In the industrial age, steel, engines, fuel, and roads were king. In the Age of Networked Intelligence, silicon, microprocessors, and roads of glass fiber as thin as a human hair are enabling humans across the hail and across the planet to apply their know-how to every aspect of production and economic life. This is an age of networking not only of technology but of humans, organizations, and societies.
Nathaniel Hawthorne, who inspired the development of the telegraph, wrote in 1851: “By means of electricity, the world of matter has become a great nerve, vibrating thousands of miles in a breathless point of time. … The round globe is a vast … brain, instinct with intelligence.” For over a century humanity has been taking steps to realize Hawthorne’s vision of a world where human intelligence could be networked. That age has arrived. Organizations can become conscious on a global scale. Perhaps societies and even humanity can as well. As Vice President Al Gore puts it: “These highways, or more accurately networks, of distributed intelligence … will allow us to share information, to connect and to communicate as a global community. From these connections we will derive robust and sustainable economic progress, strong democracies, better solutions to global and local environmental challenges, improved health care, and—ultimately_a greater sense of shared stewardship of our small planet.”
The overall structure of the economy is changing as well. A new industrial sector is emerging from the convergence among computing (computers, software, services), communications (telephony, cable, satellite, wireless), and content (entertainment, publishing, information providers). This structure is depicted in Figure 1.1. This interactive multimedia industry is narrowly defined as 10% of the U.S. GDP. By the end of 1996, this industry will be an almost $1 trillion industry__44% computing, 28% communications, and 28% content. By 2005, the industry will have grown to $1.47 trillion.
Just as the automobile changed the landscape of the world, both physically and socially, interactive multimedia will revolutionize the world again. Already, more Americans make computers than cars, make more semiconductors than construction machinery, and work in data processing than in petroleum refining.
The impact of the new sector can be seen when examining data on job growth (Appendixes 2, 3, and 4). Although output in this sector is growing faster than are jobs, there is significant employment growth. It is noteworthy that whereas output growth is fastest in the computing sector, jobs are growing fastest in the content sector.