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Nobel Intentions, Ignoble Consequences

It was 20 years ago that I discovered the Internet. According to the International Telecommunication Union, that put me in select company. There were only 77 million users of the Internet by the end of 1996. That represented a little more than 1% of the world’s population. 66% of those were in the US, due likely to access restrictions in other areas. I know I logged on to the Web as soon as I could. I had actually been online with Compuserve for a few years prior to that, but it was in 1996 that the first ISP opened in the Canadian city I live in. I was one of the first to set up an account.

Three years later I changed my business to focus exclusively on online marketing. We became one of the fastest growing companies in Canada. Eleven years after start up (or, more accurately, realignment) we sold that company.

Things moved rather quickly after I first went online. At least, I thought they did. But compared to the growth of other start ups – say, Google for instance – I was a very little fish in a very big pond.

The Nobel Survey

In 2001, Cisco conducted a survey of past Nobel Prize winners. By then, Internet usage had mushroomed. Half a billion people – almost 9% of the world’s population – were online. The Internet appeared to be a real thing. The question asked was, “Where will the Internet take us over the next 20 years?

The Laureates were mostly optimistic in their replies. Here’s a quick summary

  • 87% said the Internet would improve education.
  • 93% felt it would provide greater access to libraries, information and teachers.
  • 74% saw the coming of virtual classrooms by 2020.
  • 82% said it would accelerate innovation
  • 83% felt it would improve productivity
  • 72% believed it would improve quality of life and provide more economic opportunity to people in less developed countries
  • 93% saw it improving communications with people in other countries
  • 76% predicted a breaking down of borders

On the negative side, 65% feared it would violate personal privacy, 51% saw it increasing alienation and 44% felt it would lead to greater political or economic inequity.

15 Years later…

I think you could safely put a check beside every single box on the Nobel Laureate wish list. In fact, as optimistic as these predictions seemed just 15 years ago, they seem conservative in hindsight. Online classrooms have been a reality for a few years and education is undergoing a massive reformation. In 2011, 10 years after the survey was conducted, McKinsey estimated that 10% of GDP growth in developed countries was directly attributable to the Internet. And the fact that almost half the world now has Internet access speaks to the role it plays in communication across cultures.

But none of the laureates predicted a gut punch to the cab drivers of the world. No one foresaw the short-sheeting of the traditional hospitality industry. And there was not a peep of new forms of investment predation that would be measured in microseconds.

The Biggest Can of WD-40 Ever

All the benefits of the Internet – and all the negative consequences – come from the same common factor: the elimination of friction. Economist Ronald Coase rightly identified friction – or, in his terminology, “transactional costs” – as the reason corporations exist. Until very recently, geographic distance introduced friction into pretty much every aspect of our society. It took physical resources to overcome friction. Physical resources required capital. Capital could most efficiently be raised and controlled by corporations.

The Internet enabled a new type of connection. It was agnostic to physical distance. But, more importantly, it was a peer-to-peer connection. There was no hierarchy to the Internet. Hierarchies depend on friction. As soon as that friction is removed, the hierarchies begin to fall apart. They are no longer required.

All the good things that were predicted in 2001 came from a removal of friction. But so did all the bad. In the case, the word “regulation” can be often be substituted for “friction.” Regulation is just another form of hierarchal control.

I’ve been “online” for 20 years now. It certainly accelerated every aspect of my life; most positively, some negatively. But one thing’s for certain. Going backwards is not an option.