October 21, 1999
Political Principles of the Telecosm
Chairman, Gilder Group
MR. MONE: If we could all get you to sit down. The sooner we get you seated, the sooner we can serve you and the good times begin. So thank you.
MR. MONE: Iíll be brief. Just one moment. My name is Larry Mone. Iím Larry Mone, President of the Manhattan Institute, and my job is a simple one, just to welcome you all here to the 13th Annual Walter B. Wriston Lecture.
MR. MONE: Weíre obviously very excited about our speaker tonight. Dinner will be served now. So sit back, relax, and enjoy it. At about 8:30 weíll start our formal program. Thank you.
MR. HERTOG: Good evening. Good evening. I hate to interrupt such a wonderful event. Good evening, Iím Roger Hertog, Chairman of The Manhattan Institute. We are proud to welcome all of you, our friends, our Trustees, our scholars to the 13th Annual Walter Wriston Lecture.
MR. HERTOG: Benjamin Disreli, in one of his more fanciful flights of rhetoric promised Queen Victoria that if she would approve one of his pet projects, her name would be inscribed forever on the page separating the Old and the New Testaments.
MR. HERTOG: My place tonight is less ambitious. I fill the space separating the fillet mignons and the warm chocolate cake.
MR. HERTOG: This evening is especially exciting because our Wriston Lecture is George Gilder. Some of you may know that in 1980, about 20 years ago George was the Instituteís first Head of Research. During those years, he published Wealth and Poverty. While this evening is a celebration, it is tinged . . . in 1999 The Manhattan Institute lost three friends, and they will be missed.
The first was Zalmon Burnstein [phonetic], my friend, my partner whom I had known for 40 years. He was a devoted supporter of the Manhattan Institute, and I know he would have loved to have been here this evening because George Gilder is someone whom he deeply respected.
Second is Leon Mandracos [phonetic], a friend and colleague about 30 years. Iím really getting old B-
MR. HERTOG: B- whom I met in my youth at Oppenheimer & Company.
Finally, there is Frederick Finnius Rhoads [phonetic]. Fred, a Trustee, a multifaceted businessman, real estate developer, philanthropist, an iconoclastic thinker, he left his mark on a great New York institutions: The Lincoln Center, The New York Public Library, The Museum of Natural History, and The Metropolitan Museum of Art.
All of these friends will be missed, and we at The Institute send our heartfelt sympathies to their families. I am happy, however, to report that the Institute is in its 21st year and is more productive than ever led by Larry Mone our President.
MR. HERTOG: We have been making consistent progress in all areas. Perhaps the best way to frame it is to reference a New York City bumper sticker, a taxi bumper sticker of several years ago that said, "So many pedestrians. So little time."
MR. HERTOG: In my case there is so much to review and so much still to do. One of the centerpieces of our program of these last many years has been education reform. This area has led the agenda for the better part of a decade, and we continue to make progress. We are one of the groups that was intimately involved in getting past last year one of the most innovative charter school laws in the country, the law that Governor Pataki signed last year. One needs look no further to understand our commitment to education than the report of the Mayorís Advisory Task Force on the City University of New York. The committee chaired by Benl Schmidt [phonetic] was served, in fact, by our own Heather McDonald.
MR. HERTOG: There is no better way to describe our commitment than to just give you two statistics that were revealed by the report: 72% of incoming freshmen at City University failed at least one of their skills test B- math, English, or writing -- and 55% failed two of three.
When one understands that the vast majority of our young women, men and women in New York City are educated in public schools, one can see why our policy has been to side with kids and parents rather than institutions and bureaucracies.
MR. HERTOG: Only by providing parents with more choices can the Public School System become truly competitive.
A second innovative area is charitable choice which has been a product of a number of our Board of Directors. It is under the leadership of John DiOlio [phonetic], Professor of Political Science at the University of Pennsylvania. Johnís fundamental idea is to bring together inner city ministries and public law enforcement agencies in an effort to reach at-risk youngsters. At the heart of his commitment is his understanding that the social services structure fundamentally failed these young men and women, and itís mostly men who are at risk in our cities. It is rare that Presidential candidates agree on anything. Yet both George Bush and Al Gore have endorsed variations of this idea.
Another more recent project is reinventing the Criminal Justice System. Almost two decades ago George Kelly and Jim Wilson wrote a definitive article called, "Fixing Broken Windows." The work done by Wilson and Kelly led to a whole series of innovations that would be adopted by police forces around the nation, most importantly by our own Mayor Giuliani and which led, in part, to the remarkable drop in city crime. One way to make sure that crime numbers keep falling is to do a better job of supervising the three million offenders who are now out on probation.
This year we did a major conference with Senior Fellow George Fallum Kelly and with the help of former New York City Police Chief Bill Bratton [phonetic] who is sitting over here.
MR. HERTOG: Working with these two men with the past three Presidents of the American Probation and Parole Association, we put forward new ideas on how to deal with prior offenders cause they often can commit more crimes which endanger the public.
At the heart of The Institute is our book program. This program is inspired by the great bibliophile Jules Marks, otherwise known as Groucho.
MR. HERTOG: Groucho said, "Outside of the dog, a book is a manís best friend. Inside of the dog, itís too dark to read."
MR. HERTOG: My wife said it was dumb to say it, but I couldnít resist.
MR. HERTOG: This yearís book crop is particularly a powerful one. Kay Heimowitz [phonetic] who is sitting somewhere here B-
MR. HERTOG: B- "Ready or Not: Why Treating Children As Small Adults Endangers Their Future and Ours" has already been well received in so many publications. David Fromm [phonetic] who is sitting over her on my right B-
MR. HERTOG: -- is going to publish shortly. Weíve been saying this for awhile, "How We Got Here: America From 1968 To NowĒ, a sweeping analysis of the forces that have weakened our national culture over the past 30 years.
AUDIENCE MEMBER: [Unintelligible].
MR. HERTOG: And Peter Huberís [unintelligible] a strongly argued critique of environmentalism. In effect, The Instituteís answer to Al Goreís, Earth In The Balance.
Finally we have progressed well in our effort to map out strategies for the future not only for social services but for programs to grow cities, reduce taxes, regulations and promote housing. The Institute has thrown a wide net across partisan lines in cities throughout the country with mayors recognizing our commitment to saving urban centers. Our conferences and dialogues have included Mayors in the following cities: Indianapolisí Goldsmith, Milwaukeeís Norquist, Philadelphiaís Randell, Chicagoís Daley, New Yorkís Giuliani, Jersey Cityís Schundler [phonetic], Oaklandís Jerry Brown of all people, and D.C.ís Anthony Williams. A group truly representative of Americaís great cities.
Our goals remain undaunted to fund ideas to foster individual responsibility and competition. In essence, we want to side on the rule of law versus the search for group justice. We want to side with individual rights versus group rights. We want to side with smaller government and lower taxes versus larger bureaucracies and more entitlements.
Vartan Gregorian [phonetic] was once quoted as saying, "Most philanthropists know what they do. Frequently they know why they do what they do, but most donít know what what they do does." You and I know, and we thank you for your continued support. We all have much to be proud of. It is now my privilege to introduce the introducer who, in this case, happens to be The Instituteís best acquisition in the year 1987, Peter Huber, a man B-
MR. HERTOG: B- a man of protean intellect. Actually one could describe him as a think tank in and of himself. He holds a Doctorate in Chemical Engineering from M.I.T. and a Law Degree from Harvard. Heís clerked for both Ruth Vader Ginsberg on the District Court of Appeals and Sandra Day OíConnor on the Supreme Court. Heís attained a mastery in a range of specialities that one could never predict by knowing any one of those specialties.
It is truly unusual to find one person who has expertise in Anti-Trust Law, expertise in liability law, junk science, telecommunications, and now environmentalism and to have written definitively on all of them. So it is not only my pleasure but a point of some pride to me as representing The Institute to introduce Peter Huber.
MR. HUBER: So we are at the August Kennedy School of Government in Cambridge, Massachusetts, and the year is 1984. On the laughter, the urbane and witty John Kenneth Galbraith, a Harvard Professor, he declares that America is on the road to economic ruin; but who is this rumpled fellow on the right? This man of choppy [phonetic] diction who tells us that productivity will rise and that the debt will melt away, and that a great boom in the stock market lies ahead. Why it is George Gilder, the one-time Harvard dropout.
MR. HUBER: And the urbane and witty Kennedy school audience is wondering how did he get here?
MR. HUBER: Well it happened like this. After interrupting his Harvard undergraduate years for a brief sojourn in the Marines, Gilder completes his degree and then as an old friend described it, adopts a lifestyle both peripatetic and nocturnal.
MR. HUBER: Let us pass quickly over the details. Suffice it to say that before anyone else favors the haut cotier [phonetic] of Silicon Valley, George Gilder already owns the entire collection. He lacks a suit. He emits [unintelligible]. He favors lime green sneakers and not surprisingly he lacks a wife.
MR. HUBER: But then he finds the perfect one in Nini Brook [phonetic], and he finds his way to what will eventually become The Manhattan Institute here in New York and he begins to write path-breaking articles on supply side economics. In 1981 these culminate in a book, Wealth and Poverty. Itís a bestseller, and President Reagan ends up quoting it, quoting Gilder more than any other living author.
Gilder had, of course, established himself as a dangerous and portentous thinker of the right, which is to say not Kennedy school material, well before President Reaganís embrace made it official. He had done so by writing muscular prose about controversial subjects and writing most of it far too early. His books on men and marriage earned him in 1974 an award from the National Organization for Women, male chauvinist pig of the year.
MR. HUBER: Yet today, today youíll find his views resurfacing in the post-feminist writings of Danielle Critondon [phonetic] and Wendy Shalit [phonetic]. Gilderís 1978 book, Visible Man on the welfare system was an athema [phonetic] then, but itís mainstream now. Of course, his Wealth and Poverty heresies of the >70s have been transformed into our retirement portfolios in the >90s.
MR. HUBER: Then there is the sheer breadth of Gilderís work. In 25 years of books, Gilder has moved seamlessly from Betty Ferdam [phonetic], feminist, to Richard Fineman, physicist, from Welfare to Wealth, to Silicon Wafers to Wave Division multiplexing. After a heated debate with misguided European advocates of a certain cell phone technology, Gilder himself was searching for a point of comparison to describe the experience. He found one. It was, says Gilder, "more intense, more irrational, more emotional than debating Germain Greer."
MR. HUBER: Now I happen to know that Bill Gates feels much the same way about debates he has had with George Gilder; but for all his many achievements Bill Gates, unlike George Gilder, has never been invited to debate Germain Greer also. I donít suppose he ever will be. Gilder who runs five miles a day mostly uphill is not for the intellectually lazy. Po Bronson [phonetic] devotes a chapter to Gilder in his recent book about Silicon Valley characters which is called Nudists On The Late Shift. As Bronson notes, Gilder may start our tickling your brain; but just when your brain starts giggling, Gilder delivers a stiff spanking--pay attention.
Gilder earned his place in Bronsonís chronicles because he has become as much a part of the technological revolution as the late-shift tekkies themselves. Three years ago George created the Gilder Technology Group. Some 30,000 investors now subscribe to his monthly report. His four annual Telecosm conferences attract standing-room-only crowds. Tekkies and Wall Street alike now attend Gilder as attentively as Ronald Reagan once did.
A final word about Gilderís prose, or should I say his poetry. Consider his latest essay in Forbes ASAP which is titled, "The Brightest Start." Gilder is describing the Internet as it would appear through a spectroscope to a viewer examining it from outer space. This is very arcane stuff. Yet in Gilderís hands, it also becomes literature. We read of Maxwellís Rainbow, a glob efflorescence, a resonant sphere of light, a radiant crystallist [phonetic], a penumbra of microwaves suffused with billions of marbing [phonetic].
When I first read this, I experienced--as I often have when reading the best of Gilder--a vague sense of artistic deja vu. Where had I seen this before, brush stokes so bold, imagery so vibrant, such fevered corals, and such richly hued and incandescent sky. Then it struck me, I thought, I had seen just such a painting once before not very far from here on West 53rd Street. That canvas was painted at Saint Remi [phonetic] in France in 1889 by another artist in a bad [unintelligible]. He too had set out to paint the Telecosm, and he called his version of it, "A Starry Night."
With Gilder as with Van Gogh, youíre often left wondering . . . well youíre often left wondering two things. First, now and again you do really wonder whether this man is still in possession of his left ear.
MR. HUBER: But once you get past that, you wonder how a single mind can express such large and compelling visions about so many different subjects and render them so vividly and so memorably and so very well. George and Mini have raised four children in the red house along the main road in Piney Tering [phonetic] in Massachusetts. Theirs is a family of church and books and sports and home schooling. It is on that rock that Gilder has built his intellectual and spiritual house and built it so high that Gilder now ranks as Americaís foremost entrepreneur of the intellect and venture capitalist of the mind.
It is a very great honor for The Manhattan Institute to welcome home tonight the new Odysseus of the Telecosm George Gilder.
MR. GILDER: Well I really donít know how to follow that [laughing]. It certainly is . . . Iíve got to master some technology here, but it certainly is an amazing honor to be introduced by Peter Huber. Peter did introduce me to the crucial insight of my Telecosm. He was sitting on a couch, I think, at the Century Club or somewhere where The Manhattan Institute holds itís Board meetings, and he gave me a five-minute spiel on telecommunications which in the course of time impelled me toward fame and even riches.
Peter pointed out that centrifugal power of the microcosm, the micro chip that I had been writing about, itís tendency to distribute computer power from top-down hierarchies into heterarchies or peer networks from vertical organizations to horizontal organizations was transforming communications in the same way. I thought about that for awhile, and it was clearly true; and I ran home to rewrite some chapters of Microcosm and included a chapter on the death of television. Clearly the top-down hierarchical organization that was most likely to be overthrown by the rise of these horizontal world wide webs of glass and light which Peter had persuaded me were likely to emerge.
So I did include this chapter in Microcosm and then wrote a book from it called Life After Television which again, set me off on writing about the Internet for the next ten years. In the course of time, however, these ruminations brought me to the subject of religion and politics again with which I had ended Wealth and Poverty, Microcosm, and The Spirit Of Enterprise. This preoccupation is not always welcomed among analysts of what are seen as the holier vocations of microelectronics and money.
MR. GILDER: Technologies will win or lose, so they say, on the basis of their performance in the marketplace. All other disputes are merely religious wars that will divert the investor from his wrapped contemplation of the objective facts.
With any technology that will change the world so deeply as the Internet, however, religious wars are inevitable. As Walter Wriston showed in The Twilight of Sovereignty a book which really anticipated the Internet and its impact on the world economy and politics and showed how profoundly these technologies would change the worlds of economics and politics and finance, the Internet will affect all the cultural, ideological, and political philosophies and power structures of the world economy. It will necessarily act on a level of deeper loyalties and beliefs that may be termed religious in nature.
By dissolving the inhibitions and obstacles, the blinders and [unintelligible] of economic locality, the Internet will essentially make the globe transparent in much the way that Albert Einsteinís relativity transformed the time space grid of classical physics at the beginning of the 20th Century. The Einsteins of the Internet, of Internet communication, are now transforming the time space grid of the global economy. An emerging system resembles exactly what Peter Huber depicted years ago as the Geodesic Network. This is the network thatís chiefly governed by the speed of light as its controlling force and constraint.
The essence of the change that the Internet affects and that these technologies achieve is the overthrow of matter. This is really of the subject of my book Microcosm. It began with a statement that the most important event of the 20th Century was the overthrow of matter.
Now one manifestation of it, which Alan Greenspan has discussed a lot in recent speeches, is falling commodity prices and other trends signifying the declining contribution of material resources to global added value. Between 1977 and 1997, according to an Ernst & Young survey, the value of GDP per American citizen rose from just over $19,000 to just under $27,000; but the weight of the output, the mass of the output dropped by 23%, or nearly a half a ton a year per capita and its value per pound doubled.
The overthrow of matter had its roots at the turn of the last millennium in the scientific revolution of quantum Theory. Quantum theory essentially overthrew material solidity in the science of matter itself. Newton and his followers, Isaac Newton and his followers, had assumed that matter consisted of solid indestructible little balls of mass, atoms; but the great physicists of Europe early this century--Rutherford, Bore, Einstein, Schrodinger--discovered that this assumed source of the solidity of matter, the atom, is almost devoid of matter. It is as empty in proportion to the size of its nucleus as the solar system is empty in proportion to the size of the sun. Moreover, Newtonian Laws, as it turned out, are entirely irrelevant in the atom.
The discoveries of the quantum era allowed the manipulation of the inner structure of matter in microelectronics and the microchip and unleashed the power of microelectronics to change the inner structure of society lending new meaning to the maxim that knowledge is power, hierarchies and top-down organizations tumbled, as I said, into heterarchies as knowledge flowed freely across peer networks of equally powerful technicians and engineers. In the end the quantum revolution endowed every teenager at a computer workstation with more potential creative and communications power than a factory tycoon of the industrial era, or a broadcast magnate of the television era, or even than the use, often baffled, parents as later generations surpassed the earlier in computer skills. I have a 15 year old boy who does all my computers for me.
This is more than many people realize and fundamentally every new era is marked by a defining configuration of abundances and scarcities. Now what can be scarce in an information age? This is everybody recognizes in some sense is an information age; but what can be scarce? Surely not information. Weíre all glutted with information. Nor is any material goods scarce, strictly speaking. This is an age of material abundance. The commodity prices continue with occasional blips their hundred-year decent. This is an era of increasing, ever increasing material abundance.
Food production, for example, is up 40 percent per capita since 1950 in the world. Energy reserves are more abundant, by far, than they were in 1978--tripled by some measures. This is an age of material abundance. In an age of material abundance, the pressure of scarcity devolve unto the residual resource; and the residual resource is time. Time is the essential scarcity in the information economy, and all my business conferences are preoccupied with time: time to market, turnaround time, network delay time. Time is a general preoccupation. Racks and bookstores are full of volumes on a complete idiotís guide to time management B-
MR. GILDER: B- or time is obviously a defining scarcity. But I believe that all these measures of the scarcity of time is now reduced to two key limits. One is a biological limit. One is a physical limit. It is the speed of light and the span of life. These are the two key constraints of the information economy.
Could I have a glass of water. I think I could B- thank you.
Now how can the speed of light be a scarcity, be a key limit? Well it essentially was Peter Huberís insight in the geodesic [phonetic] network; but today the speed of light is absolutely the key constraint in both microeco B
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MR. GILDER: Now as a result of this collision with the speed of light the troposphere is filling up with low earth orbit satellites, and low earth orbit satellites will be the next generation of satellite technology as a result of this speed of light constraint. Similarly, the terrestrial networks of the Internet are being transformed by a collision with the speed of light limit, and they are going to be utterly changed over the next five years as a result of this clash.
Currently, Internet messages tend to make an average of 17 hops before they reach their destinations. This kind of . . . each hop incurs about ten milliseconds of delay, and increasingly the Internet is becoming like those geosynchronous satellites in orbit requiring a transformation of its technology and that is now underway. Even the microchip itself, which would seem to be immune to speed of light limits, is now constrained chiefly by the speed of light. Each individual microchip today contains about, on its surface, about 600 meters of microscopic wires; and around the turn of the century, new microchips underway will contain as much as seven miles of wire on their surface.
The speed of light limit constrains microchip evolution and is transforming the microchip industry in many dimensions chiefly resulting in a need for single-chip systems. Thereís no time to go off the chip anymore. Single-chip systems accord with and allow us to predict the most common computer of the new era. The most common computer of the new era will be a digital cellular phone. It will look like a digital cellular phone. It will be as portable as your watch, as personal as your wallet. It will recognize speech, navigate streets in conjunction with geopositioning satellite. It will collect your mail and your news. It will read it to you. It will connect to a variety of different displays of all kinds. Thereís amazing creativity in the display industry. It will perform transactions. Much of the world economy will flow through these billions of devices, perform all sorts of functions. Itís hard to imagine today.
It just may not do Windows.
MR. GILDER: But it will do doors, open your car door, your front door, doors to your safe, doors to the future. It will be the most common PC of the new era, and it will change the entire computer industry in the process. Many of the imperial computer companies of today, including Microsoft, will have reached their pinnacle and are now beginning a long period of decline as a result of this transformation which derives from the collision of microchip technology with the speed of light limit.
Now just as important and more important to most of us is the span of life, the biological limit of the information economy. The best way to translate the span of life in terms of these computer technologies and these business issues and political issues is the customerís time, or the citizenís time. Until recently, really still for most businesses all across the world economy, the customerís time is regarded to be like an externality. By all means waste the customerís time like air and water in the industrial era. Take the customer, cue him up in a cue, make him fill out forms in triplicate or duplicate, send him to a new cue, sit him on a couch for as long as seven hours a day watching an incredible lowest common denominator distractions and trivialities--some called news, some called entertainment--all in order that are almost indistinguishable, all in order to capture his eyeballs for a few minutes of advertising that most of the time he doesnít want to see for products that most of the time he doesnít want to buy. Television, this is a technology thatís profoundly and utterly based on wasting the customerís time.
MR. GILDER: It necessarily will succumb to the forces massively underway today.
So thatís, and now the customerís time, what these technologies do is endow the customer with sovereignty, with power. The twilight of sovereignty for governments means the rise of sovereignty for individuals and families for the customer who becomes, and the citizen, the most precious resource. So thatís whatís scarce, speed of life, span of life. Iím a cornucopian economist.
MR. GILDER: What really matters is whatís abundant. Itís the critical abundances that shape the huge opportunities that we face. In every age itís possible to identify the defining abundance readily. That defining abundance is marked by the plummeting price of a key factor of production. All those individuals, companies, nations that exploit that price, that resource that is plummeting in price gain market share against all other countries, companies, individuals and end up defining the very nature of the era, the very character of the age, naming it in a sense: the age of steam, the age of information.
In the industrial age the key abundance was horsepower ultimately translated into kilowatt hours. The price of a kilowatt hour dropped from some unfathomable level to 52 cents. That was the plummeting price. Everybody had to use electricity and power in order to prevail in the industrial age.
Weíve just been through the computer age, and the most important, the key price that was plummeting during the computer age was the price of the transistor, those tiny electronic components inscribed on a microchip. The transistor dropped during a 35 year period from about $7 apiece together with support circuitry to less than a millionth of a cent next year. Once a key item, the transistor translated into MIPS and BPPS, of computer power, drops below a millionth of a cent, it no longer will be the driving force of world economic change and transformation.
Now weíre entering a new era marked by a new dominant factor of production which like a giant river is now nearing its historic cliff of costs. This new factor of production is bandwidth, communications power. It is more important to most of us than computer power. Most of the human beings arenít very good at calculating and computing, but communication is what makes us human. Communication links us together in families, societies, nations. Communication really addresses our most truly human capabilities and thus is the most humane of all these new technologies that have emerged in recent decades.
We are now consummating the overthrow of matter launched by quantum theory. Weíre moving into an industrial era based on photons, totally massless bearers of electromagnetic energy, light. The new paradigm of technology which is governing the evolution of the world economy is the all-optical network. In these webs of fiber optic threads, photonic communications ends by driving even the infinitesimal mass of electrons out of the critical paths of networks. Still there are plenty of electrons, and as Peter will explain, the average computer in the world economy consumes about a megawatt hour. So the dreams that the computer age will eliminate the need for increasing power production are false, and Peter has made very eloquent and impressive arguments to that point. Nonetheless as the essence of the technology, what photonics means is to eliminate mass from communications, from the critical paths of communications.
At the heart of this technology is a technique called wave length division multiplexing which means sending many colors of light down a single fiber thread at the same time. This breakthrough, which I started writing about almost ten years ago, has been the key force and the explosion of bandwidth that has enabled the Internet. Itís been absolutely critical to all of the new wealth that has been created over the last five years or so on the Internet.
Recently I visited Lucent Technologies which has been originating, it used to be Bell Labs, and has originated many of these key technologies and encountered a couple of new breakthroughs which assure that this technology, far from reaching any pinnacle of capability, is about to accelerate massively at a speed as much as ten times faster than the microchip technology of previous decades. Using state-of-the-art components already in existence, it is now possible to put as many as a thousand colors of light each bearing 10 billion bits of information a second on a single fiber thread. At the same time it is possible to put 864 different fibers in a single cable. So each fiberís thread has a terabit, a trillion bits of information; and you can have 864 of these fibers in a single cable, and you can have lots of cables in a conduit.
Metromedia Fiber, company that indeed was formed after the founder who read my article on the Fibersphere, that wrote about this stuff, now runs several of these 864 fiber cables under the Hudson River from New Jersey through the Holland Tunnel. This means that a single cable can hold 8.6 million billion bits of information a second or 8.6 pedabits a second. Now learn that word pedabits. When Carver Mead [phonetic] spoke to you ten years ago as the first Wriston lecturer, one the greatest innovators in the history of electronics who has just invented a radical new camera that will transform the camera industry; but he didnít know about pedabits. This is 10 to the 15th. On one cable, 8.6 pedabits a second represents a thousand time the average traffic on all the telecommunication systems put together two years ago. It is more traffic in a second than in 1997, the entire Internet held in a month.
Now Lucent isnít alone. Hundreds of companies are introducing technologies that contribute to this incredible revolution which is technology moving faster than any other in the history of industry. Somehow we donít quite feel it yet, and thatís because of a little problem called politics, regulation which has created whatís called a bandwidth bottleneck to homes and offices. This is largely a result of the regulation, an over regulation of these companies. Most of this technology has yet to break through, but it is going to break through. It is massively moving toward its consummation. You cannot deploy a technology so radically superior to the incumbent system of television, broadcast and phone connections without invoking profound forces of social, economic and cultural change.
The vast flood of broadband services will necessarily overthrow most of the powers and principalities of current world industry. They are incurring often tacit but still tenacious resistance from the beneficiaries of the existing order. It comes from all of the old, the entire old narrow band order from voice base telephone companies to television broadcasters, from mass advertisers to Hollywood producers, from communications regulators to the communications bar. All are supported by ranks of mayors, judges and politicians from Alaska to Florida intimately entwined and embedded in the old order.
For the new system to prevail, it will be necessary to explain the power and promise of this new technology to the public and to politicians. It will be necessary to engage in what might be called a religious war fueled by visions of change and redemption and powered by faith.
Now what does faith have to do with it my critics ask. This is a technology of facts and physics, not visions and passions; but because the existing system is well established and functions smoothly, it will be able to summon powerful forces of expertise and authority in its defense. Many will depict the advocates of the new system as somehow inflamed by religious fantasies. This has happened many times before in history.
Thomas Edison, the greatest creative genius earlier this century spent most of the last years of his life combating the advance of alternating current, AC electricity. Even Albert Einstein engaged for the last 30 years of his life in a tenacious battle against the triumph of the quantum theory which he had crucially advanced during his early years. The hostility of experts to fundamental new innovation is inevitable and persistent and prevails today.
MR. GILDER: More recently many of the leading experts on radio communications, and this is what Peter was mentioning that cellular phone debate which reminded me so much of my times with Susan Brown Miller and Germain Greer, but many of the experts on radio communications including the head of the department at Stanford depicted as "violating the laws of physics" the code division multiple access CDM cellular phone technology being launched by a small company in San Diego called QUALCOM [phonetic]. This technology is now, ten years later, being accepted as the basis for a world wide third generation standard for cellular telephony that will allow broadband internet access through your cellular phone.
My understanding that QUALCOM CDMA was not a scam but a new wireless paradigm gave the readers of my letter, my commercial, some ten-fold gain in QUALCOM stock. In order to prevail against GSM, the government-sponsored common market system that had been launched in Europe, QUALCOM had to wage what was everywhere and describe with passionate impatience as a religious war and I was one of the leading profits of it. If experts were always right, socialism would work. You wouldnít need investment markets, you could predict the future through rational and mechanistic procedures, and religious wars would be unnecessary.
Faith, however, is central to every process of innovation. Just last month the key inventor of the QUALCOM system, Klein Gilhausen [phonetic], told me that his most profound insights came to him from out of nowhere. He couldnít explain them. They were, as he thought, a gift of God. What could he have meant? I think he was describing the essence of the creative process. A crucial law of intellectual creativity is that belief precedes knowledge. The logic of creativity is leap before you look, look before you look. You cannot fully see anything genuinely new from an old place. The old saw of look before you leap provides only for the continual elaboration and refinements of old ideas that comprise the bulk of scholarship and the bulk of industrial progress in large and static companies.
Imagination, intuition, and hypothesis are the crucial first steps to technical creation. As in love, a man must trust his intuition and act on faith before he can really know. Love appears blind to outside observers, but lovers know that it is guided by a more exalted vision and opens new realms of knowledge and creativity.
Commitment can create itís own confirmation. To the man who dares not commit, dares not love, the entire world seems barren and dull, the future pregnant with doom. It is love and faith that infuse ideas with life and luminosity. Without religious commitment, new ideas cannot take flight and flourish, new technology cannot be projected into untilled markets, and new systems cannot be launched. No market test can prove the demand for what does not yet exist. You cannot build bridges by counting the swimmers.
MR. GILDER: The investor who never asked until the financials affirm his choice, the athlete or politician who fails to make his move until too late, the entrepreneur who waits until the market is proven all are doomed to mediocrity by their trust and a kind of spurious mechanistic rationality and by failures of faith. Now in the United States on the verge of a new millennium, we face the usual calculus of impossibility recited by the familiar esperance to a master plan even inventors of the Internet, or inventors of the Al Gorithm [phonetic].
MR. GILDER: Here are some of the claims: you know abundant bandwidth is a delusion Iím told, the massive upsurge of Interne traffic growth is mostly a myth, the Internet is chiefly a [unintelligible] pornography and trivia. The most decentralized network in history is somehow prone to oligopoly and need far-reaching new regulation. Television is forever. You look at it in a different room than your computer is profoundly observed to me. Television is the most beloved technology in Washington, and itís a dog technology; but, of course, the politician is always the dogís best friend.
MR. GILDER: Voice will always be the key source of technology profits. This is a strong encryption. The key tool of electronic commerce must be suppressed and thus relegated to foreign companies which is the effect of suppressing strong encryption in the United States.
Global warming, pollution, ozone depletion, and other commeres [phonetic] of popular so-called science require a radical cutback in energy usage at a time when new energy demands are increasing steadily and are absolutely necessary to overcoming world poverty.
I believe that this is a time when the global afflictions of poverty, famine and disease are about to succumb to a world wide synomy [phonetic] of new commerce and invention. Itís just ridiculous at this point to quibble about digital divide and to promise to impose level playing fields on the sprouting skyscrapers of new wealth.
This is really the fundamental problem is a problem of faith. The blindness to opportunity and the bias toward regulation and distribution and redistribution is chiefly a religious disorder I think, a rebellion against the inevitable risks and uncertainties of human life. The regulation of telephony and cable TV, the best current candidates to bring broadband Net access to the home, has already inflicted a last-mile bottleneck on the information economy. This drive to extend this regulation to the Internet is the greatest threat to this redemptive technology.
Further example comes in national security policy. The world is not safer. Itís, if anything, more dangerous than before in many ways. Itís absolutely vital that defenses be maintained. The treatment of China as a kind of domestic police problem rather than a supreme opportunity in the end reflects a failure of faith. To respond to China by a vain attempt to cut off the Chinese from American technology, much of it created by Chinese immigrants living in America, is despair masquerading as prudence.
To mount a nation-wide witch hunt against crucial American companies for the crime of sharing technologies that were actually invented in 1971, if weíre really dependent on technologies invented in 1971, we are in desperate trouble. This is really the technologies that were allegedly [unintelligible] to the Chinese. All this bespeaks failures of faith and ignorance of the spiritual sources of our original triumph as a technology colossus. Freedom favors innovation.
As Edward Teller points out, comparing our progress in nuclear power to our progress in computers, one obsessively regulated, one deregulated, our defenses are more dependent on computer technology where our massive lead comes from its deregulation while our nuclear power has been paralyzed by a 30 year grip of obsessive regulation. This is a time of supreme opportunity, and a key law in this kind of predicament is donít solve problems. Pursue opportunities. You pursue opportunities and you change the landscape and the problems tend to disappear. The current anxieties and doubts of the world political order represent an obsession with problems at a time of supreme opportunity.
Internet traffic is growing at a pace a thousand-fold every five years. Web Pages are multiplying at a pace of a million a day. This means the Internet ventures today in a world with a thousand-fold increase in traffic every five years, and this is not an exaggerated projection. It seems to be about the right elaboration of the current, extrapolation of the current pace. This means that an Internet venture today currently faces volumes about one tenth of one percent of their likely business half a decade hence. Thatís the reason for the wild gyrations in the Internet economy.
In the face of this vista of opportunity, faith is the key resource we have. The overthrow of matter entails as a corollary the ascendancy of ideas as the prime objects of economic output and consumption. Essentially infinite in its horizon, an economy of ideas brings the issues of faith and spirit to the fore, and I think critical is a belief that human life is supremely meaningful and important is indeed the very summit of the universe. Now this belief is not entirely rational.
Nobel Physicist Steven Weinberg tells us that the more he understands the universe, the more pointless it seems. In order to avoid the implication of the governing intelligence in nature, Weinberg and other leading scientists uphold the idea of infinitely multiplying universes, constant, infinitely multiplying multiple universes. This absurdity is the dead end of the materialist superstition.
Chesterdon [phonetic] was right. When people reject belief in God, they donít believe in nothing. They will believe in anything. Science cannot sustain millennial technology. Faith is not entirely logical, but it is deeply scientific relating to the practice of science rather than its products. Faith is entirely essential to human achievement. Another way of putting it is a belief in God.
What does it mean to say you believe in God? A minimal definition of God is an omnipotent force of goodness. The Judea Christian tradition upholds the faith that God is one, God is good, and God will prevail. A belief in God asserts that virtue will finally triumph. No matter how dark and menacing seems the world at any particular time, goodness will win. The believerís sacrifices will be redeemed in the future by the eventual triumph of goodness over evil.
Theologian Reinhold Neibor [phonetic] once summed up our predicament. ďNothing worth doing is completed in one lifetime. Therefore, we must be saved by hope. Nothing true or beautiful makes complete sense in any context of history, therefore we must be saved by faith. Nothing we do no matter how virtuous can be accomplished alone."
MALE VOICE: I think it might be appropriate to adjourn, but I want to thank George for spending this time with us this evening.
[END OF TAPE]