Making the world a better place means giving new opportunities to enhance and leverage human potential at a vast scale
In the satirical HBO series "Silicon Valley", Gavin Belson, CEO of a dominating internet player called Hooli has a claim he uses in public and internal gatherings – "we want to make the world a better place". This is his mantra to mobilize his troops and to impress the world with his good intentions. Yet he shows no human or ethical scruple in killing off a potential competitor, revealing himself as a cultural illiterate with little understanding of the world beyond competition and technology. While the series is a caricature, the underlying point is serious. In real life too, technology geeks, combining brilliant engineering, programming and self-promotion skills, are being propelled into roles they have little preparation for. It is not uncommon for a whizz-kid with 20 employees and no assets other than a smart algorithm to become a master of the universe almost overnight, with a valuation leaving that of long-established industrial corporations producing essential products in the dust. How can this happen, and what does it mean?
Wich lessons learned?
After the bursting of the dot-com bubble, high-tech executives and investors swore they had learned their lesson. But don’t be so sure. Reaching a billion valuation (in HBO Silicon Valley’s ineffable terminology, membership of "the three-comma club") is still a driving ambition for the venture capital industry. No blame or surprise there; but this time the stakes are higher – not only money but also, critically, economic and social power are in play. To anyone outside the charmed circle, hearing yesterday's start-up leaders, now Silicon Valley’s high priests, announcing the death of privacy, the conquest of immortality and the imminent advent of a self-created "Singularity" in which machine intelligence overtakes that of humankind can only seem like hubris.
19th century oil, steel and banking magnates exploited their way to unprecedented economic and social power at then record speed. Not for nothing did they become known as"robber barons", and society devised anti-trust and anti-cartel laws to keep them in check.
Today, the one-sidedness of the value extraction is much less brazen. Millions if not billions of us accept the tacit bargain that makes us in fact products for Facebook, Google and Instagram to sell to advertisers or marketeers in return for the ability to connect with others in clever and convenient ways. But are we aware what we are giving away to companies that find ever more ways to profit from their increasingly comprehensive holdings of personal data? Is it a fair deal – or should personal data be treated with greater respect for the potential value it holds for both individuals and society?
At the core of these developments is a phenomenon that has not been sufficiently explored or its ramifications understood – the network effect, aka Metcalfe’s Law, in which the value of the network grows at exponential rate with each new participant. In today's pervasive and increasingly mobile internet tipping points for new solutions can be reached at lightning speed. The winner leaves competitors in the dust at a speed was not conceivable in the pre-internet world. Just think of the extraordinary success stories of Google, Facebook, Amazon, and others in the making like Uber and AirBnB.
These economic forces, and the rise of the Silicon-Valley elite that they have fuelled, raise at least three urgent and vital issues.
First, are these changes fundamentally altering the rules of the capitalist market economy – and thereby posing a challenge for democratic capitalism itself? For economists, network effects are largely positive for consumers and the economy as a whole. And optimists argue that just as IBM and Microsoft once seemed impregnable, so contemporary network effects will likely speed up the demise of today’s seeming titans in their turn.
Second, if this is the case, is it right for the financial benefits of the internet to be seized by the 0.1 per cent? The internet is a common infrastructure, funded by the public sector, that has many characteristics of a public utility. The creative use of personal data by trusted organisations could create trillions in value for individuals, companies and the wider society. However, this will require a much more positive, open and equal approach than that in evidence today.
Third, how do we regulate – in the largest sense – this complex of interrelated social and economic issues? Winner-takes-all after all means monopoly, and monopoly means power. There are rules about economic monopoly and economic power, although much underused, and they need revisiting, and probably strengthening, in the light of the internet. But social regulation can only come from values that are internalised by entrepreneurs and managers. These too need to be revisited and strengthened if managers are to take responsibility for harnessing the cornucopia of available economic and technological possibilities to create a prosperous society.
As Peter Drucker observed, the responsibility of managers is to contribute to the society they are embedded in, not to build a separate, parallel one based on commercial values and interests.
The internet is the new nervous system of an emerging man-made ecology for 21st century society; it indeed changes the world; it provides almost unlimited potential to innovate and to create prosperity.
However, making the world a better place will need a concerted effort by all democratic stakeholders, to take advantage of the commercial power and dynamics that, as Silicon Valley has shown, this new infrastructure can generate. Now is the time to learn how to harness it and to spread the benefits in a more equal and beneficial way generating breakthrough innovation – beyond social media, on-demand platforms and digital transformations focussed on efficiency and cost cutting. Making the world a better place means giving new opportunities to enhance and leverage human potential at a vast scale. This is the biggest and largely untapped natural resource that humanity still has. Governments, regulators, civil society and managers must wake up to this secular challenge and this historic opportunity. (29.8.2015)
Richard Straub is president of the Drucker Society Europe. The Drucker Society Europe organizes the annual Global Peter Drucker Forum in Vienna. The theme 2015 is Claiming our Humanity – Managing in the Digital Age (November 5 & 6). More info under www.druckerforum.org