28 Oct 2020 | Crypto Column
Digitization. It’s all entwined with inventiveness, commercial and communication infrastructures, politics, geo-politics and winning a very important race. The most important in centuries. Yet even a decade ago such high stakes were far from anticipated. Now that we are on the cusp of their realization, interest is moving towards a frenzy.
Like much of Victorian colonialism, the pursuit of hegemonic dominance was not an initial motivation. The intent was simply to secure shipping lanes and ports-of-call to protect trading routes, but what started in the 1760s as a mercantile adventure, rapidly evolved into a dominating empire that profoundly shaped global destinies. All this because the United Kingdom was first nation to industrialize.
Why? What made Britain unique? Continental Europe was weighed down in war debts and sclerotic adaptation (to preserve the power of the aristocracy), while unique factors in the British Isles (the Glorious Revolution) had done the opposite. Finances were sound (Bank of England, 1689) ideas were new and radical (Newtonian physics and the Scottish Enlightenment) a growing middle class were driving innovation (the Spinning Jenny) and commercial theory (Adam Smith) creating a tipping point by the middle part of the Eighteenth Century of rapidly expanding entrepreneurial industries (Wedgwood).
Digitization parallels much of this revolutionary narrative; though there are some differences. This time we all know that the outcome will be a game changer. We know the scale will be deep and global; printing press meets industrialization; meets global shipping infrastructure; meets hydrogen bomb. The driving paradigms, however, exactly parallel the 1760s, including actively abandoning old ways of thinking; adapting radical innovative approaches; pro-actively cultivating those who can drive ideas into action; deploying large numbers of engineers (this time, algorithm rather than mechanical); rapidly expanding a new consumer base; a deep pragmatism and fully seizing opportunities to change the status quo. As these are embraced in the pursuit of digital technologies the results will be profound, leading to economic, commercial, military and geo-political reorientations.
In terms of the key streams more broadly shaping these factors, we note three; the technogopolies and digital consumer, all pushing for big change; entrenched elements in the existing commercial ecosystem pushing hybrids and self-preservation; governments, legislation, regulation and direct state investment, ambivalent but going with the flow of national interest. We will consider select aspects of these factors in turn.
First, however, we must address the question, ‘What exactly is this ”digitization”?’ A generation ago it was the conversion and storage of information in binary format. Today it is also the processing of this information. Tomorrow will meld AI qubit (quantum) algorithms into the whole process. As each of these technologies has evolved, so has ubiquity and application. Thus, in 2020 we are so dependent on what digitization does, that much of what we consider “normal life” could not happen without it. By the end of the decade this scenario will be intensified by several orders of magnitude.
The most significant underlying trend, however, is the increasing convergence of human and machine. This is being driven by the technogopolies and draws from disciplines in biology, physiology and psychology. Within these, the use of neurosciences and psychology is by far and away the most significant. Where cultures have previously been shaped by philosophies originating in the human mind—and from some distance—today information gathering, analysis and implicit direction are instantaneously delivered by self-learning algorithms. At the same time via several billion social media accounts, machine learning never had access to such a scale of human activity. Thus, a critical circle is complete. The implications are seismic, perhaps to the point of seamlessly morphing mind with machine but at the price of human autonomy. Given this potential, we can understand why the pursuit of AI has been called “the second Manhattan project”.
If this evolution is blurring thinking and shaping decision-making, it is also returning us to an age where commercial corporations take on the stature and power of the nation state. Instead of the British South African Company, we have Facebook. Instead of the Dutch Vereenigde Oostindische Compagniewe, we have Amazon. Except the later, in each case, has a lot more power and instantaneous global reach. Numerous studies show that algorithms have mapped out our behaviors and subconscious a lot more than we realize. It is self-evident that with AI advances the dangers of this “colonialism” are extremely worrying.
To this confluence, we must add another megatrend, but this one a counterbalance; the rising dominance of Millennials. Normally, generational succession, while showcasing the outwardly rebellious, in reality marks no more than a step-change in outlook. The Millennial shift, however, is profoundly different. It represents a markedly separate—and in fundamental ways—antithetical worldview. One of the reasons for this is that they are the first generation to be educated exclusively in a digital age and certainly the first to be so extensively conditioned by social networking tools. Such factors profoundly change the way information in processed by the human brain as well as the logic adopted in each case. The impact on innovation is that these new generations think very much ‘outside the box’ (or as we have noted before, very much within Schrödinger’s). This, in turn, may also be critical in democratizing digitization for social good and securing broader economic growth—simultaneously weakening entrenched commercial infrastructures and technogopolies.
Our third key player is government. Where does legislation and regulation fit in with digitization? The surprise here is that the instruments of statecraft are as much subject to the forces we have outlined, as they are effective in shaping them; indeed, probably more their servant than master. For all their posturing, flurry of activities and regulatory busyness, global governments from China and the US, the EU to small micro-states are:
Understanding these factors may also help us understand what government regulation is likely to do or not do, where it may intrude and where it will stay out, and, finally, where such regulation is likely to go. As we have seen, global governments are too invested in the success of digitization/blockchain/AI or too diverse in ambition to collectively fight against it. In either case, however, they are too weak to structurally shift the direction of market force fundamentals (the “tectonic plates”). Where there are opposing forces among governments or technological oligopolies, these either cancel each other out or drive the development of opposing hegemonic alternatives.
Governments are far from powerless though. The states’ most effective weapons impacting the digital arena are rumor, threats and irritating, ambiguous regulation. Yet, ironically, these also work to significantly free-up market dynamics.
Behavior-limiting rules tend to create an incentive for intense efforts to get around them, as the parent of any two-year old can testify. Assuming rewards justify the effort, the market will always find a way to realize valuable opportunities hindered by legislators—as equally overcome attempts by technogopolies to quash threatening innovations. Each act of resistance adds to the already mighty inertia to smash the digital atom sooner rather than later; that moment where AI finally connects the functioning of an almost infinite number of digitally interconnected autonomous, commercial, educational, energy, logistical, manufacturing, medical, military, robotic, security, and social inter-plays. As empires go, each one of us has a duty to ensure that this one is both enlightened and a service to all humankind.