Sunday, April 21, 2013

Double click on the next digital revolution, then brace yourself

At first, the internet was treated as a curiosity.  YouTube has a television segment from 1981 on newspapers experimenting with sending digital stories over the phone line.  ''Imagine, if you will, sitting down to your morning coffee, turning on your home computer to read the day's newspaper'', said the host with a bemused smile.

We all know how that turned out.  The internet has played havoc with the newspaper industry.  It has ripped up the music industry and intimidated Hollywood.  What is a curiosity today might be the industry-disrupting, society-realigning, prosperity-enhancing and utterly essential technology of tomorrow.

Two recent innovations suggest the next few decades will be more disruptive than any other time in living memory.  Right now, Bitcoin and 3D printing seem the province of geeks and hobbyists.  But they're omens of revolutions to come.

Bitcoin is a digital currency that can be used like normal money.  You can buy or earn Bitcoins online and use them to purchase goods or services.  An increasing number of online retailers accept Bitcoins as payment — including one of the world's biggest dating sites, OkCupid.  But unlike normal money, Bitcoins are very hard to trace, extremely hard to tax, and can be completely anonymous.  With only a bit of care, you can make it impossible for the government to pry into your Bitcoin account.

Scepticism is reasonable.  Bitcoin is an immature technology.  It seems prone to huge swings in value, so it's hard to be confident about using the currency in the marketplace.  Bitcoin may end up fizzing out.

But the idea underpinning it is both radical and plausible:  that digital technology allows the creation of an entirely new global currency outside the control of governments and central banks.  Political power and power over the currency have always been intertwined.  Technology may break — or at least undermine — this age-old relationship.  Sound far-fetched?  So did the internet.

3D printing allows hobbyists to easily and cheaply produce three-dimensional objects at home.  The only costs are the printer itself and the raw material — plastics, rubber, even metal — that are made into the final object.  The printers cost just a few thousand dollars.

For the most part, 3D printing is used to make trinkets.  But it can also be used to make more valuable things — prosthetic limbs or replacement car parts.  Or firearms.  There's a group of hobbyists in the US working to build 3D-printable semi-automatic rifles.  These weapons are illegal in most countries, but may soon be easy to build in your own home.

Our legal and economic institutions are not well equipped to deal with these sorts of technological innovations.  Usually, when governments want to ban or regulate something, they target its source.  If it takes a big factory to make prohibited goods, it's not hard to detect.

Complex laws and well-funded regulators manage our financial transactions.  Yet imagine a world where you can store your earnings outside the government's reach.  We're nowhere near that scenario yet.  But in 1981, we were nowhere near being able to access every newspaper in the world and every song ever recorded on a tiny phone.

The economic consequences of these innovations are huge.  But economies are used to change.  One of the advantages of a free market is how it is able to adapt.  Absolutely, those adaptations aren't always pretty.  The shift from a manufacturing to a service economy has been traumatic for some.  When we can make custom industrial products in our own home, what happens to all the companies and workers doing that now?  Yet we've been through this sort of rapid industrial change many times.  And we always end up more prosperous.

Legal systems are not as flexible as the market.  Politicians are backward-looking.  Only this year was the classification system fixed to properly account for video games.  Our laws haven't caught up with the internet.  Legislators have no idea what to do about music and movie piracy — our copyright laws are routinely ignored.

So do we want people to be able to 3D print anything they like?  Well, how on earth would we stop them?

These future innovations will be enormously beneficial.  It's why viewers of the 1980s were titillated by the idea of digital newspapers and why it's fun to imagine what comes next.  They will enhance our living standards, give us more choice and greater comfort.

But if you think the internet has been disruptive, brace yourself for what comes next.


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