It’s amazing to me how futurists 20 years ago were able to predict the trends that are mainstream today. Not only has the advent of the internet facilitated this next wave of the industrial, tech and economic revolution, but today blockchain technology has really brought it to the mainstream level even more so. Kevin Kelly, the founding editor of the iconic Wired Magazine, wrote in his thesis 21 years ago that the digital era would usher in a new expression of consciousness which he called “the Network Economy”. Here is what he revealed to us about ourselves as a culture today…
I have only read Kelly’s initial article and not the full book which came later, but the essence of his 12 principles of the Network Community are clear and concise. Amazingly they are still valid today, so his words continue to ring out with clarity. He even said just a year ago that after all this time since his article was published he would not change much of it at all. Kelly goes down in the Hall of Fame as one of the tech pioneers and digital gurus of the internet revolution, up there with the likes of Tim May, Satoshi Nakamoto and other cypherpunks and crypto anarchists as they’re known today. Despite, or perhaps thanks to the fast-paced evolution of our tech and all the advances it has brought us, the 12 principles of the new Network Economy as well as the “Sharing Economy” are more relevant than ever.
As a futurist Kevin Kelly was the person that Hollywood directors like Steven Spielberg and others would consult when making movies like The Matrix and Minority Report (based on the 1956 book by scifi writer Philip K. Dick).
His 12 principles of the new Network Economy are abstract but they are pertinent in that they refer to the new world in which many of us conduct our lives today – namely the online world of cyberspace. Here on the world wide web a new social and economic dynamic is in operation. Millenials today will not take you seriously if you don’t have an online presence, so the interweb is the new world of today, like America was the new world for European explorers hundreds of years ago. And it’s a far greater world than all the Americas put together because it contains the entire globe. Up to 4 billion users have been recorded on the web as of 2018, out of the 7+ billion people on the planet, from every nation. You could say cyberspace is the new first world. Those that don’t engage there are third world, regardless of the country they’re in.
The 12 principles of Kelly’s Network Economy or cyber socio-economic paradigm are as follows:
1 Connection
2 Plentitude
3 Exponential Value
4 Tipping Points
5 Increasing Returns
6 Inverse Pricing
7 Generosity
8 Allegiance
9 Devolution
10 Displacement
11 Churn (not change)
12 Inefficiencies
Kelly described the emerging new digital economy as a “tectonic upheaval in our commonwealth” with its own distinct opportunities and new rules. It is after all via the internet that the modern world is making money today and prospering. Those without it are being left behind. Way back in 1969 Peter Drucker was already perceiving knowledge or information to be a new currency and labelled it the “Information Economy”. Today we have an entire industry called IT. Here information plays a superior role even to material resources or capital in creating wealth. However our current paradigm involves more than just information as currency and therefore the term “Network Economy” has become preferable.
This is based on the concept that it is the communication between computers as well as the computers themselves, that is facilitating our age – whether it be cloud computing and storing, or blockchain technology and cryptocurrency, or monetized social media, or tokenomics – the tokenising of everything, or AI or IOT (internet of things) connecting all gadgets, or 5G – the ominous toxic waves of high speed bandwidth that bring such destruction along with their communication efficiency. Much of this was futuristic to Kevin Kelly 21 years ago when he wrote his thesis on the Network Economy, but today they all back up and validate his vision of our modern society. In fact they are the foundation of our society without which the modern world would come to a standstill within in days.
In today’s world wealth flows from innovation and not optimization as it did in the previous century’s industrial era. No longer is it enough to perfect the known, we now succeed by seizing the unknown – even if imperfectly at first. Agility and nimbleness are highly prized today, and the “make, maintain, destroy” cycle happens much faster than before. And even this current paradigm is not the end game. It may only last a generation or two, when possibly a totally new set of rules may take hold.
Nevertheless, let’s look now at Kelly’s 12 principles of today’s Network Economy in brief:
1 The Principle of Connection – Embrace dumb power
Based on the shrinking size and price of microchips and the explosion of connectivity globally, every object is becoming linked up to every other object, or at least to the internet, in what we call today IOT. Now Fedex parcels, fridges, kitchen appliances, doors, lights all have chips and can report their status to others. Even clothes, perishable foodstuffs – everything is becoming microchipped, like a credit card, for better or worse. In comes efficiency, convenience and “just-in-time” delivery, while out goes privacy, some may say. This is connecting all the dumb objects or nodes to the smart web and to each other and giving them power. In time even humans are being chipped, so that one can read the person’s biometrics and location from a remote distance away. This is how our dumb objects will talk to us and vice versa, as we tell the car to warm up, the lights, music and heating to go on, the door to unlock, etc as we require.
“Dumb parts, properly connected, yield smart results.” - Kevin Kelly
The chips connecting all the gadgetry is the hardware while the software that runs through it all is the Network Economy. Farm implements are linked to weather satellites. Cash registers are connected to banks. Patients are connected to hospitals. We are connected via social media. Ultimately we are connecting all to all, so the parts can talk to each other and produce a better mouse trap. This is how we are embracing dumb power via the principle of connection, or as we call it today – IOT.
2 The Principle of Plentitude – More gives More
“Mathematicians have proven that the sum of a network increases as the square of the number of members.” - Kevin Kelly
The implication here is that the more nodes in a network, the more valuable the network, exponentially. For this principle Kelly used the example of fax machines, though I doubt many of even use such an outdated tool nowadays. They were cutting edge in 1998. Basically we could say that one phone has no real use but two phones have at least one connection between them. However, five phones have ten connections and so the equation multiplies step by step in value.
It may be counter-intuitive to us to think that the more plentiful things become, the more valuable they become, something quite contrary to the old paradigm of the Industrial era. Back then value came from scarcity, like gold, silver or oil, even college degrees. Similarly when things became plentiful, they became devalued. Nowadays the logic of the Network Economy turns this logic on its head. Now value is derived from plentitude and power comes from abundance. It is the abundance of connections, the relationships that add value. As the cost of production of goods diminishes, so the price may drop, but the value of the network that invents, manufactures and distributes them increases. This is the logic of the Network Economy.
3 The Principle of Exponential Value – Success is Non-linear
Many giant internet-based corporations, like Microsoft, are perfect examples of how years of effort initially brought quite minimal results, until the point where they reached a certain threshold and then they exploded. Similarly the internet itself took some years to catch on but then one day it mushrooms as a critical mass is reached, enveloping the world. This is non-linear growth. Even some biological organisms work like this.
What we have here is one of the prime principles of the Network economy – value explodes exponentially with membership. This kind of virtuous circle can also be seen in bitcoin today. Although originating in early 2009, it remained underground and hardly known except to a few geeks and then to the underworld. But around 2011 it suddenly started to boom, following the principles of 1 connectivity, 2 plentitude and 3 non-linear exponential growth.
4 The Principle of Tipping Points – Significance Precedes Momentum
In other words the value of something may be obvious way before it becomes popular, and as it becomes more popular, it reaches a tipping point and goes viral, as we say today. That’s an ironic turn of phrase because Kelly actually uses the example of an infectious virus to describe this principle in his original 1997 publication. In biology the tipping points of diseases are comparatively higher than in the digital world, where members are much more willing and interested. As a result smaller initial progress of a significant product or concept may take time but can lead to runaway dominance in its field once contagion sets in.
Detecting a winner before they reach their tipping point is essential if you want to profit from it today. In the 1980s TV home shopping channels were dismissed by retailers, since purchases from them were so small, but once the tipping point was reached, it had already gone viral and it was almost too late. Similarly with online shopping today retailers that fail to have a website or online store are falling by the wayside. What better place to have the entire digital world as passing feet at your storefront door?
Also those who took to bitcoin in its earliest days, or even Ethereum or Neo (Antshares) in their formative days of 2016/7 would have profited beyond imagination by seeing the significance before the product had gained momentum in the marketplace. In the past Industrial age, momentum indicated significance, but today significance precedes momentum.
5 The Principle of Increasing returns – Make Virtuous Circles
This is one of the prime laws of networking – value explodes with membership, and the explosion of value pulls in more members, compounding the result exponentially. This is how Silicon Valley grew in Kelly’s time at the turn of the century and the arrival of the internet. New successful start-ups attracted more start-ups, which brought in more skill and capital, creating a virtuous circle. These positive feedback loops were also present in the old Industrial era but they were linear, while today they are exponential, like compound interest compared to a piggy bank.
Secondly and more importantly, previous industry required massive effort to outpace the competition in creating value for less. But today increasing returns are created and shared via the entire network. No longer does one corporation succeed alone in the digital world. There may be slightly more gains by one over the other but by and large, the multitude of agents, users and competitors all benefit from the revolving door of staff, customers and users amidst the greater web of relationships.
Crypto enthusiasts and bitcoin maximalists are similarly so committed to the space, the blockchain, that they have more loyalty to it as a whole than to anything else. As a result they are always open to sharing info, tips, and educational knowledge among the others in the space, especially newcomers. They are more loyal to the industry as a whole (compared to the mainstream financial sector) than to one particular company. Networking pays as more investors enter the market and adoption increases when it comes to crypto and the Network Economy of today. Every member’s success is shared and leveraged by all who are involved.
I will end part 1 here as the post is becoming longer than the attention span of many nowadays, particularly regarding such abstract material, and I will continue in part 2 soon, so watch this space for the rest of the 12 Principles of the Network Economy.
Ref: https://www.wired.com/1997/09/newrules/
Pic https://www.kobo.com/tw/en/ebook/minority-report-6
Pic https://www.goodreads.com/book/show/48731.New_Rules_for_the_New_Economy
Pic https://www.slideshare.net/rossgarrett/build-platforms-not-products