‘The Digital Economy’ author Don Tapscott looks back two decades to look forward

Landmark author argues that digital disruption undermines the traditional approach to social supports

Don Tapscott: “ I think there is a crisis of legitimacy about democratic institutions.” Photograph: Ana Grillo

Don Tapscott: “ I think there is a crisis of legitimacy about democratic institutions.” Photograph: Ana Grillo

 

Perhaps nothing puts Don Tapscott’s deeply influential 1995 book The Digital Economy in context better than a story he tells in his new introduction to its 20th anniversary re-release.

As he worked on the book in 1994, he had to consider carefully terminology. Many of the things he was writing about were so new that they hadn’t entered popular parlance. One issue was a name for that big network that joined together computers all over the world.

No one had really settled on a term, he writes. There was the underlying infrastructure that most called the internet. More recently, someone named Tim Berners-Lee had come up with what he called the world wide web, an overlay that presented information on the internet in a more intuitive, graphic way.

Meanwhile, newly elected US vice-president Al Gore had spoken about the “information highway”, a phrase popular in some circles. Tapscott settled on a snazzy new coinage for the book: the “I-Way”.

It’s one of the few things that clang in an extraordinarily prescient book, which – you have to remind yourself in some disbelief as you read – not only predated the dotcom crash, but even the dotcom bubble (much less the term dotcom).

Nevertheless, you will read on-the-mark observations and possible future scenarios that have come to pass and continue to create turmoil – the mass disruption by digital technologies of business, media, society, the working world, entertainment, government, privacy, education.

And, in one of the only editorial changes made to the original manuscript, Tapscott did a search and replace on the term “I-Way”, now more conventionally known the internet or the web.

The new edition features an incisive forward by Google chairman Eric Schmidt and endorsements from a business who’s who – which, Tapscott concedes, might be a slightly risky for those 25, considering that many of the 1990s business community and companies that featured in endorsements on the first edition’s dust cover crashed and burned because they did not adapt fast enough to the very changes and impacts he had outlined.

His publisher, McGraw-Hill, proposed the anniversary reissue to Tapscott, who has written 15 books, including Grown Up Digital (2008) and Wikinomics: How Mass Collaboration Changes Everything (2006). He is also chief executive of business and management think tank the Tapscott Group and holds several academic positions, including chancellor of Trent University.

“They said, ‘it’s held up really well and why don’t you take a look at it and think about an anniversary edition and you could write a new foreward?’ So I took a look at it and I was pretty dumbfounded that I’d been able to say this stuff 20 years ago,” the Canadian laughs, talking over the phone from his office in Toronto.

Instead of just a foreward, he ended up writing a dozen “mini chapters reflecting on what’s happened. It was very cathartic for me to think about what’s gone on and where we’re headed. It’s been a good exercise.”

One of the biggest shifts between then and now, he says: “I think the digital economy for me was separate from the real economy 20 years ago but now the economy IS a digital economy. So this is changing every aspect of how we orchestrate capability, to innovate, to create good services, to manage, for companies to engage with their customers or the rest of the world.”

One key difference – “The first 20 years was really a period of chaos, where new entrants could become massive players. I honestly think we’re moving into an era where we’re seeing a certain monopolisation now in the digital space.

“One of the reasons for that is you have these powerful business models which become deeply entrenched in a whole number of different industries. It’s because of the power of the data that they have. They have this massive asset now that’s very difficult to replicate.

“The early Pets. com or whatever really didn’t have that and could just flame out first time something happened to the economy, like the dotcom crash. But I don’t see Google or Facebook or Apple or Amazon, or any of these companies flaming out in the same way. If anything, there’s sort of this real concentration of power that’s happening and it’s reflected in many ways.”

One of them, he says, is the notion that M&A (mergers and acquisitions) is the new R&D (research and development).

“During the heyday of the dotcom period, what happened was you built a company, you got a revenue stream, hopefully, or at least a good story, and you did an IPO [initial public offering] and you got wealthy. Now, companies don’t do IPOs. They sell to these big behemoths when they start to show any kind of serious revenue traction.

“You can be these little companies, like WhatsApp and have hardly any revenue and Facebook will pay $18 billion for you. So why would you do an IPO?”

Another change is under way, too. “It wasn’t long after that book came out that Bill Gates famously said we underestimate the significance of technology in the long term and overestimate the impact in the short term. I think that law is being flipped – or at least I think we are underestimating the impact of technology in the short term now.”

This is to be expected after the 20-year gestation of the digital economy.

“When you have exponential growth for 20 years, something kicks in with the rate of growth, where quantitative change becomes qualitative change. It’s staggering, really, to think about the rate of change today. These mind-boggling new things keep coming out constantly and this is a time when every business is becoming a digital business,” he says.

“This is a time when everybody’s got to listen up and get engaged, and be using this stuff. Personal usage is a prerequisite for any kind of comprehension.”

People need to think more consciously about the life they want and the way in which they wish to manage the technological onslaught, even on a day to day basis within the family. “It’s just we never had to think about this stuff 20 years ago. Life was blissfully simple. Now it’s not.”

As the original subtitle of The Digital Economy noted, these technology-driven changes offer both promise and peril.

“In theory, there’s this extraordinary opportunity to generate prosperity, wealth, to use this new medium for social inclusion and for closing divides, be they digital, economic, social, ethnic, religious. There are opportunities to bring families together and enable them to open up the bandwidth of communications and for people to participate in the economy in ways that were previously unthinkable.

“Trouble is, when you look around today, you get a little different picture, don’t you? Sure, there have been lots of spectacular innovations and glorious things,” but, he says, look at youth unemployment, which is already significant in OECD countries, still rising, “and is primarily caused by technology”.

So what does all this mean? He argues that society itself is ill equipped right now to grapple with those changes mainly because it has not taken in that the change is as momentous as, say, the shift from a feudal, agrarian economy to an industrial age.

“It took a while, but we figured out that we needed to make some big structural changes”, like public education, a social safety net, income tax, anti-monopoly legislation.

“We did a whole bunch of huge changes, but we’re just nibbling at this stuff right now. I mean, ultimately, technology is going to do a lot of the work we do today, so you can’t just say, isn’t that great – you need to have policy changes. We’re going to have to shorten the work week and we may well have to move towards a guaranteed annual income for people.

“If we have the prosperity and the wealth in society to do that, we have to make sure the prosperity isn’t further bifurcated. And that’s just one of many, many issues.”

That sort of shift seems especially difficult for an American mindset that considers basic public healthcare to be “socialist”, though. Does the US risk tumbling from its “leading nation” role?

“Yes, emphatically. Because the alternative is not just that the US drags its feet and falls behind, the alternative is called massive social unrest or worse,” he says. “As I discuss in the book, I think there is a crisis of legitimacy about democratic institutions. The US congress is exhibit A for that. You’ve now got people in the Republican party saying the purpose of the next two years is to make congress and the government dysfunctional. Boy, this is really messing with some powerful things.

“The number of protests in the world in the last 20 years has gone from 600 a year to 260,000 a year, and we ignore the need to step up to these tectonic changes as societies at our peril. So I’m very concerned.”

Still, he cautions, he isn’t making predictions.

“I think the future is not something to be predicted, it is something to be achieved.” But, he adds, based on existing evidence, “we’re on a trajectory here towards massive social dislocation, unrest or worse. It is time now for thoughtful people to sit up and realise this digital economy thing is really happening. It’s not going to go away and it’s penetrating ever more into every aspect of our society and our lives. We need to start to think about what needs to be done.”

He stops. “Oh, I don’t want to sound too negative,” he says. And there’s still so much more in this meaty book that could be discussed: the internet of things, climate change, education, digital currencies, privacy – but our time is up.

Almost.

“You know what? I’ll let you in on a little factoid. I think I got the sequence of my books wrong. You know my book Safeguarding Privacy in a Networked World? I wrote that book before the Digital Economy. It came out like the year before and, boy, talk about a book that nobody bought. That was a beauty. Everybody was like, ‘Privacy? What are you talking about?’ but anyway, it’s all happening now,” he chuckles.

“There’s a very strong line in The Digital Economy about privacy. The bottom line is that 20 years ago, when I wrote about it, I said that the way to manage this issue – the one way – is data minimisation. We all need to be careful what information we provide.” He laughs.

“Well, the train has left the station on that one. As a guy said to me recently, what happens in Vegas stays on YouTube. ” The Digital Economy Anniversary Edition: Rethinking Promise and Peril in the Age of Networked Intelligence by Don Tapscott (McGraw-Hill) is available at £23.99.

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