|
||
 |
||
| Nicholas
Negroponte has become the big-idea guy of the digital world. His 1995 book, Being
Digital, made the now-famous assertion that the world is moving from atoms to bits and
gave people a way of thinking about how technology is transforming the world of business
and rearranging everyday life. Long before the book, Mr. Negroponte was well-known in the
technology world, partly because he has a gift for explaining complex ideas in simple
terms and partly because he founded the Media Lab at MIT, a remarkable incubator of clever
ideas. Context recently had the chance to sit down with Mr. Negroponte, in a meeting moderated by Executive Editor Chunka Mui. Mr. Negroponte talked about new economic models, about how electronic commerce may vary by country and by age group, and about a potentially explosive product called electronic paper. As always, his stories were fascinating, his ideas compelling, his language powerful. CONTEXT: How far are we into the digital revolution? NICHOLAS NEGROPONTE: There is no more digital revolution. There is no more rioting in the streets. Now, the same people who read Town and Country are reading Wired. We are now a digital civilization. CONTEXT: What are the implications for business as we move from the revolutionary stages into a digital era? NEGROPONTE: There has to be a whole revisiting of your economic models. Who pays whom for what and how. There was a boxing match where people in the U.S. paid up front to watch, and there was a knockout in the first round. Well, people demanded their money back. So, with the next boxing match, the cable company said, "OK, you pay so much a round." People were happy. The next step is for people to pay per ounce of blood lost. If that's why you look at a boxing match, then the more blood, the more it costs. Now, the idea is ridiculous on the one hand but not so ridiculous on the other. Everybody is going to have to get into this sort of exercise because customers are going to want lots of options for paying. This is a very big thing. Here's another story: A woman went to an automobile dealer to buy a car, negotiated the car down from $19,000 to $17,000 and went home. She said to the car dealer, "I'll sleep on it." She went home and didn't sleep on it. She went on the Web and found 20 people in the greater Boston area who were interested in buying a car of exactly the same sort. She went back to the dealer the next day and said, "OK, I'll buy the car for $15,000." The dealer said, "No, madam, you are making a mistake. We negotiated yesterday, and we settled on $17,000." She said, "No, I'm not making a mistake. Yesterday, I was only buying one, and today I'm buying 21." He said, "Sold. Done." And every person in the group got their car for $15,000. The dealer was pleased as punch because he got his lot emptied out. His margin was tiny on each car, but he got it times 21. When you hear a story like that you realize that the woman didn't need to stop there. If she had found 50 people, she could have gone to Ford and said, "I'm a fleet. I want my car for $13,000." What I think is important about this story is that for years and years and years we've talked about cartels where people in powerful positions can sit around a table and set prices. Now you have consumer cartels. CONTEXT: A survey we did last year found that lots of executives agree that customers have gained leverage over their dealings with companies selling products and services. But it sounds like you're going even further, describing a change that's more fundamental. NEGROPONTE: I see an enormous change in the nature of buying and selling. The credit-card world, for instance, has a clear concept of the merchandiser, the person selling, and the person buying. The two are treated as being as discrete as authors writing and readers reading. What we learned with the Web is that publications that had a distinct author and a set of readers started to change. Somebody who was a reader could be an author. It's going to happen in merchandising. I might want to sell some of my old wine, perhaps, and yet fractions of seconds later I might bid on some wine from somebody else. So, I could be both a buyer and a seller. I could be both the store and the customer. CONTEXT: We hear a lot about disintermediation, about middlemen being squeezed out because the Internet makes it possible for a company to deal directly with customers. Do you see that happening, or can the middlemen adapt? NEGROPONTE: My favorite example of disintermediation is a tomato. I buy a tomato in Boston, and there are eight people between me and the farmer. Now, I am not offended by that. In fact, when I pay 50 cents for the tomato and know that the farmer gets eight cents, it's still OK because I understand how hard it is to move them. The economic model is fine in the world of atoms. In the world of bits, it really becomes very different. Almost anything that has the word "agent," "broker," or "wholesaler" in it has a little visible flag on its head as far as I'm concerned that says, "Going out of business." The travel agent is a perfect example. Over the past 15 years, travel agents have seemed to know less and less about travel. All they are is the interface between you and an airline-reservation system that updates its pricing five times a day and that has all these absurd codes. It's as if you're using them as a language translator. They speak Urdu, and you don't. So you speak to them in English, and they speak in Urdu to the reservation system. But technology will soon make it easy for you to speak directly to the reservation system. One has to bear in mind, though, that as soon as someone is disintermediated they reintermediate themselves, unless they are really stupid. Almost always, reintermediation is done one way, through personalization. If a travel agent can learn more about you, he can say, "Alan, I know you like the Okura in Tokyo. I know you like the Peninsula in Hong Kong. So when you go to Singapore next week, stay at Raffles." Alan will do that and then will say, "Wow. My agent really knows me. What a great hotel." Slowly, Alan and the travel agent start building this rapport. CONTEXT: You've criticized some of the predictions for the growth of electronic commerce because you think they're too conservative. Would you lay out what numbers you think should be used and, more generally, describe how you see the electronic commerce market developing? NEGROPONTE: The Forrester Group says that electronic commerce will hit $300 billion at the end of the year 2001. We should tie boat anchors around their ankles and drop them in the ocean. Their number is false on three very simple observations. First, Cisco today is doing $3.5 billion of commerce annually on the Net. If the Forrester numbers are correct, that means that in 1998 Cisco represents 1% of the global electronic commerce in 2001. No. Doesn't work. Second one: Dell Computer is now doing $2 million to $3 million of business a day on the Net, seven days a week. These are big numbers. The third is that, not counting what happened during the Asian crisis, the average daily movement of money around the planet today is $2.5 trillion. Now, we know that money movement does not relate directly to goods and services. But for Forrester to be correct, in the year 2001 electronic commerce would require roughly four hours of money movement. That's not possible. The numbers for electronic commerce are going to be much, much bigger. The consumer side of the equation, whatever that number turns out to be, will be less than 20%. The lion's share of electronic commerce is going to be business-to-business. When General Motors realizes that they can cut out all this purchase-order stuff and deal directly with the vendors, by doing all of that intranet-type stuff that some of us may find boring, the numbers will just go through the roof. CONTEXT: In general, as companies think about where they might find opportunities for business-to-consumer electronic commerce, where should they look? At the kids, or across the board? NEGROPONTE: In the U.S., 85% of teenagers have access to computers at home. It's fair to say that there is no 14-year-old, digitally illiterate child in the U.S. That's certainly true if I include Nintendo and Sega. The numbers have gone out of sight. The big surprise to me was that the next highest percentage, in terms of access to computers at home, was for those 60 and up. Actually, 30% of 80-year-olds have access to personal computers at home. And the rate of growth is really astonishing. I used to call the people in the middle—let's say, above 30 and below 60—the digital homeless. They were not part of the digital world because they arrived on the planet too soon. I don't think, to be honest with you, I can make that statement in the U.S. for much more than another year. A year from now the digital homeless will be such a minority, they'll be a nonissue. If a family has a child going off to college and that family is not on-line and that kid goes to college in another city, that family signs up for AOL or some other on-line service. 100%. There's not even an if. If families have kids in the four-, five-, six-year-old range, even with family incomes of less that $25,000, they will spring for a computer. CONTEXT: How about outside the U.S.? NEGROPONTE: If you move around the rest of the world, the demographics aren't quite as simple. Europe, for example, has this very odd situation. Scandinavia is absolutely digital—more so, in many ways, than we are. Finland is wildly more so than the U.S. 60% of the population is on the Internet in Finland. In Denmark, 55% of the homes have personal computers. In Iceland, the numbers are even more amazing in terms of percentages of the population. When you drop down, not very far in miles, you find France and Germany with huge economies, but they are basically the Third World when it comes to being digital. People say, what about Minitel [France's pioneering on-line system]? That's part of the problem, not the solution. The presence of computers in French homes is less than 5%. Norway, with a population of three million, has had more e-mail addresses than all of France. The Germans, in their wisdom, keep raising the price of local telephone calls, which is exactly what you shouldn't do. If you drop to the Mediterranean, the teledensities—the number of phone lines per 100 people—are in the 40 range. Italy is 45. Greece may be 40. Spain and Portugal are in the low 40s. Those numbers aren't as good as Scandinavia, which may be 87 or 88. The cost of telecommunications in the Mediterranean is high, and the service is crummy. But the mindset of the Italians, to pick one country, is exactly right. These people have a healthy disrespect for authority. They have underground economies. They love having the little guy win. Lots of Italy's economy consists of little, family-owned enterprises. It's just a bubbly place whose character is very compatible with Internet-style thinking. If you jump to the Far East, you have very odd situations. Most people would expect Japan to be much more digital as a nation because they make so many components that go into the digital world. Yet Japan has not adopted the computing world at home or at work in anywhere near the proportion that you would think. And it's not changing fast. Here are two things about South America: Out of the 100 poorest countries in the world, none is in Latin America. Interesting point. And here's an entire continent that speaks two languages, effectively. So, you're going to see much more growth in the digital world there than anybody expects. Here's a piece of trivia that nobody will ever get at a cocktail party: Which country in the Americas, North, South, and Central, was the first to have a fully digital phone system? Not one switch even in the farthest, remotest place is non-digital. It's Uruguay. In fact, most people don't know where Uruguay is. I don't think a second has appeared yet, but Costa Rica is likely to be the second. Those countries are really pushing the technology out. They're getting it into schools, and they're getting it into village centers. The reason I dwell on the demographics is that I've gone on record as saying that there will be a billion people on the Net in the year 2000. We will see the billion users. I'm convinced. And, even if I lose my bet to [minicomputer pioneer] Gordon Bell, two months later when he's trying to figure out what to do with his $6,000, the Net will hit that number. In other words, if I'm off, I'm off by a tiny, tiny amount. Whether the number turns out to be a billion or 600 million, my next comment is that half of them will be from developing nations. That's very important to remember because it's going to affect electronic commerce very dramatically. Most people don't take the importance of developing nations into consideration. They just think they're selling to the people who buy L.L. Bean catalogs, that these are Americans. CONTEXT: In order for the world to be really digital, does everybody have to have a computer? That could get expensive. Certainly, growth in household penetration in the U.S. has slowed in recent years. NEGROPONTE: To be digital, you don't even have to have access to a computer. That's wrong. You just need an e-mail address. CONTEXT: So, the developing world is going to have e-mail addresses but not computers. NEGROPONTE: Absolutely. I want to say one last thing on demographics, because I think this is something we all forget. The billion users on the Net will be a shadow compared with the 10 billion to 100 billion "things" that will be on the Net by then. By things, I mean cameras, doorknobs, light bulbs, your car, most appliances, and many things that people will make. Each one of us may have 20 of them within the next couple of years. Imagine that you can buy by Christmas next year a high-quality camera that has a little solar power charger to it. This camera uses the cellular telephone grid. It has an Internet address, and it sells for $1,000. You paste it on the wall opposite your home, and you can log into this IP address and have it take a picture, and transmit it to your Web site. You can actually look at your house and sort of keep your eye on it. There are all sorts of things. Little boys and girls could start playing tricks on each other, and all the rest. It's a whole toy department, as well. We've started a new program at the Media Lab called Toys of Tomorrow because we believe that in five years it will be very hard to buy a toy that does not have an IP address and a connection. Some of these teddy bears that tell stories, once they're connected, can tell some pretty interesting stories. In a sense, you can keep drawing and drawing from the whole Web. CONTEXT: Of all the things you're working on at the Media Lab at the moment, which would you say has the best chance of becoming a killer app? NEGROPONTE: Electronic paper. Imagine a sheet of paper that uses the technology of carbonless paper. Carbonless paper is really quite extraordinary. It's one of these things, in my mind, that ranks right up there with the universal joint in your car. To make carbonless paper, you coat the back side of the sheet of paper with tiny little capsules of ink, literally tens of thousands of them per square inch. When you write on the top side of the piece of paper, the pressure of your pen is literally bursting the little capsules below and squeezing a bit of ink onto the next sheet of paper. What we did at the Media Lab is, we said let's put the coating on the top of the sheet of paper. And, instead of putting ink in the micro capsules, we're going to put a Ping Pong ball in each capsule. This Ping Pong ball will be black on one side and white on the other. It will be charged positive on the black side and charged negative on the white side. We'll put a lubricant in the capsule so it can rotate. (Of course, it's not a real Ping Pong ball. It's something tiny, tiny, tiny, measured in a few microns.) You can put the paper through a laser printer, which very, very easily just exposes the different points, using plus and minus voltages to turn the little balls in the right direction. When the electronic paper comes out you get a print. And believe me, the black is as black as ink, and the white is as white as paper. It stays that way, too. What this means is that you can reuse a previously used sheet. All the printer has to do is make two passes. One pass gets all the whites to face up, and a second pass prints something new. The idea, particularly for newspapers—maybe magazines some day—is that you can print it at home. The next step is to take two layers of transparent, conductive, and resistive materials and lay them on top of the sheet of paper. You end up with the same kind of grid that you have on your laptop display. You embed scanning circuitry and control what the paper displays by introducing power, rather than run the paper through a printer. If you can do this cheaply enough, you could take a couple of hundred of pieces of electronic paper and bind them into a book. I'm sure there will be leather on the front and leather on the back, just for romantic reasons, but this book would have, in fact, a plug on its spine. It would be a book with white pages that you could plug in. You could write the whole book in four or five or 10 seconds. Then you would unplug the book and read it wherever you like. When you finish your book, you plug it back in. The words get sucked out, and you can write the next book. This means that some of our grandchildren and great-grandchildren will have libraries with one book in them. The last stage is to add another couple of layers of transparent, conductive, and resistive materials and turn the sheet of paper into a radio. So we call it radio paper. This piece of paper can listen to whatever signal it's tuned into and be an active display that is updated as you talk. CONTEXT: How quickly could this be brought to market? NEGROPONTE: Reusable is done. It's totally done and debugged, and it's going to manufacturing. The book is still questionable. There are many issues. When you have that much circuitry on there, what happens when you bend it, what happens when you fold it, etc.? But radio paper could happen pretty quickly, which would be interesting. It's in a context like electronic paper that my distinction between atoms and bits starts to blur a little bit. Words printed on electronic paper are hard copy, but they really aren't hard copy. They're hard, soft copy. Or maybe they're soft, hard copy. They're a different animal. CONTEXT: Thanks, Nicholas. Provocative, as usual. |
