felipe rodriquez on Tue, 22 Feb 2000 01:30:14 +0100 (CET)

[Date Prev] [Date Next] [Thread Prev] [Thread Next] [Date Index] [Thread Index]

Re: <nettime> Revolution! Globalism! Convergence! New Economy! NOW!!


>However, you've overlooked something equally fundamental which you might
>wish to consider in future versions of your essay: anticipation of
>"monopoly" position in a world without edges.  Without national borders.
>Without industrial edges.

In my text about valuations, I described the subjective part of the
valuation process. That is the anticipation of the future. You anticipate
monopoly positions in a future environment. That is a subjective
expectation. It is similar to the expectations of the rest of the crowd that
invest in tech stocks these days. I have a different opinion. But that does
not mean either of us is right or wrong. One can never know for sure if an
interpretation of the future is right. Only the future can tell !

I do not expect many monopoly positions on the Internet. And believe that
the only monopolies will be taken by organizations that sell something
proprietary that cannot be easily copied by the competition. For any
companies that retail consumer products, like books, toys, music, movies, on
the Internet will have a hard time. The internet is an incredibly
competitive environment, and intense competition will drive down prices
enormously. That means that the future economic fundament of many of these
companies is flawed.

In the ISP consumer business one can already see margins becoming thinner
and thinner. Products like internet access, web hosting, email and bandwidth
are a cheap commodity product in most places. Broadband will soon be such a
commodity product, as it becomes available on cable, adsl, g3 mobile
networks and sattelite networks. In other areas, like Internet retail, a
similar process is happening. Margins are nonexistant, or are getting
thinner. Except at companies like Yahoo, that has a proprietary product;
ordering chaos the Yahoo way.

Monopolies are often an important source of economic prosperity for a
company (not necessarily for its customers). And in certain area's of the
society there is a tendency towards monopolies. In the newspaper market for
example typically every newspaper in an area is low profit or losing money,
the strongest will remain. It becomes the only newspaper in town, and
suddenly very profitable.

But on the Internet monopolies will not be easily created. The Internet, by
its nature, promotes diversity and creativity. There will always be a
smarter competitor just around the corner. And this drives profit margins
lower and lower. The only good positions on the Internet are taken by
organizations that have in some way created something unique, and therefore
valuable. And just a strong brandname is not enough.

>The current valuation "bubble" in tech-stocks is *not* premised simply on
>discounted future cash-flows -- in the traditional fashion.  Not at all.
>If it were, it would be merely another "frenzy" or simply another "Tulip
>Mania" -- waiting to be toppled.  Which it isn't.  Not at all.

Then what is it about, if not another tulip mania ? To me the current tech
stock market seems like a terrible speculative vulcano. There are few other
words to describe companies with 10 million dollar revenues and 10 billion
market capitalizations.

>For good or ill, the fundamentals of the current situation lie more deeply
>buried . . . which are, ironically no doubt, partly a result of the
>"internationalist", "revolutionary" and "radical" thinking lying beneath
>much of nettime's own rhetoric.  Nettime is (partly) responsible for the
>"frenzy." (Pit . . . ECUTE!)

I was a convinced Internet preacher from 1992 onward. Back then nobody
listened and thought I was crazy. But I setup our former Internet company in
1993, the dutch Internet provider XS4ALL, a lot of people, some also working
with the Internet, told me then that it would be a flop because nobody would
like to use the Internet.

But I've always been convinced about the revolutionary aspects of the
Internet. And believed that a lot of people would be attracted to it. It is
truly a revolution, in many ways. But it is a neutral revolution, it is not
positive, nor is it negative. Effects of the introduction of the internet in
society are mixed. There are opportunities and threats.

In our society Internet breaks barriers. Particularily geographic borders of
nations. These borders have to some extent stabilised societies, because it
enabled societies to implement law and order. Almost all legal systems are
confined to the borders of the state. Yet the Internet is a global
environment, that does not care about geographic borders. This creates both
problems and opportunities. In the area of free speech the opportunities are
most visibible; it is very difficult to censor information once it has been
published on the Internet. The content will be mirrored and recreated in
areas where it is considered legal. Even if illegal in some countries.
But this same concept of many jurisdictions in the global village can cause
real problems too. What protections do electronic citizens have in the
electronic environment ? Will companies that are into electronic profiling
of consumer habits just migrate to areas where privacy laws are non-existant
? And what about electronic surveillance legislation around the world ?
There has never been a better opportunity to create a perfect big brother
society; all data can, and will, be monitored and stored indefinitely.

There are other problems with the Internet too, flaws. These are risks that
not many people see. These flaws involve the structure and nature of the
Internet. It is fairly easy to engage in electronic warfare on the Internet.
I have a hacker background and do know a fair bit about hacking, cracking,
electronic terrorism and electronic surveillance. The attacks we have seen
on the Internet are mostly harmless attacks by bored teenagers with an
enormous ego. But it is just as easy for real enemies of the US and Europe
to engage in attacks on the information infrastructure. And the results
could be infinitely more disastrous.

The Internet Economy is beginning to be a very strong economic force in
society. That is also the reason why the economy is becoming more
vulnerable. Massive and professionally organized information warfare attacks
on the Internet can do real economic damage these days. It will be a matter
of time before we see professional , or state organised, hacker attacks on
the Internet increasing. Don't you think Osama Bin Laden, or Saddam Hussein,
or people like that, would love to blow up an icon of the new economy ?
Internet is the ideal area for terrorists to be active; it is very high
profile, real damage can be done, but nobody can get killed. Don't forget
that there is almost no defence against a professionally organized attack on
the Internet.

Most people don't see how fragile and vulnerable large parts of the Internet
infrastructure are. How easy it is to penetrate or disable most online
systems. And forget to discount these risks in their models.

	Felipe Rodriquez

#  distributed via <nettime>: no commercial use without permission
#  <nettime> is a moderated mailing list for net criticism,
#  collaborative text filtering and cultural politics of the nets
#  more info: majordomo@bbs.thing.net and "info nettime-l" in the msg body
#  archive: http://www.nettime.org contact: nettime@bbs.thing.net