My Money Files Column
Maybe this is an urban legend, or maybe this is happening right now someplace near you.
Word on the street has it that there are some pretty bright young programmers knocking around these days: some of them, perhaps even among the brightest, write what have become known as spider programmes. But how, you may ask, does the work of anything so exotic sounding as a spider programme affect me. Well, you being a highly intelligent and sophistocated person probably it doesn't. But if you were silly enough to want to sit in the first few rows of a concert by some mediocre but fabulously rich pop star, maybe you would be cursing them: for what the spider programme does is buy up the tickets automatically, before you even get the chance to go and stand in the line. Using these programmes you can buy up any kind of special 'offer' - cheap airline tickets for example - and then offer them for resale a some multiple of the original cost. Word has it that at first this work was easy, but recently the companies offering the tickets have begun to wise up and things have gotten more difficult for our would-be new economy entrepreneurs. One way in which concert organisers have tried to overcome the practice is by having an image inserted at some point in the process to which you have to manually type some given response to establish the fact that you are indeed a human, not a robot. Problem solved you might think. Well not exactly: this is where ingenuity and globalisation come in to guarantee that 'real' entrepreneurship will not be thwarted lightly.
You see our modern day 'spidermen' have actually responded rather creatively: they have taken the business to India. For in the India of today you can contract halls with workers by the hundred, paying by the minute. Such workers may in fact be high-tech engineers working at the highest level, or they may simply be reasonably intelligent and educated people capacitated to spend their day typing routine image responses manually into a data base. And if you put enough of such employees to work you can rapidly run up 6 figure numbers of image responses in your data base - responses which can of course automatically be drawn-upon as the image shows up on the horizon. (It also occurs to me that systematic spam entrepreneurs must do something like this: a kind of bacteria-antibiotic effect).
Now the image of the wharehouse of people defeating the turing-test safeguards is extremely interesting. At the risk of sounding callous, I think that an interesting way of conceptualizing what's happening in India and China might be by saying that what has become know as Moore's law is increasingly extending its application from the world of the silicon chip to that of the human neurone: it seems that the capacity of a person you can rent for $1 is increasing fast, thanks to a bigger pool of people and better technology for teaching and connecting them. Of course the pool of people is finite - something which is true for both the physical and the virtual ecomomy, and eventually you start getting higher wages, but the proportion of available third world brainpower being educated and put to use at the present time is sufficiently low to imagine that a Moore's law type process - where either the available capacity doubles or the price halves - should be more than able to continue for some years into the forseeable future. The principle is in fact very much the same as for the silicon chip - and if stuff like MIT's Open Courseware works well, the trend of extending the pool of cheap and potent brainpower across the planet might well be set to continue.
In fact this is one clear example of where the internet skeptics may be so busy being skeptical that they don't notice when the roof is falling in around their heads.
In the latest edition of Business Week it is not Gordon Moore, but another member of the Intel family, Andy Grove, who is asking the pertinent question. As Grove suggests "it's a very valid question" to ask whether America could eventually lose its overwhelming dominance in IT, just as it did in electronics manufacturing, since lunging global telecom costs, lower engineering wages abroad, and new interactive-design software are driving an increasingly revolutionary change. As he rightly notes: "From a technical and productivity standpoint, the engineer sitting 6,000 miles away might as well be in the next cubicle and on the local area network."
On another front, inveterate new economy skeptic and productivity expert Robert Gordon, try as he might, cannot seem to get to grips with the magnitude of what is happening. The best guess comparison which seems grudgingly to be floating around is one with the invention of the internal combustion engine. Writing back in the summer he argued that it was possible to :
I am sorry, and with all due respect to Bob: this can only be called getting it wrong big-time. The next generation of inventions not only does not appear to be second rate, it appears to be profound, and potentially devastating for the conception of the corporation as a physical entity. What we are about to witness may well turn out to be the unwinding of the institutional and physical structure of the economic organism as it has existed virtually intact since the time of the industrial revolution. What we have is the globalisation of mental capacity, and that little physical detail that your colleague down the corridor may well now be in his home two thousand miles away seems more than an insignificant trifle, it seems in fact to be central to the new conception of flexibility and shared capacity which one might argue will be central to achieving the benefits of the newly available neworking externalaties accrueing to the interconnection of human brainpower.
classify innovations as "mega," "first-rate", "second-rate," and beyond and argue that the marriage of computer and communications hardware with software in the 1990s was a first-rate invention, but that it had a one-time-only component because the web could only be invented once, because part of the boom consisted of demand from dot.com firms which promptly went bust, because of the mismatch between hardware and software innovation, because of the timing of Y2K, and because of the overbuilding of telecom infrastructure. The main areas of ICT investment in the near future are innovations that look distinctly second-rate, the further move toward mobility with internet-enabled mobile phones and wi-fi enabled laptops that will allow e-mail, web access, Word, Excel, and Powerpoint to be accessed more conveniently, but the functions to be accessed will be the same as five years ago.
The fact that we are entering a global deflationary environment has long seemed clear to me. In trying to get to grips with why this might be happening - as opposed to the what we can do about it, which has so notably caught the attention of Central Banker Alan Greenspan and economists across the board from Ben Bernanke to Paul Krugman - I have identified three factors which might be important: OECD ageing, surplus labour in China (and now, increasingly, of course, India), and the falling price of information. Up to now I was never really clear where to go with this third one, it was really simply a case a of reading people like Ray Kurzweil and extrapolating the obvious. Now we have a more succint version: Moore's law as it applies to humans. And like the other version of the law, the only remaining question is how long can this run till we hit specific physical limits. I think Kurzweil's answer would be: farther than you imagine.
Many thanks to Marcelo Rinesi for supplying me with the vision and insight which lies behind this article.