December 17, 2003


Simon London writes in the Financial Times about how the computer revolution has barely started: Home US: Type "digitisation" into's new Search Inside The Book feature and you get back a list of 1,176 titles. Along with the usual roster of authors and publishers, you also get to browse pages relevant to the search.... The new search feature is in itself a reminder that, more than a decade after digitisation became a buzzword, its impact is being felt in new and different ways. By scanning every page of 120,000 volumes - 33m pages in total - Amazon has for the first time brought a significant chunk of the English language book catalogue into the digital domain.... the long-term implications for authors, publishers and rival booksellers are profound. As with other media, once books are digitised they become not only easier to search but also easier to copy and share.

The wider point is that while industries ranging from travel to securities trading have already been transformed by the transition "from atoms to bits" - a phrase coined by Nicholas Negroponte, head of the Media Lab at the Massachusetts Institute of Technology - other sectors are only now starting to feel the impact. Many of the business and social stories of 2004 will revolve around the impact of digitisation on, among others, broadcast television, conventional telephony, publishing, the motion picture industry, health and education.

"People tend to confuse the secular trend [digitisation] with the cyclical phenomenon of the dotcom bubble," says Gary Hamel, an author and consultant on corporate strategy. "It is clear to me that the secular trend remains intact." For evidence, look at the business pages. Digital discomfort is widespread: in Kodak's cathartic decision to focus its resources on digital imaging; in the record industry's attempts to regain control through the courts of digital music distribution; in the challenge posed to telecommunications companies by internet-based telephony; in the collision of consumer electronics companies such as Sony and Matsushita with the big names of personal computing - Dell, Hewlett-Packard, Gateway and Apple. Then there are companies that are finding ways to harness digital technology to add value to their products. Examples here might include OnStar, General Motor's in-car telematics service or the global positioning system (GPS) service that enables users of John Deere farm equipment to plough or spray to an accuracy of two inches....

The obvious question is why, given the progress of digital technology, over at least 30 years, digitisation continues to catch companies by surprise. After all, the force behind digitisation is Moore's Law, which predicts a doubling in the number of transistors on a chip every 18 months. This trajectory has more or less held since the 1960s, when it was first propounded by Gordon Moore, Intel co-founder. The mobile camera-phone, one of this year's consumer gadgets, is a prime illustration of Moore's Law at work: billions of transistors in an affordable, hand-held package, enabling digitisation and high-speed transmission of both voice and images.

If the sales success of camera phones this year took some companies by surprise - step forward Motorola, which was both late to the market and failed to secure sufficient component supplies to meet demand - it was surely an "inevitable surprise", the phrase used by Peter Schwartz, the author, to describe sudden but foreseeable events. In the same category fall other instruments of digitisation, including the sub-$400 (£230), five-megapixel cameras that have led the consumer stampede this year away from film-based photography, the affordable 40-gigabyte disk drives that power the latest generation of portable digital music players and the steady improvements in "voice-over internet protocol" (Voip) telephony. Why did companies fail to see this coming? The trite answer is that they often did - but were too closely wedded to existing products to respond...

Of course, Simon London did not search for "digitisation"--that returns only 195 hits. He searched for "digitization"--that's the search that returns the big numbers. Copyeditors are a menace.

And the big point is that soon it will make as little sense to talk of the information economy or the new economy as it makes to talk of the telephone economy or the metal economy.

Posted by DeLong at December 17, 2003 09:09 AM | TrackBack


"The obvious question is why, given the progress of digital technology, over at least 30 years, digitisation continues to catch companies by surprise."

Something rarely talked about is that fact that our software sucks. What do you got? "Windows?" "Microsoft Office?" Ha. The alternatives from Apple or Sun or the open-source community aren't any better. If anything, they are "almost as good."

You are going to need an intelligent software revolution before true "digitization" takes place.

Posted by: Alan on December 17, 2003 09:42 AM


Gee, I've been hearing about "picturephones" since I was a kid in the 1940's. Always they were resisted. And now they've taken off? Talk about the transformation of quantity into quality!

Posted by: Dick Thompson on December 17, 2003 09:42 AM


What about the words "digitalization" (477 hits) and its "s" counterpart (114)?

Dick, one difference between "old" picture-phones and the current fad is that now those who drive the change are not adults in a business setting but teenagers, or young adults in a leisure setting. It has a strong conspicuous consumption aspect. A parallel is the PC business, the first "personal computers" were hobbyist business, then people who used them did so mostly for fun, so there were a lot of differents models peaking with the Amiga and Atari. Still they were expelled from the marketplace when the no nonsense IBM Personal Computer got on scene. It was a step backwards in many aspects, still since it was where the money was, it swallowed most of the market(*). Many aspects that were well done in Atari and Amiga computers were not achieved in PC version for more than 10 years.

(*) The Macintosh was the only outsider that was able to withstand, because it had a serious business application in edition.


Posted by: Antoni Jaume on December 17, 2003 10:17 AM


Automation, gentlemen, automation; that's where economic, social, and political change is; and such change is what excites me.

Kiddos on the pic-phone, on Atari-Amiga games.. that's just what it is; game; no, child's play.

Information economy/revolution is in automation; in incorporation of knowledge/ technology in production processes; in substitution of labor by capital, as the French Senate has discovered.

Look at things like robots replacing the farm hands.

Look at things like workerless GM plant onto the computers of which you log on and use their friendly software to design your own one-of-a kind one hundred percent personalized hybrid car -- which will be a sports car because you won't be commuting much and half of the time you will prefer public transport because it will be so pleasant.

And you won't own a car outside of a pleasure vehicle or hobby car. The streets will be full rentals, all wired up to satellites. You get in, insert your credit car, go where you want to, park it, and get out, and forget about it. You won't even have to drive, actually. It is going to be a fully automated vehicle, a cab w/o a cabby.

The Dubya team is just a passing thing. They won't even be remembered in less than a decade or two.

Posted by: Bulent Sayin on December 17, 2003 10:47 AM


BTW, every body here obviously likes to concern themselves with economy and economics; if you also like classical music, then you might want to know about

Their motto is;

L'économie d'aujourd'hui; La musique de toujours

And they have a presentatrice who comes on once in a while and she sounds like an angel -- I mean you don't have to speak French for your heart to just melt away when you hear her speak; I mean listening to her increases your life span; and she speaks French even better than French Senators (who themselves speak French better than French TV anchorpersons -- and please don't get the idea that I speak French)

I wonder if any body in Dubya team likes classical music?

What about Howard Dean? Does he like classical music?

Posted by: Bulent Sayin on December 17, 2003 11:30 AM


"[...]The streets will be full rentals, all wired up to satellites. You get in, insert your credit car, go where you want to, park it, and get out, and forget about it. You won't even have to drive, actually. It is going to be a fully automated vehicle, a cab w/o a cabby. "

At first I was going to say that you had forgotten to indicate that these cars would self-drive... :)
Still there is a point that you speak about credit cards, I believe this mays end absolutely passé, the car will recognise you, and if you have a variety of means to pay, ask which one to draw upon. Oh, and at the same time provide a trace to ascertain that you are who you seems to be.


Posted by: Antoni Jaume on December 17, 2003 11:55 AM


It is somewhat disingenous to think it was obvious camera phones were going to be a success. First of all, other consumer devices that combine the functions of other devices have not fared so well. Windows Media, the heart of the big screen TV based entertainment centers that Gateway and Dell sell, PDAs in all their forms, including those containing cameras, Notepad computers, which bridge the PDA laptop gap, and so on are all examples of technologies that have either outright failed, or are struggling in niche markets. In fact, the general consensus is that a device should do one thing, and one thing only, well. The classic example of course being the iPod, which costs as much as a PDA, many of which are capable of playing digital audio, but lacks PDA functionality.

I admit the previous paragraph is a little off topic, but it annoys me to see the commentariat congratulate itself on its wisdom and understanding of how the world works, when much of the so called wisdom is simply hindsight. To make a point more closely related to the topic, the development of voice over IP technology is going to be interesting. Internet radio has already been stillbirthed, thanks to legal action by the recording industry. Voice over IP suffers from same problem as online subscription services: the owner of the content, or the developer of VoIP software, does not control the means of delivery, which are in fact controlled by the same industry that would be most negatively affected by widespread use of VoIP. Furthermore, to be truly useful it must be possible to transfer VoIP calls to other networks, cellular or POTS, and there is little interest on the part of the still largely state owned enterprises which control these networks in much of the world, to let this happen. In fact in much of the third world there are laws prohibiting precisely this practice. So given the running war between the entertainment marketers and file sharers, and the impending battle between established telecoms firms and VoIP services, it will make sense to talk about the information economy, insofar as it competes with the large firm economy and drives the business of the legal profession and associated government bureaucracies.

Posted by: Ssezi on December 17, 2003 12:10 PM


This is slightly (OK, substantially) off-topic, but there is a guest editorial in the NY Times (reg required to view) saying that the Wright brothers' whole approach to their research program/business plan was designed to preserve the patent rights in their wing technology (called wing warping, which the piece says was their main contribution). And that their strategy 1) failed miserably, and that 2) the patent disputes resulted in the temporary loss of US advantage in flight research, development, and production.

Does anyone know anythng about this, or evaluate?

If the piece's analysis is correct, then in some ways, the more things change, the more they stay the same. And some lessons from the ages of metal and telephone may still be very useful for our understanding. And reading the debate between Jefferson and Hamilton in patent protection, I feel they had a more intellegent and balanced exchanged than what I read in the press and the courts today.

Prof D, would this be a good project for a MA or Phud student who needs a topic?

Posted by: jml on December 17, 2003 12:51 PM


One of the reasons Jane Jacobs is long overdue for her Nobel in Economics is that her "The Wealth of Cities" makes it perfectly clear that we've been a fundamentally information-based economy since developments in Anatolia roughly 7,000 years ago. At least.

Posted by: David Lloyd-Jones on December 17, 2003 12:57 PM


Whatever you say, Antoni Jaume, as long as we get rid of the cabby.

Well, you know me by now; I'm bad! I support doing away with jobs like cleaning and cab driving.

Posted by: Bulent Sayin on December 17, 2003 01:46 PM


>>jobs like cleaning>> Vacuuming - same type of equipment as back in the what, 1920's 30's? Recently they (Electrolux) brought this automatic (digiti[s,z]ed) vacuum cleaner to the market. And... can't clean in the corners! Hello, hello, earth to 21'th century digiti[s,z]ed economy!? That's where the dust actually accumulate!

Posted by: Mats on December 17, 2003 02:02 PM


David L-J,

"The Economy of Cities", Jane Jacobs

"The Wealth of Cities", John Norquist

Posted by: K Harris on December 17, 2003 05:28 PM


Maybe he was talking about "Cities and the Wealth of Nations"...

Posted by: jimbo on December 17, 2003 07:33 PM


Quote, Mats:

"... Recently they (Electrolux) brought this automatic (digiti[s,z]ed) vacuum cleaner to the market. And... can't clean in the corners! Hello, hello, earth to 21'th century digiti[s,z]ed economy!? That's where the dust actually accumulate!"

Posted by Mats at December 17, 2003 02:02 PM

That the machines can't do the corners is just a temporary setback, it will be fixed soon (maybe with nanotechnology). Meanwhile, we hire human cleaners to clean the corners and have the rest done by machines, thereby eliminating maybe 90 percent of cleaning jobs.

We will at the same time tax the cleaning machine manufacturer and retail business on increased profits (perhaps without even increasing the tax rate) and use the funds to help people get a better educaiton for better jobs than clean supermarkets.

Hoy! You don't run out of solutions in democracy!

Just watch out to uphold democracy!

Don't let the Dubya team hurt democracy!

Posted by: Bulent Sayin on December 17, 2003 10:09 PM


nice site

Posted by: mugu on December 22, 2003 08:57 AM


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