Fighting China is a Recipe for Disaster
Yesterday, I introduced and celebrated Tom Siebel’s important new book, Digital Transformation: Survive and Thrive in an Era of Mass Extinction.
He counsels that to survive and thrive you should do what everyone else is doing: Elastic cloud, big data, AI, and 50 billion sensors in the so-called internet of things (IoT), moving into the trillions and all interlinked in a Zetta-nodal (10 to the 21st) computer platform.
Propelling its value is the exponential power of Metcalfe’s Law (a network’s worth rises by the square of the number of nodes).
Hey, I introduced Metcalfe’s Law. It is a rough metric and captures the rising value of internet and blockchain companies. But it ultimately faces diminishing returns and combinatorial explosions. The most valuable Zettanode in the universe is still the individual human brain.
Important Lessons from Zero to One
Siebel is a Silicon Valley giant. Pioneer of relational databases at Oracle, he founded Siebel Systems to launch Customer Relationship Management (CRM) software.
For several years in the late 1990s and early 2000s, Siebel Systems was the world’s fastest growing and perhaps most influential enterprise tech company. Siebel sold it back to Oracle in 2006 and is now emerging as an oracle himself, offering in effect the establishment answer to Life After Google.
“The value of enterprise data… increases exponentially with scale… If incumbent organizations can digitally transform, they will establish ‘data moats’, which are an asymmetric advantage that [give them] almost unprecedented — and extremely favorable positions… Google, Amazon, and Netflix are clear examples…”
It’s a winner take all universe!
Essentially Siebel says, “if you don’t use Google era digital transformation — elastic clouds and big data in datacenters, artificial intelligence and internet of things — to get more efficient, you are going to go extinct like the dinosaurs.”
An enthusiast for neo-Darwinian analogies — “Cambrian explosions,” “punctuated equilibria” “mass extinctions” — Siebel believes in raw competition. He believes that the struggle for survival among existing species somehow generates new species.
He needs to read Peter Thiel’s Zero to One on the menace of competition and on the need for real, not merely artificial intelligence.
Competition is doing what other people do in the hopes of achieving greater efficiency than them. It’s copying Google to compete with them. It’s Zero to “n” — it is ultimately a dead end.
Zero to One innovation gives you a temporary position of monopoly, beyond the competition. Siebel knows that is what is important. But his book is all about what Google era companies are already doing.
In a revealing passage, Siebel celebrates Isabelle Kutcher of the French energy company ENGIE, as “in many ways the archetype of a large enterprise embracing digital transformation… through de-carbonization, decentralization, and digitalization.” She is all for “sustainability” and “alternative energy” and other buzzwords.”
Turns out that what that means is optimizing windmills! More efficient windmills will not make the wind a useful or reliable or environmentally positive large-scale energy source. To provide scant net new energy, it uses hundreds of times more of the scarce resource of planetary surface than oil or coal or natural gas.
Siebel knows that the existing power grid is hugely vulnerable to cyber-attacks and other threats. He feels its weaknesses pose an existential peril. But then he supports a lot of politically correct upgrades that will make it still more vulnerable. The power grid will not be fixed by making it more complex and digital and “smart” to adapt more efficiently to erratic wind and solar.
Siebel really knows this. He writes, “the digitalization of the grid and exponential growth in interconnected distributed energy resources dramatically expands the vulnerable attack surface.” But he thinks somehow it can be improved by more computational complexity and more solar and wind.
Like most of Silicon Valley he fears to confront the problem of a media and academy that believes the real threat is not terrorism but climate change.
A basic problem is his rearview mirror vision system. Siebel quotes Peter Drucker:
“If it is important, measure it.”
But you can only measure what already exists. A more significant Drucker insight is:
“Effectiveness is more important than efficiency. It is more important to do the right thing than to do things right.”
More efficient windmills represent the epitome of doing the wrong thing in response to politically correct fashions.
China is Light-Years Ahead
At the same time that he is fitting out the Titanic with ever more efficient and fashionable deck chairs, he issues panicky warnings about China. But with a three times larger population and a disdain for political correctness, China is already producing millions more engineers than we are. It has three times more IPOs and more technology startups. It builds whole cities faster than we fill potholes. It is the manufacturing center of the globe. It already is fully competitive with us in cloud computing, big data, AI, and IoT.
We cannot compete with China doing the same things they are. That is why I wrote Life After Google: The Fall of Big Data and the Rise of the Blockchain Economy. We need a new internet architecture and a new global monetary system. Both are now emerging from thousands of new companies around the world.
No, you can’t measure these new companies. But travel widely and you will find them everywhere, from Israel and Estonia, to Silicon Valley and Switzerland.
A new generation of innovators is preparing a new economy that puts security first and suppresses the paranoia that currently leads to trade wars, monetary conflicts, and technology bans. We hope to explore this new economy at our COSM conference in Seattle October 23-25 with Peter Thiel and Ray Kurzweil and other innovators.
The new COSM strategy provides an Internet architecture that transcends the current nationalistic morass of IP addresses. It embraces public keys and private keys as the essential primitives for a new global internet. Based on security first, it offers a block stack that enables bottom up control of data by its creators. The COSM moves beyond big data winner-take-all omnivores who don’t know that centralization is neither safe nor creative.
Siebel’s “digital transformation” has already happened. It will continue. But it is not what is important. It offers no solution to the security challenge of a porous top-down internet. It offers no answer to the hypertrophy of finance with chaotic and useless currency trading the world’s largest industry. It offers no answer to trade wars and spying paranoia and money manipulation. It provides efficiency but not effectiveness.
As my time-value of money shows, we are moving into a new era of abundance in which energy efficiency is mostly a waste of time and resources. We are entering “life after silicon” (carbon-based systems such as graphene and nanotubes) and new analog interfaces (quantum is the new form of analog computing).
Fighting China is a recipe for losing everything. Let’s learn how to collaborate with Chinese capitalism in a new era of global trade, peace and prosperity.
Editor, Gilder’s Daily Prophecy