Posted by Tom Foremski - March 15, 2011
I recently interviewed Bill Davidow, the veteran Silicon Valley VC and co-founder of Mohr Davidow Ventures, about his recently published book: OVERCONNECTED: The Promise and Threat of the Internet.
The premise is that our modern society faces new perils because our computer technologies and the communications technologies of the Internet accelerate flaws in our systems. For example, the recent financial crash that was sparked by the mortgage crisis, was made easier by computers and the Internet.
Mr Davidow borrows from his engineering background the concept of "positive feedback". This describes systems that can feed on each other to grow out of control. It is these positive feedback loops that put us in peril, and as our use of computer and Internet technologies increases at a fast pace, this increases our vulnerability to unpleasant effects such as economic crises.
Here are some notes from our conversation:
- Mr Davidow said he first started working on the idea for his book more than ten years ago, following the dotcom bust.
- The rapid fall of Middle East governments is an example of acceleration due to being over-connected.
- The Internet acts to compound effects already in the system. It's like compound interest rates, a 2% annual return means you double your money in 36 years, 5% interest doubles your money in 14 years. Small compounding interest can have large effects.
- Lehman had more than 900,000 derivatives contracts, it could not have managed so many without computers and the Internet.
- We don't plan for accidents. As a society we only act afterwards.
- Stock markets are vulnerable. For example, high frequency trading taking advantage of small differences in prices, now accounts for the majority of trades. I can see 90% of stocks traded algorithmically in the near future. Is this good for society? Does this leave us vulnerable to instability caused by being over-connected? We don't consider questions like "is this good for us?"
- Ten years ago I knew that we would have problems.
- The Internet helps oil the skids, it can encourage mob mentality that can get out of hand.
- The book is aimed at the 2,000 or so policy makers in this country so that they can think about these issues and then plan on ways of mitigating the effects. So far I'm hearing a good response from policy makers.
- I had mentioned that on first look, I thought that the book might be about our over-connected lifestyle: Twitter, Facebook, email, phone, etc. Mr Davidow said he would leave that topic for sociologists. But he did say that like some fish had evolved two sets of eyes, one set looking for predators from above, and the other from below, we might one day evolve two sets of ears, one for the earbuds of our connected devices :)