Groupe Serveur
The third Millennium industry

  Introducing Server Group



June 29, 2001
Nutrisco et Extinguo

JUNE 29, 2001

Can I begin by thanking LYON PLACE FINANCIERE ET TERTIAIRE for inviting me to speak. Can I also thank all of you for coming to participate.

This presentation is basically a reflection on nearly twenty years' experience. And my main aim is to contribute to an open and informed debate. In the course of the debate, I will be trying to answer any questions you wish to raise. Hopefully, the questions will be many and varied.

This presentation also carries the stamp of the 350 colleagues in our Group who, for nearly 15 years around the world, have by their talent and their confidence enriched the cultural wealth of Server Group.

May I also say how saddened I am to be here without one of the original founders of Server Group, my good friend François Moillo, who passed away last Wednesday. He was a pioneer of the synthetic image in Europe. As he wished, his funeral takes place today on the island of Bora Bora, French Polynesia and we will always remember him for the scientist and artist that he was.

The subject I want to address in this presentation is "The Twenty-First Century-Access to Knowledge", with some reflection on the history, and the economy, of knowledge through the ages.

The new economy, subject of much heated discussion these days, was actually born nearly 3,000 years ago with Pythagoras, the first philosopher to suggest that "all is number".

For Pythagoras, numbers were both the matter and a model of the world.

This dematerialization of the ancient world and its economy came into its own on the threshold of the 21st century with the great global village so dear to sociologist Marshall MacLuhan.

Today, the world-wide digital organization has a name: the Internet, the network of networks.

Philippe Quéau of UNESCO sees it as the world's memory. Others have called it a new Library of Alexandria. The Internet effortlessly crosses the power frontiers of nation-states, rendering irrelevant on its way all regimes that oppose the free flow of information.

Today as I speak, around 450 million of us are linked through the Internet. Every second, 7 new consumers (or participants) go on-line, nearly 700,000 new entrants every 24 hours.

Let us have a little historical perspective:

- In 1987, I discovered the Internet where the number of people connected world-wide was less than the population of a small French market town.

- In 1991, the Internet had the population of a whole French département.

- Today, the Internet has the population of a continent.

- In a year and a half, it will break through the barrier of one billion human beings connected to the Internet, equal to the population of the entire western world.

I remember with emotion my American colleague, global head of research at IBM, who in 1991 presented me in a trance with a confidential projection model featuring 1 billion people connected to the Internet by 2000.

A few weeks ago, already gravely ill, he said to me, good catholic that he was:

"I would sell my soul for a few more years of life

Because you ain't seen nothing yet!

What we are going to live in the next few years will go way beyond anything talked about by futurologists and science fiction."

Every hour that passes sees 20,000 new servers arriving on the Internet, the equivalent of 20 years of French telephony.

In other words, one hour of the Internet economy is worth 20 years of the French telephony economy where we information industrialists have still only created under 18,000 servers.

The Internet is destined to become the data bank of all of humanity's data banks, accessible at any moment by any individual for a minimal cost over whatever distance.

Consequently, education, research, commerce, the economy and the general way information is organized are going to be unrecognizably altered, in a very short time.

I remember my father, a polytechnicien, doctor in law and scientist, once said that the steam engine took over 60 years to travel from the ironworks of Lilles to Alsace-Lorraine.

This meant that parents, children and grandchildren had time to adapt to the technological revolution going on around them.

Never in the history of humanity has a scientific revolution affected so many people in such a short space of time and in every part of the world.

Radio took 50 years to build up an audience of 50 million; television took 30 years; the Internet took 5 years…

More than 230 nation-states have each seen a legal and regulatory framework built up over 2 to 3 centuries wiped out by a scientific revolution that abolishes territory and time.

Some see this as a legislator's nightmare. Others as a self-fulfilling utopia. The Internet revolution has swept past all the pseudo revolutions such as the comparison so well beloved by skeptics: the British railways which bowled along happily at 60 km/h and had English legislators passing law after law to prevent the country emptying within 50 years.

Already, the global markets see the Internet and the digital revolution as an engine of the economy generating mergers and acquisitions on a global scale, but also an engine for employment growth.

In New York alone, the Internet and digital revolution employ more than 1,200,000 people.

This protean industry can be seen as an avatar of the 21st century, information from the Internet will become as essential for human beings as the food they eat.

Access to knowledge via the Internet is as important to Africa as clean water.

In trying to understand the revolution in the access to knowledge and the knowledge economy we would do well to step back and consider the European renaissance, another revolution where Lyon was one of the key cultural centers.

The European renaissance is inseparable from one invention, printing, and the new paradigm of knowledge that printing brought with it, dissemination.

It was the possibility of mechanically reproducing information that opened the way to humanist thought:

A European savant could at last compare ideas, referring to distant manuscript sources, spreading the continent's philosophical heritage and proselytize their individual vision to a relatively large audience.

This technical revolution coincided with the epic voyages of discovery. We see a movement of knowledge that is simultaneously horizontal, geographical and missionary. Thought turned towards progress, which became the engine of a purely Western history.

This period, fathered by Gutenberg, is now coming to a culmination as networks of information cover the furthest reaches of the earth.

The implications of the economic model of the Internet network and access to knowledge has been excellently described and considered, by among others, Jeremy Rifkin. He has written several publications including "The Age of Access" ("Editions La Découverte" in French: "Putnam Publishing Group" in English).

In 1851, an English scientist reflected on the perspectives opened up to humanity by electricity: "Is it true […] that with electricity the entire world of matter has become nothing more than an immense nerve fiber, able to propagate vibrations over thousands of kilometers in the blink of an eye?"

Or should we rather see the globe of the planet as a vast skull, a brain blending instinct with intelligence?

Thanks to the merger of microelectronics, servers and telecoms in a single seamless system of integrated communication, this vision is becoming reality. The whole world is now covered with a planetary nervous system.

This colonization of cyberspace is one of the great revolutions in human organization. It is vital to understand its meaning as it will also bring a major transformation in the very nature of our perceptions and social interaction.

- Through data banks in cyberspace servers and clients are swapping substantial quantities of information, knowledge, experience and learning.

- In physical space, economic actors transfer goods among themselves.

- In virtual space, everyone trades access to knowledge in relation to his or her own existence.

The proliferation of planet-wide electronic networks has allowed the development of virtual commerce and the move to an economy based on networks and servers.

The most important network is, of course, the Internet. The Internet is a network of networks created by the Pentagon at the end of the sixties. One thing that worried the heads of the US Defense department was the potential vulnerability of over-centralized communications systems.

They were looking for new communication servers that would be less centralized. These would be able to channel messages in multiple ways to a mass of users and continue to work even if part of the system was destroyed.

This was at the height of the cold war and the possibility of mass destruction of the major Western cities by Soviet nuclear strikes was taken very seriously.

The solution they came up with was called ARPANET. This system was developed by the Defense department bureau responsible for all cutting edge research projects.

The first server in the network went on-line in 1969.

This makes the Internet more than 30 years old!

In 1988, there were already 60,000 servers. Other networks were built soon after ARPANET.

The US National Science Foundation created NSFnet to link researchers spread across the USA to servers at the major universities. When ARPANET was taken off-line in 1990 (after the fall of the Berlin wall), NSFnet was thrown open to a growing number of users and ended up becoming what we call today the Internet.

The Internet is the network of networks. A message can be transmitted by any means that will carry it: copper, optical fiber, wire and over-the-air solutions or satellite. On this point we note that the electrical grid, historically the largest network in the world, is potentially the best channel for Internet distribution.

Hence a huge political debate in Europe between energy producers and telecoms operators who, after the pipe-dream (or intellectual swindle) of UMTS, are destined to disappear or be taken over…

For a society obsessed by the notion of property "it is very hard to conceive that the Internet is not a thing, not a corporate entity, nor an organization. Nobody owns the Internet. Nobody manages the Internet. All the Internet means is that everyone with a computer or passive terminal is connected".

Economic activity in cyberspace is characterized above all by connectivity to data banks by servers.

It is in the nature of electronic networks that they transcend all borders.

Companies are already linked to their suppliers and clients to share resources both tangible and intangible (information and expertise).

We are a long way from the prescriptions of Adam Smith, which dominated much of the industrial age.

For Smith, the logic of the market responded to the ability of individual economic actors to accumulate and hold property on their own account, thereby denying their fellows access to that property.

In a network economy, self-interest dictates a wholly different way of behaving.

One thing must be clearly understood. This new-style economy is both cause and effect of an extraordinary acceleration in technological innovation.

The accelerated cycle of innovation and obsolescence in technologies and products dictates the terms of the new network economy.

Shortening product life is a direct effect of Moore's law.

Gordon Moore, electronic engineer and a founder of Intel, was the first to forecast that computer's central processors would continuously double in speed every 18 months, while their cost of production would remain stable or even fall. A Reuters' report this week announced that IBM had broken the 210-GigaHertz barrier-more than 120 times the processing power of the fastest chip on the market today (1.7 GigaHertz).

Moore's law governs the life of products with a rod of iron.

For futurologists "economies of time are replacing economies of scale" in the new hyper-competitive markets.

In such a hyper-commercial environment the idea of property itself becomes hopelessly out of place.

Why own a product or a technology which is already obsolete before you have finished paying for it?

In the new network economy short-term access to goods and services via leases, rentals, etc. is an increasingly attractive alternative to ownership in the long term.

Networks are based on complex communication circuits, multiple perspectives with parallel processing of information that is growing at an exponential rate through the data servers.

Networks also drive creativity and unconventional ways of thinking.

This means that network players are more likely to make new connections, to generate new ideas and fresh scenarios and to put into effect innovative plans in the hyper-competitive environment.

The president of Time Warner, offers a neat summary of what this new way of organizing capital will mean. As he put it "the old establishment was a club. The new establishment is a network of servers."

In the frenetic world of the Internet and the digital revolution, companies will have to become ever more adaptable, protean, able to transform themselves in the blink of an eye to confront the new and merciless market conditions.

When markets are bound to a physical territory, structure is still important.

But in the cyberspace of the Internet, frontiers have been abolished. And the idea of process has replaced structure as the key to operational survival.

The organization of activity becomes as ephemeral and versatile as the electronic medium that supports it.

In the age of access to knowledge, a company's greatest fear is to be excluded from the networks of activity and relationships that generate the best commercial opportunities.

In other words, access to networks and data banks is as important in the Internet economy as command of markets was in the industrial age.

We are entering a new age of capitalism. One might even say a more cerebral age. The aim now is to access time and the life of the mind.

True, the manufacture and transfer of material goods between sellers and buyers (the logic of property) is still part of our daily lives, particularly in territorial markets. But these transfers are increasingly sidelined in favor of the selling and buying of human knowledge.

With the migration from physical space to cyberspace and from the commercialization of goods and services to the commodification of whole rafts of human experience, all other economic activity will increasingly be based on the organizational models pioneered by the giants of the culture industry such as Time Warner and Vivendi Universal.

The economy is gradually dematerializing.

The industrial age was characterized by the accumulation of capital and tangible assets. The new economy places higher value on the intangible forms of power constituted by bundles of information and knowledge transferred across data banks.

Intangible assets

One cannot imagine a more spectacular development in the history of modern capitalism than the shift-in less than forty years-from the ownership of capital to a focus on leasing and outsourcing.

No one has described this state of affairs better than journalist Fred Moody when he wrote in the New York Times that "Microsoft's only factory asset is the human imagination".

This is just another example of the way in which the new economy of the 21st century prefers "light" companies whose value is measured more in ideas than in tangible assets.

This move from tangible to intangible assets is becoming increasingly evident world-wide.

The shift from an economy where wealth and success are valued in terms of ownership of tangible assets to a world where they reflect control of intangible intellectual capital destabilizes traditional accounting methods.

In a networked economy, the calculation of market value becomes a much more subjective and high-risk activity. Ideas and talent may be more important than tangible infrastructures, but they are also more difficult to quantify.

The problem is that "our accounting systems miss the crux of the matter".

Traditional balance sheets reflect the flows of cash and goods that are handled by a company, the tangible assets it owns and the money it owes to shareholders, creditors and other external entities.

Conventional accounting methods work extremely well in an economy which essentially produces physical goods traded in a market of buyers and sellers.

But in an economy where the exchange of goods has largely given way to transactions between servers and clients around the sharing of access to knowledge and experience, double-entry bookkeeping is woefully inadequate.

In 2000, the new information technologies already accounted for over 25% of economic activity in the United States.
By 2005, this figure will have risen to over 50%.

Intangible assets account for a large part of the real value of these businesses, and this value is not therefore accurately reflected by their balance sheets.

How could traditional accounting methods measure the value of the intellectual property rights that comprise the patents to the 140,000 genes making up the human genome, for example?
Just this morning, the French newspaper Libération carried an article about a private company in Iceland that has bought the right to access genetic and medical data on the country's 280,000 inhabitants.

The problem, as described by William Davidow, is that "information age accountants face a difficult challenge:
- they can either live with the old comfortable systems that distort the truth,
- or try to develop a new accounting system, with all the risks that the valuation of intangible assets entails."

According to him, "we need […] radically different accounting valuation methods".

In the new accounting models developed for the networked economy, tangible assets will gradually move from the asset side of the balance sheet to the liability side, where they will be recorded as operating costs. Intangible assets meanwhile will be increasingly posted as assets.

(Mind over matter)

This drive to redefine our accounting methods reflects a sea change to a new era in which intellectual ability has taken over from physical power.

The industrial era was in a sense the age of brute force, when physical strength was everything.

Heavy machinery was used to extract raw materials that were then transformed into goods for the market.

When property and the markets reflected the supremacy of material values, physical omnipresence was the ultimate goal.

But we are now entering a totally different world, a world that is much more cerebral and intangible, a world of Platonic forms, ideas, images and archetypes, concepts and scenarios.

The inhabitants of the industrial world wanted to appropriate and transform physical matter; the first generation of the knowledge era is much more interested in gray matter - the mind.

In a world governed by a logic of access to knowledge and the Internet, ideas become the raw material of economic activity, and the ultimate goal is that of universal knowledge provided via information servers.

To gain an infinite mental presence, to achieve universal connectivity in order to affect and gradually work on human consciousness through the distribution of organised knowledge (the data bank)-this is the ambition of the industries of the third millennium.

The goal of the industrial age was to meet our physical requirements. The knowledge era seeks to address our mental, emotional and spiritual needs.

Instead of controlling exchanges of goods, companies now seek to control exchanges of concepts.

In the 21st century, ideas are becoming the subject of increasing commercial transactions. Individuals now have to buy access to these ideas and to the physical media that carry them.

Our accounting dilemma is just one reflection of this trend.

The importance and value of tangible assets is declining. Meanwhile intellectual property has become the most valuable intangible asset of the new era, as mind takes precedence over matter.

This calls for our accounting experts and auditors as well as the banking and investment sector to thoroughly overhaul their auditing and valuation methods…

According to Mark Getty, the founder of the Getty Image data bank, "intellectual property is the oil of the 21st century."
This growing importance of ideas in the market raises some worrying questions.

When human thought (and therefore knowledge) becomes such a highly prized commodity, what happens to ideas that, though important, have no immediate commercial potential?

By a strange historical paradox, the capitalist system, which was based on market growth and the trading of property rights between buyers and sellers, is now in the process of systematically deconstructing its basic principles and institutions.

Capitalism is in the process of reinventing itself and gradually turning away from the traditional market economy to the Internet- and server-based network economy.

In a networked economy, the replacement of a logic of acquisition with a logic of access to knowledge affects all forms of property.

That said, let us stress that the effective exercise of power is tending to rely less and less on tangible assets. Intangible assets in contrast are at the heart of the information age.

It is ideas, in the form of intellectual work, copyright, patents, registered trademarks, data bank organization rights (sui generis rights) and so on, that have allowed the creation of a new form of economic power. This enables huge servers to gain control over access to knowledge, with world-wide networks of users connected to the Internet.

The role of property is undergoing drastic changes.

This revolution will have major and far-reaching consequences for our society.

Modernity made property and the market two virtually synonymous concepts.

The capitalist economy is in fact built on the concept of trading property rights on a market.

But the very foundations of our modernity are now starting to crumble.

In the new era, networks are taking the place of markets and the concept of access to knowledge is replacing that of ownership.

Companies and consumers are starting to lose contact with the basic reality that underpinned modern economic life-the transfer of goods on a market of buyers and sellers.

This exchange of goods between buyers and sellers, which drove the modern market economy, has been replaced by a data bank giving access to knowledge, operating in real time between servers and clients organized on the Internet.

In the new network economy, rather than trading tangible and intangible assets, companies are controlling knowledge and regulating access to it via information data banks.

Ownership of physical capital, previously one of the key principles of our industrial society, is becoming increasingly marginal to economic life.

Companies see it as an operating cost rather than a productive asset, and prefer to lease services rather than owning them.

Intellectual capital has instead become the true driving force of this new age of access to knowledge, making it all the more highly prized.

In the new economy, it is ideas, concepts and images that are of value, rather than things.
And wealth is now measured in terms of imagination and human creativity, rather than tangible assets.

Businesses are to a great extent already committed to this transition from the property age to the age of knowledge-access.

Companies are selling their real estate assets, cutting stock levels, leasing their equipment and outsourcing their business as they seek to survive in the market place through shedding their tangible assets as far as possible.
The CEO of Alcatel commented to Le Monde yesterday that the Alcatel group was to become a "fab-less" or factory-less company, keeping open only 12 R&D plants out of a previous total of 120…

In contemporary capitalism most physical infrastructure no longer needs to be owned by those making use of it.

In the access to knowledge economy, success no longer depends on discrete market transactions but on building long-term commercial relationships.

It may well be that in twenty-five years' time the very idea of property will seem very limited, or even completely outmoded, to a growing number of companies and consumers.

In a world of tailor-made production, constant innovation and ongoing improvements, with increasingly short product life cycles, everything very quickly becomes obsolete.

There is little sense in acquiring, owning and accumulating things in an economy where the only permanent feature is change.

In this new world, networks are taking over from markets, buyers and sellers are being replaced by Internet-connected information providers and users, and virtually everything is subject to a logic of access to knowledge.

This transition will also lead to major changes in our systems of government.

Even more importantly, in a world where personal ownership of property has for a long time been seen as an extension of the self and in a way the real "measure of a man", the decline of its importance in the economic sphere could drastically change the way future generations perceive human nature.

One might even expect a world of relationships based around the logic of knowledge-access to produce a new social type of human being.

These changes in the organization of economic relationships reflect an even more profound transformation which affects the very nature of the capitalist system.

We are witnessing a shift from industrial production to cultural production. Information is becoming the indispensable raw material for economic life.

We are therefore entering what the experts call an "economy of experience and knowledge"-in other words a world where the life of each individual has a market value.

In the new economy, people consume their own existence through buying segments of human knowledge.

This transition from one economy to the other is a slow process that began at the beginning of the 20th century when the services sector began to expand relative to the manufacturing sector.

The organized knowledge- or information-based society is the culmination of the capitalist civilization, which has constantly sought to bring an ever-greater number of human activities into the market sphere.

The commodification of culture and human knowledge has led to a profound change in the nature of work.

During the industrial era, human work took the form of the production of goods and the provision of basic services.

In the age of access to knowledge intelligent machines are replacing human activity in sectors of activity such as agriculture and industry.

In twenty years' time, the market will have the technological means and the organizational capacity to provide a growing population with goods and services, using only a fraction of the labor force currently required.

In 2020, we can reasonably expect that only 5% of the adult population will be needed to ensure the operation of the 20th century's traditional industries.

The capitalist journey began with the commodification of material goods and places. It is now ending with the commodification of duration and human time.

We should not forget that, even in a developed market economy, market relations are limited in time and space.

Buyers and sellers meet for a short period of time to negotiate a transfer of goods or services before they each return to their own non-market reality.

The rest of their time is free of any commercial consideration.

In a hyper-capitalist economy, on the other hand, virtually all our time is transformed into a commodity through the logic of access to knowledge and experience, via text, image and sound data banks.

The question of supreme importance that will be asked of us over coming years is whether civilization will be able to survive this decline in the political and cultural spheres and the supremacy of the market sphere as the main mediator of all human experience.

Our postulate is as follows:

- the shift from conventional markets to networks, and from a property logic to a logic of access to knowledge,

- the marginalisation of tangible assets and the growing domination of intellectual property,

- and the increasing commodification of human relationships,

are three phenomena that are driving a gradual shift from an era when goods and property transfers were the main functions of the economy to a new system where the market transaction par excellence is that of paying consumption of lived experience, as defined by organized knowledge.

This transition from industrial capitalism to cultural capitalism calls into question all our assumptions about the nature of a human society.

We are entering a new era in which human experience is increasingly information consumed in cyberspace through Internet access.

These electronic networks and the data banks to which a growing number of individuals are permanently connected on a daily basis, are controlled by the servers operated by leading media and information network sector players.

These 21st century majors own the networks over which the said individuals communicate, controlling most of the cultural content that defines this commodity/experience in our post-modern world.

Never before has human communication been under such close control

The owners of organized content linked to today's vast media giants are becoming "access guardians"-for hundreds of millions of human beings they guard access to the communication servers that connect them to their fellows.

The absorption of the cultural arena by the commercial reflects a fundamental upheaval in human relations.

The consequences of this upheaval on the future of society are hard to read.

Since the dawn of civilization, culture and knowledge have always taken priority over the market.

Man founds communities, draws up sophisticated social contracts, reproduces shared values and symbols and builds social bonds.

It is only when the social bonds based on trust and reciprocal exchanges are sufficiently developed that these communities enter into commercial relationships.

Finding equilibrium between the cultural and the commercial spheres is likely to be one of the most important challenges of the age of access.

The key political issue of the new global Internet economy and the trend towards promoting knowledge as a tradable commodity will be that of developing and preserving cultural diversity over time-the lifeblood of civilization.

Young people of the new protean generations are far more comfortable than their elders in the world of cyberspace defined by the Internet-much of their professional and social lives depend on this world.

They adapt effortlessly to the various simulated worlds that characterize the new cultural economy.

This generation is already living the logic of access to knowledge, and while the logic of property still matters, having an Internet connection is the most important factor of all.

Their perception of personal freedom will no longer be based on rights of ownership and an ability to exclude others, but rather on the right to be integrated into reciprocal relationship networks.

Over the last five hundred years, the printed word has profoundly remolded the human consciousness.

In the next fifty years, the Internet and access to knowledge through data banks will have a similar impact.

Children now grow up in a world of networks and widespread connectivity where the aggressive concept of one's own exclusive space which marked the age of property has been replaced by a perception of reality based on independence and mutual involvement.

This concept is more social than competitive is linked to a more responsible and consensual way of thinking.

The new social divide is between those whose lives will increasingly depend on cyberspace and those who will never have access to the huge potential afforded by this new sphere of human knowledge.

The transition from geographical space to cyberspace, from industrial capitalism to cultural capitalism and from the logic of property to one of access to knowledge is forcing us to completely rethink the nature of the social contract.

Let us not forget that the modern notion of ownership, characterized by individual possession, exclusivity and trade was one of the key pillars of the industrial age.

After five hundred years of hegemony, this view of civilization resting on transfers between sellers and buyers of property is undergoing radical changes.

The new landscape of this era is defined by the logic of access to knowledge through servers, prompting us to rethink economic relationships, political action and the perception of our own identity emerging from the depths of the human conscience.

In this new world based on the exchange of information and services, and the consumption of states of consciousness and experiences, the intangible prevails over the tangible. And the trading of time becomes more important than ownership of land and space.

The notion of access to knowledge and the Internet is becoming increasingly important. It is gradually redefining the dynamics of our companies, just as the concepts of ownership and the market did at the dawn of modernity.

Today, access to knowledge is the path to progress and to personal achievement, and, in the eyes of new generations, embodies what democracy meant to their forebears.

Access to knowledge is a phrase pregnant with meaning, particularly political meaning, since it creates distinctions, erects barriers and ultimately determines who will be included and who will be excluded.

The notion of access to knowledge through data banks and servers is a powerful conceptual tool enabling us to rethink our view of the world and the economy.

It is the most eloquent metaphor for the forthcoming age.

Certain negative signs suggest the digital age may to some extent be destructive of human relations.

Again, the answer comes from mathematician and philosopher Pythagoras, with whom we opened this debate. To Pythagoras "all is number", except for human emotions, which are unquantifiable, indescribable and to which numbers are irrelevant.

Thank you for your attention. I hope this has opened the debate to many questions.

Thierry Ehrmann
29 June 2001
Copyright ©2001 Server Group


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