The network economy will unleash opportunities on a
scale never seen before on Earth. But the network economy is not utopia.
It is a unique phase of economic development much like
adolescencea thrilling, disorienting, and never-to-be repeated
time. The planet can progress only once through the stage when it is
first completely wrapped by networks of thought and interaction. We are
now at that moment when a cloak of glass fibers and a halo of satellites
are closing themselves around the globe to bring forth a seamless
This new global economic culture is characterized by
decentralized ownership and equity, by pools of knowledge instead of
pools of capital, by an emphasis on an open society, and, most
important, by a widespread reliance on economic values as the basis for
making decisions in all walks of life.
The sources of capital, which in the industrial age were
once consolidated in a few banks and individual "capitalists,"
are now fragmenting into millions of networked bank accounts, mutual
funds, and private investments throughout society. Elite, centralized
banks used to have a monopoly on capitalthe engine of capitalism.
Bankers loaned their assets as debt, and from this debt, industry rose.
But with increased knowledge and communication, investors realized that
partnershipsor investments where the investor shares
riskyield significantly more wealth in the long run. Technology
has accelerated the migration from making loans to making investments.
The ease of computerized accounting allows almost anyone with as little
as $100 to plug into the network of equity. Despite the rise of a few
gigantic global banks, increasing amounts of the wealth are now held in
equity, and not in debt. Today, for instance, 28% of U.S. household
assets are kept in equitiesmore than is kept in banksand 44%
of U.S. households own stock.
Networks promote this equity culture. The ownership of
organizations is distributed and decentralized into a thousand points.
The transactional costs of owning a tiny share of someones
elses dreams and ambitions continues to drop so that it becomes
feasible to possess, directly and indirectly, small parts of many
companies. When you invest in a mutual fund, you invest in hundreds of
thousands of other peoples work. You use the wealth that your own
ambition has generated to seed the generation of prosperity by others.
You may own only some minuscule portion of an enterprise, but you can
easily own parts of many firms, and each firm is owned by millions of
individuals. This is network equity.
Out of this distributed ownership a portrait of a network
emerges. Millions of lines of investment crisscross the landscape. A few
individuals own a lot, but the majority of nodes are dispersed into
small bank accounts in small towns. The bulk of stocks in the United
States are controlled by the pension funds of ordinary citizensby
millions of individuals in the aggregate. The workers of America really
do collectively own the means of production.
This network equity is made possible by the same network
technologyshrinking chips and expanding communicationsthat
creates wealth in the first place. The tracking, accounting, and
transmission of each persons wealth and slivers of ownership can
happen only because computation and telecommunication have reduced the
cost of a transaction to insignificance, Today there are 7,000 mutual
funds7,000 ways to divvy up the equity of wealth creation. And
there are a similar number of publicly traded companies that have, in
effect, divvied up their wealth to many owners.
There are several trends in this emerging equity culture,
each one amplified by pervasive network technology.
First, the spread of ownership is becoming global, just as
the economy itself is. In the last few years, Europe has suddenly sent a
mind-boggling infusion of money into the stock markets. Europeans
discovered equity culture and overnight invested hundreds of billions of
dollars of their old wealth into the network of ownership. At the same
time, hungry investors are pouring billions into the coffers of Asian
and Latin American "emerging markets." Today, almost any
investor in mutual funds, whether he knows it or not, has a stake in a
company operating in a nation outside his own.
Second, as the ease and price of transactions drop, the
spread of ownership becomes fine-grained and ever wider. Smaller and
smaller investments into more and more varieties of endeavors are
possible. Several banks are following the lead of the Grameen Bank of
Bangladesh and offering microloans. These loans amount to U.S. $100 or
less, and are made to third-worlders who use the money to buy a cow,
purchase some yarn, or begin some other microentrepreneurial dream. The
payback rate is around 95%, making these almost as risk-free as bonds.
As one banking report says, "Lending to poor people in the shanty
towns of La Paz may be safer for banks than lending to the government of
Bolivia itself." Large commercial banks have noticed the U.S. $7
billion already lent to 13 million people around the world, and are
bringing "microfinance" into the mainstream of banking. The
low cost of tracking large numbers of fast-circulating payments means
that network technology can accelerate the velocity of money in such
decentralized, microfinance programs. It is easy to imagine a
high-yielding mutual fund based on hundreds of thousand of up-and-coming
third world microentrepreneurs.
Third, the same type of fine-grained decentralization is
about to happen in publicly traded companies. During the 1990s
approximately 4,000 companies "went public" in the United
States. These corporations were newly funded by the investment of many
small shareholders, who collectively contributed about $250 billion to
these companies equity. Right now, very old-fashioned hurdles
prevent many smaller companies from accepting equity investments by the
public. Some of these hurdles are legacies from the industrial era when
communication and information were scarce. Some obstacles are simply the
selfish protections of investment bankers and others who reap billions
by their monopoly on controlling the process of taking a company public.
Network technology is radically altering the stock market, causing a
widespread reevaluation of the role and worth of stock brokers, traders,
and a centralized market itself (such as the New York Stock Exchange) in
a world where economic information is ubiquitious and instant. Secure,
reliable, and trustworthy offerings of publicly traded companies can
happen on the net without most of the traditional Wall Street rigmarole.
Network technology will make it possible for qualified companies to take
their company public from a desktop, directly soliciting the investments
from billions of individuals and organizations worldwide. This will
happen sooner than Wall Street thinks.
Fourth, the Silicon Valley model of compensation is
infecting more parts of the world. A major element of equity culture is
the ideology that every person working in a company should have the
opportunity to own part of it. In most American high-tech companies,
stock options for employees are mandatory. Shares in the company are
often used to recruit hot talent, or to be dispensed as bonuses, or, in
the case of start-ups, to be paid out as a substitute for a salary.
Companies that grant stock options to all employees return greater
wealth to shareholders than companies that dont (19% for the
former, 11% for the latter).
In the network economy, ownership is fragmented into myriad
parts, sped along electronic pathways, and dispersed among workers,
venture capitalists, investors, alliance members, outsiders, and, in
minute doses, even to competitors. Networks breed swarm capitalism.
Yet as networks rise, the center recedes. It is no
coincidence that global networks appear at the same time as the
postmodern literary movement. In postmodernism, there is no central
authority, no universal dogma, no foundational ethic. The theme of
postmodernism in the arts, science, and politics is summed up by Steven
Best and Douglas Kellner in their book The Postmodern Turn: "The
postmodern turn results in fragmentation, instability, indeterminacy,
and uncertainty." This also sums up the net.
Network principles renounce rigidity, closed structure,
universal schemes, central authority, and fixed values. Instead networks
offer up plurality, differences, ambiguity, incompleteness, contingency,
and multiplicity. These qualities are ideal for disruption, for the
spread of networked-organized crime, and for fostering the lack of
Because the nature of the network economy seeds
disequilibrium, fragmentation, uncertainty, churn, and relativism, the
anchors of meaning and value are in short supply. We are simply unable
to deal with questions that cannot be answered by means of technology.
The stereotypical modern consumer is already a rather thin character. He
or she is like a balloon: possessing an inflated ego and a thin identity
stretched to its limit. They dont know who they are, but they are
very certain that they are very important. The smallest prick can pop
In the great vacuum of meaning, in the silence of unspoken
values, in the vacancy of something large to stand for, something bigger
than oneself, technologyfor better or worsewill shape our
Because values and meaning are scarce today, technology will
make our decisions for us. Well listen to technology because our
modern ears listen to little else. In the absence of other firm beliefs,
well let technology steer. No other force is as powerful in
shaping our destiny. By imagining what technology wants, we can imagine
the course of our culture.
The future of technology is networks. Networks large, wide,
deep, and fast. Electrified networks of all types will cover our planet
and their complex nodes will shape our economy and color our lives. The
shift to this new perspective will be neither immediate nor painless.
Nor will it be as strange as it first appears.
There is no reason to accept the imperative of technology
without challenge, but there is also no doubt that technologys
march is clearly aimed toward all things networked. Those who obey the
logic of the net, and who understand that we are entering into a realm
with new rules, will have a keen advantage in the new economy.