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  •   .COM LIVE
    Hosted by Leslie Walker
    Washington Post Columnist
    Thursday, January 14, 1999
    Leslie Walker
    ".com" columnist Leslie Walker.

    Welcome to ".com Live." I'm your host Leslie Walker. Every other Thursday, I'm online from 1 to 2 p.m. Eastern to explore the economic forces whirling through cyberspace. The live discussion gives you an opportunity to talk directly with entrepreneurs, visionaries and online business people about the competition to make money online and how the Internet is remaking the world of commerce.

    Read today's .com column and join us for a discussion on the rise of the new, networked economy.

    My guest today was Kevin Kelly, founding editor of Wired magazine and author of "New Rules for the New Economy." In his new book, Kelly lays out his 10 fundamental (albeit unorthodox) rules for navigating the networked economy. Also, read reviews of his book at Amazon.com.

    The transcript of our live discussion follows:



    Leslie Walker: Hello to all and welcome to Kevin, Wired magazine's editor-at-large. Kevin has just come home from a run (It may be icy in D.C., but it's 53 degrees in Pacifica, Kevin's home 12 miles south of San Francisco.) As a founding editor of Wired, Kevin had a front-row seat at the birth and early growth of the commercial Internet. He believes the trends roiling the Internet and computer industries will soon sweep through the rest of the economy, dramatically changing the way we work and play. Computer networks, he believes, will spawn a whole new culture that values speed, innovation and customization. Kevin, let's go right to the first question.


    Leslie Walker: Kevin, many notions you've written about for years are just now getting attention from the mass media. It's creating real anxiety as people read the hype and wake up to the magnitude of changes. What do you see as the biggest trends people must confront, and are people right to be worried?

    Kevin Kelly: First, thank you for inviting me to speak (type) here.

    There is a great deal of anxiety about the future now. The hysteria over Y2K is just one measure of that. Not only are regular people worried about what is coming, but so are companies as a whole, and particularly the people responsible for running those companies and making sure they continue to exist and provide income and jobs for others. I wrote this book for those people, and so my comments are mostly going to be about the functions of businesses rather than careers -- although you can easily translate one to the other.

    The biggest trends people need to pay attention to in this respect are three: shift from tangibles to intangibles, the first and only time we'll go global, and the intense decentralized connnections between everything and everyone.


    Falls Church, VA: Why do you think the Internet economy merits "new rules?"

    Kevin Kelly: The changes brought by dematerialization (shift to intangibles), globalization, and networking (intense connection) means that wealth is created in different and new ways. No one is surprised that skill in making money or creating jobs in agricultural were not the same skills needed in industry.No one should be surprised now, that the knowledge needed in industry are not the ones needed in this new era.


    Leslie Walker: Can you tell us more about this shift from tangibles to intangibles? I remember you picked up a glass of soda water when you first explained it to me and said the cost of the glass part was going to shrink big-time. Why will information become more valuable than things we can touch?

    Kevin Kelly: The ongoing demassification of our most valuable things has been going on for a while, but it will only accelerate as we network our world together. Already, for instance, the cost of materials in a GM car (the icon of the industrial age!) are only 16% of the cost of making a car, and that number will continue to decrease, as it will in most other things as well. More important than the cost of iron atoms, are the costs of design, of innnovation, of patents, of marketing, of the information and knowledge put into the steel and plastics. All copies of things (tangible and well as intangible) will decrease in cost over time. The things that are difficult to copy -- like expert knowledge -- will increase in value over time.


    Towson, MD: How do you see the everyday world of work changing in the new networked economy? What will be different about the way we work in the future?

    Kevin Kelly: I think our work enviroments will change far more than our home enviroments. Yet I don't see the end of cities as many do. What we see so far is an INCREASE in the number of work places people want. They want a place that they can work with others, for meetings and consultation, and they want a place they can work in isolation, and a place they can work while nomadic. Also people have less allegiance to companies and more allegiance to projects. Finally, sitting down is not the best way to think, so the desktop will shrink (at first for only a few) as voice, and gesture inputs become real. So we can imagine a workplace that is fragmented, less deskbound, and less permament. This will increase stress levels for some, I'm afraid.


    Toluca, Mexico : I work for a non-for-profit organizaton that focuses on training of leaders in 3rd mostly 3rd world countries.

    HOw do you think this technological revolution will effect organizations like ours , especially considering how costly these technologies can be for the 3rd world.

    Tim Gulick

    Kevin Kelly: Technology is expensive, or at least it starts out expensive. But it drops in price faster and faster. Basically the rich early adopters "subsidize" technology development for the less rich and poor who adopt it later, and the gap between the have earlies and have laters continues to decrease. Occastionally the leapfrog (cellular phones in China), but I don't think leapfrogging will be common. I think the single thing developing countries can do to increase innovation, technology adoption, and economic development is to deregulate and demonopolize telecommunications in their country. Nothing has more affect on the arrival of other good things as an open telecom market.


    Leslie Walker: In response to today's .com column, a reader suggests:

    New York NY: Can off-line retailers like Barnes & Noble really succeed against monsters like Amazon.com? How? Here's my two cents: Personally, I think offline companies are disadvantaged when they try to compete head to head against pure Internet companies. For one thing, offline companies usually have a split focus--they have important assets to protect in their traditional businesses. But many try--smartly, I think--to come up with their own strategies that take advantage of their physical stores or warehouses. It may take a while, but as the Internet insinuates us even more into our lives, I suspect off-line companies will start to see some advantages, too. But right now, the advantage seems to be with the Dot.Com companies because of their flexibility and focus.


    Newport, RI: Are you worried that the networked society will increase the gap between the haves and have nots in our society, by giving more advantages to those with technological know-how?

    Kevin Kelly: There definitely is a law of increasing returns operating in this new economy that rewards the successful with more success. Some call it a winnner-take-all model, but it is really a winner-take-most, or at least a winner-takes-alot. My own guess is that like in pro sports, what we'll see is steady rising standards of living for all players, while the very top stars or winners reap ever huger rewards. What is interesting so far is to see what the winners do with their wealth, and by winners I mean here middle America.


    Oil City, PA: Not all workers are office workers. What about plumbers,
    retail workers, appliance repair people, etc?

    Kevin Kelly: Even farmers, plumbers and appliance repair people will work in the new economy. To the extant that their jobs are plugged into the economy, their services and goods will obey the new rules. Truckers ride incredibly wired cabs, and farmers are some of the most technologicalized jobs around. Plumbers may only need a monkey wrench to unplug your drain, but they can't compete with other plumbers unless they advertise, have cell phones, remember who you are, etc. Those that offer better intangible services (attention, billing correctness, warantees, etc, will have more customers than those who don't).


    Seattle: Which of your 10 rules do you think people will find the hardest to embrace? Also, which is the easiest or most apparent?

    Kevin Kelly: The hardest rule to embrace is "Let Go At the Top."

    This means abandoning products and services that are still making money. It means leaving mainframe computers while they are profitable and heading into toy personal computers. It means leaving a multi-billion dollar copper wire phone system, while it is immensely profitable, and heading into fiber optic packet switch networks.

    It is very very very hard to do. But it is essential.


    Norfolk, VA: I can't help wondering if the Internet isn't being hyped beyond credulity. How is Internet shopping really much different from direct mail and telemarketing? I just don't see what's the big deal about network marketing--haven't Amway and its cousins been doing it for a long time?

    Kevin Kelly: You are right. There is very little difference between online shopping and regular shopping, and the two will quickly converge. My predictions:

    1) Traditional retailer Wal-Mart will become a huge internet shopping player. They know how to do the hard delivery part (which many internet sites failed on this past Christman), and they have a brand name. When you want a pair of snowshoes you can hunt around for snowshoe.com, or go right to wallmart.com, knowing they have what you probably want and can get it to you safely.

    2) Amazon.com will erect their first physical super-store within 5-years. The store experience is vital for a full shopping experience, and Amazon wants to be retail brand of the first order.


    Washington D.C.: What do you think of the Wall St. Journal's online subscription strategy? Is this a model for other e-publishers to follow in the future?

    Leslie Walker: This is a tough one. WSJ is different than most news publications because of its focus on finance. People are willing to pay for info they think will make them money (think: stock market.) But washingtonpost.com has no plans to charge, and I doubt Wired Mag on the Web does, either. What about it, Kevin?

    Kevin Kelly: Yes, other publications will follow the WSJ's model of charging for it. Others already do. Science magazine charges for access to its online variety. Slowly, as value is created and conveyed, others will earn their right to charge. I imagine most publications will have a continium of material from free to fee.


    Leslie Walker: I agree with Kevin that convergence between online and offline will occur fairly quickly. Right now, offline retailers are limited by sales tax rules in the amount of cross-promotion they can do. Real-world book stores would love to put a kiosk in their chains where folks could look up stuff on their Web sites, but right now, that would subject Web sales to a tax. As all the regulatory issues are sorted out, I still think that's the kind of integration we'll see more of.


    Baltimore MD: What books do you recommend reading if I want to learn more about strategiies for coping in the age of instant global communications? Are there any authors on this topic who you admire?

    Leslie Walker: I enjoyed "What Will Be" by Michael L. Dertouzos, a scientist at MIT's lab. Great read.

    Kevin Kelly: The best book on the new economy (beyond my own NEW RULES, :-) ) is Hal Varian's INFORMATION RULES. Unlike me, Hal is a real economist. He aims at tactical methods of using the new rules, rather than the strategic level that I speak at.


    Leslie Walker: Kevin, we're all trying to understand the magnitude of these changes. I hear constant debate about whether the changes are on par with the Industrial Revolution or smaller, like, say, the elevator, which enabled highrises and big centralized corporations.

    You talk a lot about the economy, but how big do you think the social effects of all this will be?

    Kevin Kelly: There is a tendency to think of the changes coming out of hi-tech industries to be specific only to the computer industry, or to software, or to entertainment, but in fact, as more of the value in what we make is due to the information, design and knowledge put into them, the more they resemble intangible products,and the more they obey the laws of intangibles. This means that the weird economic behavor of silicon chips and computer networks will become the ordinary behavior of cars, steel, oil, and farms. That is a big deal.


    Frederick MD: What has been the most influential innovation in medicine in the last year in regard to the Internet?

    Kevin Kelly: I think the recent approval of Icelanders last week to allow their collective genetic data to be used (in aggregate) by biomedicine researchers is a great example of how connected information will change medicine.


    Arlington VA: How do you feel about the sale of Wired to Conde Nast and the sale of Wired Digital to Lycos (both sales separately, but also the fact that they were sold to separate entities)

    Kevin Kelly: As one of the folks who help found Wired, I thought the sale of Wired was stupid, and the breakup of the Wired brand to two different parties even stupdier. But we lost control of the company, so my views didn't count for much. However, if Wired magazine had to be sold, I think Conde Nast was a good match: the publish premium magazines and aren't afraid to back something they love even if it isn't a gold mine (think the New Yorker). Of Lycos, I have no opinion since I know very little about that deal. (Wired Digital was already a seperate company from Wired magazine.)


    Washington, DC: Kevin. Whatever happened to that book you were going to write--about being holed-up and unplugged for a time?

    Kevin Kelly: Sssshhh! That's a secret! :-)

    The idea was to see what a post-literate society would be like by trying to do my job at Wired without reading or writing. I was going to pay someone to read to me and take dictation (in anticipation that this would someday soon be done by a black box), just to see if I went crazy, or perhaps, found oral life to be okay.

    Just never got around to doing it, but it still beckons me.


    Toronto, Ontario: Do you agree with Nicholas Negroponte that the digital revolution is over and that we are now fully into the digital era?

    Kevin Kelly: I agree with Negroponte that the computer revolution is over, but I think what we are now engaged in, and what I am most excited by, is a communication revolution. All the changes you can expect to see due to stand alone computers have already happened. All the changes that will most warp our society in the next couple of decades will be due to communications (or biotech).



    Rosslyn, VA: Every day the Net stocks skyrocket is a day I wonder what will happen to the economy when the individual investors driving this trend -- probably trading online -- decide to sell. What do you think?

    Leslie Walker: I'm always leery of making stock market predictions. The market is as irrational as we are. Stocks will go up and down and up and down. Pundits say the long-term trend is up. I do think the Net stock mania driven partly by individual investors now has to do with many of the fundamental economic changes Kevin writes about. But Kevin's books focus more on longterm trends than short-term market blips.


    Arlington, Va.: Are computers today and to the future what automobiles were to the fifties - and still are today? And if so, how can we keep another bunch of smelly big loud machines from overrunning the world yet again?

    Kevin Kelly: Computers are disappearing. They will succeed by becoming invisible, embedded into our environment. They are already doing this, unnoticed. There are about 200 million PCs in the world today. But there are also about 6 BILLION non-PC "computer" chips in the world that you don't notice -- in microwaves, cameras, hotel doors, and cars. In the end we won't notice computers at all.


    Austin TX: It seems there are so many new technologies being written up in the press every day that no one can keep up. Can you tell me which new technologies you think are worth paying attention to? For an ordinary bewildered consumer, where do we start separating the significant from the trivial?

    Kevin Kelly: I would pay attention to the kinds of technologies that exhibit increasing returns -- that is the kind of technologies whose value increases that more that people adopt them. Think MP3 these days, for instance.


    Leslie Walker: We're out of time for today. Thanks to all you Web readers out there who submitted questions and to Kevin for sharing his views of where the digital revolution is taking us. Kevin, we look forward to your next book. We hope if you decide to unplug for your next book, you find a way to channel your thoughts out to the rest of us wired souls. And let's hope we still have jobs and houses to read in by that time!

    © Copyright 1998 The Washington Post Company

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