A 'soft' future of chipped lettuces

New Rules for the New Economy - 10 Ways the Network Economy is Changing Everything
January 15, 1999

Each chapter of this book explains a different way in which Kevin Kelly believes the network economy is changing everything. The chapters have titles such as "Embrace the swarm" and "Feed the web first", and each consists of a series of boldface points that are then amplified in plain text. Each ends with a list of recommended strategies for managers.

There are some notes consigned to the back of the book but not indicated in the text, and a useful and wittily annotated list of book and website references is provided at the end.

This description implies that the work is conventional, but this is far from true. The jargon-laden text often makes for laborious reading and its message is rarely clear. Kelly makes the point that traditional rules of economics are turned upside down by the advent of computerised networks and their ubiquity. In particular, he mentions W.

Brian Arthur's increasing returns where "networks encourage the successful to be yet more successful". He also discusses Paul Krugman's characterisation of the network economy as reversing the slopes in the normal supply and demand curves. Thus, the more a resource is used, the more demand there is for it.

He imagines a fanciful world where lettuces will have disposable chips on them to display fluctuating prices from moment to moment according to market conditions. His view is not utopian. He is obviously concerned about the possible social effects of the network revolution, but his main thrust is that globalisation, intangibles and connectivity will shortly take over from normal industrial-age economic tenets.

It is tempting to conclude, as Kelly does, that in a world where a company such as Microsoft, only writes and sells software and employs only 20,000 people, nothing apart from the "soft" matters, but that is a gross oversimplification. He claims that the hard world of atoms is being replaced by the soft world of computers and networks and that is going to be the economic determinant of the future.

There is a passage early in the book where Kelly attempts to explain Metcalfe's law - that the value of a network is the square of the number of machines in it - and gets into a terrible tangle despite several attempts and a footnote explaining that he uses the term "exponential" in its loose sense to cover polynomial growth.

It is a simple problem in combinations that he gets wrong. This does not give much confidence in his ability to interpret the statistics that he freely gives. Some of the latter do not ring true, eg that you need to waste 56 hours on the web before you master its search process.

He also states that only 6 per cent of US homes have no phone in support of his argument of the ubiquity of telecommunications, but this is still a very large number of people in what is, after all, one of the richest countries in the world. If these people do not have a telephone, how are they going to connect to the internet? What about access in the rest of the world, where the proportion of poor people is much higher?

Finally, this book tackles innovation and productivity. Kelly believes that true innovation can only occur at the edge of chaos.

This is a message many managers will find hard to swallow. He notes that productivity has not been increased by the use of computers, but is unconcerned by this. He thinks that in the long run productivity will rebound as we are still in the early stages of the age of the microprocessor, but says that "productivity is almost nothing ... because (it) is a rote process".

Despite several faults, this book is thought provoking and should be critically considered by any academic with an interest in the information age.

Tony Valsamidis is lecturer in information science, City University, London.

New Rules for the New Economy - 10 Ways the Network Economy is Changing Everything

Author - Kevin Kelly
ISBN - 1 85702 871 6
Publisher - Fourth Estate
Price - £15.99
Pages - 170

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