Marc Porat and his agents of change.
Marc Porat is CEO of General Magic, a Silicon Valley start-up that is developing new personal communications technologies in alliance with American companies AT&T and Motorola; Japanese giants Sony, Matsushita, and Nippon Telegraph and Telephone; and European powerhouses Philips and France Telecom. Wired asked him to describe the larger effects that digital technology - especially General Magic's new "intelligent agent" technology - may have upon the structure and wealth-creating capacity of the overall economy itself.
Wired: When economists talk about the impact of the digital revolution, they usually say it will create jobs and improve productivity. But you say this is much too narrow a way of looking at the economic implications of the technological changes coming.
Porat:
Right. What's really at stake, I believe, is the "genetic material" of the economic system itself. Look back at the history of human economic activity. Before barter, people were constrained by their own limited personal resources and had to learn how to supply all their essential needs. The invention of barter, however, enabled them to trade the value of their intellectual content - the skills and knowledge that they put into making goat cheese, for example - for other goods they needed, like olive oil. Later, the creation of paper money and related systems of accounts made it easier to reach into wider markets. Finally, the invention of capital stock - shares of ownership in factories and other means of producing goods - helped money flow where it could be best used to create new productive capacity, expand trade, and increase wealth.
Is there some common thread to these changes?
Abstraction is the key. If I have to carry my goat cheese with me and find you carrying your olive oil, the market is slow. It's stilted. The transaction cost of finding you, and arriving at some sort of exchange value is high. But by abstracting our goods into something called gold - and then paper money and a system of accounts - things can now move faster. Trade can move broadly across vast distances. But, ironically, at the level of everyday consumption, most of us are still limited by physical reality.
How does digital technology change that?
The invention of electronic agents will allow people to abstract their commercial desires from their physical selves - to create representatives of themselves - that go off and do useful things for them in the marketplace, buying and selling goods and services. This has never happened before. We have always been firmly rooted in ourselves, except for minor exceptions like the ability to call a travel agent or a stockbroker and have that agent do things for us. Until now, only the rich could afford agents. But with digital technology, people will have the ability to create electronic agents for free, essentially - or close to free - to do things for them.
In my case, my kids burn through a pair of Nike shoes every six months, so I'd like to buy them on sale if I can. I'll be able to instruct an agent to sit out there in the electronic market, watching for those shoes to go on sale. When it spots a sale, it'll alert me to that fact, or even purchase them and order delivery for me, if I've told it to do so.
The agent never gets bored, never complains. Whatever you or I might want, if it's in the marketplace, the agent will find it. It's a whole new paradigm, called "I want."
Sure, this would be a convenience. But how does that change the nature of the marketplace?
Until now, merchandising has always been organized so that the person who has something to sell floods the market with advertising, promotions, coupons, and so on. But now we can turn that upside down. Now we can say to our agent, "I want a discount coupon for cereal," or "I want the best-priced tuneup for my car." Sellers will see your agent and, noticing that you've raised your hand as an interested buyer, will come to you to try to fill your request. This has never been done before. There's never been a time in history where the ordinary consumer can put out a request-for-proposal into the market at large and have vendors bid on it. Corporations can do it. Governments can do it. But not consumers.
Why not?
Simple. We've never had the mechanism, the technology, to do it. And think about what it could do for the efficiency of the market. Today, for example, 320 billion supermarket coupons are printed every year, but only about 8 billion of them are redeemed. What if consumers could use their electronic agents to find discount coupons for cornflakes, pet food, toothpaste, laundry detergent, toilet paper, and all their other necessities without having to spend their lives cutting through newspapers - which is a major roadblock to the efficient use of coupons?
The economic effects could be great. Merchandisers, for example, would not have to suffer the waste and expense of printing and distributing coupons that are redeemed at only a 2-percent rate. And for working Americans, who have an average disposable income, after rents and mortgages, of perhaps US$500, the ability to easily obtain enough coupons to save an extra $50 a month, for instance, would mean a 5 percent raise after taxes in their income.
This could turn retailing upside down.
Well, it would be much too simplistic to say that the seller's market will suddenly become a buyer's market. Initially, perhaps only 1 percent of retailing will be done electronically. But over the course of time - and it'll take 30 years, at least, before we really know how to do electronic markets - it will become an increasingly viable form of commerce.
But how will this create more wealth for society?
Same as new technologies have done throughout our history. As digital technology reduces the transaction cost of buyers and sellers finding each other - and of buyers and sellers reaching into more varied markets on a global scale - markets can become vastly more efficient, thereby making available a lot more money that can be put quickly where it'll do some good.
