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THE THIRD TECHNOLOGICAL REVOLUTION

An American historian once opined, "Peace is the mastery of great forces; it is not the solution of a problem." Great new forces are at work in the world, and if we are to master them, the beginning of wisdom is to recognize that the world is changing dramatically and at unprecedented speed. We are in the midst of a revolution. A revolution by definition causes old power structures to crumble and new ones to rise. The catalyst -- but not the cause -- has always been technological change. Now, as in revolutions past, technology is profoundly affecting the sovereignty of governments, the world economy, and military strategy.

We are now living in the midst of the third great revolution in history. When the principle of the lever was applied to make a plow, the agricultural revolution was born, and the power of nomadic tribal chiefs declined. When centuries later, men substituted the power of water, steam, and electricity for animal muscle, the Industrial Revolution was born. Both of these massive changes took centuries to unfold. Each caused a shift in the power structure. Today, the marriage of computers and telecommunications has ushered in the Information Age, which is as different from the Industrial Age as that period was from the Agricultural Age. Information technology has demolished time and distance. Instead of validating Orwell's vision of Big Brother watching the citizen, the third revolution enables the citizen to watch Big Brother. And so the virus of freedom, for which there is no antidote, is spread by electronic networks to the four corners of the earth.

History is strewn with wonderful inventions. Most of them were designed to solve specific problems: the wheel to move things, engines to supply power, clocks and compasses to tell time and direction. The inventions that made possible the information revolution were different. They changed the way we solve problems. When Johann Gutenberg pioneered movable type in Europe in 1436, and when Intel designed the integrated circuit in the 1970s, the way we record, store, access, and peruse knowledge made quantum leaps forward and affected not only how we do our jobs, but what we do.

These two events were just as important as they sound. Gutenberg broke the monopoly of the monks who copied manuscripts by hand and guarded them jealously. They understood that knowledge was power and sometimes chained books to the shelves. In The Discoverers, Daniel Boorstin cites a 12th-century manuscript inscription: "This book belongs to the monastery of St. Mary of Robert's Bridge, who ever shall steal it from this house, or mutilate it let him be forever cursed. Amen." Contrast that mindset with the ability of a researcher anywhere in the world with a computer and a modem to tap into the entire database of the Library of Congress, the Bibliotheque de France, or the British Library. In today's parlance, this change constitutes a paradigm shift.

George Gilder explains that "the key to paradigm shifts is the collapse of formerly pivotal scarcities, the rise of new forms of abundance, and the onset of new scarcities. Successful innovators use these new forms of abundance to redress the emergent shortages." The enormous use of timber for railroad ties and trestles as American railroads pushed west caused Theodore Roosevelt to declare a national shortage of timber, which was soon replaced by an abundance of concrete, iron, and steel. Shortly thereafter, electricity and steam power overcame looming shortages of labor and materials. The recent alleged shortage of broadcast frequencies caused electronic engineers to expand the spectrum's useful frequencies. This cycle has continued throughout history. In the three pillars of the order that resulted from the Industrial Revolution -- national sovereignty, national economies, and military power -- the information revolution has increased the power of individuals and outmoded old hierarchies.

A GLOBAL VILLAGE

Sovereignty, the power of a nation to stop others from interfering in its internal affairs, is rapidly eroding. When Woodrow Wilson went to Paris to negotiate the Treaty of Versailles, he ordered his postmaster-general to assume control over all transatlantic cable lines in order to censor the news from Europe. Today no one and no nation can block the flow of information across national borders.

During the Persian Gulf War, Saddam Hussein proposed what was viewed in Washington as a phony peace settlement. President Bush had to convey that judgment to the 26 nations in the coalition. As Marlin Fitzwater, former White House Press Secretary, remembers, the "quickest and most effective way was CNN, because all countries in the world had it and were watching it on a real-time basis . . . and 20 minutes after we got the proposal . . . I went on national television . . . to tell the 26 members . . . that the war was continuing." In this and many other instances, the elite foreign policy establishment and its government-to-government communications were bypassed. No highly trained foreign service officer meticulously drafted a note, no secretary of state signed it, and no American ambassadors called on foreign ministers to deliver the message. The United States entrusted a vital diplomatic message to a private television company seen by the whole world. Wilson's strategy was to control the flow of information by fiat, while Bush realized that since he could not beat the world information free market, he had better join it.

Today special interest groups of all kinds, from terrorists to human rights activists, bypass government-based communications channels. In The News Media in National and International Conflicts, Andrew Arno explains that when relations sour between two countries "it is often more a matter of strained relations between centers of interest than whole countries." We have seen these forces at work from South Africa to Korea as one pressure group after another steps around national governments to further its own crusade.

The convergence of computers and telecommunications has made us into a global community, ready or not. For the first time in history, rich and poor, north and south, east and west, city and countryside are linked in a global electronic network of shared images in real time. Ideas move across borders as if they did not exist. Indeed, time zones are becoming more important than borders.

Small villages are known as efficient marketplaces of ideas. A village quickly shares news of any innovation, and if anyone gets a raise or new privileges, everyone similarly situated will soon be pressing for the same. And why not? These people are just like me, the villagers say. Why should I not have what they have? The Internet carries conversations between millions of people without regard to gender, race, or color. The impact of the global conversation, like that of a village conversation, is enormous -- and it is multiplied many times.

A global village will have global customs. Denying people human rights or democratic freedoms no longer means denying them an abstraction they have never experienced, but violating the established customs of the village. It hardly matters that only a minority of the world's people enjoy such freedoms or the prosperity that goes with them; these are now the benchmarks. More and more people around the globe are demanding more say in their own destiny. Once people are convinced that this is possible, an enormous burden of proof falls on those who would deny them.

The global conversation puts pressure on sovereign governments that over time will influence political processes all over the world. The information revolution is thus profoundly threatening to the power structures of the world, and with good reason. In Prague in 1988 the first protesters in the streets looked into CNN cameras and chanted at the riot police, "The world sees you." And it did. It was an anomaly of history that other Eastern Europeans watched the revolution on CNN relayed by a Russian satellite and mustered the courage to rebel against their own sovereigns. All this has confirmed Abraham Lincoln's sentiment, expressed on his way to his first inauguration, that the American Declaration of Independence "gave liberty not alone to the people of this country, but hope to all the world, for all future time." At the time Lincoln spoke, his words were heard by only a handful of people. It is a testament to his prescience that changes he could not have imagined have brought his words, and freedom itself, to unprecedented portions of humanity.

A NEW SOURCE OF WEALTH

The flood of real-time data has also transformed the international economy. The depth of the global market renders economic theory based on national markets suspect. In the world's financial markets, sovereign governments have lost the ability to influence the price others will pay for their currency on anything but a momentary basis. When I started in the banking business, the total foreign exchange market in New York was only about $50 million. If the Federal Reserve called Citibank or Chase and instructed them to sell $10 million, an order that size could move the market. Today, the market is $1 trillion, and central bank intervention in foreign exchange becomes an expensive exercise in futility. The market is a giant voting machine that records in real time the judgment of traders all over the world about American diplomatic, fiscal, and monetary policies. It has created an information standard that is far more rapid and draconian than the gold standard ever was. Moments after a president announces a policy in the Rose Garden, the market's judgment is reflected in the price of the dollar.

Information technology has also produced a new source of wealth that is not material; it is information -- knowledge applied to work to create value. When we apply knowledge to ongoing tasks, we increase productivity. When we apply it to new tasks, we create innovation. The pursuit of wealth is now largely the pursuit of information and its application to the means of production. The rules, customs, skills, and talents necessary to uncover, capture, produce, preserve, and exploit information are now humankind's most important. The competition for the best information has replaced the competition for the best farmland or coal fields. In fact, the appetite to annex territory has already attenuated, and major powers have withdrawn from previously occupied territories.

The new economic powerhouses are masters not of huge material resources, but of ideas and technology. The way the market values companies is instructive: it now places a higher value on intellectual capital than on hard assets like bricks and mortar. Microsoft, with only a relatively small amount of fixed assets, now has a market capitalization well in excess of Ford, General Motors, and Chrysler combined, all of which have huge bases. The powerful economies of Singapore and Hong Kong, countries with virtually no physical assets, demonstrate the growing irrelevance of territory to wealth. This shift requires a different management structure and mindset, and affects not only individual companies, but entire nations.

The changing perception of what constitutes an asset poses huge problems in expanding or even maintaining the power of government. Unlike land or industrial plants, information resources are not bound to geography or easily taxed and controlled by governments. In an economy that consists largely of information products, the government's power to tax and regulate erodes rapidly. Our laws and systems of measurement are becoming artifacts of another age. Bill Gates, with the skills to write and market a complex software system that can produce $1 billion of revenue, can walk past a customs officer anywhere in the world with nothing of "value" to declare, but his wife might have to pay duty on her new ring. Bad data produces bad decisions and leaves us puzzled as to why old policies no longer work. The measures of the industrial society, which count the number of railroad brakemen but do not record the number of computer programmers, highlight a growing problem in setting policy. As DNA research reveals more precise understandings about the way a living organism functions than gross observations of developed biological structures, so we need more precise measures of how nations and companies function in our new environment.

INFORMATION DOMINANCE

These changes affect not only the civilian production machine on which our economic strength rests, but also our military capabilities. In science, there used to be two ways to proceed: the first was to construct a theory, and the second was to conduct a physical experiment. Today we have a third: computer simulation. In the Persian Gulf War, for example, young, basically inexperienced Americans defeated Iraq's feared Republican Guards. A retired colonel asked one commander: "How do you account for your dramatic success, when not a single officer or man in your entire outfit ever had combat experience?" "But we were experienced," said the commander. "We had fought such engagements six times before in complete battle simulation at the National Training Center and in Germany."< The U.S. military today is a spectacular example of the replacement of physical assets by information. Information, to be sure, has often made the difference between victory and defeat. Where is the enemy located? How many troops are involved? How are they armed? What is new is the ease and accuracy with which such questions can be answered.

Military intelligence has become much more complex and even has a new name: "information dominance." Today Apache helicopters flying over Bosnia upload detailed pictures of action on the ground to a satellite, record them with a video camera, or beam them directly to local headquarters. Videos taken from the air verify the Dayton accords. Major General William Nash observed that in Bosnia, "We don't have arguments. We hand them pictures, and they move their tanks." This is a long way from 1943, when analysts were hunting through the stacks of the Library of Congress for maps and photographs of possible German targets for Allied bombers since few, if any, were available in the War Department. Today even the ground troops on patrol are equipped with night vision goggles and use a hand-held Global Positioning System device to pinpoint their exact position from satellites. Because the soil is strewn with mines, knowing exactly where you are is a matter of life and death even when there is no fighting. Mines that have been located by an airborne mine detection system are exploded by remotely controlled drone Panther tanks. And so in the military as in civilian life, information in all its forms is replacing hard assets.

Reliance on information technology also has dangerous downsides. The American information infrastructure, in the words of the recent Report of the Defense Science Board Task Force on Information Warfare, is "vulnerable to attack" and "creates a tunnel of vulnerability previously unrealized in the history of conflict." Rogue states and groups can conduct information warfare even though they do not command a large military establishment. Today we are witnessing guerrilla warfare, ethnic conflicts, and active terrorist groups. As the Task Force notes:

Offensive information warfare is attractive to many because it is cheap in relation to the cost of developing, maintaining, and using advanced military capabilities. It may cost little to suborn an insider, create false information, manipulate information, or launch malicious logic-based weapons against an information system connected to the globally shared telecommunications infrastructure. The latter is particularly attractive; the latest information on how to exploit many of the design attributes and security flaws of commercial computer software is freely available on the Internet.

Adversaries, both real and potential, have a lot to work with since the Department of Defense has over two million computers, over 10,000 local-area networks, and over 100 long-distance networks that coordinate and implement every element of its missions, from weapons design to battlefield management. During the calendar year 1995, up to 200,000 intrusions may have been made into the DOD’s unclassified computers. These intruders "have modified, stolen and destroyed data and software and shut down computers and networks." Effective diplomacy at critical junctures in any age is backed by the knowledge that if all else fails, military force can be used to attain national goals.

Therefore, vulnerability to an attack on information infrastructure is attracting the attention of a presidential commission and numerous task forces. But with about 90 percent of our military traffic moving over public computer networks, it is increasingly hard to tell the military from the civilian infrastructure. The bureaucratic distinctions between intelligence and law enforcement, between permitted surveillance at home and abroad, may be unsuited for information warfare. There are no borders in cyberspace to mandate these distinctions. The smallest nation, terrorist group, or drug cartel could hire a computer programmer to plant a Trojan horse virus in software, take down a vital network, or cause a missile to misfire. Voltaire said: "God is always for the big battalions." In this new world he may be wrong. The United States' increasing reliance on massive networks may make it more, not less vulnerable.

It may even be unclear what constitutes an act of war. If U.S. satellites suddenly go blind and the telephone network on the eastern seaboard goes down, it is possible that the United States could not even identify the enemy. Its strategic stockpile of weapons would be of little use. There would be no big factory to bomb -- only a person somewhere writing software. The possibility of an electronic Pearl Harbor has sparked a debate on how to counter the threat. The Commission on Critical Infrastructure Protection established by President Clinton's executive order is a step in the right direction and has been described in Senate testimony "as the equivalent of the Manhattan Project." It will work at the crossroads of the First Amendment and national security, at the vortex of personal privacy through encryption and the National Security Agency's desire to breach it, and at the frontier of what Sun Tzu two millennia ago described as "vanquishing the enemy without fighting."

VIRTUAL LEADERSHIP

We live in revolutionary times, as did the Founding Fathers. They exhibited a keen interest in technology -- provision for copyright and patent protection was written into the Constitution itself. This provision was implemented by an act of Congress in 1790 creating a patent board consisting of the secretary of state, the secretary of war, and the attorney general. It was a prestigious group: Thomas Jefferson, Henry Knox, and Edmund Randolph. That board is long gone and the schism between the diplomat and the scientist has grown wider at the very time it is becoming more and more important that the two understand each other. Because so much change in the current revolution is driven by technology, our task in mastering these new forces is made more complex by the difficulty of communicating across disciplines. Diplomats, trained in the humanities, often tend to validate C. P. Snow's famous lecture on "Two Cultures," in which he argued that scientists and humanists are ignorant of each other's knowledge and are content to stay that way. Many diplomatic historians have minimized or even ignored the impact of scientific discoveries on the course of history, preferring instead to follow the great man theory or look for the historical tides that carry the world along. Indeed, the indexes of many standard texts on diplomatic history do not even include the words "technology" or "economics."

An expert is a person with great knowledge about a legacy system -- indeed there are no experts on the future. Henry Kissinger observed in Diplomacy that "most foreign policies that history has marked highly, in whatever country, have been originated by leaders who were opposed by experts. It is, after all, the responsibility of the expert to operate the familiar and that of the leader to transcend it." During World War I, an aide-de-camp to British Field Marshal Douglas Haig, after seeing a tank demonstration, commented, "The idea that cavalry will be replaced by these iron coaches is absurd. It is little short of treasonous." In the United States, the ridicule and court-martial of Brigadier General Billy Mitchell, when he postulated the importance of air power by offering to sink a battleship, is instructive. Secretary of War Newton D. Baker thought so little of the idea that he was "willing to stand on the bridge of a battleship while that nitwit tries to hit it from the air." Indeed this recurring phenomenon was encapsulated in Arthur Clarke's First Law, cited in his Profiles of the Future: "When a distinguished but elderly scientist states that something is possible he is almost certainly right. When he states that something is impossible, he is very probably wrong." In the case of U.S. national security, a refusal to take note of real change in the world is a recipe for disaster.

The new technology will not go away -- it will only get better in accordance with Moore's law, which postulates that microchips will double in density and speed every 18 months. Bandwidth will grow even faster. The third technological revolution has brought about immense global prosperity. Contrary to the doomsayers who postulated that the world would run out of resources by the year 2000, it is difficult to find a single commodity that is worth more in real terms today than it was ten years ago. Knowledge, once an ornament displayed by the rich and powerful at conferences, now combines with management skills to produce wealth. The vast increase of knowledge has brought with it a huge increase in the ability to manipulate matter, increasing its value by the power of the mind and generating new products and substances unknown in nature and undreamed of only a few years ago. In the past, when the method of creating wealth changed, old power structures lost influence, new ones arose, and every facet of society was affected. As we can already see the beginning of that process in this revolution, one can postulate that in the next few decades the attraction and management of intellectual capital will determine which institutions and nations will survive and prosper, and which will not.

But despite all of the advances of science and the ways in which it is changing the world, science does not remake the human mind or alter the power of the human spirit. There is still no substitute for courage and leadership in confronting the new problems and opportunities that our world presents. What has changed dramatically is the amount of information available to our policymakers. One hopes that the data processed by the minds of trained diplomats will produce real knowledge, and with enough experience, wisdom. Wisdom has always been in short supply, but it will be sorely needed in the days and years ahead, because in the words of former President Richard Nixon, "Only people can solve problems people create."

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