Sep 11, 1995: Software AG and Esther Dyson
San Antonio: This city stifles me with its heat and humidity,
and I think the much-vaunted downtown river-walk area is over-rated;
it was a lot better 25 years ago, before it got so commercialized
with sleazy plastic imitations of Venetian gondolas floating along
something that looks more like a large drainage canal than a legitimate
river. It reminds me of the "It's a Small World" boat
ride in Disney World: there's no riverbank per se, no dirt, no
grass; it's all concrete...
But no matter: I've enjoyed the past two days while being holed
up in the air-conditioned comfort of a complex of Marriott hotels
and the San Antonio convention center, where I participated in
the annual Software AG) (SAG)
user conference. I was here to give a one-day seminar and a keynote
presentation on the new OO analysis/design methodology that I've
been helping SAG develop over the last couple of years. (The Mainstream
Objects book describing this methodology is listed on my Web
page of Ed's books).
Among the highlights of the conference was a fascinating opening-night
keynote presentation by Apollo 13 astronaut Jim Lovell. In addition,
several folks from the SAG management team put on some interesting
presentations, and SAG introduced some interesting new products
like LIGHTSTORM, a rapid application development tool. The president
of the U.S. SAG operation, Mike King, gave a presentation in which
he suggested that over the next few years, IT departments will
evolve to the point where they focus on three different kinds
- infrastructure systems -- tools, networks, software packages,
etc., where the decisions will be based largely on cost, because
these systems are rapidly becoming commodities.
- application systems -- where the emphasis will be on "process
competency," and where the priority will be reducing the
- divisional systems -- which involve helping the organization
adapt to new infrastructure systems and new application systems.
The emphasis here will be on business performance.
But by far the most thought-provoking part of the conference for
me was Esther Dyson's presentation on "intellectual value."
It was a variation on her July 1995 Wired magazine article
that I've listed on my "cool papers"
page. If you get a chance to hear Esther present this in person
at one of the many conferences she attends, don't miss it; otherwise,
go find it in Wired
magazine. I scribbled a bunch of notes on the back of an envelope
during the presentation; here's a brief summary of her thesis
on intellectual value:
- In the agricultural period of human history, land was the
primary source of value; but it was people who worked and tilled
and fertilized the land to make it valuable. And during the industrial
age, machines and "capital assets" were the artifacts
of wealth; but it was people who built those artifacts, maintained
them, and helped establish and preserve that value.
- In the post-industrial age, it has been argued that knowledge,
or intellectual property, has now replaced land and capital assets
as the valuable artifact. But it is people who create, interpret,
analyze, filter, and process knowledge.
- Because of technologies like the Internet, intellectual property
is rapidly becoming free, but the intellectual process
is valuable. Knowledge has no value until it's part of an intellectual
process in someone's head.
- There is an over-supply of information and knowledge; and
that's one of the primary reasons why the market price of most
information is going down rapidly. Thus, the popular Internet
paradigm that "information is free" is not about violating
copyrights or contracts, but rather a recognition that if there
is an oversupply of information, then in a free-market economy,
the price will be driven down.
- Esther told us to write this one down: Information consumes
attention. And there is a shortage of available attention:
we're all so busy and so bombarded with information that we don't
know what to pay attention to.
- Thus, one of the primary purposes of information and knowledge
is to serve as a form of advertisement to gain the attention of
customers, consumers, prospects, etc. Esther noted that attention
can be negative, too -- e.g., a product or a company that everyone
consciously hates. In any case, it helps to think of attention
as an asset.
- An example of a business organizations that are based on this
new paradigm of intellectual value: Esther is on the board of
a company called Cigna Systems (? I don't know if this is the
correct spelling) that sells support and service for "freeware"
software. It's an interesting point: even if software is free,
it has no value if you can't figure out how to use it. The value
comes from the service associated with helping people install
it, customize it, debug it, use it, etc.
- In the future, companies will create the "illusion of
attention" -- e.g., by providing automated e-mail services
to respond to complaints that we send (by e-mail, of course) to
the customer service department. But customers will become savvy,
and will begin demanding "real" attention. And there
will be an ongoing race to supply and demand adequate levels of
- Where is value created? In people's minds. You have to build
loyalty in the minds of customers and also employees.
- One of the big issues we're facing now involves redistribution
of assets. In the agricultural age, peasants could revolt and
seize the land; in the industrial age, workers could revolt and
seize the factories or the buildings in order to redistribute
the commonly accepted form of wealth. In today's world, the Internet
provides us with a way to redistribute information and knowledge,
and in so doing we redistribute the wealth currently associated
with intellectual property. But even if information and knowledge
become free, we don't know how to redistribute intelligence
and the intellectual processes that know how to deal with the
During the question-answer session, someone asked if the Internet
represents a threat to Microsoft. Esther replied that Microsoft
has become somewhat like a government and is able to take advantage
of the standardization represented by the ubiquitous presence
of Intel boxes and Windows operating systems: it essentially imposes
a tax on hardware manufacturers to cover the pre-loading of Windows
into every new machine, whether they want to or not.
But the Internet doesn't value this notion of standardization
in the same way; contrariwise, diversity is valued on the
Internet. So this does indeed represent a challenge to Microsoft,
which until recently might have thought it could "own"
(or at least dominate) the Internet. But if Microsoft adapts to
the Internet culture, it could help prevent the ossification that
comes with large monopolies, and it could stay lean and agile
What does all of this mean? Well, it suggests that there is a
new and different economic model for consultants, authors, analysts,
information-providers, and "knowledge-workers" who have
enjoyed a fairly comfortable income over the past 20-30 years
by jealously guarding the actual information content that they
create; the profit has often been derived by making physical copies
of the information (in the form of atoms, rather than bits, to
use Nicholas Negroponte's metaphor) and earning fees or royalties
on each copy distributed to a consumer.
In Esther's economic model, information-providers and knowledge-workers
will devote a considerable amount of time and effort creating
information which they consciously and deliberately distribute
for free. A case in point: the modest, but slowly-expanding,
set of Web pages that I've created has taken a considerable amount
of time and effort on my part, and so far, nobody has paid (or
even offered to pay) a penny for it. So either it's a silly and
time-wasting hobby, or I'm making a voluntary contribution of
my knowledge for the advancement of the human race :-) or I'm
so egotistical that I think the human race really wants to know
what I think about San Antonio ... or I've already instinctively
concluded that Esther's model is correct, and that the eventual
"intellectual value" of my work will occur in a deferred,
I sure do hope Esther is right.
Copyright © 1995 by Edward Yourdon, updated July 16, 1996.
Comments to Ed Yourdon, email@example.com