How Communications Technology Is Changing Our World

THE OPEN MIND
Host: Richard D. Heffner
Guest: Walter Wriston
Title: “How Communications Technology is Changing Our World”
VTR: 9/16/1992

I’m Richard Heffner, your host on THE OPEN MIND and my guest today is Walter Wriston, former head of Citibank, and know Chairman Emeritus of Citicorp, a determined student of the world economy inside our borders, and outside, too. Now, his banking experience and his participation in so many corporate endeavors have provided Mr. Wriston real insight into the ways in which information technology has changed the economic and geopolitical map of the world. His new Charles Scribner and Sons volume Twilight of Sovereignty: How the Information Revolution is Transforming Our World signals for us what he considers the demise of the Industrial Age, and raises for me many of the questions I want to put to Mr. Wriston today.

So welcome to THE OPEN MIND, Sir.

WRISTON: Thank you.

HEFFNER: Let me ask you something about what totally intrigues me about this book. You write: “Cherished political and regulatory economic levers routinely used by sovereigns in the past while losing some of their power because of the new information standard, the new intellectual, informational technology”. How so? Why so? What evidence is there of that?

WRISTON: Well it used to be, for example, that a sovereign controlled what went on within the borders of his or her own country. Today the borders are totally parsed. There are thousands and thousands of spits of data that are moving across borders as if they didn’t exist. I think that probably Arthur C. Clarke said it best, the man who first had the concept of the geosynchronous satellite. He said from an altitude of 32,000 meters borders are singularly insignificant.

HEFFNER: But what about the control of the technologically advanced signals that come from the synchronous satellite?

WRISTON: Well, a lot of people have attempted to block them over the years. And at a while, there was technology that could block out for a moment. But the way the world goes now is that there are too many satellites in orbit, there are too many fiber optic cables, there are too many people with hand-held transistor radios in a jungle somewhere, and there are too many broadcasts. Just the electronic bulletin boards, the computer networks are just enormous. For example, during Tiananmen Square the Chinese made the mistake, if you will, of putting an automatic switching system on their telephone system so that the students, the Chinese students in America took their fax machines, dialed up their fax numbers, and distributed what they really thought was happening in China to thousands of fax machines. And the Chinese government was totally unable to stop it because all of the switches were automatic and went through. That’s just one example of how borders have become totally parsed.

HEFFNER: So when you’re referring to the twilight of sovereignty, you’re referring to the relations between and among nations, not necessarily inside a particular nation.

WRISTON: Well, inside nations the same thing is happening. Today, the relative importance of intellectual capital is much greater than that of money capital. One of my friends, one of the remarkable people of the century is Bill Gates, who built a Fortune 500 company all on intellectual capital. He can walk through any customs hall in the world and say “I have nothing to declare”. Yet inside of his head is the software that runs a substantial amount of all the computers in the world.

HEFFNER: Yet you make the point in your book, you make it so real, that this phenomenon isn’t recognized as such.

WRISTON: No it isn’t. Whenever there’s a change in the economic underpinnings of the world it’s almost never recognized. For example, when the industrial age started, which was basically when we learned how to use power, steam engines particularly, water power to drive mills, we started an industrial society. And there was a group of economists called “Physiocrats”, of which Benjamin Franklin was one, who said industrial work creates no value, creates no wealth. As Franklin put it, they just take one raw material and process it and turn it into something else. And he said the only true wealth was lead. (?) Right today, the mindset is that the service economy, so-called, the information economy are quote “a bunch of hamburger-flippers” who don’t produce anything real. And so, what we’re going through, in my view, anyway, the same transition; we went from nomads, when land was worth nothing, they just grazed their flocks and went on…to an agrarian society when we learned how to plow and grow crops. Land then became important; To an industrial society where factories, mills, production lines became terribly important to what George Gilder’s called “the overthrow of matter”, and which a man sitting at a workstation can design a computer chip that will run a steel mill. Now that…what it means to a sovereign is that the men can sit at that workstation anywhere he or she wishes to. So that a country has to create an atmosphere that is welcoming to intellectual capital. Otherwise it just gets on a plane and goes away. And this is brand new in the sense that when it was money capital we had all kinds of foreign exchange restrictions, people trying to block the flow of capital; but today intellectual capital goes where it’s wanted and stays where it’s well treated.

HEFFNER: What are the implications of this movement for the notion of democracy or popular mood? Because in the past, each man, one vote; one woman, one vote, presumably. Now you’re talking about a capital formation by very few individuals in our society. What happens, then, to the disposition of power?

WRISTON: Well, the disposition of power is shifting, and it will go to those countries that create an educational system that produces truly educated people. It will go to that country that is hospitable to people from other cultures, other lands, who have, in their minds, the intellectual capital that drives our new society. And I suppose the reason I’m so optimistic about freedom is that freedom is traveling on this electronic infrastructure all over the world. And people understand that there’s another way to do it other than what they have been used to. So I guess the greatest demonstration was the demonstrators in Prague in 1988; and they were confronted by the riot police on CNN, and they were chanting “The world sees you”; and they did. And I would argue that the electronic infrastructure that carries what I call “The Virus of Freedom”, for which there is no antidote, cannot be reversed, because the network will be there. And as people understand that freedom is the way to go, I think it’s a very optimistic view of the world.

HEFFNER: But Milton wrote, “Whoever knew truth put to the worse in a free and open encounter”, and that seems to be what you’re saying. But how many “free and open encounters” are there in terms of the ways in which the media are used, the ways in which news is presented to us? I mean, you’re talking about a kind of free enterprise and ideas. Does that really exist?

WRISTON: Yes, it exists, but it also exists as a competition. And we have…when I first started looking at these things, we had the big networks, television networks; we had this fine network, and that was about it. Today it’s a very unusual cable system that doesn’t pull in 50 or 60 channels. And you can get a satellite dish of one meter and put it in your back yard and get 150 channels. So that the diversity of information that is flowing in is, in fact, a free exchange, although there are some people who think that they can still control the spin on a story, and try very hard…in fact, there’s a cottage industry of putting spins on stories. But at the same time, there are 15 other sources of information that compete for your attention. And it’s a lot like a (???); and people vote, they vote with their feet if they have to, or they vote in a voting machine, or they just bring the pressure of public opinion. Today, for example, human rights: The record of the world is not perfect, by a long shot; but nothing like Tiananmen Square reporting has ever been seen in the world. That was an accident, of course, because the Russian Premier was supposed to be there. And so every television camera in the world happened to be there. When the riot started it spread all over the world. But my point is, the sovereign can no longer get away, if you want to put it that way, with these gross violations of human rights without incurring the opprobrium of basically, the world.

HEFFNER: You talk about spin control. And you say there is a cottage industry…

WRISTON: Yes.

HEFFNER: …and more, indeed, of those who spin control. But when you talk about the demise of network dominance and the proliferation of signals, at least throughout our country, what appears on those signals…diversity is a function of what appears, not the multiplicity of signals…Are you convinced that there is such a diverse presentation of points of view, of information? Or just that we have a hell of a lot of signals now.

WRISTON: I think you have a little bit of both. But there are certainly channels that carry something other than the conventional wisdom. And there are programs that certainly present an enormous diversity of views. But be that as it may, the central issue is that what the information revolution has done is to teach people all over the world who had no idea that there was another way to live that there is. And since the technology’s not going to go away, I would argue that that’s irreversible.

HEFFNER: Now, again, I come back to the question of whether that isn’t more the case, truer, perhaps, on a broad, international scale, than within countries themselves, within our own country, for instance.

WRISTON: Well, within our own country there is a debate going on all of the time as to what generates wealth and I’ll give you an example of that: We are using an accounting system which is designed for an industrial society, and some would argue that it has served us well. And we say, for example, that we don’t invest enough in our businesses, in our people, in our infrastructure, whatever. And yet, all of a sudden what drives all of the computers, what keeps the airplanes in the air, that keeps the factory running, that keeps the lights on, that’s running this station now, has in effect, disappeared. It doesn’t appear on the balance sheets of any corporation in the world in any significant way. So there is very little way that you can tell what our investment is. But there are billions of dollars of software that has disappeared. On the other hand, in industrial accounting we capitalize and set up on our balance sheet an old building that you couldn’t give away, but that’s touchy-feely. That’s something you can feel, and it’s real, and it’s solid. But a bunch of code written by some brilliant kid in Palo Alto, that in fact, steers a spaceship, disappears for the balance sheets of the world. What I would argue is that before we get too far into the debate about whether we’re investing enough, we have to have a measuring system that is congruent with today’s world.

HEFFNER: How do we achieve that?

WRISTON: I don’t know.

HEFFNER: I don’t mean the details; but politically, how do we achieve that?

WRISTON: Well, I think that the…there is a growing feeling in the country that the current system that we have, which was devised in the 30s, which is probably the only thing from the 30s that’s still around that’s basically unchanged…For example, national income accounts, which were a brilliant achievement in the 30s…it was important to know how many railway brakemen there were, and we can tell you that today. But nobody really cares. But we can’t tell you how many computer programmers there are. That’s a stark example of where the technological revolution has overtaken what we knew. People make the blind statement that there is no productivity gains in the service business. The flip side of that, of course, is that the government measures only about 40% of the service business. And when you get into the service business you get into quality, you get into customer satisfaction, you get into error rates; very difficult to measure. And one of our problems is that our measuring system doesn’t pick that up. For example, if a man makes…if a man in a bank makes one loan for a million dollars and it goes bad, is he more productive or less productive than a man who makes ten loans of a hundred thousand dollars, five of which get repaid and five of which don’t? Nobody knows the answer to that question. The same in the insurance business: You insure against a hurricane, the hurricane comes and you lose a lot of money. You insure against a hurricane the next year, it doesn’t come, and you make a lot of money. Is one more productive than the other?

So you have value judgments moving in on what used to be statistical certainties, on most. And I would argue that it’s time that we look at the whole of the national income accounts to find out what kind of an economy we now have, which I don’t believe we have a very good handle on.

HEFFNER: You obviously believe that if we could get a handle on it we’d be much more pleased with our status in the world, economically speaking.

WRISTON: Well, I think there would be a good possibility that we would be. It’s very difficult to tell because we really don’t know. But for example, on measuring productivity there is about 80% of Americans, give or take, who work in the service business; and yet we read every day about American productivity, which incidentally, is the highest in the world, much higher than Japan, much higher than Germany. But the rate of increase is much slower than in some other countries. Now, if we ignore 80% of the economy and say that productivity doesn’t advance, it’s difficult, I believe, to make a good judgment.

HEFFNER: I want to go back for a moment, if I may, to this matter of the implications of your suggestion of the way we “tote up” our abilities, our resources, our productivity. Relate that to the notion of democratic rule. As we see the person who is involved more with ideas, technology…whose mind, rather than whose body is participating in creating goods, or in creating wealth…what is the implication for us as we find fewer and fewer people, statistically speaking, or speaking in terms of percentages, who are involved in this kind of productive work? Will they maintain the notion…will we maintain in the future that kind of notion of one person, one vote?

WRISTON: Well, I think that there’s no question that we’ll maintain one person, one vote. Let me address the other issue on productivity, for example: in the American workplace we’re learning the oldest lesson in the world, and that is that the person doing the job knows more about it than the supervisor. And in companies…for example, in General Electric, where their productivity is increasing at a compound annual rate of over 6%, it has almost nothing to do with invested capital. What it had to do was opening a dialogue with a fellow running a lathe and saying “You do this job. How can you do it better?” And as one worker at GE told me, he said, “They used to hire my back, and now they get my mind for nothing”. And most of the productivity gains come from talking to the people on the shop floor who know how to do it, so that those people are not left out of the information revolution.

On the other side of the coin, there is no question that “knowledge workers”, as Peter Drucker called them years ago, are going to be more and more important in society. And that brings you back to the problem of making sure that our educational system can handle those.

The same thing happened…we used to have twenty million people on American farms in 1900. Today there are roughly…there are probably two million, and we feed the world because of the technology of agriculture. And those people transitioned from the farms to the assembly line. People argue that that wasn’t as difficult as going from an assembly line to a knowledge worker.

HEFFNER: Is that not true?

WRISTON: I don’t know. I think, as a lawyer would say, it’s fact, not evidence. But my experience has been, looking at the GE model, that these people, when asked and when a dialogue is set up, are the principle drivers of the productivity gains.

HEFFNER: You know, when reading The Twilight of Sovereignty, I had the feeling that I was reading the work of the greatest optimist I’ve faced at this table. You seem to feel that what we have now is access, increasing access to the world, and in that very access, for the people it’s power.

WRISTON: That’s right. I…George Orwell wrote the great book 1984, which in you recall, Big Brother controlled the citizens. I would argue the information revolution has stood his thesis on its head. It is now the citizen that controls Big Brother.

HEFFNER: Unless the citizen is fed information by Big Brother.

WRISTON: Well, Big Brother is only one source of information. You have only to look at the current…what passes as political campaign, and you have multiple sources of information: From young ladies in Arkansas, from Harvard professors to talking heads – we have a potpourri of information going in. I have an enormous confidence in the intelligence of the American people, and I would argue that the record of the United States, which obviously made mistakes, is equal to or better than any other form of government.

HEFFNER: It’s interesting. Years ago Margaret Mead, at a session that I moderated, said…I thought rather naively, you’ll forgive me…said, “They…” meaning the bosses – she was referring to the bankers and others… “…can no longer pull the wool over our eyes because the beady red eye of the television camera is focused upon what they do. We know what they do now”. I, at the time, thought that that was a rather naïve notion, because there is someone who determines what the camera eye is looking at, who determines what is made accessible to us.

WRISTON: Well, for example, to debate it a little bit…

HEFFNER: In the one minute we have left.

WRISTON: …in the one minute we have left. During the revolution in Eastern Europe a gentleman at CNN told me that they were getting, over the Iron Curtain, seventy home videos a week, which were not taken by Big Brother. They were taken by citizens, and therefore…sure, the decision to put them on the air was CNN’s but you got this tremendous…A video taping in Los Angeles regarding a police officer is another example. There are thousands of video cameras out there in the hands of citizens recording things right now that maybe Big Brother doesn’t want you to know, that will get on the air somehow, sometime.

HEFFNER: Mr. Wriston, thank you so much for joining me today on THE OPEN MIND.

WRISTON: Thank you. It was a great pleasure.

HEFFNER: Thanks. And thanks, too, to you in the audience. I hope you join us again next time. And if you’d like to share your thoughts about our program today, please write The Open Mind, P.O. Box 7977, F.D.R. Station, New York, NY 10150. For transcripts, send $2.00 in check or money order.

Meanwhile, as an old friend used to say, “Good night, and good luck”.

Continuing production of THE OPEN MIND has been made possible by grants from The Rosalind P. Walter Foundation; The M. Weiner Foundation of New Jersey; The Thomas and Theresa Mullarkey Foundation; The New York Times Company Foundation; and from the corporate community, Mutual of America.