- The Empire Club of Canada Addresses (Toronto, Canada), 1 Oct 1998, p. 137-149
- Bloomberg, Michael R., Speaker
- Media Type
- Item Type
- A joint meeting of The Empire Club of Canada and The Canadian Club of Toronto.
Comments on the year 2000 problem. Technology and how companies come and go. Fortune 500 companies then and now. Coping with rapid change and how technology exacerbates that change. Past forecasts and how accurate they were. The computers around us. New-fashioned computers. Ways in which technology is helping us. Technology and how it comes but never in the form that you expected. Some examples. Computers in the office. Effects of technology on communication. The role of the Internet. The increased competition of the open egalitarian world. Our need to know about technology, and how and why that is so. The failure of companies to make transitions to the next kind of product, and reasons why that happens. What happened to the mainframe and mini-computer manufacturers. The lack of infrastructure in new businesses. Moving beyond Microsoft, Intel, and the PC. Another way that technology is changing things very rapidly - how we address the privacy issue, how we address the publicity issue, and how we address the political issue, with discussion and example for each. The nature of the Internet. The difficulties of going into the next century with technology.
- Date of Original
- 1 Oct 1998
- Language of Item
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- Full Text
- Michael R. Bloomberg, Founder, Bloomberg L.P.
TECHNOLOGY IN THE NEXT CENTURY
Chairman: Mary Anne Chambers, President, The Canadian Club of Toronto
Head Table Guests
George L. Cooke, President and CEO, The Dominion of Canada General Insurance Co. and President, The Empire Club of Canada; Patrick Ross, CEO, GPC Canada; John A. Honderich, Publisher, The Toronto Star; Nalini Stewart, O.Ont., Immediate Past President, The Canadian Club of Toronto; Kevin Doyle, Canadian Bureau Chief, Bloomberg News; Darwin Kealey, President, GPC Communications; Rabbi Baruch Frydman-Kohl, Senior Rabbi, Beth Tzedec Congregation; Sara MacDonald, OAC Student, Malvern Collegiate Institute; Donald A. Wright, Chairman and CEO, TD Securities Incorporated; and H. Garfield Emerson, Q.C., President and CEO, NM Rothschild Canada Ltd., Chairman, Rogers Communications Incorporated and a Director, The Canadian Club of Toronto.
Introduction by Mary Anne Chambers
Michael Bloomberg Mary Anne thank you.
The invitation you received said that I was going to talk about Technology in the Next Century but if you read some of the stories about the year 2000 problem we don't have to worry about technology in the next century. We are never going to get there. I might point out that most of the people who say we are going to have a big problem tend to be consultants who will be very happy to fix your problem if you will just pay them. It may give you some cause to think that maybe it's not going to be everything it is cracked up to be. But regardless we will get through the year 2000 problem. We will get through the euro currency. We will get through the current chaos in the stock markets around the world and I think technology is probably going to be pretty good for all for us down the road.
I want to talk about technology and talk about how companies come and go. If you look back to 1981 when we started our company and you look at the Fortune 500 companies then and compare them to the Fortune 500 companies today there are only 160 companies that have survived. Two decades have not yet passed and more than 50 per cent have gone. They have become totally different companies, they have gone out of business, they have become much smaller or they have merged. The fact of the matter is the world is changing very rapidly and technology is exacerbating that change. For some of us it's great and for some of us it's not so good and the question each of us has to worry about is: "What about ourselves and our families in the future? How are we going to deal with the effect of technology?"
If you take a look at what the pundits said would happen today, 20 years ago, they were very very wrong in terms of form but probably pretty right in terms of substance. The pundits predicted that you would have a computer in every room of your house. It sounded like a very farfetched thing but these people are paid to predict the future and they always seem to predict it with such certainty. Today if you get up and look around your house unless yours is very different from my house you don't have a keyboard and screen next to the bed and you don't have one in the bathroom and there's probably not one on the sideboard in the dining room or in the kitchen or the living room. So where are these computers that were supposed to be everywhere? If you look very carefully the pundits were right. There is a computer in every room in your house. The clock radio has one, the telephone has one, the dishwasher has one, the washer/dryer has one and the elevator has one. Your automobile has so many computers that in the year 2001 General Motors will ship more computer power from its automotive division than IBM will ship. Just think about that. You don't think of a computer as an automobile or an automobile as a computer but in fact they have become one and the same. There are so many computers in automobiles these days that that's what people steal when they take the car and rip it apart. That's what they want. And we are going to see more and more of this.
What we are seeing is a change from old-fashioned computers to new-fashioned computers and we are finally getting to the point where technology really is helping us. Everybody said that certain things would come along that would create haves and have-nots and once again the pundits were right in substance but not in form.
For example, only 50 years ago, there were a lot of people that argued there was a new technology, a communications medium, that we should ban because it was going to help the haves get culture and education and training and the have-nots wouldn't be able to afford it so we would have a bigger gap between rich and poor. That technology was television and they were dead right that television had an enormous impact on our people but not in the way they thought. The fact of the matter is that those down the economic ladder tend to watch a lot more television than those at the top end of the ladder and those at the bottom end of the ladder tend not to use it to get culture and get training.
So technology comes but never in the form that you think. Take a look in your office and there is a computer on every single desk. You say: "Ah, it's management that's really adopted technology in the world," but that's not true. If you go and take a look on the production floor that's where technology has really taken over. No company has a production line without lots of computers. Take a look at the people building roads and look at the equipment they are using and how efficient they are in building roads. We've taken technology down to the level at which people need it. Construction workers today have exactly the same educational background that construction workers had 40 and 50 years ago. But today they can use technology that lets them build better roads, more economic roads, because we have made something useful.
The same thing is true with your carpenter. The carpenter walks around with a laser level and a pneumatic gun that shoots nails into the wall and a walky-talky so he or she can communicate. We are really using technology for those people who work with their hands.
Let's get back to the office. We said there is a computer on every single desk but it is very hard for an economist to find improvement in productivity in the office. Sales of paper to offices per capita have gone up every year since we started buying computers. Nobody predicted that. We were supposed to have paperless offices. We have gone in exactly the reverse direction. Do computers let people make better decisions? There is no evidence whatsoever that management is making better decisions.
More and more we have an ability to communicate but when you have good communication it makes society much more open and clearly makes society much more egalitarian. If you take a look at the Internet, for the first time in history anybody in the world can get on the net at negligible cost with no government control and get his or her ideas out to lots of people around the world. We have never been able to do that before. This open egalitarian world is also much more competitive than ever before and competitive worlds are good for 50 per cent of people by definition. Those above average should do better. Those below average have a big problem. If you believe in meritocracy that's okay. Make sure you and your kids are in the top half of the class.
What do you need to know to do that? Well the one thing you don't need to know is technology. Think about an automobile. When automobiles first became mass market products that people could afford you had to be an automotive engineer to own one. Cars broke down every 10 miles. You opened the hood, you took out a wrench and a screwdriver and you could actually fix them. I don't know if anybody has looked under the hood of a car in a long time but there's nothing to see folks and it's all sealed up and you can't do anything with a screwdriver and a wrench. On the other hand computers have made automobiles and other factors so reliable. When was the last time your car broke down? The fact of the matter is automobiles have a phenomenal record of not breaking down and so you don't need to be an automotive engineer.
Well the same thing is happening with computers. Computers are starting to be smarter. The complexity inside a computer is growing by orders of magnitude and that internal complexity is giving us an external simplicity so we can use a computer the same way you use an automobile. Where do I want to go? With a computer, what do I want to do? With the automobile I don't have to worry about how it happens and with the computer you're more and more not having to worry about how it happens. All you need to know is you hit a button and you get an answer. You turn the key and the car starts. The next generation of computers will make things terribly reliable, make things terribly useful.
If you take a look at the history of companies, they fail because of all this change in technology. There is a great book out called "The Innovator's Dilemma" which I read a few months ago. It talked about why the mainframe manufacturers never got into the mini-computer business and why the mini-computer manufacturers never got into the PC business? And is it true that the PC manufacturers are being left out of the next generation? I would argue that the successor to the mainframe was the mini. The successor to the mini was the PC but this is the successor to the PC. This is a little organiser and there are lots of these things. The fact of the matter is that Bill Gates and Intel are not going to own the world and it isn't the U.S. Justice Department that's going to stop them. It's that no company in history has ever been able to really make the transition to the next kind of product.
The book that I was talking about tries to address the issue and figure out why. The author's thesis is the following: Companies are very good at defending their turf and enhancing their basic product. What they do is they marshal all their resources to improve their product and constantly market it better, service it better, sell it better, make it cheaper and anybody who comes along is hopelessly behind and is never going to knock them off. And there is a lot of evidence. Nobody ever made better mainframes than IBM for example. Even to this day IBM still makes the world's greatest mainframes. But the mistake that IBM and companies that made mainframes all made was that they asked their customers what they wanted. I know classic business theory says that you always listen to your customers. But like most classic things I would argue right on substance, wrong on form. Mainframe customers were asked whether they wanted better, bigger mainframes or whether they wanted this new mini-computer that somebody just invented that's smaller, cheaper, but doesn't work very well. Every mainframe customer told the mainframe manufacturers they would never want a cheaper inferior product? They wanted more bigger mainframes. So the mini-computer manufacturers went out and sold their mini-computers to a different market. It was a different product and they sold it to different people and with the revenue they kept making it better and better. One day the mainframe manufacturers called up their customers and said: "Hey you said you wanted more bigger better mainframes. We have got the next version." And the customers said: "I don't know how to tell you this. I'm sorry but we just bought mini-computers." And the mainframe manufacturers said: "Why didn't you tell us you didn't want them?" "Well yes, but I didn't know that they were at the beginning of development and it was going to get so much better." So it wasn't that the mainframe manufacturers got beaten; their customers left them for a product that did enough of the same things to be adequate along with a lot of other things the mainframe computers couldn't do.
What happened to the mini-computer manufacturers? And incidentally IBM did eventually make some mini-computers and they did alright. IBM is really the one company in all of this that has been able to jump a little bit. Minicomputer manufacturers listened to their customers. "You want bigger and better minis?" "Absolutely." "Would you ever want a small computer that an individual could use and put on their desk? It's cheap and doesn't work very well, crashes all the time and is very slow?" "No, why would I ever want that?" One day the minicomputer manufacturers woke up and people were buying PCs. And there was really no mini-computer manufacturer, with the exception of IBM, that ever went into the PC business.
The question right now is: "If you're a PC manufacturer is the same thing happening to you?" All of the computers that we carry in our pockets--the telephone, the organiser and your beeper--are getting pushed together with web access. Not one PC manufacturer is making any of these appliances.
And the same trend keeps going on. You get into a business and you can't jump into the next business. Why? Because everything in your company is structured to do one thing and the economics of new businesses are never terribly attractive. It's very hard to plan whether a new product will be accepted and big companies need certainty. It is the only way they can run a big organisation. And the political structure in a big company requires when they do something new that they split up the new product across the divisions in the company whether that makes sense or not. But they've got a marketing division so they've got to give it something to do. They've got a sales division so they've got to give it something to do. They have a production division, an accounting division, whatever the case may be.
Companies that start new businesses don't have all this infrastructure--don't have the corporate jet to pay for, don't have the marketing department. They can structure their organisation and their economics to make sense for the new product. Maybe history is repeating itself here. We are worried about the wrong things. We are worried about Gates owning the world. We are worried about Microsoft bringing everything down. We are worried about the year 2000 with all this old technology when in fact what we should be doing is sitting back and saying: "We are going to transfer our allegiance as customers to whoever comes along with a new product, whether that product is let's say a PC or a TV, and arguably the only real difference between those two are what you call it and who makes it. Whether it is Compaq or Zenith that makes the device. That's the real battle that is being fought. The rest of us are just pawns because under the hood they both have input and output devices, they have power supplies, they have some chips. There isn't any reason why any television can't do the same thing any PC does or any PC can't do the same thing any television does. It's a question of who is going to supply the chips, who is going to supply the software.
If you think for one second that Microsoft wants people selling devices without their software you're crazy. The question is: "Does it add anything and will some people come along without all of the marketing department that let's say Microsoft has and come up with a new product?" And all these new products, every single one of them, do not use Microsoft Explorer, do not use Netscape, do not run Windows. These things go out and do the functions that we need without any of that stuff and they are all small companies without any of the baggage that the big companies have.
If you take a look five years, 10 years from now, you are not going to see the same names. The Justice Department and the politicians are always fighting last year's battle. The trouble with government is that the political process takes time by definition. It is supposed to. The objective of government is to come to a consensus after you give everybody a chance to have their opinions. Well unfortunately technology changes much too rapidly. When the government tries to get involved in technology, whether it's to set standards, regulations or to apply the anti-trust laws, it is always fighting something that is so far behind it probably doesn't make a lot of difference. Maybe it does to the stockholders of Microsoft but it is really hard to argue, the way Microsoft tries to, that all the Justice Department's efforts are going to hold back technology. The battle has really moved, if you look at it, beyond Microsoft, beyond Intel, beyond the PC. It's into these appliances--the telephone and the clock radio that we talked about, all of those things. The things on the shop floor, the way we live our lives. Technology really is making a big difference.
Let me leave you with one other thought. Another way that technology is changing things very rapidly is in how we address the privacy issue, how we address the publicity issue and how we address the political issue.
When you listen to the politicians talk, their problem is we are going from a physical world to a logical world and it's very difficult for politicians to redistribute wealth, meaning tax and spend, or to regulate. And that's the job of politicians. We want our politicians to do that. We may disagree as to whom they should tax and what they should do with the money and what's appropriate regulation but nobody seriously suggests we shouldn't have some ways to force us all to pay our fair share and to obey certain laws. The trouble is in a logical world that's very difficult and the politicians are screaming out there. They don't know how to get their hands around it.
What happens if you put something in a computer in one country? It is stored in a second country and retrieved in a third. Whether it is commerce, or pornography, or anything. Whose laws apply? If I try to go after you and you throw a switch and magically appear somewhere else how do I get you to obey the law? How do I get you to tax? Politics with technology is a very difficult thing we are going to have to deal with. Make no mistake; we have to do something because if we don't have taxes we can't have the fire department, we can't have education, we can't do any of that.
Regarding the privacy issue, make no mistake about it, we are all making a deal with the devil. For the convenience of using modern technology we are giving up our right to privacy. No matter what anyone says. Think about it. You go to dinner and you pay for it with a credit card. There's a record of where you had dinner, probably a record of what you ate. There is no record yet of who was there except if it is a business dinner for tax reasons and you enter that into a computer when you get back to your office. In New York we have what's called Easy Pass. You put this thing on your card and you zip through the toll booths. The trouble is there's a camera that takes your picture. So if I go out to dinner tonight in New York and I drive through one of the toll booths there is now a record of which direction my car went at what time and there's a picture of who's in the car. As you zip through they want to get a picture of your licence plate.
Ever tried to pay for an airline ticket with cash? They'll arrest you. There's something wrong if you try to use cash. There are a lot of good things that come out of technology but the cost of it is diminution of our privacy. And we'll yell and scream about it and then we will go right back to doing things that are most convenient, never thinking about it.
When you write something on a computer it is stored forever. You send an e-mail and there are a number of places where it gets stored. The government wants it; it gets an injunction. Your employer wants it, but doesn't need an injunction because you use company equipment to send the e-mail so it is owned by the company. We just sent out a notice to all our customers reminding them that their bosses have the right to look. We provide a service so that everyone of our customers can have a list of suspect words and phrases and any e-mail coming in and out of their companies goes right through this computer and if a word matches, the computer either flashes up the words "inappropriate word" or just quietly lets it go through and sends a copy to the compliance department.
You have no idea in sexual harassment cases how many times everybody's e-mail is instantly requested. We don't wait for the government to ask. We just send it to them because it is so obvious what's going to happen. People, no matter what they say, forget when they are typing and they write the most inappropriate things and the most embarrassing things in the world as evidenced by some of our politicians in New York and Washington.
And the last thing that's different about technology is promotion. Gutenberg invented the printing press. It was great to print a bible but the fact of the matter is virtually nobody but the very wealthy could read in those days and nobody could afford paper and ink and delivery. And that's even true today. The average person can't go and start a newspaper or a magazine. The kids can put up a sign on a billboard: "Let's go burn down the government," but fundamentally they can't get that out to very many people.
Telephone was never a mass market thing. It is one to one so if I wanted to spread crazy ideas I would have to make 1,000 phone-calls to talk to 1,000 people. That didn't work. And radio and television have never really been mass market in the sense that the average person could use radio and television to get their ideas out. Remember it would cost them an awful lot of money to get a radio or a television licence and the government's got to like you. Fundamentally if you put stuff on the air that the government doesn't like they'll take the licence away from you. They may couch it in other terms but that's what happens.
For the first time, technology through the Internet lets any of us at reasonable cost, anywhere in the world, say anything to lots and lots of people. What's even worse is that you can't tell who's saying it. In the past if you read something in the newspaper, there was the masthead so you could judge the accuracy or the likely accuracy of the story based on your recollections that this newspaper always connoted a certain degree of accuracy, taste and reliability. We know which are the gossip sheets, which are the tabloids and which are the serious newspapers. The same thing happens with radio and television as they always announce whom they are. You know the source and so there's some pressure on them to keep their quality up and you have legal recourse if they violate the slander libel laws.
Internet doesn't have any of that stuff. The real problem with the Internet is that I can pretend to be anybody I want, I can say anything I want, I can destroy careers and businesses and reputations and unfortunately there is little anybody can do about it. How we deal with these issues, the privacy issue, the political process, and this promotion issue is something that we will find very difficult with technology going into the next century.
Thank you very much for coming.
The appreciation of the meeting was expressed by George L. Cooke, President and CEO, The Dominion of Canada General Insurance Co. and President, The Empire Club of Canada.