Information Revolutions Old and New
The greatest story of our age is the Information Revolution, that is transforming our world.
Today’s Information Revolution comprises the rise of digital media and Big Data. For example, social media. One social media company, Facebook (NASDAQ: FB) or Meta (NASDAQ: FB), had7.269 billion users worldwide in July 2021. In comparison, Worldometers estimates the world’s population was 7.9 billion in November 2021.
To elaborate, Facebook owned four major social brands in July 2021. Those brands were Facebook with 2.853 billion users, WhatsApp with two billion users, Instagram with 1.386 billion users, and Facebook Messenger with 1.3 billion users, Statista estimates.
Hence, one company reaches the greatest audience in human history. Meta CEO Mark Zuckerberg has a larger audience than all the press barons, movie moguls, and television tycoons in human history. Zuckerberg and his employees could transmit a message to 7.269 billion social media accounts.
Hence, one company reaches the greatest audience in human history. Meta CEO Mark Zuckerberg has a larger audience than all the press barons, movie moguls, and television tycoons in human history. Zuckerberg and his employees could transmit a message to 7.269 billion social media accounts.
The Big Data Revolution
Social media is only part of the new Information Revolution. Big Data could be as disruptive and destructive as social media.
In 2017, The Economist made the astounding assertion “the world’s most valuable resource is no longer oil, but data.” To explain, The Economist’s editors believe data has replaced oil as the resource that drives the world’s economy.
“A NEW commodity spawns a lucrative, fast-growing industry, prompting antitrust regulators to step in to restrain those who control its flow,” The Economist’s editors observe. “A century ago, the resource in question was oil. Now similar concerns are being raised by the giants that deal in data, the oil of the digital era.”
For example, Statista estimates six of the seven companies with the largest market capitalizations were data-driven businesses. Those businesses were Apple (AAPL) with a $2.52 trillion market cap, Microsoft (MSFT) with a $1.967 trillion market cap, Amazon (AMZN) with a $1.712 trillion market cap, Alphabet (GOOG) or Google with a $1.539 trillion market cap, Facebook (FB) with an $870 billion market cap, and Tencent Holdings with a $773.8 billion market cap.
Notably, the only non-data company with a trillion-dollar market cap was the Saudi Arabian Oil Company, or Saudi Aramco, with a $1.897 trillion market cap. Yet even Saudi Aramco relies on data to guide its oil exploration, drilling, refining, and distribution operations.
Data is the basis of our civilization, as oil was the basis of 20th Century civilization. Consequently, Precisely estimates the global big data market was worth $138.9 billion in 2020. That market could grow to $229.4 billion by 2025.
The New Information Revolution
Hence, Big Data and Social media are driving the Information Revolution that is transforming our world.
For example, Amazon (AMZN). a digital platform, drives brick and mortar stores out of businesses. Meanwhile, pundits claim Facebook (FB) affects election outcomes and drives print newspapers out of business.
Moreover, government’s reaction to the New Information Revolution is reshaping culture and politics. Predictably, government responses to Big Data and Social Media could reshape nations and international relations.
Broadly, there are three government reactions to the New Information Revolution that are disrupting our world. I call these reactions the American, Chinese, and European responses.
The Digital Wild West
The American response is what I call the Digital Wild West. The United States government gives digital technology companies as much freedom as possible. US authorities do not regulate content or enforce anti-trust regulations in Silicon Valley. Similarly, the federal government usually ignores new devices and apps.
Instead, the US government only intervenes in the digital space in extreme situations. Like an Old West lawman, Uncle Sam only acts when something terrible happens. For example, US authorities only crackdown online when there is blatant criminal activity such as terrorism, child pornography, or drug trafficking.
Economically, the Digital Wild West has been an enormous success. Of the seven companies with the largest market capitalizations in 2021, five were American. The seven largest market cap companies were Apple, Microsoft, Saudi Aramco, Amazon, Alphabet, Facebook, and Tencent Holdings, Statista estimates. Apple, Microsoft, Amazon, Google, and Facebook are data-driven US companies.
However, the US government finds itself in a weak position. For example, former President Donald J. Trump (R-Florida) could not prevent Facebook, Twitter, and other social media companies from blocking his posts in January 2020.
The Digital Empire
I call the Chinese Response the Digital Empire. Unlike the US government, the Chinese regime imposes centralized control over everything digital in the People’s Republic of China.
The Chinese government functions as a Digital Emperor deciding about every facet of China’s digital life. For example, the National Press and Publication Administration restricts online video game play by Chinese under 18 to three hours a week. Notably, the Chinese government tightly controls the activities of foreign technology companies in the People’s Republic.
Similarly, Chinese regulators squashed Alibaba (BABA) billionaire Jack Ma’s initial public offering (IPO) for his financial services platform Ant Financial in November 2020. I think Chinese officials were afraid Ant could grow into a gigantic financial services platform they could not control.
In contrast, the US government has done nothing to stop the growth of gigantic platforms such as Amazon, Facebook, Google, YouTube, PayPal (PYPL), and Netflix (NFLX). Like an Old West Marshal, the Chinese government wanted to make an example of a wealthy tech titan. So they even had Ma “disappear.”
The Digital Empire has been successful. For example, China did not experience the destructive riots that swept the United States and UK in 2020. So far, China has escaped the destructive effects of conspiracy theories, and online social movements such as QAnon. In addition, the People’s Republic could contain the COVID-19 pandemic fast and avoid the hysteria it triggered in other nations.
The Chinese Communist Party has created a stable digital ecosystem at high price. The price is censorship, rigid controls, and freedom for almost nobody. Additionally, it is unclear if the Digital Empire is sustainable or exportable.
The Digital Welfare State
I call the European Model the Digital Welfare State. Essentially, the Digital Welfare State is an effort to create a regulatory model that combines the benefits of the Digital Wild West and the Digital Empire.
For instance, the European Union (EU) has created a centralized regulatory structure for digital utilities and a digital environment that delivers high levels of freedom. In particular, the EU’s General Data Protection Regulation (GDPR) restricts what companies can do with individuals’ data.
Conversely, the EU allows tech companies enormous amounts of freedom. Unlike the People’s Republic, the EU allows all the major American tech companies to operate in every corner of Europe.
Yet, unlike the United States federal government, the EU is constantly investigating, fining, and regulating tech companies. For instance, the European Commission fined Alphabet (GOOG)$2.8 billion for rigging Google results to favor its products.
The object of the Digital Welfare State is to enjoy the benefits of both the Digital Empire and the Digital Wild West. To elaborate, European officials want both lucrative tech companies and powerful regulatory agencies.
Critics will allege the Digital Welfare State is less successful than the Digital Empire or the Digital Wild West. Notably, none of the world’s seven largest companies by market cap are European.
There is no British Google, French Facebook, Dutch Amazon, or German Tencent Holdings, for instance. Conversely, no European politician has to worry about being thrown off social media by a tech bro in San Jose. Despite that, some European countries such as France suffer high levels of social unrest and rioting.
History buffs will note that they root all three models in different regions’ history. For instance, the Digital Wild West extends the 19th and 20th century industrial economy that made America the richest and most powerful nation on Earth.
Similarly, the Digital Empire extends China’s traditional system of governance into the digital sphere. Meanwhile, the Digital Welfare State, is an effort to recreate Europe’s model of powerful government and high levels of individual freedom online.
Only future history will determine if any of these systems is sustainable. The Digital Wild West, the Digital Empire, and the Digital Welfare State are experiments in progress.
Nor is it clear if any of these models are exportable. Although governments in India and Australia are trying to recreate the Digital Welfare State in their nations.
The First Information Revolution
The First Information Revolution began in 1436 when a German goldsmith named Johannes Gutenberg built Europe’s first printing press.
Like the Internet and Social Media, Gutenberg’s printing press led to a global information network. That network distributed new information and ideas around Europe and the world.
The printing press turned an obscure German College Professor named Martin Luther into the most influential person in Europe and launched the Protestant Reformation. Similarly, the printing press sparked the Scientific Revolution by allowing people to read about new scientific ideas and discoveries. A few centuries later, the Scientific Revolution spawned the Industrial Revolution by inspiring the creation of technologies such as the steam engine.
Moreover, the printing press spawned modern accounting and finance. To explain, in 1494 Luca Pacioli published Summa de Arithmetica, Geometria, Proportioni et Proportionalita ,the first book to describe the systems of accounting and credit. Hence, anybody could learn accounting by reading Pacioli’s book.
Once a system of accounting became widely available, modern finance was possible. Consequently, a banking system capable of financing the nation state, corporations, modern warfare, and the Industrial Revolution evolved. With a financial system, monarchs, entrepreneurs, inventors, and explorers could borrow enormous amounts of money. Finance was possible because accounting provided the tools to track and control the flow of money.
A century before the Industrial Revolution, the printing press triggered the Enlightenment by spreading new ideas about law, liberty, and government. Those ideas triggered the American and French Revolutions, and the Napoleonic Wars which tore Europe apart.
The effects of the First Information Revolution were catastrophic. Martin Luther’s ideas led to the Protestant Reformation. The Protestant Reformation sparked a series of apocalyptic wars that included the Thirty Years’ War and the English Civil War.
Historians estimate the death toll from the 30 Years’ War at 450,000. Some historians think up to 20% of Europe’s population perished in the Thirty Years’ War. In some areas of Germany, Thirty Years’ War fighting killed up to 60% of the population during the Thirty Years’ War.
In the three centuries after Gutenberg’s invention, Europe’s political and economic order collapsed.
The Response to the First Information Revolution
European States’ response the First Information Revolution resembles modern governments’ response to the Second Information Revolution.
Some states, including England, the Dutch Republic, and the Venetian Republic, adopted the Digital Wild West strategy. Hence, they allowed anybody to print whatever they wanted. The free flow of information led to the Reformation by giving critics of the Church a mass audience.
In contrast, the Roman Catholic Church tried to control the flow of information. To explain in 1542, Pope Paul III established the Congregation for the Doctrine of the Faith. The Congregation’s purpose was to spread approved doctrine and suppress dangerous ideas.
The Congregation’s projects included the Index Librorum Prohibitorum, or List of Prohibited Books. This Index was a list of books Church leaders viewed as dangerous. The banned books included many scientific and philosophical works and Protestant tests.
Critics noted the Index contained works critical of conservative Catholic political regimes such as the Spanish Empire. One result of the regime of censorship was centuries of stagnation and decline in Catholic areas such as Spain, Portugal, Latin America, and Southern Italy.
A third response to printing came in Europe’s most powerful polity, the Ottoman Empire. The Ottomans did not allow or encourage printing in effort to encourage stability. The printing ban worked.
There was no Islamic Martin Luther railing against the Sultan as the tool of Satan or Moslem Reformation. There were plenty of Islamic preachers who hated the Sultan and wanted Reform in the Ottoman Empire but they had no way of reaching a mass audience.
Hence, there was no Islamic Thirty Years’ War, but no Islamic Reformation or Enlightenment. Consequently, the Industrial Revolution occurred in England, New England, and Germany, rather than Egypt and Iraq.
The printing ban saved the Ottoman Empire in the short-term but doomed it in the long term. The Sultan did not have to worry about a Sunni Oliver Cromwell marching him to the executioners’ block. However, by the early 19th Century the Ottoman Empire was the bankrupt and backwards Sick Man of Europe. The Ottoman Army, once the most advanced on Earth, was incapable of defeating European troops on the battlefield.
In contrast, the Northern European nations and the United States, which allowed the free flow of information, experienced incredible levels of progress and economic development. By the early 19th Century, the British Empire was the richest and most powerful polity on Earth because it was the most advanced. One reason for that was the free flow of printed information in London, which had become the center of the world’s publishing industry.
The Second Information Revolution is the principal story of our age. History shows how we respond to that revolution will shape our future.