[Subtitle] The Fall of Big Data and the Rise of the Blockchain Economy

George Gilder is one of my favorite thinkers. He writes coherently and thoughtfully about a rich variety of topics, and a common theme running through much of his thought over the last 30 years is an optimistic “futurism.” He sees important developments in technology and grasps their philosophical underpinnings and implications long before they are even a glimmer in the eyes of us average folk.

In the early 90s, for example, Gilder foresaw and wrote about the impending broadband revolution and the smartphone era (there’s even evidence to suggest that he directly influenced Steve Jobs and the iPhone).

Undergirding his recent writings on technology is the science and philosophy of a concept known as Information Theory. Gilder spends a lot of time teaching the fundamentals of the theory and unpacking its implications in his 2013 book Knowledge and Power: The Information Theory of Capitalism and How it is Revolutionizing our World. It also directly informs his subsequent books: The Scandal of Money (2016) and now Life After Google: The Fall of Big Data and the Rise of the Blockchain Economy (2018).

Explaining information theory is beyond my scope here, and I certainly do not understand it fully (definitely not enough to write confidently about it). But I’m utterly fascinated by the way it actively informs Gilder’s thinking on so many different topics–from his opposition to insider trading laws, to his defense of entrepreneurship as the lifeblood of economic activity, to his framing of government intervention in the interest rate market in terms of time and knowledge, and his full-throated defense of capitalism. His most recent application of information theory touches on Google’s ecosystem and its philosophy of humanity, on blockchain and decentralization, on rapid innovative increases in low-power computing capabilities, and on cryptocurrencies.

All Your Data Belong to Us

Gilder starts Life After Google by utterly demolishing the premises that Google’s model is built upon, and describing how dangerous it is to society. To Google, you and I are not the customer; in fact, we are the product. They sell our information to advertisers and also use it to develop and perfect their algorithms. It’s all part of their attempt to “organize the world’s information.” It’s as arrogant as it sounds.

Google’s approach to collecting our data is ingenious: offer all their products and services for free–Gmail, Drive, Docs, Maps, Voice, Search, News, Books, Photos, YouTube, Assistant, the list goes on. And on. But there are major consequences to this model. For one, there is no market incentive to provide security of your data. After all, you aren’t a paying customer, and Google can get away with token efforts at protecting you. To make matters worse, a centralized model means all the important data is in one place–a glorious gift for hackers and data miners.

In the early stages of the Internet, data centralization wasn’t feasible. Processor speeds and the costs of memory were prohibitive. But Google (and the rest of Silicon Valley) drove the miraculous innovation that brought us exponentially faster, smaller, and cheaper computers. Google’s approach to building their server farms to store, organize, and rapidly calculate their “best” answer to whatever we were searching for radically changed the tech industry. This made it possible for them to become efficient repositories of our data. And so they vacuumed it up while we used their “free” services.

This model–and the risk involved–is not unique to Google. Just consider all the data breaches in recent years, and the hundreds of millions of users who saw their information exposed. This is a direct result of a centralized model of data storage. You don’t really own your data at all these companies–financial institutions, utilities, retail merchants, healthcare providers, insurance companies, personal cloud storage (DropBox, OneDrive, Evernote), etc. Nor do you have any ability to keep it safe. A single successful hack can potentially expose millions of customers’ worth of data. And for the most part, we simply get an “oops” from these corporations in response.

The solution is not just “better security.” We don’t need an even stronger wall around the castle. To change the metaphor, as long as the gold is sitting in the vault, the bank robbers will keep finding ways of getting in. It’s an inherent problem and an enormous moral hazard, and it doesn’t serve our interests. The entire model is flawed.

Gilder proposes an answer to this problem, and we’ll get to that. But first we need to discuss the philosophical roots of Google’s worldview.

The Fatal Flaw In Google’s “System of the World”

Boil down Google’s philosophy and you get a single, fatal flaw: they assume man (and his brain) is like a machine. They assume that eventually artificial intelligence (AI) will surpass us. But they cannot account for human consciousness with only mathematics and algorithms. In Google’s worldview, the Singularity is real–the inevitable moment when artificial intelligence overtakes that of man. Citing a handful of German scientists, mathematicians and philosophers from the 19th and 20th centuries, Gilder argues that information theory has definitively disproved this concept, shown it to be inherently self-contradictory. In one sense it’s a warmed-over, scientific cousin of classic Marxism. But how can Gilder apply a “Neo-Marxist” label to men who are obvious capitalists?

The fundamental claim Marx made was that the Industrial Revolution would create a future where, as Gilder puts it, “the key problem of economics would become not production amid scarcity but redistribution of abundance.” (6)

“Marx was typical of intellectuals in imagining that his own epoch was the final stage of human history…. The neo-Marxism of today’s Silicon Valley titans repeats the error of the old Marxists in its belief that today’s technology – not steam and electricity, but silicon micro chips, artificial intelligence, machine learning, cloud computing, algorithmic biology, and robotics – is the definitive human achievement. The algorithmic eschaton renders obsolete not only human labor but the human mind as well.” (6-7) […]

AI is believed to be redefining what it means to be human, much as Darwin’s On the Origin of Species did in its time. While Darwin made man just another animal, a precariously risen ape, Google-Marxism sees men as inferior intellectually to the company’s own algorithmic machines. Life After Google makes the opposing case that what the hyperventilating haruspices Yuval Harari, Nick Bostrom, Larry Page, Sergey Brin, Tim Urban, and Elon Musk see as a world-changing AI juggernaut is in fact an industrial regime at the end of its rope. (7) […]

“Marxism was historically hyperbolic the first time around, and the new Marxism is delusional today. Is time for a new information architecture for a globally distributed economy. Fortunately, it is on its way.” (9

Google’s fundamental philosophical mistake is to assume that AI could ever match real human consciousness. But AI doesn’t have true intelligence, and it can never exhibit genuine creativity–only humans can do that. AI is just an algorithm. An incredibly sophisticated algorithm that grows beyond the understanding of its creators, yes, but ultimately it is still simply following rules, however complex.

“The problem is not AI itself, which is an impressive technology with much promise for improving human life. What transforms ‘super-AI’ from a technology into a religious cult is the assumption that the human mind is essentially a computer, a material machine.” (99)

Here is Gilder’s kill-shot against Google’s philosophy: “By using their own minds and consciousness to deny the significance of consciousness in minds, they refute themselves.” (100-101)

Introducing the Cryptocosm

So what is Gilder’s cryptocosm and how can it shift the paradigm away from the Google philosophy?

Very simply, it’s the new frontier being developed by young and emerging protocols of data decentralization, currency, info privacy and security–all built upon peer-to-peer, distributed ledgers known as the blockchain.

Imagine a money system where governments are incapable of printing their way out of debt, or of manipulating interest rates to serve the interests of their corporate cronies or advance an imperialist foreign policy. Imagine contracts–business deals, land titles, and more–that are enforced automatically by software protocols that nobody can interfere with. Imagine being able to pay anyone around the world instantly with total security, privacy, freedom, and without usurious transaction fees. Imagine being able to deliver micropayments to content providers on the internet rather than be force-fed ads that are either irrelevant to you or so targeted that they are creepy. Imagine having total control over your data–financial info, transaction history, personal medical records, browsing history, personal preferences and hobbies, etc.

In a world of centralized data, you get none of these things. You are the product being marketed, and your information is not protected. But the cryptocosm can deliver us from this model and deliver to us these benefits of security, privacy and control

But how? The potential of the cryptocosm is rooted in separate innovations in hardware and software.

Although Google played a key role in fostering the hardware innovations that were prerequisites to developing their dominance in centralizing and delivering data, and although their insatiable need for better and faster tech is fueling the next round of advances today, the irony is that those same innovations are fueling parallel advances in cryptographic decentralization based on the blockchain.

The computational power available in ever-smaller (and low-power) devices–like smartphones–allows cheaper and faster data processing than ever before, all without the need for centralized servers. For example, facial recognition software is built upon extremely complex algorithms that initially required a stack of servers to accomplish. No longer. A hand-held device can manage it instantly and locally. It’s the same story with rendering video. The possibilities are endless. Google is sowing the seeds of its own destruction.

Gilder quotes Muneeb Ali of Blockstack:

“Google and Facebook captured value in the application layer but then had to invent a lot of protocols and infrastructure to actually scale…Because of the value they created early on, they had the resources. This [architecture] leads to giant moats because big companies had all the data, but also because no one else had the resources to innovate at the protocol/infrastructure layer. This innovation is always needed. The question is who has the incentive to lead the charge. In the post-blockchain world, the model gets flipped and there is direct incentive [for many teams outside the giant companies] to work on the hard problems of protocol and infrastructure innovation. This is a major shift.” (201-202)

How else could this all play out in reality? Gilder provides many examples.

Brave.

Brendan Eich, creator of the most widely used programming language in the world (JavaScript) and former head of Mozilla, has been innovating on his latest venture–the Brave browser. It is built around speed, privacy, ad-blocking (30% of mobile bandwidth is sucked up by ads that virtually nobody clicks on!) and–most excitingly–an anonymous and secure system of rewarding web sites with cryptocurrency rather than trading time for content (watching ads). It’s a brilliant approach to reasserting one’s autonomy and privacy on the internet, and I hope it takes off.

Cryptocurrencies.

I believe the future of our money will definitely be a cryptocurrency. The question is, do you want a cryptocurrency that is managed, overseen, controlled, and gate-kept by a government, or one that is decentralized, secure, private, outside the control of a state, and impossible to inflate or manipulate? Gilder writes that the cryptocurrency is

building a new trust, ID, and transactions later for the Internet. Better than cash, it offers exchanges that conceal personal information but also allow complete proof of compliance where necessary. Not only can you exchange anonymously, you can prove your record of behavior if a government makes untrue charges or a business makes spurious claims. This combination of security and attestation makes cryptocurrencies a fundamental improvement on existing moneys—a remedy for the monetary turbulence of our time.” (176-177)

We are still in the early, wild west stage of cryptocurrencies, with a lot of unknowns. But this is by far the most active and innovative sector of the tech economy right now, with billions being invested. Indeed, crypto startups have all but replaced the standard IPO (this is partly because of draconian regulations imposed after the 2008 financial crisis that effectively killed IPOs and are doing immense damage to entrepreneurship in the United States).

Blockchain

The blockchain (which cryptocurrencies are built upon but is NOT the same thing) poses some really amazing opportunities for taking back control over your personal and private data in the Internet age, from smart contracts to land titles. Just about anything that requires security and integrity can move to a decentralized model that will ultimately be safer and more reliable for end-users.

As Gilder is fond of saying, every failed venture is an opportunity to learn, to gain clarifying signals (information) from the market economy. Here is his pithy analysis:

“Many of these [innovative blockchain and crypto] ventures will fail, but together they can emancipate the next generation of the Web from closed silos of captured data. The cryptocosm can mobilize computer power in volumes that dwarf even the data centers of the leviathans. In this cause, the advances in computer science pioneered at Google serve to emancipate the world from Google’s silos.” (210)

Life After Google

Near the end of the book, Gilder addresses a contemporary hot button political issue–net neutrality regulations. As a free market guy, he naturally opposes the draconian attempts to regulate internet service providers, for reasons both philosophical (it’s immoral) and practical (it’s counterproductive). As the world’s data continues to accumulate, and the ever-growing need for bandwidth and wireless coverage continues, the fate of the cryptocosm depends on the nascent 5G network. The gains in speed and coverage that 5G promises are so vast that they make net neutrality concerns all but obsolete–if the government doesn’t smother the spread of the technology through regulation.

“In practice, the only factor that makes any serious difference for Internet neutrality is investment in bandwidth. If bandwidth is scarce, it will have to be allocated preferentially, regardless of the laws.” (236)

Google finds itself in an ironic catch-22. It supports oppressive regulations because it enables their “free” service model to the masses. But those regulations threaten to kill the very innovations that will allow their heavy data usage to continue into the future.

The good news for us is that Google, in attempting to provide for its future, will actually sow the seeds of its own destruction. Gilder gives us many good reasons that life after Google will arrive soon, and what a better future it will be.

Get it on Amazon.