Sunday, 25 June 2017

DIGITIZATION 2.0: A NEW GAME BEGINS

The political utopias facilitated by the Internet and Social Media have faded. However, the true digital revolution is yet to come – one that combines prosperity, sustainability and peace.

This piece can be downloaded as a pdf here.

Recently, technology visionary Elon Musk, head of Tesla and Space X, asked, "What if the world were a computer simulation?" Then, life would be like a game where, in order to win, we would have to learn how to creatively get to the next level! But what are the rules?


The challenges of the game should really be known to all of us. More than forty years ago, the "Limits to Growth" study, commissioned by the Club of Rome, found that a world with limited resources would inevitably run into an economic and population collapse.

Irrespective of the model parameters used in the computer simulations of the world’s future, it always ended in disaster.

As a result, decision-makers seemingly panicked. It was believed that billions of people would have to die. Step by step, a "fight of everyone against everyone" started. The prevailing strategy was to bring as many resources under control as possible. We decided to play "Monopoly". Consequently, the last decades of our planet were characterized by globalization and wars.

"Bread and circuses"


No one thought of changing the system of equations that governed our future, i.e., the way in which we organize our economy and society. What if the goal of the game was a different one, namely, to find new rules of the game so that the world’s resources would be enough for everybody? Then we would have failed miserably!

Fixing the problem would have been possible. If we had reduced our resource consumption by a miniscule 3 percent each year over the past 40 years, we would have a sustainable economy already. In fact, in the 1970s, an environmental movement emerged. There were car-free Sundays and people started using Jute instead of plastic bags…

What if the goal of the game is to find new rules of the game, so that the resources of the world are enough for everybody?

But this did not please industrialists. From their perspective, citizens should continue to consume and not think about the future. The motto was bread and circuses for the people – distraction from the imminent apocalypse and the end of the world. Politics and industry would take care of everything. We just had to let them do what they believed had to be done. And we as a society trusted them – we cleared their way…

The economic credo of the time was: "If problems are just large enough, there are enough incentive for engineers to invent a technical solution that can then be scaled up globally." In this way, problems could never get serious. For this plan to work out, industry should be restricted as little as possible. Therefore, neo-liberalism spread. It was claimed that, when resources become scarce, "economies of scale" were needed more than anything else, i.e., efficient global-scale production. Oligopolies and monopolies were the result.

New methods of energy and food production were developed, such as nuclear energy and genetically modified food. Also, the gross domestic product increased impressively. However, the energy consumption per person increased, and with the further spread of the oil industry, the world population grew by 2-3 billion people. Furthermore, even though petroleum companies knew about the climate impact of their business already in the sixties, political action was delayed for half a century by fueling scientific and public controversy. In summary, despite increased efficiency, the consumption of resources kept growing. In the end, consumers were blamed for this, even though the masses were influenced to buy many products they did not want or need, using giant advertising budgets and marketing campaigns.

Total transformation of the economy

Then followed the Paris climate agreement and countries had to admit that the efforts of big businesses had not been enough to solve the world’s existential problems. Even among the Rockefellers, voices were heard that the petroleum business was immoral. Europe thereafter committed itself to reduce its CO₂ emissions by 40 percent in 15 years.

Today, however, most of our economy – heating, transport and logistics, plastic and fertilizer production – is still built on coal, gas and oil. Hence, we need nothing less than a total restructuring of our economy. The alternative would be a drastic population reduction in the world. Our refusal to produce and live sustainably has become a question of life and death. That’s why World War III is looming.

However, the solution to the impending resource crisis is neither to depopulate the world nor to impoverish the masses through a creeping financial, economic, and debt crisis. In contrast, a combination of a circular economy and a sharing economy would help. Within our lifetime, each of us produces 50 tons of waste – including several cars, TV sets, computers, mobile phones, all sorts of furniture and much more. This swath of resources would, in principle, be enough for at least five people if we finally replaced linear supply chains by circular material flows. While this cannot be efficiently achieved by regulation, a new, digital, financial and economic system could facilitate this by creating new kinds of market forces. We will discuss this later.

In the meantime, the inequality in the world has reached an extent that, according to the OECD, WEF, and IMF, strangles the economic development as well as the political, social, and cultural evolution. In many European countries one can already see this clearly. For instance, although the central banks are pumping trillions of dollars into the financial markets (by Quantitative Easing), the global economy has not succeeded in recovering fully.

"A world in which one percent of humanity controls as much wealth as the other 99 percent will never be stable." Barack Obama

The world pays a high price for the fact that the monetary and financial system was clearly forgotten in the democratization of our society. Today, money creation is in the hands of very few people. The FED, for example, is 100% private, the European Central Bank is private in part, and commercial banks are private anyway. This leads to a serious conflict of interest, as private interests are standing above public interests. What is worse: those who had the resources and power did not solve the world’s problems. It is therefore time for us to admit that society is suffering from the political and feudal structures that still determine the world in many ways. However, it makes no sense to keep a financial and money system alive that no longer meets the demands of the modern world and requires billions to die. There is no legitimacy for such a system. High time to change it!

"Democratic Capitalism"

One cannot put the interests of a few hundred people over those of mankind. As long as the mechanism of money-making does not benefit everyone equally, the fate of the world will hardly change for the better. But there are alternatives! The failed approach of pumping trillions into the economy from the top could be replaced by a new approach, where the money is fed in from the bottom, i.e., via the bank accounts of the citizens. Note that I am not talking here about unconditional basic income, because it might eliminate healthy competition as well as creative and performance incentives.

At least a part of this money should be paid out as an investment premium. Everyone should invest it into projects, i.e. distribute it to people with good ideas, and to people who engage for social or environmental matters. Then the money would flow where the best ideas and engagement are. I think it would be the logical next step to go from venture capitalism, to crowdfunding, to participatory budgeting, and finally to crowd funding for all. Such an approach would marry together our two most successful systems – democracy and capitalism – and replace today’s "market-conform democracy", where capitalism threatens to destroy democracy, by "democratic capitalism". According to the constitution, "all men are equal before the law." It is time to demand true equality of opportunity, also when it comes to money creation!

In this new democratic capitalism we would continue to earn an individual salary, depending on what we do for business, society, or the environment. But we could focus on what we consider to be important and right. Combined with "open innovation", the rate of inventions, innovations and investments would be accelerated in all areas of life, from the improvement of neighborhoods to the investment in new technologies. Isn’t this what we need in order to allow society to master its challenges in a successful and timely manner? Couldn’t we now reach the next level of our economic, social, and cultural evolution?

Behavioral and social control?

If we continue as before, things couldn’t end well. We would surely end in disaster, as crises, wars, terrorism, mass migration and populism herald. We must take a new path. In many countries, consumers are already lacking purchasing power, and many companies are no longer able to profitably sell their products. As a result of both, citizens and entrepreneurs are suffering. Banks are in danger of collapsing, and many states would bankrupt immediately if central banks would increase the interest rate only slightly. Hence, politicians must do what is demanded from them by those who own and run the central banks.

Inequality has again reached the level that existed before the French Revolution. Therefore, the current elites are afraid to lose control of world affairs. This is why digital instruments have been created to not only surveil all of us, but also steer our attention, opinions, feelings, decisions and actions – with personalized information. "Cambridge Analytica" has shown how to do it in the Brexit and US campaign. But it is not the first and most influential company to use the "mind control" techniques of "neuromarketing". The personalized advertising of Google and Facebook, as well as personalized news feeds of Facebook and a wide range of Internet platforms – recommending anything from restaurants to hotels and holiday destinations to sex dates, partners and friends – manipulate increasingly many areas of our lives. Many of these decisions are influenced on the subconscious level and feel like our own. The success of these methods is based on psychological tricks and the collection of huge amounts of personal data, which makes us transparent and controllable. The effectiveness of this new and computerized form of propaganda is further accentuated by "social bots".

Through profiling and big data analysis, the Internet knows us probably better than us, including our weaknesses and our diseases. Most of this information was collected without our knowledge and our consent. As was recently revealed, so-called "cookies" and "supercookies" collect all our clicks when using the Internet. It is now practically impossible for the normal consumer to use the Internet without being digitally exposed. By now, much more information has been collected about each of us than the Stasi or secret services of totalitarian states ever had. How long can this go well? A lot of money is made with selling our data. Our privacy, which should have been constitutionally protected by the state, has become a commodity of surveillance capitalism. We are all the focus of interest – not just terrorists.

"Digital Judgment Day"

Representatives of the first digitization phase – let’s call it the "digitization 1.0" – often argue: If you only had enough data, the truth would reveal itself, even without theory and science. Super intelligent systems would understand the world and tell us how to optimize it. Then one would only have to do what the data tell us to do. The best kind of data-driven society would, therefore, be a "benevolent dictatorship".

In view of the various crises and challenges of this world – such as climate change and its many victims – it is claimed that "the end justifies the means". In bad times, it would be necessary to limit human rights and, if necessary, even to sacrifice democracy. Is this really what we have to do, or has politics been deceived? Not to mention the public, who did not know anything about all this at all ...

It is often argued that the world’s problems are a consequence of the irrational behaviour of selfish citizens. They would destroy the environment with their consumption behaviour. Therefore, one would have to correct their "misbehaviour" and steer their decisions. Business and politics would take care of this using personalized information ("big nudging"), personalized prices and a "Citizen Score.

The Citizen Score is a number measuring the "value" or "usefulness" of a citizen from the point of view of whoever rules the country. In the future, it would decide which products and services we get, what jobs, rights, and credit conditions. Everything that we and our friends do or don’t do would give plus or minus points. Such a system is already tested in China, but not only there. A similar "Karma Police" program was revealed in Great Britain as well, run by the secret service.

To determine the Citizen Score, an algorithm analyses your clicks on the Internet, including the videos you watch and the music you hear. Importantly, in case of resource shortages, the Citizen Score would decide who will receive what kinds of resources and services and who won’t. For some, this may be very bad news. One may compare the approach with a data-driven "Judgment Day", run by an Artificial Intelligence system.

This system is ready to use. During the next disaster or crisis, the system could be turned on, and then, the above described totalitarian, neo-feudalistic system may persist for decades. Self-determination, democracy and human rights would largely be lost. In other words, democracy is threatened by a possible power grab by a small elite, which is being justified by the world’s problems caused by us.

Experts agree that, what has become technically possible by combining Big Data with Artificial Intelligence, Smart Devices, the Internet of Things and Quantum Computers, exceeds the scenarios described in George Orwell's "1984" and Aldous Huxley's "Brave New World" exceedingly so.

Therefore, several people – including the previous president of the European Parliament Martin Schulz – recently demanded that we fight against technological totalitarianism. The former US President Barack Obama also warned us that liberal democracies are under attack by forces that ignore science and facts – forces so powerful that it would not be enough to put a megaphone into the hands the people. In the meantime, we have seen that he was right. Public opinion is now increasingly controlled by intelligent computer programs such as social bots – and so we have arrived in a "post fact society" in which fake news increasingly determine the public discourse.

"Deadly Danger"

Recently, Frank-Walter Steinmeier – when he was Minister of Foreign Affairs – called the "post fact society" created by modern manipulation techniques a "deadly danger" for democracy. And Elon Musk called Artificial Intelligence the perhaps greatest threat to humanity, possibly more dangerous than nuclear bombs. Therefore, he invested one billion dollars to establish the OpenAI Initiative with the aim of ensuring that Artificial Intelligence will be democratically used as "an extension of individual human wills and, in the spirit of liberty, as broadly and evenly distributed as possible". Also, a unique initiative of five large IT companies – IBM, Google, Amazon, Facebook, and Microsoft – was launched to ensure that Artificial Intelligence will be ethically used and destroy the "echo chambers", which are made responsible for increasing extremism and polarization. Finally, the initiative addresses the problem that people have been locked up in an informational filter bubble (a kind of "digital matrix"), which hinders our free, creative, and innovative thinking.

However, many things played out differently than expected. For decades, US strategist Zbigniew Brzezinski had propagated that the world was a great chess board, such that a kind of giant chess computer was built with the goal to control us all and win the game. However, recently he had to bury the dream of American world supremacy. After Brexit and the outcome of the US elections it appears that the previous world order had come to an end. The old organizational structures of our world were increasingly breaking into pieces before our eyes.

The USA – once the role model of the Western world – had exhausted itself in countless globalization wars. The financial system and infrastructure were crumbling. The society and its value system were breaking apart, and the US election campaign has turned the country into a battlefield. In the meantime, the Shanghai Cooperation Organization was becoming a superpower, and the BRICS countries (Brazil, Russia, India, China and South Africa) were calling for new financial and economic structures. They were less and less willing to provide material goods for worthless paper money…

There will be again competition for the most innovative system. In the end, the best ideas will win, not money or power.

The Paris Climate Change Agreement will also lead to fundamental changes. There will again be competition for the most innovative system. In the end, the best ideas will win, not money or power.

To be more creative, we will need more scientific, economic, and political freedoms and opportunities than today. Thanks to a new financial system, environmentally and socially responsible behaviour will be rewarded. A sharing economy and a circular economy will enable more people to enjoy a high quality of life with fewer resources. New energy systems based on decentralized energy production will be established. But there is still a long way to go. All of us will have to make an effort to get our society to the next level together.

A digital ecosystem

First, we must learn that our reality is based on co-creation and co-evolution. We need collective awareness that our well-being is dependent on the environment and our fellow human beings, and that it is best for us to cooperate. Digital technologies can help us get it all started. When we use them properly, we will experience a "golden age" – a new era of prosperity, sustainability, and peace.

But how do we get into this new age? The digital revolution is instrumental for this. In the first phase of the digital transformation, Big Data, and Artificial Intelligence were used to create central information and control systems. But since the US election, the Silicon Valley is in a crisis. The technocratic visions of automated Smart Cities and Smart Nations have not kept their promises. "More prosperity for all" has not been accomplished. A much-noted Open Letter on the Digital Economy calls for a re-orientation, a "digital ecosystem" that can benefit us all, not just a few large companies.

In this way, we enter the second phase of the digital transformation, the "digitization 2.0". It will be characterized by principles such as co-creation, co-evolution, collective intelligence, self-organization, and self-regulation. Coordination will be more important than control, and empowerment more important than power. This evolution will create a giant sharing economy, in which everyone can participate with their own ideas, products and services. Reputation and reciprocity, as well as data portability and interoperability, will be important functional principles. They will enable efficient exchange of ideas and resources as well as combinatorial innovation, and thus an explosion of creative and economic possibilities.

It will be seen that the digital economy is completely different from the material one. The latter is characterized by the competition for limited resources. The digital world, in contrast, benefits from the sharing of non-material resources, which are unlimited in principle.

With digital technologies, it becomes easy to share and recycle resources

It is now necessary to learn how to play this new game. It is a cooperative game, not the "Monopoly" of the old, material economy. The principle of ownership is increasingly replaced by the principles of use, access, and sharing. In addition, it suddenly becomes possible that the limited resources of the material world are sufficient for all. We just need to learn to recycle and share resources. We need a circular economy rather than linear supply chains, where fresh resources are used to produce consumer goods, which are finally thrown away.

But how can we bring the new system forward? The digitization 2.0 will come with three closely intertwined transformations: the digital, the ecological, and the financial transformation.

The Internet of Things and Blockchain technologies are the technological drivers of the financial transformation. By linking them together and taking the science of complex systems into account, it is possible to manage complex systems such as society or nature in real time. And as AI-driven automation in the wake of the digital transformation takes over 50 percent of today's tasks previously performed by us, we can concentrate ourselves on the issues that have been in part neglected so far, including environmental and social issues.

New incentive system

In other words, we have to re-invent half our economy and build an ecological, digital economy that consumes much less coal, gas, oil, and other resources. Sustainability could be reached with a new, differentiated incentive system – a socio-ecological financial system that is liberal, efficient and democratic at the same time. How can this be achieved? The financial system is essentially a coordination mechanism, which decides who receives how much of what resource at what price. But there could be a myriad of better coordination systems. Instead of managing society with a complicated tax system with 1-2 years delay, the Internet of Things will soon allow for real-time taxation information. This can be set up in such a way that the values of society are built into the system ("values ​​by design").

The effects of our actions, including our "externalities", can now be measured at low cost: noise, stress, CO₂, emissions, waste, etc., but also desired outcomes such as job creation, social cooperation, education, health, and the reuse of resources. These would receive a price or value in the socio-ecological "finance system 4.0". With the addition of numerous new currencies, existing alongside today's one-dimensional monetary system, one could increase the desired effects and activities and reduce unwanted ones. Social and ecological commitment would no longer be expensive – it would pay off. With such an approach, a circular economy would basically emerge by itself, driven by new market forces rather than a digital command economy. Numerous regulations could be replaced by measurement processes and participatory (subsidiary) pricing processes. Through a hierarchy of incentive systems, one could promote local commitment to achieve global goals. The economy would become efficient, and it could benefit all: citizens, banks and businesses. In the interest of digital democracy and collective intelligence, the socio-ecological financial system would be jointly managed by representatives of the economy, politics, science, and the general public.

In addition, the socio-ecological finance system could be designed in such a way that it would automatically generate taxes to pay for public goods and infrastructures. By means of the differentiated, multi-dimensional incentive system, once could manage complex systems much better, and even build self-organizing or self-regulating systems. The externalities underlying this incentive system would be measured in a crowd-sourced way, using sensors in smartphones and the Internet of Things. By sharing the measurements and making the data available to all, one could earn different kinds of money – money that would be fed into the economy on the bottom, from where it would eventually flow to the top. Even without a redistribution of money and wealth, we could all benefit, simply by organizing the use of resources much better.

Here is an example: With its self-driving cars, Google would soon like to offer "transport as a service". The company believes that about 15 percent of today's vehicles could cover our mobility requirements. This means we would need a lot less steel, rubber, glass and other materials, fewer garages, less parking lots, etc. It would also be more comfortable for us. You would just tell your smart device that you need a vehicle in 5 minutes, and it would bring you from door to door, then move on to the next customer. It might be even cheaper than using a car today…

To take a new path, we first need to break up the fetters of the old age


Why don’t we start this now? Europe missed the train of the digitization 1.0. So what? Let us be world champions of the digitization 2.0! We could be pioneers in building digital democracy, the socio-ecological finance system, and democratic capitalism. When robots soon produce the goods we need to live, we can spend our time with creative and social activities, with learning and environmental projects. Digital assistants could help us in all situations. Personal Artificial Intelligence systems, acting in our interest, would help us manage our personal data and support our informational self-determination. With spoken instructions or even steered by our thoughts, we could create and experience new worlds and Virtual Realities.

However, we are not there yet. We first have to free ourselves from the fetters of the old age before we can take a new path. Which one would we choose? It is time for a public debate where we want to go in the digital age – and for investments into the future rather than in the renovation of the broken past. Let’s do this now!

Dirk Helbing is Professor of Computational Social Science at the Department of Humanities, Social and Political Science at ETH Zurich, and an elected member of the Academy of Sciences "Leopoldina". This article is an updated and expanded version of an essay for the NZZ at this link
https://www.nzz.ch/meinung/kommentare/digitalisierung-20-es-beginnt-ein-ganz-neues-spiel-ld.131433


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