"The book is brilliant, original, sobering and fascinating... extraordinarily important."

John Shoven - Director of the Stanford Institute for Economic Policy Research

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Q&A with Bill Davidow

What motivated you to write Overconnected?
I knew policy makers had no idea about the impact of the Internet.  So my original goal was to write a book that would explain to them the Internet’s impact so they could be more effective.  During the writing process, I discovered that very few people understood much about the power of the Internet. So I decided to address a much broader audience–the general public, businessmen, economists, etc.

You write that you have gone from being overly optimistic about the growth of the Internet to worried about the growth.  Can you explain why?
It is becoming evident to almost any observer that markets have become more volatile, financial innovations mushroom in size and become dangerous, computer viruses and junk email are beyond control, identity theft is rampant, social networking has the potential to cause big problems, etc.  The Internet, the world’s most powerful interconnection technology facilitates all of this.  Change and growth race ahead of governance, regulation, and social control.  So what you have is things like the 2008 Financial Crisis, massive amounts of cybercrime, and the meltdown of the Icelandic economy.  The Internet does not in and of itself cause these things to happen but it facilitates them.  It is an unindicted co-conspirator.  It makes problems larger and happen faster.

How do you respond to the skeptics who feel the Internet is being made the scapegoat for larger financial issues?
The Internet did not cause the 2008 Financial Crisis, the failure of Lehman Brothers, or the meltdown of the Icelandic economy.  But as one former Lehman employee told me it could not have happened without the Internet.  What she meant was the Internet made it larger and more virulent.

In the case of Lehman, at the time of their bankruptcy they had 930,000 derivative contracts they were a party to.  How could they have exchanged documents, kept track of changes in the market in order to engage in offsetting transactions, or created the documentation required to support these transactions without the Internet?

You point to many examples outside of the financial community that the internet has impacted – from social uprisings to the economy of a small country like Iceland.  As an early pioneer in the internet, how do you feel when you see and hear about such things?
I am deeply troubled when technology and scientific advances are misused and abused.  How can anyone feel good about computer viruses, junk email, cyber-bullying, and financial abuses made possible by the Internet.  But I would argue the Internet is in many respects no different than genetic engineering, oil drilling, automobiles, etc.  Every powerful new technology can be subject to misuse and abuse.  The challenge for society is to use technology responsibly so that society benefits and side effects are minimized.  Overconnected clearly states the challenge and explains approaches for dealing with side effects.

Do you believe the positives of our overconnected society still outweigh the negatives?
We are currently living in an overconnected society.  As I have defined overconnectivity, it is a bad thing.  An overconnected society is populated with dysfunctional institutions and situations driven to extremes.  It is accident and contagion prone.  There is little good one can say about overconnectivity.  The challenge is to take our overconnected society and make changes to our institutions and governance systems so they function effectively with extremely high levels of connectivity.  When these systems are redesigned to match the high levels of connectivity, society will no longer be overconnected.

Do you think that we’re already so overconnected that we can’t turn things around?
Of course we can turn things around and the sooner the better.  The first thing you have to do to address the problem is to learn what the real problem is.  I hope the book will help in this process.  If it just gets the word “overconnected” added to the lexicon and causes people to debate the issue, it would have made an important contribution.
Solutions to overconnectivity will begin to emerge as people are faced with extremely uncomfortable situations like the 2008 Financial Crisis.  Many of the things they will do to fix the financial system directly address the problems created by overconnectivity.

What would it take to slow down the positive feedback loop that you credit with creating the overconnectedness that now exists?
There are lots of things one can do to reduce the levels of positive feedback in the system.  Rational regulation will help.  You can tax certain activity like financial transactions.  You can break interconnections and not create some in the first place.  For example the move from defined benefit retirement plans to defined contribution plans as explained in the book breaks interconnections.  You can design systems from day one with less feedback.  You can build more slack into the system by having the proper level of reserves etc.  None of this is rocket science but it will require some very uncomfortable compromise.


Overconnected released January 2011 by Delphinium Books & in e-book formats by Open Road Integrated Media