[Note: This is an article I wrote for Forbes ASAP magazine near the beginning of the dot-com boom, and I thought it would be interesting to post it here on its 15th anniversary. Most of the ideas in this article have stood the test of time, with the exception of the reference to software. (It formerly required a physical package, unlike the Internet-based software that we have today.)]
In the information age, conventional mathematics is obsolete. Economics and accounting, which are based on an outdated version of mathematics, are likewise obsolete. The key is to recognize that information arithmetic is fundamentally different from object arithmetic. In the information age, one plus one equals four.
Imagine a meeting where all attendees bring one tangible object and one idea. The objects and ideas are shared. Everyone leaves with only one object, but each departs with as many ideas as there are attendees. When ideas are shared at the meeting, every attendee interprets the ideas in his or her own way. Every idea mingles with all others. What results from the meeting is distinctly different from what was brought to the meeting. Whenever ideas are shared, the result is always greater then the sum of the parts.
This fundamental law of information, in which someone can give something yet retain it, is the most vitally important concept to grasp if one is to understand the information age. Our language frequently impedes our comprehension of this idea. When we use words such as give, transfer, deliver, receive, steal, etc., we assume that the transferred item no loner resides with its originator. With information, ownership of ideas, facts, and knowledge is not exclusive. It does not leave the originator. Rules and laws derived from the world of physical objects are frequently applied to the world of information and ideas with adverse results. When more than half of the software in use throughout the world is estimated to be illegally copied, something is wrong with our system of using and protecting intellectual property. Surely the needs of content creators, publishers, and users can be better balanced without making criminals of millions of people. But to conceive of a better system, we must first contemplate the new questions that arise when many people “own” the same information.
The world of information is infinite. Unlike capital, labor, the money supply, or physical resources, there are virtually no limits to the knowledge and understanding that can spread throughout the world. This limitlessness applies whether it is raw data of questionable utility, information that imparts something genuinely relevant, or knowledge that conveys meaning and insight. Pessimists who worry about the “information haves” exploiting the “information have-nots” erroneously apply physical object-based concerns to the intangible world of information. Physical objects are expensive to duplicate for everyone who might want them. Information and knowledge have no such limits. They can be used by everyone, simultaneously.
The allocation of scarce resources by markets and governments has fueled many a political and economic debate. In the information age, this key commodity, information, is anything but scarce. Since no one has to lose anything when someone else gains knowledge, our economic models of allocation need a fundamental overhaul. We have entered an age in which the possibilities should be as boundless as the flows of information around us. Yet far too many us are worrying about how the pie is being carved up, rather than enjoying the feast of a rapidly expanding pie.
Original publication date: December 2, 1996.
Cognitive Investing 