Spar - Pirates, Prophets and Pioneers: Business and Politics Along the Technological Frontier

Contents

The advance of digital technology is creating whole new markets and industries. Telecommunications is merging into media; information is blurring into entertainment; and commercial ventures of all types are being pulled into the amorphous space of the internet. Pirates, Prophets and Pioneers examines how these new technologies are pushing at the boundaries of existing rules, and how governments are likely to respond to them. Using material gathered from four years of academic research and confidential interviews, Debora Spar brings us inside the world of business and politics in the digital age. In the process, she also takes us back in time, to explore to older technologies and earlier battles. Looking at the advent of radio and telegraphy, the rise of trans-oceanic trade and the development of satellite television, Spar finds striking parallels to our own time (for example, online music and software wars) and critical lessons for both business and politics.

Debora Spar is a Professor at Harvard Business School and regularly lectures on the topics of this book to top-level managers at companies such as IBM, Abbott Laboratories, the World Bank and General Electric. She has spent the last eight years teaching the politics of international business to MBA candidates and corporate audiences. She is also author of The Cooperative Edge (Cornell University Press, 1994).

Dedicated to Ray Vernon

(19131999)

Who would have hated anything too sentimental

In a book that spans seven centuries and a dozen technologies, it seems only natural that the authors gratitude should be similarly expansive. And indeed it is. Scores of people have helped me with the research required for this book; with the intellectual framework that sustains it; with the funding that was so critical; and with generous doses of enthusiasm and support. I am grateful to them all.

At Harvard, many of my colleagues read successive drafts of the manuscript and added their wisdom to it. I deeply appreciate the efforts of Rawi Abdelal, Sven Beckert, Alexander Dyck, Walter Friedman, Geoffrey Jones, Rosabeth Moss Kanter, Thomas McCraw, Julio Rotemberg, Richard Tedlow, Richard Vietor, Louis Wells and David Yoffie. Dick Rosenbloom was particularly helpful in clarifying my work on the radio and telegraph industries; and Tony Oettinger and Harry Lewis provided masterful help with the intricacies of software and computing. Kalypso Nicolaidis of Oxford University helped me struggle through the articulation of the books overall formulation, as did Jessica Korn of the Gallup Management Journal. Stephen Barden, Len Schoppa, Christopher Marsden and Gordon Silverstein each intervened at critical points in the books journey, and Allegra Young and Terence Mulligan plowed through final versions of the chapters. Along the way, the book also benefited from a long and illustrious stream of research assistants: Jennifer Burns, Joshua Friedman, Larry Hamlet, Brianna Huntsberger, Lane LaMure, and Elizabeth Stein. Laura Bures was invaluable in the earliest stages, compiling a monumental survey of piracy and serving as an ever-patient sounding board. Michelle Neve did a wonderful job of handling all administrative details and Christopher Albanese advised on matters both technical and musical.

I am also grateful to Mari Sako and her colleagues at Oxford University for offering me a congenial atmosphere in which to write during the spring of 2000; and to Prof. Dr. Friedhelm Neidhardt and Dr. Georg Thurn at the Wissenschaftszentrum Berlin for providing a similarly conducive arrangement in the fall. Throughout, research funding for this project was generously provided by the Division of Research at Harvard Business School.

As usual, though, my greatest debts lie closest to home. My sons, Daniel and Andrew Catomeris, have essentially grown up with this book and helped to make it fun. They found me pictures of satellites and conquistadores; kept my music current; and listened eagerly to pirate tales. My husband Miltos was a joy and a comfort throughout. And Maria Araujo and Irene Saavedra took care of all the other things while I was busy writing.

Finally, many of the most important contributors to this book are not mentioned here. They are the true pioneers of our era the men and women working along the technological frontier and helping, in some cases, to rein it in. To protect their confidentiality, I am not mentioning these people by name. But I am grateful to all of them and thankful for their time. I hope that this book captures some of their frontier spirit and helps to establish these pirates, prophets and pioneers along technologys arc.

D.L.S. Cambridge, June 2001

PARTENIA IS A lonely place. Strewn across the sands of the Sahara, it is formally located in Tunisia, or Algeria, or Libya, depending on whom you talk to or which way the winds are blowing. It is an ancient place, Partenia, remnant of a world that hardly anyone can even remember. Yet in a very strange way Partenia is coming back.

In 1995, the Vatican dismissed an outspoken French bishop named Jacques Gaillot. Arguing that Gaillot had been far too liberal for the Churchs doctrine, Vatican officials removed him from his diocese outside Paris and sent him instead to Partenia. Clearly it was a symbolic move, for the Church never expected Gaillot to preach to the empty drifts of the Sahara. They simply wanted to defrock him gently, pushing the unruly bishop to one of the several jurisdictions reserved for retired, or ageing, or unwanted priests. Gaillot, however, wasnt prepared to go quietly, or to renounce the liberal views that had angered his superiors in Rome. So he went to Partenia virtually.

One year after his dismissal, Gaillot launched the worlds first virtual diocese. Named Partenia, it is a site for liberal Catholics, a place of freedom, according to Gaillot, where Catholics can discuss the issues that Gaillot had come to stand for: the problem of homelessness, the spread of AIDS, the evils of nuclear testing and the wisdom of married priests. In the first six weeks of 1996, Partenia registered 250,000 hits. The Vatican, presumably, was not impressed with Gaillots move and spent a good deal of time trying to concoct a strategy for dealing with this unsettling cyber-priest. But there really wasnt much that they could do. So they left Gaillot and his liberal site alone. Partenia had won.

In cyberspace, Partenia is everywhere. Dotted about the Internets web are thousands millions of places where rebels like Bishop Gaillot reside. There are pornography sites accessible to strait-laced Singaporeans, Liberian gambling dens, and secluded banking services run from the tiny island of Anguilla. There are networks of Burmese dissidents, collecting information on the dictatorial regime in Rangoon and e-mailing it to thousands of supporters around the world. There are bootleg copies of academic papers and Snoop Doggy Doggs latest hits. In cyberspace, even sombre corporations indulge their rebel side, slipping around the real-world laws that govern things such as export controls or truth in advertising.

If we look at cyberspace from the viewpoint of Partenia, then, it looks very much like a frontier town like California of the 1890s, for example, or the Indies that Europe scrambled to in the seventeenth century. There are the usual hordes of rebels and rogues, plus scores of pioneers and gold-diggers, each scrambling to carve out new territories and stake their claims in them. There are people like Marc Andreessen and Jerry Yang (the respective founders of Netscape and Yahoo!) who ventured West to test their mettle and made incredible fortunes virtually overnight. There are prophets who scream of a brave new world and travelling salesmen hawking IPOs instead of snake oil. (The connection, of course, may not be that distant.) As in any good frontier, there are not a lot of rules or marshals in town, so justice is rough and the winners grab whatever they can. There are, to be sure, some remote authorities (the U.S. Federal Communications Commission, the European Commissions DG IV) who claim to be patrolling the area, but everyone knows that their guns are not loaded. For cyberspace, it seems, is a lawless realm, a place where unruly bishops can confound the Pope and Jerry Yang can start a multibillion-dollar industry before turning thirty.