Monday, July 23, 2012

Government didn't invent the internet

I always thought that our government invented the internet, and usually conceded that point in barroom arguments. 
I was wrong, and I apologize for the error. 
From the Wall Street Journal.  I'm scraping the whole thing before it disappears behind a paywall:

A telling moment in the presidential race came recently when Barack Obama said: "If you've got a business, you didn't build that. Somebody else made that happen." He justified elevating bureaucrats over entrepreneurs by referring to bridges and roads, adding: "The Internet didn't get invented on its own. Government research created the Internet so that all companies could make money off the Internet."

It's an urban legend that the government launched the Internet. The myth is that the Pentagon created the Internet to keep its communications lines up even in a nuclear strike. The truth is a more interesting story about how innovation happens—and about how hard it is to build successful technology companies even once the government gets out of the way.

For many technologists, the idea of the Internet traces to Vannevar Bush, the presidential science adviser during World War II who oversaw the development of radar and the Manhattan Project. In a 1946 article in The Atlantic titled "As We May Think," Bush defined an ambitious peacetime goal for technologists: Build what he called a "memex" through which "wholly new forms of encyclopedias will appear, ready made with a mesh of associative trails running through them, ready to be dropped into the memex and there amplified."

That fired imaginations, and by the 1960s technologists were trying to connect separate physical communications networks into one global network—a "world-wide web." The federal government was involved, modestly, via the Pentagon's Advanced Research Projects Agency Network. Its goal was not maintaining communications during a nuclear attack, and it didn't build the Internet. Robert Taylor, who ran the ARPA program in the 1960s, sent an email to fellow technologists in 2004 setting the record straight: "The creation of the Arpanet was not motivated by considerations of war. The Arpanet was not an Internet. An Internet is a connection between two or more computer networks."

If the government didn't invent the Internet, who did? Vinton Cerf developed the TCP/IP protocol, the Internet's backbone, and Tim Berners-Lee gets credit for hyperlinks.

.But full credit goes to the company where Mr. Taylor worked after leaving ARPA: Xerox. It was at the Xerox PARC labs in Silicon Valley in the 1970s that the Ethernet was developed to link different computer networks. Researchers there also developed the first personal computer (the Xerox Alto) and the graphical user interface that still drives computer usage today.

According to a book about Xerox PARC, "Dealers of Lightning" (by Michael Hiltzik), its top researchers realized they couldn't wait for the government to connect different networks, so would have to do it themselves. "We have a more immediate problem than they do," Robert Metcalfe told his colleague John Shoch in 1973. "We have more networks than they do." Mr. Shoch later recalled that ARPA staffers "were working under government funding and university contracts. They had contract administrators . . . and all that slow, lugubrious behavior to contend with."

So having created the Internet, why didn't Xerox become the biggest company in the world? The answer explains the disconnect between a government-led view of business and how innovation actually happens.

Executives at Xerox headquarters in Rochester, N.Y., were focused on selling copiers. From their standpoint, the Ethernet was important only so that people in an office could link computers to share a copier. Then, in 1979, Steve Jobs negotiated an agreement whereby Xerox's venture-capital division invested $1 million in Apple, with the requirement that Jobs get a full briefing on all the Xerox PARC innovations. "They just had no idea what they had," Jobs later said, after launching hugely profitable Apple computers using concepts developed by Xerox.

Xerox's copier business was lucrative for decades, but the company eventually had years of losses during the digital revolution. Xerox managers can console themselves that it's rare for a company to make the transition from one technology era to another.

As for the government's role, the Internet was fully privatized in 1995, when a remaining piece of the network run by the National Science Foundation was closed—just as the commercial Web began to boom. Economist Tyler Cowen wrote in 2005: "The Internet, in fact, reaffirms the basic free market critique of large government. Here for 30 years the government had an immensely useful protocol for transferring information, TCP/IP, but it languished. . . . In less than a decade, private concerns have taken that protocol and created one of the most important technological revolutions of the millennia."

It's important to understand the history of the Internet because it's too often wrongly cited to justify big government. It's also important to recognize that building great technology businesses requires both innovation and the skills to bring innovations to market. As the contrast between Xerox and Apple shows, few business leaders succeed in this challenge. Those who do—not the government—deserve the credit for making it happen.


Dr Ralph said...

Ars Technica has an article that calls bullshit on this sloppy mishmash.

Ars Technica is a geek news site, not a business news site. I know which I'd trust to get the facts right in this specific area.

You might want to check the Ars Technica story and consider whether your post needs any revision, since the source material appears to be written by someone who is clueless at best.

Hot Sam said...

One should tread lightly when the good doctor calls BS.

Nevertheless, even if all the preceding lines were wrong, one salient factor remains: the internet became what it is today through private innovation. In government hands, it was a plaything for bureaucrats who did not and could not realize its potential.

A meteorite slammed into the Appalachia Mountains creating the Cumberland Gap. Daniel Boone blazed the Wilderness Trail with private money. State government eventually paved it. But government wouldn't have thought to do so if it weren't for Henry Ford and his successors.

Government deserves no more credit for Route 25E or the CG tunnel than Daniel Boone, God, or a piece of space debris. But it is the private sector that makes the tunnel valuable. In the absence of government action, I have no doubt the road would have been built.

By means am I poo pooing everything government does. I'm simply rebutting giving it (especially the federal government) so much credit. Before you credit the government with anything, start by saying, "But for the government, we would not have....." If that statement doesnt stand, then government deserves little credit.

Dr Ralph said...

An important thing to recall (and which Gordon Crovitz didn't know or was too lazy to find out) is that the World Wide Web is but one piece of the Internet. There was a robust culture on the 'Net long before Tim Berners-Lee came along. Not everyone has to point and click to get the job done.

An excellent book that chronicles the history and development of the Internet is "Where Wizards Stayed Up Late," by Katie Hafner and Matthew Lyon. $10 on Amazon and a fascinating read.

The Internet was originally designed to allow government and research facilities to easily share information between disparate computer systems (mostly mainframes) more or less instantly - or at least as instantly as 56k leased phone lines allowed. And have the network decentralized enough to survive a nuclear attack.

Was it used for play occasionally? No doubt, for playfulness is a necessary component of creativity. In my experience, bureaucrats are the enemy of that element of creativity.

Hot Sam, while it was not the engine of commerce it has become, the pre-web Internet was a success by every measure it set for itself, which is why this lazy, ill-informed bit of trash from the WSJ is so off-putting. It's like listening to me spout off about economics.

Hot Sam said...

Doc, the government doesn't fail my test all the time. Take, for example, GPS. I doubt that the private sector would have, by now, launched private satellites just so people could toss away their AAA triptics or the 50 maps in their trunk.

There are two types of goods: private goods and public goods. Private goods are rivalrous, i.e. that if one person consumes them, another cannot. A hamburger is a private good; if I consume it, you cannot. Public goods are nonrivalrous, i.e. everyone consumes equal quantities. National defense is a public good; we all consume equal quantities even if we value it differently.

Public goods are a form of market failure. Individuals will not voluntarily supply the optimal amount of public goods. So there may be a role for government.

Natural monopolies are another market failure. They arise when there are huge fixed costs for startup and it is most efficient for their to be only one firm in the industry. A lot of fixed infrastructure projects are natural monopolies. We couldn't have a hundred water companies running pipes to everyone's home. So government can play a role in that.

The problem is that government has lately involved itself in providing a lot of private goods, and some natural monopolies are now quite competitive. Government rarely knows when to step back. Another problem is that while government could fix these market failures, 1) sometimes it does a worse job than not doing it, and 2) there are sometimes decentralized solutions.

Government is like kudzu. Once it grows, it is hard to eradicate and it squeezes out private action. Every day we should be asking the question of what government can and should retreat from. But government has become a powerful interest of its own. Managers wield considerable power and employees have good paychecks. Few heads of government agencies would say, "You know, we really don't need my agency anymore."

Instead, they fight like mad to prove their continuing relevance, and they do so on our dimes.

In a democracy, government serves the people. It undertakes provision of public goods for the benefit of the people. But the people we elect are people. They crave power, money, and a reputational legacy. We should always be on guard for overreach. We could easily eliminate our deficit without having our air and water polluted and without stopping the federal government from funding interstate highways and satellite launches.