Michael Wade sent me and email a few days ago asking me what purpose I thought banks served any more. That email led to a phone conversation, and that conversation led to this post. Because that simple question opened up a whole area of investigation about not just banking, but a whole universe of institutions that may be near the end of their purpose.
The modern era has been an age of institutions. Banks, unions, governments, corporations—a whole panoply of organizations whose sole purpose was to provide a central clearinghouse for goods and services, and the regulatory rules and legal framework under which they operated. But we are now seeing glimpses of a future in which institutions simply have no purpose, or, at the very least, will serve a different purpose than they do now. The era of institutions is passing, and is being replaced by the era of…something else. I think—I hope—it will be the era of the individual.
Let’s take the example of banks, first. Currently, banks take deposits from their customers, then loan those deposits out—less a reserve requirement—for mortgages, revolving credit, business loans, etc. They also offer their customers the convenience of access to their money on a moment’s notice, almost anywhere in the civilized world.
Now, imagine a world where your money is stored on a personal biometric device. So, you no longer need an institution to store your money. You can carry it with you—perhaps implanted in you—everywhere you go. Your entire stock of cash and savings are now truly yours, and in your personal possession at all times. So what happens to banks? Without depositors, there are no longer any deposits to loan out in credit cards or home purchases. What happens to banks, then? More importantly, what happens to credit then? Perhaps banks will have to change from depository institutions to investor-funded lenders. Or be replaced by them, as there are already web sites where potential creditors and debtors can engage in micro-lending.
We are on the cusp of really transformative technological change, and if you want to see what the implications are for institutions, you need look no further than the music industry, where the RIAA is in a fierce rear-guard battle to maintain their viability. The entire music industry is being destroyed, as an institution, by the new digital technologies that were created just a decade ago. It may be a shock for some of you younger readers, but there was, at one time in the recent past, a world in which there were record stores in every shopping center and mall.
It used to be that the recording industry controlled every aspect of commercial music. They would underwrite the recording costs, would create the playable media and packaging, then pay for the distribution to music stores. If you wanted a piece of that pie, and hit it big in the music world, you had to scrape up enough money to make a demo tape, send it into Sony, BMG, RSO, etc., and hope that some executive was impressed enough to sign you to a contract to make your first album.
The world doesn’t work that way any more. For less than $1000, you can turn your dingy studio apartment into a multi-track recording studio. You can get a web site, upload your MP3 files onto it, and sell them online. You don’t need a record company, a distribution channel, or marketing money. This is killing the record industry. The RIAA is actually trying to extort royalty money from bar owners who have live bands play, on the theory that they should get a piece of the bar’s profits from the music performance. Good luck with that.
Digital publishing is starting to do the same thing to the publishing industry, as Amazon is making it possible for anyone to publish their book. Yes, a lot of less than stellar talents are publishing for the Kindle now, but some mainstream writers are now moving over to the Kindle platform. Publishing, as an institution, is in trouble.
Technology is now empowering individuals in ways that were undreamed of 20 years ago, and the pace of that change, and the vistas it’s opening up for individual empowerment is increasing every day.
Obviously, institutions, including governments, are going to become increasingly leery of this trend. After all, it is not in the best interests of institutions to allow individuals to be empowered. So there will be some sort of backlash at some point. Hopefully, that backlash will be as ineffective as the RIAA’s backlash against digital music has been. But some institutions have their own police and armies, and they have the potential to resist more strongly.
Of course, since we are now in the middle of what appears to be a huge test of government’s ability to manage the economy and currency—and government is not doing a very good job of demonstrating competence—maybe even that potential problem can be minimized.
We can only hope.
You may have seen this, but it does cause one to pause and think about what the future holds:
So what will an infantryman look like in 2030? Well, here’s the vision (and I might add, this has been the vision in one version or another, for decades):
Some interesting comments in the NY Post article about this concept:
Aided by “smart drugs,” enhanced with prosthetics, and protected by a lightweight suit of armor, this soldier of the future possesses near super-human capabilities and weapons that would make even Iron Man jealous. He’s suited up in an “exoskeleton” – essentially a Storm Trooper-esque external shell – that allows him to carry heavy loads. Electronics integrated in his outfit allow for simultaneous language translation, automatic identification of potential foes, and video-game-like targeting. If the soldier is tired, overworked, or injured, neural and physiological sensors automatically send an alert to headquarters.
A networked battlefield has been a military dream ever since computers and networks was first understood by the institution. The upside is pretty obvious – the ability to quickly gather, integrate and disseminate intelligence. Fewer people necessary to cover more ground. Command, control and communication are enhanced in ways that aren’t possible right now. Joint ops would be a snap. And some excellent force protection technology too boot.
The other side of that is our tendency to display an bit of an over reliance on technology. Technology is not a tactic or a strategy – it’s a tool. The fact that you field a networked battle force doesn’t mean an automatic win. Of course that’s been evident in the low tech battlefields on which we’re engaged in both Iraq and Afghanistan.
Used as a tool, and given the amount of enhanced training that will be necessary for the lowest of privates to use it effectively, it could be something that gives us an edge in the type of warfare in which we’re engaged now, and certainly an edge on a conventional battlefield. What we have to remember, however, is technology isn’t a substitute for tactics or strategy.