Thank God for the Internet

"Next" author Michael Lewis says that the Net makes lawyers look foolish and Wall Street analysts irrelevant. And that's a good thing.

Published July 18, 2001 7:00PM (EDT)

Enough with the Internet pity-party, already.

As the three-hanky demise of the dot-coms and the floundering of technology stocks continue to hog headlines, Michael Lewis is one journalist who's telling a different story.

In his new book "Next: The Future Just Happened," the author of "Liar's Poker" and "The New New Thing" looks at the emperor-has-no-clothes effect that the Net has on many of the so-called experts in fields like law and finance and how new technologies like TiVo and Replay are undermining entire industries.

But the real showstoppers in the book aren't the technologies themselves, but the kids who are using them. There's Marcus Arnold, the 15-year-old who dispenses legal advice on the Internet to eager adults; Johnathan Lebed, another 15-year-old who roils the Securities and Exchange Commission with his stock recommendations, and buys a $41,000 Mercedes with some of the $800,000 he makes trading stocks on the Net -- a car he's too young to drive. And finally, Daniel Sheldon, a sweet 14-year-old British boy who preaches on the Net the gospel of Gnutella and freedom from intellectual property constraints. (Versions of several of the stories collected in this book have already run in the New York Times Magazine.)

On the phone from Paris, where Lewis now lives, he talked about how the right to privacy will become an expensive luxury and why we're all already older than we think.

The central characters in many of your pieces are children -- teenagers -- stirring up Wall Street and the law. Why are children in a better position to make these changes than adults?

This is a great question. It's a mystery that would be wonderful to solve.

Twenty-nine is the new 39. We're obsolete at ever-younger ages. But the person who framed the question best was a neurologist at Stanford University, Robert Sapolsky.

Sapolsky started with the observation that there is no center of novelty in the brain. Nothing happens to the human brain as it ages that they know about that would explain why it is that older people are slower to adapt to new things than younger people.

So, he gave up trying to explain it physiologically and moved to the next level of just sociology. He wrote this up in the New Yorker a few years back.

He did this study in which he finds that if people who haven't tried a new kind of food, like, say, Japanese food, by the time they're 25 years old, there's a 99 percent chance that they won't try it for the rest of their lives. If they haven't tried a new kind of fashion by the time they're 20, like an earring or a nose ring, there's a 99 percent chance that they'll never do it for the rest of their lives.

He finds that rats show exactly the same propensity. They are born very conservative creatures. There's a brief period during adolescence when they are obsessed with novelty. They are frantic to try new things. An adolescent rat is an explorer, is an adventurer. But then after this brief period, they return to the same conservative tendencies they showed when they were very young, and the same hesitancy toward new things. He surmises that there is something wired into us, but he has no explanation for it.

What's interesting about it is that this trait in human beings now intersects with the economy in a really rich way. If you have an economy that's premised on really rapid technical change, young people, people who are willing to accommodate that change and embrace it, are going to do better than they've ever done. That trait in adolescence, that essentially adolescent trait, becomes highly prized.

And once you realize that, you start to explain a lot of the behavior of the people who were sort of in the middle of the technology world as they get older. They understand as they get older that they've got to preserve this quality in themselves, and they end up preserving an awful lot else of adolescence along with it.

Arrested adolescence.

But it's not a mature or necessarily admirable trait. It just happens to be a trait that is economically valuable now. And the reason this is such an intriguing subject is that just in the last 10, 15 years it has become accepted wisdom that a society that wants to prosper encourages rapid change.

So, young people are in an ever more peculiar position of authority. The phenomenon of the 25-year-old multimillionaire comes out of this. It is not just the norm. It was entirely a result of rapid technical change and young people being able to embrace that and exploit it in a way that older people couldn't.

The flip of that is, as you say in your book, that it turns their parents into immigrants, powerless and uncomprehending in their own homes.

We've been talking about the business world, but there is a direct relationship between business organization and family organization. I think that these organizations exist in the same society.

When businesses are generally agreeing that to manage well you have to loosen the hierarchy, you have to flatten the organization, et cetera, it's not surprising that the same thing bleeds into the family.

What was so interesting about the Lebed family is that you could see just why that happened. The kid all of a sudden knew about the thing the father historically was supposed to know about: money. And the kid became the financial authority in the family, and from that came all kinds of other perks.

Because of that, he exercised an authority in the household that a kid would never be normally allowed to exercise, and the father was neutered, and the father was basically at his son's mercy.

And it's even a threat to older technologists. For example, do you really think, as you say in the book, that Bill Joy's premonitions of gray goo gobbling us all are the musings of an obsolete technologist who just wants to stop the technological change that made him an elite in the first place?

(Laughs) Reading that article, the only thing that it explained it to me was the psychological interpretation. Analyzed, it was inexplicable to me. It seemed crackpot-ish.

It seemed to me that when faced with this technology, the natural reaction is to celebrate it. It is likely to do great good. And that Bill Joy's inability to do so is a new thing in his makeup, because people were saying the same things about computers 25 years ago.

It was once Bill Joy who you were supposed to be afraid of, but now Bill Joy is afraid of these other things. I would not have reacted quite as I did if this whole spiel had come from someone who was clearly an expert in the subject, and who explained the subject to me, so that I understood it. But he didn't even try to do that. I was put off by the fact that this wasn't an argument, it was an assertion, and it was an assertion from someone who fully admitted that he was an interloper in his field.

And what bothered me was that he had a political interest in reining in this process. Stopping it. Stopping change. This just seemed the height of hypocrisy to me. This is a man whose status in the society derives entirely from the society's willingness to be very liberal in its attitudes toward technology and change and development and now that he's on top he wants to control it.

It just reeked to me of status anxiety.

The amazing thing about the story of Marcus Arnold, the 15-year-old kid who posed as a lawyer on the Internet, was that when his actual age and inexperience were revealed, the adults he'd given legal advice to defended him. Why do you think they did that?

I do think that he had managed to persuade a lot of people that he was good at this. And for these people he'd persuaded, there were only one or two responses that they might have had when they found out he was 15. One was: I'm a fool, and I was conned by a 15-year-old. The other is: He's a genius, and I have the privilege of having seen that, and recognized that in him, and having his services available to me.

They had something invested in his expertise.

But there's a larger point. Right after I met Marcus, I came back to London, and I got into the back of a London taxicab, and the cabbie asked me what I was doing. I told him the story, and he said: "Oh, I use that service." He wasn't using Marcus, but he said, "I'm getting a divorce, and these lawyers here were going to charge me a fortune." He said: "For 60 pounds, I can get divorced on the Web."

People recognize, and they're right to recognize, that legal services are overpriced. They're overpriced because there are trade restrictions -- to be a lawyer you need to be licensed. And the fact is, an awful lot of the service you need can be provided by someone who doesn't have a license. Just like a nurse can treat you for many things just as well as a doctor, at a tenth of the price. So, there's a market inefficiency that I think slowly people are figuring out. And the Internet will facilitate the removal of it.

When you talk about the circulation of information, you say that as it speeds up it becomes commodified. You show that in finance and law with the story about Marcus. Do you think that there is any information that won't become commodified in this way? Are there going to be any true, credentialed experts that are unassailable in their lofty authority?

I don't think this is a process with one direction. I think there's a dialogue that goes on between the higher class and the lower class, the amateurs waging the war and the experts who are being besieged.

Let's take an example: financial expertise. Slowly but surely, the stockbroker has been undermined. People use stockbrokers now with much less reverence than they did 20 years ago.

That process of demystifying the stockbroker accelerated dramatically when the Internet collided with the financial markets. The stockbroker -- the lower-level expertise in the financial markets -- has been largely washed away.

Brokers at Merrill Lynch are being replaced by clerks and electronics. But in the higher reaches -- the more complicated stuff like mergers and acquisitions advice or really complicated financing that is innovative or clever and original -- they have some kind of intellectual property component to them. This work is still very highly compensated. And nobody thinks -- nobody thinks yet -- to subject them to extreme price competition.

I guess what I think is that the ranks of the so-called experts will shrink. There's a little less room at the top. Large chunks of the legal, medical, financial professions will be commodified. But there will still be heart surgeons that get paid zillions of dollars, there will still be extremely able corporate lawyers who get paid zillions of dollars and extremely able mergers and acquisitions advisors who get paid zillions of dollars. But that is much more rarefied than it used to be. It's a shrinking aristocracy.

All these challenges to the established order, like Gnutella and Nullsoft -- you talk about how they get absorbed by companies and co-opted by capitalism. What then is their significance? A lot of people suggest that they are just cheap R&D for big companies.

This is the mechanism of technical change. This is where it comes from. It comes from people who are unhindered by the usual kind of corporate constraints.

Corporations do not dream up the technology that is going to undermine their business. Once that technology is dreamed up they have to assimilate it very quickly, or else they get put out of business by someone else who does. That's the new dialogue.

What's changed, and I think the Internet had a lot to do with changing this, is that the traditional corporate response to a threatening technology was to try to ignore it or suppress it for a long time. The popular perception in the management class has now changed. It's now widely believed that it's futile to do that. Instead, what you need to do is co-opt it. It may hurt you in the short term to take on this technology and undermine parts of your business with it, but if you don't do it, someone else will.

It's really interesting the way capitalism has changed, especially since it ceased to be opposed, and people who really are seditious enjoy a different sort of relationship with the establishment. It's a much tighter embrace.

Like when Justin Frankel wrote that program to take the ads off of AOL's own instant messenger program, and he was working for the company. It seemed impossible that he wouldn't be fired, and then of course he wasn't. It's like keeping your enemies close.

That's right. Because it's understood that if they chucked him out he'd still have the capacity to cause a great deal of trouble. Whereas the early corporate model was if you chucked him out, you could leave him destitute on the streets without any ability to cause trouble.

Insiders and outsiders have been thrust more closely together, and I think that's just going to continue. But it's becoming systematized; insiders and outsiders are coming to almost be self-aware about the process. I don't think that I'm telling you anything that Steve Case wouldn't tell you.

I think he would say the same thing if he was being honest. He completely understands what he's doing. It probably drives him crazy that he can't just fire this guy. Wouldn't you think?

You paid him $70 million and then he goes to try to find a way to undermine your business. It's just one relationship, but it's a nice metaphor for something that's changed.

Jumping back to TiVo and Replay, privacy advocates have raised a lot of concerns about these programs that will watch what you watch in exchange for giving you more control of your TV. But you come out with this great statement: "Privacy is no longer a right but a wasteful luxury." Can you explain why that is, and why you think that customers will welcome that intrusion?

Here's this huge opportunity for the market to streamline itself. By finding out more about people, you can deliver them what they want. You can also manipulate them, but this is the same fear that people in earlier eras had about advertisements, that they were manipulative, until the ads became a joke because people became capable of defending themselves psychologically against these things.

You're bribed to do this. You're bribed to get rid of your privacy. You're bribed by being shown lots of things you want at the best possible price, and people love that.

Say you watched the ordinary amount of television, which is, say, 35 hours a week. You're sitting there and, you have your remote control, but all these things get hurled at you that you have just no interest in.

What if someone said that in addition to having control over your television set, which is fabulous in itself, they're only going to show you things that really interest you. That's very appealing. The response to that isn't naturally for people to march out into the street and protest the violation of their privacy.

They say, "I don't have to look at all these ads for pharmaceutical medicines treating a disease I don't have."

That's exactly right. I don't have to watch the hemorrhoid commercials anymore. It's true that someone could come and explain to them, theoretically, they should be offended that their privacy is being violated, but practically they're just being given what all Americans want: more stuff at cheaper prices.

But doesn't it even go farther than that? If the current TV advertising model is so inefficient now, then this will make companies more efficient and then presumably prices will go down?

That's right. If you have one culture that embraces this technology, and another culture that rejects it, the culture that embraces it is going to be commercially more successful. And you could argue that the inner lives of the people in that culture will be less rich. And that may be true, but that's a separate issue.

The culture that rejects it will be paying a very steep price for its rich inner life.

So, why then do you think there is this worrying about privacy around these kinds of technologies? Do you think it's just a small group of people that actually care about that and are very vocal, or is there real, widespread anxiety?

People need to be scared about something. It is a smaller group of people who are actually, genuinely enraged by the idea of other people's privacy being violated.

And there's a large kind of amorphous low-level interest in the general public. They're willing to feign outrage on command, until they see the benefits of relinquishing their privacy, and they'll say: "Oh, give me that. I want that. I want to be able to do that with my box. My friend down the street, he's a boat fanatic, and he's got all these great cheap deals for boats coming in through the television set."

That's the way it's going to work. People are not going to worry much about privacy -- unless some really horrible things are done, which I don't think corporations are stupid enough to do.

One of the downsides of all this technological chance is the dislocation of adulthood. As you write, the price of being able to be a genius at 15 or 18 is being washed-up at 40. Do you think that's going to be true of your field? Do you worry about that yourself?

I do. I think about it. I look around and think that I'm in a lucky field in that they're lots of examples of writers surviving past the age of 40. Any field in which there is a lot of change, and a lot of technical change, and that's a lot of fields, is going to be increasingly youth-oriented.

Right now it's true of medicine. Medical technology, especially medical research, is moving so fast, and you see very young people becoming very prominent in medicine.

The technology of routine, white-collar office work, what most Americans do for a living, has been changing rapidly because of computers. I would think the effect there is the same. It's not as dramatic as on Wall Street or in the computer business itself, but that's the general pressure.

What effects do you think that the Internet has had or will have on journalism? Has it undermined the elites in some way?

I think it's had a very healthy effect on journalism, especially American journalism. Because there is this horrible tendency in American journalism to want to be a profession. There are people who aren't their work; they're their position. So, it's because they're a muckety-muck at the Washington Post that they're an important journalist, not because they've actually done any good journalism.

And the Internet is a great celebration of doers and it also enables anybody to do it. So it enables Matt Drudge and anybody else; it just opens up the fields. It lets lots of people do to journalism what Jonathan Lebed did to Wall Street -- make it look foolish, make professionals look foolish.

The Internet is a blow to the idea of the professional journalist, and so for that reason I think it's a very healthy thing. And every time you see a panel at a journalism school about "Whither Internet journalism: Good or Ill?" I think, God almighty, thank God for the Internet.

By Katharine Mieszkowski

Katharine Mieszkowski is a senior writer for Salon.

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