ࡱ> c RjbjbSS 11<V]fff|( ( ( 8L$pl&>>(fffyyy&&&&&&&,(*&( yuyyy& X @ff.y( f( f&< ll(  y&L["%( ( & 4`_wq&I. Introduction A. Shift in the Economic Landscape "There is a deep-seated [and] still-developing shift in our economic landscape," Federal Reserve Chair Alan Greenspan told his Congressional audience. The cause of this shift is "an unexpected leap in technology". Central bankers are by nature and training cautious. They hedge and qualify their views. They carefully cloud their statements with ambiguity. When a central banker not only announces that there is a shift but attributes to it changes in basic macroeconomic dynamics-- it is time to sit up and pay attention. This change in our economic landscape has been given many names: an innovation economy, a knowledge economy, a network economy -- most loosely a new economy. We prefer the E-conomy because the story is fundamentally a structural one -- that is a story about change in what is produced and distributed, and how it is done. The present transformation thus rests on an accumulation of electronics - based information technology. It is not at its core a macroeconomic or cyclical phenomenon, though it will have macro-economic consequences. It is not about permanently rising stock prices, wages and government surpluses along with permanently low rates of unemployment, interest and inflation. We have not eliminated the risks and dangers of business cycles or economic dislocations. There are times and places when advancing technology and changing organizations transform not just one sector but the whole economy as well as the society on which it rests. There are only a few such moments. But they do exist. And this present moment has a very good chance of being one. It is this structural transformation which we are calling the E-conomy. The E-conomy is driven by the compounding and rapidly spreading impacts of a new -- and soon to be dominant -- source of economic development, Information Technology. Information technology amplifies brain power. It does so by permitting us to store, transmit, and manipulate information in a digital form. It does so in the way that the technology of the Industrial Revolution (steam engines, metallurgy and giant power tools) multiplied muscle power, or more precisely substituted machines for human and animal efforts. Powered machines hugely increased the scale and accuracy with which energy could be applied to production and transportation, and therein dramatically changed the world. Information technology, and the economic transformation it propels, builds the most all-purpose tools ever. The transformation is more than computer chips, lasers, broadband Internet, and software. They are the key components of the technology that drives it. The E-conomy is about where and how they are used. This information technology leading sector makes tools which are used by its customers, other industries, organizations, and people, to transform what they do and how they do it, and do wholly new things never before possible. B. The Unfolding of the E-conomy The E-conomy begins, of course, with the micro-electronics revolution. In a real way the driving force is the ongoing explosion in our productivity at making the integrated circuits that underpin all of modern computer and communications technologies. That chip revolution permitted a stunning expansion in computing power. Our computers in 2010 will have ten million times the processing power of the computers of 1975. That computing power has radically diffused throughout the economy. There has been a million-fold increase in the installed base of information processing power since the end of electro-mechanical calculators in the 1950s, a compounding thirty-five percent per year increase in information processing power. The diffusion of information processing power has been possible because the price of computing has dropped radically. The price of computers has fallen more than ten thousand-fold in a single generation; the price of semiconductors has fallen even faster. The extraordinary build-out of the communications networks that linked computers, is as remarkable as the explosion in computing power. Simply, the E-conomy has emerged faster, has diffused more rapidly and widely throughout the economy, and increased capacity more dramatically than any of its historical predecessors. Let us compare the past forty years of progress in information processing with the replacement of the steam engine by the electric motor. In 1869 America's steam engines delivered 1.2 million horsepower to America's manufacturing firms. By 1939 America's electric motors delivered 45 million horsepower to America's manufacturing firms. This was roughly a forty-fold increase in mechanical power in seventy years--a five percent per year increase in muscle power C. An Economic Transformation, Not Just Another Leading Sector. Skeptics say that all they see in this story of a "leading sector"--an explosion of invention and innovation in a narrow sector of the economy that revolutionizes productivity in making a small range of commodities. There have been many such leading sectors in the past--air transport in the 1960s, television in the 1950s, automobiles in the 1920s, organic chemicals in the 1890s, railroads in the 1870s, etc. Yet they did not change the standard dynamic of economic growth; they delivered it. They were the standard dynamic of economic growth. (footnotes to Schumpeter) Semiconductors, computers, and communications do constitute a leading sector, but the full story is deeper and broader. Inventions that are not deeply integrated into economic life are gadgets. We marvel at these gadgets. They enrich us--or at least grab our attention--because of their utility or novelty. But there is another kind of invention: tools that open new possibilities for economic organization--what can be made and how it can be made--across a very wide range of industries. The electric motor is a tool. It made possible, among other things, the assembly line. No longer did factory floors have to be arranged in order to make sure that each machine was connected to the network of belts and shafts that transferred energy from the central steam engine. Instead factory floors could be arranged to make the flow of work simple, easy, and automatic. We call that reconfigured system by the name of "mass production." The long-run consequences--industrial, organizational, social--were enormous. Our current technological revolution is making tools for thought. The tools forged today will be used to calculate, sort, search, organize--amplify what we might as well call brain power. They have the potential to be used in every economic activity in which organization, information processing, or communication is important. And that is every single economic activity. It is about new uses, lots of them, many with hard-to-see and many with easy-to-see benefits. Think of microsurgery (which saves days in hospitals, and spectacularly reduces pain and suffering); of new ways to search for pharmaceuticals; of hyper-efficient retailing (which saves American consumers enough money to bring into question government statistics on US economic and income growth); of cheap wireless phones; of remote monitoring of medical equipment like pacemakers; of farmers able to substantially increase yields while cutting back on polluting insecticides and fertilizers; and of students in small schools in Indiana--or India--who gain access to information well beyond that in their local libraries (if they have local libraries) that just the other day was available only to those with access to major research institutions. Thus the E-conomy is about changes in business organization, market structures, government regulations, and human experience that the revolution in information processing and data communications technology is triggering. The transition to an E-conomy is not simply a story about the development of technology. That technological revolution, certainly the particular trajectory it is following and its extraordinary pace, rests on the emergence of distinctly new forms of business organization and work, new strategies for developing and deploying innovation. Certainly as a national community, we in the United States have over the past half-century made mammoth investments in science and engineering research and education to assure the capacity to generate and absorb fundamental new ideas. This bet on formal science and science-based engineering has been extraordinarily successful, generating a flow of technological advance over the past few decades that has both created and been accelerated by an increasingly innovative economy. Certainly large companies in a broad range of sectors have aggressively and successfully pursued innovation to defend and expand their market positions. However, often--and more often in recent years--radical technological developments and applications from semiconductors through the personal computer and the web browser have come not from established organizations but from new entrants, start ups, entrepreneurial companies. In the last quarter of the twentieth century the U.S. high-technology economy has been composed of an extraordinarily effective blend of public investment, large company innovation, and entrepreneurial disruption. That entrepreneurial disruption has been critical to the sudden development and diffusion of new technologies and applications: entrepreneurial companies that spot new opportunities, take the big risks to develop new applications of information technology, and recruit innovative people willing to share those risks in anticipation of potential rewards. It requires open competition in big user industries -- such as finance, air travel, and pharmaceutical development -- that experiment with new technologies to gain competitive advantage, and thereby launch the mass use and production of the technologies. And it is about established companies that re-create and re-organize themselves to respond to competitive pressures and opportunities that define the new economy. Perhaps most explored in the high-tech sectors and in Silicon Valley, the United States in the past decades has created the foundations for an innovation economy that is better at supporting and creating a faster pace of breakthrough technological development. Our social and economic institutions appear to be uniquely effective in generating innovators in produce and user industries. Open competition in industries that use information technology, and the feedback from users' experience to information-technology product design are essential to the mass diffusion of our modern information processing and communications technologies. D. Policy: Frameworks and Choices. People come to Silicon Valley today much as people came to Manchester, England at the start of the industrial revolution in the 19th century or to Detroit as the age of mass production emerged in the 1920s. They come to marvel at the accomplishments of technology and industry, mostly they come to try to understand what this all means. When they leave it would be good if they had a framework to structure the information, visions and debates. They need to understand what this transformation means, why it should command their especial concern, and how government policies and economic institutions should and will respond. Our purpose here is to set this transformation into perspective so that policy makers and opinion leaders will have better knowledge of the forces, the structures, and the colossal stakes at play for America. Policy makers, for the most part, are far removed from the revolution in technology and the massive changes in the activities of business, education, agriculture, health care and daily life that it is propelling. We must close some of that distance. II. The Information Technology Revolution The story of the revolution in information technology must be told in two ways: first as a story of technology; second, as a story of innovations in business organization and practice. Only the combined stories explain how the technology moves out of the lab into the economy and into daily life. The E-conomy Unfolds: The Technology Story The Semiconductor Revolution: In the 1960s Intel Corporation co-founder Gordon Moore projected that the density of transistors on a silicon chip would double every eighteen months. Moores law, as it came to be called, has held. Todays chips have 256 times the density of those manufactured in 1987--and 65,000 times the density of those of 1975. This continuing doubling of semiconductor capability and productivity underpins the revolution in Information Technology. 2. Power, Price, and Pervasiveness The increase in semiconductor density means that that todays computers have 66,000 times the processing power, at the same cost, as the computers of 1975 and in ten years, . In ten years they will be more than 10 million times more powerful than those of 1975. We now expect--routinely--that todays $1,000 personal computer ordered over the Internet has the power of a $20,000 scientific workstation of five years ago. What was once supercomputing is now run-of-the-mill. Indeed, recent Apple television commercials make much of the fact that its personal computers are now classified as "supercomputers" not to be exported to potentially hostile countries because of potential military uses such as weapons design. At the end of the 1950s, ( when electronic computers had largely replaced electromechanical calculators, there were roughly 2000 installed computers in the world with average processing power of about 10,000 instructions per second. Today, forty years later, there are approximately 200 million active computers in the world with processing power that averages perhaps 100,000,000 instructions per second--a billion fold increase. 3. User Industries Transform and Are Transformed by Computing Raw processing power is potential. The key question is: "What is it is useful for?" The answer changes steadily as the price of computing drops, the size of computers shrinks, and the possibilities for application expand. But the way to answer it has not changed. The critical step is discovery by users of how to employ ever greater and ever cheaper computing power to do the previously impossible. Leading-edge users and the innovative applications that they developed have been the creators of the demand that has sustained technological development. The first leading-edge economic applications of large--for the time, the 1960s--amounts of computer power came in industries like insurance and finance which processed large amounts of paper. Data-handling applications were then followed by other applications of computing power to product design, production and distribution. And computing power in ever more miniaturized formats, has more recently become embedded in diverse products ranging from cell phones to pacemakers to automobiles. At first computers were seen as powerful calculators. They were seen as good at performing complicated and lengthy sets of arithmetic operations. Such applications were the first mass market for large scale computing power. But by the 1970s it was clear that the computer was at least as useful in stuffing information into and pulling information out of large data bases--that it was much more than a calculator, however large and however fast. As a result of increased computer power, products, product design, and production and distribution were all transformed. The insurance industry automated its traditional processes--its back office applications of sorting and classifying. But then as insurance companies began to learn the possibilities of computing they began to create customized insurance products. The user cycle became one of first learning about the capabilities of computers in the course of automating established processes, and then applying that learning to generate innovative applications. The financial sector likewise soon became a very heavy user of information processing services. As computing power has grown, computer-aided product design from airplanes built without wind-tunnels to pharmaceuticals designed at the molecular level for particular applications has become possible. Todays complex designs for new semiconductors are simply impossible without automated design tools. The process has come full circle. Progress in computing depends upon Moores law; and the progress in semiconductors that makes possible the continued march of Moores law depends upon progress in computers and software. Production and distribution processes likewise have been changed. It is not just robotic auto painting or assembly that have become possible, but scanner-based retail quick-turn supply chains and robot-guided hip surgery. . The computer has now evolved in two quite different directions. It has burrowed inside conventional products as it has become an embedded system. And it has connected outside to create the world wide web of network-accessible information. 4. Pervasive Computing: The Microprocessor Becomes Embedded Computing is becoming pervasive. The new production and distribution processes that pervasive computing makes possible are visible to us at the check out counter, which scans, prices, inventories, discounts, and reorders instantly;I at the gas pump; and in the delivery truck as handheld devices assign the next stop and record the paperless paperwork. . Microprocessors are embedded in traditional products, and altered the way they operate. In automobiles, anti-lock brakes air bags, and engine self-diagnosis and adjustment are invisible sensing and computing functions performed by embedded microprocessors. In toys embedded intelligence rests on very simple computing products. From cash registers to cell phones to hotel doors to elevator-control systems, to cardiac pacemakers, the embedded microprocessor is transforming our world from the inside. Consider one single case of embedded computing: the automobile. Electronics now adds ( xyz $$$ or percent) of the value of this once principally mechanical device. (See Figure x) This, of course, is just a measure of the computers embedded inside the car.. There is another world of information technology in the design, production, marketing, sales, servicing, and resale of automobiles. 5. Computers Become Linked: The Spread of Networks As the cost of communications bandwidth dropped because of cheaper semiconductor chips and fiber-optic cables, it became possible to link individual sensing, computing, and storage units. Today overwhelming amounts of data can be transmitted in an eyeblink. Today we complain when it takes an ATM machine half a minute to verify the bank balance we hold in a bank in a distant city. The key point is, as with computing power, not that rapid transmission has become technically possible but that the costs of data communication are dropping so far and fast to make the wide use of the network for data transmission economically possible for every use we can think of. With the early data use of data networks it was once again leading-edge users who created new applications in their pursuit of competitive advantage. Networking began either as private corporate networks (or, as in the case of the French Minitel, a public networks with defined and limited services). Business experimentation began. And data communications networks began their exponential expansion as experimenting users found new useful applications and configurations. 6. Computers Become Hyper-linked: The Coming of the Internet But few saw the true long-run potential of high-speed data networking until the http protocol and the image-displaying browser--the components of the world-wide web--revealed the potential benefits of linking networks to networks. A PC became a window onto the world's data store, and the more people there are on a network the greater is the value of a network to each user--a principle that we now call Metcalfe's law  The build-out of the Internet has been so rapid in large part because the Internet could be initially run over the existing voice telecommunications system. ((toss in number of host sites, think in economists this week)) Even before the new technologies designed from the ground up to manage data communications emerged--and they will replace data-over-voice--the global internet had already established an incredible reach. Many of the elements of next generation of data networks are already evident. First broadband to the home to create high-bandwidth and low-latency connections that will permit much more sophisticated applications. (now takes me 21/2 hours to download something that with dsl would take 21/2 minutes. Ought to indicate that order of change. And I know, cable will do it better yet still)). Second, wireless voice networks will soon be as extensively deployed as the wired phone. Widely-diffused wireless data networks will set off another round of experimentation and learning, a round that is already beginning. This round of network deployment already brings both new applications, challenges to established equipment and software players, and struggles over standards. 7. Networks Transform Industry: But the full story of the emergence of the E-conomy does not lie in the sequence of technologies alone. It does not lie in the numbers themselves, whether they be the totals of computers, web sites, or the total value of e-business transactions. These numbers hide much of the real story of how the growth of the network will transform business organization and business competition throughout the economy. (Take the two cisco sponsodred estimates of web busines (out of texas) latest is up 30 % on last year or something like that..)all means little ford and gm announment last week. Gaive in real illustation is we rae uillustrating.) It is not just that the traditional businesses that act as intermediaries, stock brokers and travel agents, will be irrevocably altered. Traditional products, like cars, will be marketed in new ways. Stores will not disappear, but the mix of stores and what stores do will change. New ways of reaching customers will in turn drive new ways of organizing production and delivering goods to consumers. How large will the Internet economy be? It is surely best to say that within two years there will be no Internet economy. There will be no slice of the economy that can be carved out of the rest and assigned to the Internet. Instead, all of the economy will be linked to the Internet. For the E-conomy is truly of economy-wide scope: every business organization and consumer marketplace can make use of the information-processing and communications tools that constitute this current wave of technological advance. There is no reason for the transformation to affect only those industries we see as close to computers-and-communications. How will the entire economy be linked into information processing and data communications? We do not yet know. Today we can see a range of strategic experiments, in the form of new companies trying to exploit the web and established companies trying to defend their positions. But we do not know which of these experiments in corporate information and network strategy will be successful. We can see which strategies have been successful in the past. Look at what is literally Main Street, U.S.A.--at Wal-Mart, a company not usually seen as a member of the dot-com revolution. Between the turn-of-the-last-century Sears catalogue and today, many entrepreneurs have thought that the relatively small stores of small town America incurred very large inventory and other distribution costs, and that there should be a way to combine economies of scale in purchasing with economies of scale in distribution in order to satisfy small-town and rural consumers at significantly lower cost. But until the coming of Wal-Mart no one had managed to solve the associated problems of control and distribution. Wal-Marts extraordinary efficiency advantage can be credited in large part to its early investments in modern information technology, and to careful thought and skilled execution of how modern information technology can achieve economies of distribution. As Wal-Mart founder Sam Walton wrote in his autobiography: Nowadays, I see management articles about information sharing as a new source of power in corporations. Weve been doing this from the days when we only had a handful of stores. Back then, we believed in showing a store manager every single number relating to his store, and eventually we began sharing those numbers with the department heads in our stores. Weve kept doing it as weve grown. Thats why weve spent hundreds of millions of dollars on computers and satellitesto spread all the little details around the company as fast as possible. But they were worth the cost. Its only because of information technology that our stores managers have a really clear sense of what theyre doing most of the time. These efficiencies went mostly to boost the real incomes of shoppers across the country, in rural and small-town America, who benefited from lower prices at Wal-Mart and its imitators, and residents of rural and small town America who suddenly had access to a wider range of goods. (And these increases in real incomes were missed by the Governments statistical system, which did not take account of the rise of discount stores like Wal-Mart in its estimates of the cost of living.see below, pp. ) Who would have thought ex ante that among the biggest gainers from the exploitation of the possibilities of computing and communications would be people shopping for plastic doghouses at discount stores across America? Yet that may indeed be the case. 8. The Future: The Emergence of the E-conomy We already see the coming of the broadband Internet to America's businesses and residences. It will bring a quantum jump to our ability to process and distribute information. (Here is where the pac bell ad goes)) What we cannot see, however, is what will turn out to be the uses of these future capabilities that businesses and consumers will value the highest. These uses will emerge only at the end of a process of experimentation and search--and may well be something that we do not now expect. Economic historian Paul David points out that it took nearly half a century for business users to figure out the possibilities for increased efficiency through factory reorganization opened up by the small electric motor. Finding the most valued uses for the next wave of computer-and-communications technology will probably not take as long, but it will take time. This point is worth expanding. Changes in the powers and capabilities made available by modern information technologies are redefining efficient business practices, and sustainable market structures; they are redefining which activities belong inside a firm and which can be purchased from outside. In brief, throughout the economy they are changing business models and market structures. Those changes are only beginning. It is anyones guess, and any players bet, what the outcome will be. We do know that at every stage up to now, the killer application of each wave of technological innovation has been a surprise. Indeed, if we are wise we should expect to be surprised by what will be the most valuable uses fifteen years from now: who in the mid-1970s before VisiCalc understood that the greatest value of a computer to an office worker would come from a spreadsheet program? Who at the start of 1980sbesides the founders of Adobethought that desktop publishing would be important? Who at the start of the 1990s understood that proprietary on-line servicesno matter how good their content and connectivitywould be doomed by the end of the decade unless they offered transparent e-mail- and browser-access gateways to the broader network outside? The E-conomy Unfolds: Innovations in Organization and Business Practice The emergence of the E-conomy is driven by on-going innovations in business strategy and organization that are redefining a more innovative business system, just as much as it is driven by innovations in technology. Indeed, the two, technological and business innovation go together. They co-evolve, the one driving and enabling the other. The innovations in business-practice evolved out of day-to-day efforts to to resolve real problems or capture perceived opportunities. From the swirl of fads, frustrations, tactics and strategies just-in-time, total quality, downsizings, knowledge management, outsourcings,strategic alliances, mergers, demergers, spin-offs and start-ups, came the reality of a more entrepreneurial business world able to innovate and commercialize at much faster speeds. The list could be long. There are unending examples of the transformation of business strategy and work organization: changes in where people work linking business groups and home workers, changes in how organizations are structured flatter organizations that reflect the new possibilities of information flows, in how work itself is organized with the traditional clerk becoming a marketer and the traditional salesperson absorbing into the networked PC many previously clerical functions. But lists disappoint. They miss the point that these innovations in business and social practice began as efforts to solve real problems and culuminate into the creation of a substantially new business sytem with on-going innovation and speed to scale market as its differentiating characteristic. To illustrate the co-evolution of technological advances and innovations in business and social practices we consider innovations in just two, but important, sets of business practices. They are the solutions to The Innovation Dilemma and the Production Challenge. Resolving the Innovation Dilemma.  It is often the case that large established firms are not very good at fully developing and commercializing technologies that disrupt their existing markets and procedures. Even in this era of star CEOs, decisions in big companies are not taken by one person; most of them never even get to the CEOs radar screen. Parts of a big company, often the biggest and most powerful parts, are not eager to contemplate the risky development of a new technology that could end up cannabalizing their market. Typically that group will doubty the feasibility, the reliability the marketability of the potential techynology. New markets are hard to imagine and harder even to assess quantitatively while substantial enhancements to existing product lines can generate considerable returns. Established customers and suppliers shape companies assumptions about how their industry will unfold. AT&T certainly asserted that an Internet styled communications system was impractical. Motorola, the leader in analog mobile phones, missed the step in the shift to digital. IBM missed internet routers. Microsoft came very late to the web browser. Thus the more effectively a company is tied into its network of customers and suppliers, the more likely it is to sustain a course of innovation that maintain its position within existing markets and technologies. The less likely it will be to undertake radical innovation. And the more likely it is to be blindsided by breakthrough technologies. The established company may generate and literally drip with technology, but nevertheless be unable to capture its value. The creation at Xerox PARC of the functioning GUI interface, the page description language, the Ethernet--and their commercial exploitation by others (Apple and Microsoft, Adobe, 3Com) is simply one of many examples of breakthrough technology lost inside of excellent established companies. Thus start-ups--entrepreneurial companies--have driven much of the radical innovations in this transition. They have defined and developed entire new industries not just new markets. In the rapid growth of the information technology sector, half the growth in a given decade has come from products or product markets that did not exist at the beginning. Chart I. Another way of putting the problem is that large established firms are not very good at generating disruptive technologies. They are often blindsided by technological breakthroughs that alter their existing markets, their existing procedures. Established firms, to use Jim McGroddys imagery, play chess in established markets. Start up firms play poker in the creation of new industries. The new arrangements allow both came to be played and well. But entrepreneurial companies face substantial problems. They require money, help developing business plans and strategies supplier contacts, access to clients, legal advice, international business judgment--the list is very long. And America in the 1980s and 1990s is unique in having built up a business ecology that makes it not easy and straightforward but possible to establish an entrepreneurial start-up. The funds are available to start and further develop a company. Stock options that reward stunning success with stunning wealth create the incentives for talent to leave established firms and start out on their own. The institutions of the new innovation system, of which the venture community is a part, have provided solutions to many of these requirements. Institutions and policy have played major roles in developing this entrepreneurial community. The early venture money paved the way, but the change in the prudent-man rule that allowed institutional money to enter the venture business changed the scale. The scale of investment changed as well. Individual projects could become much larger in scale. But it is not just how large particular projects are, it is how pervasive venture phenomena became. The funds were suddenly available for the venture world to move from niche to centerpiece. Similarly the institution of stock options meant that a cut in pay and a move across country, could suddenly represent an opportunity not a failing, if the reward were the option share of a venture start up. Even large, established firms are devising new ways to resolve the innovators dilemma by adding to their internal strengths ways to encourage and to participate in spin-outs and start-ups and venture funds. Because the breakthrough start up community is has become so well entrenched, and the capacities of entrants to challenge incumbents so developed, established firms have themselves begun to explore ways of creating arms length start ups, corporate start-ups. Those corporate startups, and corporate venture funds are ways to follow the evolving technology product market as well as to raise internal returns. 2. The Production Challenge Unexpectedly and abruptly in the 1980s Japanese consumer durable and electrnics products surged into American markets. Previous import surges in labor intensive products such as shoes, apparel, and low end assembled goods such as toys forced significant industrial reorganization and meant important social dislocations. But they did not challenge the sense that American producers and production methods defined advanced manufacturing and advanced industry. The demonstrated competitive strength of Japanese auto and electronics producers were created by fundamental production innovations that meant that lower cost could also bring higher quality. (cite) The shock of a basic challenge to position in the symbol of the industrial age, the auto, and the symbol of the emerging electronic age, the basic memory chip, was considerable. The lean production system, (cite) as the set of Japanese production innovations came to be called, forced American and European producers to reorganize fundamentally their production and business practices. The production challenge to both Americas high technology and main-line manufacturing firms came when many firms discovered s that the market advantages of many innovations are lost if the innovating firm cannot also be world class producers or have access to world class production. A generation ago it became clear that U.S. comparative advantage in mass production manufacturing could be eroded extremely rapidly. Distinctive innovations in production generated advantage for Japanese firms in both productivity and quality in complex manufacturing ranging from autos and televisions through advanced electronic components. Whatever the origins of these production innovations, it became clearer and clearer, starting in the late 1970s that a group of Japanese manufacturing firms had managed to create the first significant innovation in the organization of manufacturing business since Alfred P. Sloan. Reformulating the production and design process into a lean production system simultaneously eliminated inventories and their costs, permitted constant quality improvement, and reduced cost. In consumer durable products, autos and televisions, that had lots of parts complex innovations seemed to have established an enduring marketplace advantage. The challenge to traditional mass production American manufacturing became an irresistible onslaught and a rout in the mid-1980s, as lower and declining relative real costs in Japanese manufacturing combined with a dollar severely overvalued as a result of mistakes in macroeconomic policy. The result was the hollowing-out large chunks of American manufacturing capacity--and in the process the destruction a lot of valuable human- and firm-specific capital. Nevertheless, American companies have proved remarkably successful at adopting "lean production" innovations, lean production being the collection of strategies and small adjustments that cumulated to give Japanese companies distinct production advantage. The Japanese manufacturers may have taught American producers a painful lesson. But the American producers really learned. By the mid 1990s--with a stronger yen and reconfigured American manufacturing processes--the balance of manufacturing advantage in high-technology industries appeared much more even. Partly the eclipse of the Japanese challenge came about because the leading edge of consumer electronics shifted from broadcast/entertainment--TVs, VCRs, radios and related products--to wireless and computer based products where America-based producers had set standards. And companies such as Hewlett Packard now understood how large the long-run benefits from learning-by-doing were that came from controlling the low end of a market through high-quality volume production even if cost accountants told top managers that low-end margins were low. With the inkjet printer, HP dominated the market by systematically defending the bottom end of the market as it introduced new low cost product. But a larger part of the change came with a finer division of labor. Producers discovered could lower their costs by concentrating on what they did best, and contracting to buy the rest from those with a firm-specific advantage in productivity or a nation-specific factor cost-based comparative advantage. Outsourcing across borders, a cross-national production system, and the emergence of contract manufacturing have been at the heart of the solution of the production dilemma. Better communications have enabled firms to implement this "outsourcing" strategy. The ability to use modern data communications networks to transmit information allows client firms to specify in great detail what, exactly, they want their contractors to do. In a previous generation, with information flow limited to telephone, fax, mail, and air couriers, a lot of tacit knowledge about how the client branch of the organization would use the output and what the client organization's default operating procedures were was necessary in order for work to be distributed. Such tacit knowledge could best be gained through long experience. Hence large multidivisional enterprises that allowed the building within the enterprise of this tacit knowledge were an attractive organizational form. The increase in bandwidth has allowed explicit directions and thick presentation of the overall project to substitute for tacit experience. It has allowed for a much finer division of labor and the creation of what we now call contract manufacturing. Because the world's nations are so highly differentiated in terms of labor skills and labor costs, the greatest benefits to producers from the finer division of labor may well come from the possibility of extending the firms division of labor across nations: cross-national production systems.First came the shift from a market dominated by integrated producers to one in which firms located anywhere in the disintegrated value chain can potentially control the evolution of key standards and in that way define the terms of competition, not just of their particular segment, but critically in final product markets as well. Market power has shifted from the assemblers such as Compaq, Gateway, IBM, or Toshiba, to key producers of components (such as Intel); operating systems (such as Microsoft); applications (such as SAP, Adobe); interfaces (such as Netscape); languages (such as Sun with Java); and to pure product definition companies like Cisco Systems and 3COM. What all of these firms have in common is that, from quite different vantage points in the value chain, they all own key technical specifications that have been accepted as de facto product standards in the market. The radical start up companies had begun to define the direction and fate of the industry.  Second, companies that had found production a weakness began to outsource both component production and assembly. But new highly flexible and adaptable production systems emerged. Cross-National Production Systems (CNPS) is a convenient label to apply to the consequent dis-integration of industrial value chain into constituent functions that can be contracted out to independent producers wherever those companies are located in the global economy. And such independent producers can locate wherever factor costs and local levels of technological development provide a comparative advantage. CNPSs permit and result from an increasingly fine division of labor both between firms and between nations. The networks permit firms to weave together the constituent elements of the value-chain into competitively effective new production systems, while facilitating diverse points of innovation. They are not principally about lower wages as such, nor about access to markets and natural resources--although these objectives often motivated initial investments. Rather they are about the emergence of locations that can deliver different mixes of technology and production at different cost-performance points. Third, and perhaps most important, CNPSs have turned large segments of complex manufacturing into a commodity available in the market. Supply chain management took on a strategic meaning. Fourth, this set the stage finally for companies such as Dell to more tightly link marketing and production, convert themselves into a service business tying design to the customer. More generally this service model set the stage for a web based service orientation. Importantly, as American companies began to invent new models of marketing and producing, they effectively stopped the net loss of manufacturing jobs in their sector. For example, manufacturing jobs in electronics in California grew. As American firms won initial market positions with innovative ideas and then defended positions with imaginative approaches to production and marketing, their total sales grew. Many firms found that maintaining quality and sustaining innovation was much easier if critical productions were kept close at hand. Industry analyses are confirmed by plant level studies. In plants that introduce innovative production technologies, employment grows. In plants employment shrinks and often disappears as production migrates. Winning firms generate jobs; losing firms do not. 3. The Silicon Valley System Silicon Valley has, over the past few years, transformed itself from a vibrant locus of high tech firms, venture capital, and scientific research into a new kind of industrial system that provides solutions to the Innovation dilemma and the production dilemma. Underneath the rather frantic swirl of tactics, strategies and bets start ups, downsizings, outsourcings, entrepreneurship, stock options, mergers, spin-offs and new labels such as virtual corporations and intrapreneurship we can discern the pattern of a new business ecology, or industrial system. The basic resources financial capital and high skilled human capital head for the United States because it has created the best system for transforming those resources into growing businesses that create their niche in the e-conomy. Both social institutions -- such as research universities, venture capitalists, specialized law firms -- and market institutions -- such as an extremely flexible labor market, incentive compensation, financial capital, and ultra high skilled people from literally the entire world -- have come together to form a Silicon Valley system. That system is both bigger and different than a simple sum of its discreet parts. What defines the system is not just the availability of capital or skills or ideas or even all of them but the ability to combine them, in a functioning, focused company. That company is provided with access to all the services necessary for business operations, ranging from experienced business operations management through contact with overseas suppliers, customers and potential partners. Finally the company is back-stopped with an on-call capacity for crisis management. The result has been not merely the creation of a set of very successful companies, but a new industrial innovation/commercialization system. The Silicon Valley system solves the innovation dilemma And the production dilemma. It makes it possible for new companies to do what only technologically and financially rich companies were capable, but too often unable, to do. More and faster growth is the most likely outcome. This new industrial system has become a critical competitive advantage for America, and will remain so, unless we somehow dismantle it, or until it is successfully imitated again and again, elsewhere. C. Assessing the Transformation: What Is at Stake A discrete change is easy to measure: radial tires last more miles than ordinary tires; a 256 MB memory chip stores more information than a 64 MB chip. The implications of a discrete change can be clear and bounded. This is never the case for a fundamental transformation. And the emergence of the E-conomy is a fundamental transformation. Such moments of change are not about more of the same, but are about creating wholly new activities and about changing old activities so that though still recognizable, different measuring rods are needed to gauge them. The stakes in this transformation are large. As with all great industrial transformations, those economies that manage them effectively gain enormously in absolute wealth and material standards of living. Those countries that manage them most effectively gain in relative wealth and power as well. But since we cannot credibly forecast the future, or even reliably measure the rapidly changing present, how are we to understand the emergent E-conomy? In this section we view this problem from four separate perspectives: First, the emergence of a leading sector such as textiles, organic chemicals, or air transport is economically and socially significant as the effects spread widely to alter entire sectors and the dynamics of the economy. The impact of this transformative moment will be different from, not simply greater, than the impact of a more typical wave of innovation. Despite the rapid growth and substantial scale of the information technology industry, it is not just a leading sector. Second, to gain some perspective, we explore briefly historical analogies. Previous waves of innovation in information processing and communications technologies were each of a particular kind. Each had powerful effects. The transformation we are now going through alters each and combine them all in revolutionary ways. Third, we respond to those who say that the information technology revolution cannot be a big deal because it does not show up in aggregate statistics as a visible acceleration in real GDP growth. We believe that those who focus on this "productivity paradox" fail to understand the limitations of our attempts to measure long-run economic growth. We believe that the failure (so far) of the computer revolution to show up strongly in measured real GDP growth does not point to how limited its impacts have been. Instead it carries a strong message about just how widely the benefits from information and communications technology have been spread. But no one should expect a structural transformation to be primarily macroeconomic in its effects; though it may affect their triggers and dynamics, it will not eliminate business cycles of inflation or recession. 1. More than a Leading Sector Though the pace of productivity improvement offered by Moore's Law is exceptional, the automobile during its heroic age of technological advance saw productivity improvements that gave tenfold the car for the money over a generation. Consequently, skeptics ask, why are boosters of information technology so sure that this current transformation is something other than the rise of another big, leading sector? There have, after all, been leading sectors of economic growth for more than two hundred years. Each leading sector grows quickly propelled by rapid increases in productivity and increases in demand as user sectors exploit its possibilities. There are always concordant shifts in the pattern of production and consumption. Why? they ask, can we be so sure that the economic and social impacts of information technology are different and more all-encompassing than the impact of the automobile, or of penicillin, or of television? Those technologies made big economic and social differences. An answer would begin by acknowledging the intractable difficulties of measuring the economic and social impacts of, say, the automobile-- let alone information technology. But it would not stop there. Leading sectors generate rapid productivity growth in a significant but delimited slice of the economy. As an industrial sector experiences a growth spurt, it pulls other supplier and complementary sectors with it, and together they often push up aggregate economic performance. Such leading sectors do not transform the broad range of economic activities, as information technology does, and they do not multiply the possibilities of scientific invention itself. They flare up and slowly diffuse to find a normal place in the normal economy. However, our current wave of innovation is part of a different process. The information revolution resides in the digital representation of information, altering how information is stored, transmitted, and manipulated. This amplifies the power of intelligence. The applications are becoming pervasive, even though the technology is still in its early stages of development. Typically, the first uses of the innovations in a leading sector have been the most valuable ones. Doctors making house calls in early twentieth century America were the first mass purchasers of the automobile. The first antibiotics were used to cure people who would otherwise have died. Subsequent uses speed recovery from more minor illnesses. The first electric lightbulb in a house is an enormous improvement. The fiftieth makes little difference. As goods and services created by standard leading sectors diffuse, the subsequent mass spread of use creates much less value per use than did the initial diffusion to early adopters who found the new capabilities and powers uniquely valuable. When the gate is unlocked, the first instinct is to pick up the $100 bills lying in the street; the $1 bills come later. But things seem to be different now. The metaphor needs to be changed. Each generation of semiconductor technology produces radical new possibilities in computing and communications. More powerful computers open entirely new applications and so does the radical decline in price and physical size. Embedding processing in automobiles or in medical equipment was not possible when computers were the size of a room and the price of a house. When the power of yesterdays supercomputer used principally for science, defense and finance becomes available at the price of a few dollars and the size of a coin, it represents a fundamentally new capability for a new mass market. Pricing that permits mass diffusion operates in economic terms like a fundamentally new product and defines for itself new applications and markets. This kind of mass diffusion is not a process like that of going back over the sidewalk for the third time looking for nickels. It is as if each time we turn around, a new batch of $100 bills has been scattered onto the street and the process starts over again. 2. Historical Analogies To inform our efforts to look forward, we again look back: previously we compared the information technology transformation with the original 19th century industrial revolution. Here we look back at previous revolutions in information technology. Todays information technology transformation is the broadest and deepest of a long series of innovations in information technology. In their day, the broadcast media of radio and television, the communications infrastructures of telegraph and telephone, and the book printed with moveable type provided new information capabilities which had powerful consequences. These clusters of innovations are themselves not superseded, but altered, by todays digital information technology. Information Technology affects all of them broadcast, communications, print -- altering patterns of communication and social interaction. It raises exponentially the abilities to communicate and process information generated by all the previous technological revolutions noted above. First, the 20th century One-to-Many broadcast technologies, radio and television created widely shared information and forms of entertainment. They created distinct channels for centrally created programs to be transmitted to large communities, indeed, thereby, creating very large communities. Digital possibilities both expand the media and transform them. Certainly digital TV makes an infinity of channels possible as well as detailed information about each of them. More profoundly, broadcast becomes easier and cheaper, making Many-to-Many possible. And sophisticated computer data bases and on line video will make customized advertising and distribution possible as well. Second, the systems of communication born in the 19th century, telephone and telegraph, altered business communication. Ultimately, the telephone altered social community as well. Consider the simple telegraph. It could only transmit a few bits of information. But those few bits could be transferred in real time. And they were the highest value bits--telling shippers of prices in destination cities, and allowing headquarters to keep track on a day-to-day basis of at least the key facts about what was going on in other locations. For the first time with the telegraph it was possible for a business organization to keep itself informed and in some control of what was happening in more than one place at once. The telegraph nearly halved the capital requirements of running the railroads of the mid-nineteenth century. With a telegraph in operation a single-tracked railroad can effectively carry goods and passengers in both directions (with the occasional horrific head-on crash). Without a telegraph in operation railroads must be double-tracked. The 15th century gave us the original modern information tool set, moveable type, and hence the book. The book altered how information was stored, diffused and controlled. It is surely no accident that the intellectual flourishing of the humanities and sciences happened in short order after the invention of printing by movable type. The invention of printing via movable type amplified access to the accumulated store of human knowledge. To duplicate a book no longer required three months of work by a highly-skilled--literate--professional. The number of written sources that a reader not immured in a monastery could have access to in a lifetime rose from approximately 300 to approximately 30,000 in less than a century. As intellectual historian Elizabeth Eisenstein argued, printing was necessary for the Renaissance to be a true upward step in knowledge, rather than a transitory flowering of intellectual inquiry that--like all the previous Renaissances, Carolingian, Abbasid and so forth --would soon dissolve and disperse. Does the new mechanism of storing and transmitting information presage such dramatic social evolution? One cannot know? But certainly the very possibility of being able to seriously ask the question suggests that something profound is afoot. Certainly one of the most important of the future transformations opened up by modern computer and communications technologies may be the universal online library and the universal virtual on-line librarian! The possibility of the universal online library means that very soon many of us may have transparent access to virtually all the collective knowledge of humanity. If the answer to a question is known--or even if it isn't known, but a bunch of people have opinions--each of us will be able to get that answer within five minutes. There remains the problems of figuring out which people's opinions are worth paying attention to, and of possessing the background needed to understand the answer. Nevertheless, ignorance on any subject matter will be much harder to maintain in the future than in the past. As everyone who has ever used an Internet search engine knows, current information technologies have not solved the problem of gathering the information relevant to a query and presenting it in an organized and comprehensible fashion. But the arrival of much better information organization and retrieval tools is only a matter of time, software design, and Moore's Law. Each of these three distinct information/communications infra-structures broadcast, communications, and print --entangled with its own economic and social revolutions, is being reformed or challenged by digital information developments. It is not just that DVD movies can now be played on your computer, or that your TV can be a web access device. Rather fundamentally different business models of publication, distribution, sales, financing, advertising, and marketing have developed. It is not just that e-mail, or indeed instant messaging, is an alternative to paper mail or the phone call, but rather that the TCP/IP based networks are a fundamental challenge to the underlying economics of the traditional telephone communications system. It is not just that e-mail attachments replace faxed documents, but that entire systems of supply base management, management of the logistics of production, have emerged. But most powerfully, all three have become inter-tangled. The effects are diverse. Included among them, the lines between private communication and media broadcast become blurred as all the above modes of communication and information retrieval are transformed from separate analog systems to interconnected digital representations. Instead of several parallel essentially analog infrastructures, a single digital infra-structure is emerging with the information embodied in broadcast, communications, and books represented in the same digital form, transmitted over networks with compatible rules. The effects of these changes in traditional information technologies are multiplied when we recognize that information flows not just from people to people, but also from the physical world to people through their senses. Take one case from the world of sensors. The invention of the microscope in the 16th century multiplied sensory power. When little creatures were observed in a drop of water, a new universe opened in which was to be found modern medicine and organic chemistry. Information technology takes the power of sensory devices into wholly domains. Bio-medicine and new materials are just some of the implications. The way to look at the future of information and communications technology is as an order-of-magnitude improvement in all branches of communications-and-information processing, all happening at once. 3. The Productivity Paradox "How come we see the computer revolution everywhere but in the [aggregate] productivity statistics?" Nobel Prize-winning MIT economist Robert Solow asked back in 1987. The fourteen years from the date generally accepted as the beginning of the productivity "slowdown"--the oil crisis year of 1973--to 1987, when Solow wrote, had seen measured output per hour worked in the non-farm business sector of the U.S. economy grow at a pace of only 1.1 percent per year.  By contrast the fourteen years before 1973 had seen measured output per hour worked grow at a pace of 2.8 percent per year. The years after Solow asked his question,computer sales soared,-but productivity performance worsen: between 1987 and 1995 measured output per hour worked for the U.S. non-farm business sector grew at only 0.8 percent per year. a. Partial Answers to the Productivity Paradox: While the computer revolution was invisible at the level of aggregate economic statistics such as GDP, economists and business analysts studying individual companies had no trouble finding that investments in high technology had enormous productivity benefits. MIT economist Erik Brynjolffson found typical rates of return on investments in computers and networks of more than fifty percent per year. In production facilities where there were heavy investments in information technology flourished in the 1980s and 1990s--and their lagging competitors did not. ((, )) Another part of the resolution of this "productivity paradox" comes from Stanford historian of technology Paul David's observation that it takes considerable time for an economy to restructure itself to take full advantage of the potential opened up by a revolutionary technology. David claims that it took forty years, from the 1880s to the 1920s for the American economy to realize the productivity potential of the electric motor. , And yet another part of the resolution of this "productivity paradox" comes from the fact that observers of business behavior and technology look at the leading edge of innovation and implementation. National income accountants see changes reflected in their aggregate data only when what was the leading edge becomes standard practice. Thus, Federal Reserve Board economist Dan Sichel pointed out, in the 1970s and 1980s computers were simply too small a share of total investment and total GDP to strongly imprint aggregate economic growth. But he later added that, what was true in the 1980s is no longer true in the 1990s: now investments in information technology are more than half of total investment. One fourth of all economic growth in the US last year was directly accounted for by growth in information technology producing industries. And in the past four years productivity growth has been accelerating: the productivity slowdown of 1973 to 1995 may well be over, and if so, then information technology is the prime candidate for responsibility for this recent acceleration in American economic growth. b. Problems of Measurement Yet these partial answers do not fully resolve the productivity paradox. The overwhelmingly likely possibility remaining is that there are systematic flaws in the process by which real GDP is estimated--systematic flaws that have led us to overstate inflation and understated true economic growth in recent decades. Widespread awareness of these flaws has been largely the result of the Boskin Commission, which tentatively concluded that true economic growth had been understated in recent decades by somewhere between one and two percent per year. An understatement of annual economic growth by one percentage point is a very big difference. Growth has averaged less than 2% for the past twenty years. The difference raises measured economic growth by half. It is now generally agreed that a number of individual components of productivity growth have been significantly understated. For example, the Bureau of Labor Statistics failed to track the shift in American consumers' purchases from department stores and other traditional retailers to discount storesWal-Mart, CostCo, and so forth. Some 0.2% per year of aggregate productivity growth was missed as a result of this failure. Over the past generation, measured productivity growth in the banking sector has been set at zero because there are no good output measures for banking. The national income accountants--doing the best they can--have been assigning zero productivity growth to sectors where they cannot measure it. In education, health, general government and finance good measures of productivity growth are next to impossible to achieve. Unfortunately, this omission quickly climbs to roughly 40% of the economy. And all this leaves completely to one side the problems of accurately assessing the increase in material well being and productivity that arises from the invention of genuinely new goods and new services such as cellular telephones or CAT scans. Furthermore the aggregate data completely miss increases in productivity that do not generate an immediate revenue stream from final consumers to producers. The enormous benefits of a new drug, say the Salk vaccine for polio, end up in our aggregate statistics as a decline in GNPall those iron lungs, and labor hours are subtracted. A few cents per immunization is added. New forms of medical imaging, and new forms of micro surgery, made possible by developments in IT share some of these national statistical problems. They can detect problems that were invisible to doctors only a few years ago. The procedures, microsurgery, costs less than traditional large incisions. So there is a clear economic benefit, even if escapes measurement deep in the immeasurable health sector. But even if it were to cost the same, there is not doubt that patients would choose microsurgery, because it saves so much pain, suffering and incapacitation. That last big item is by definition, lost. This proposed resolution of the productivity paradox has an important implication. The typical benefits of the computer-and-communications revolutions that have been largely missed in the past few decades by the national income accountants were benefits that showed up as better quality to banking customers, and as lower prices to discount-store shoppers, and as new drugs, diagnostic and surgical procedures. These benefits are widely distributed: every American who has had sonic imaging or knee or surgery, used an ATM or a cell phone,or shopped at Wal Mart or on the Net has benefited--directly--from the coming of the E-conomy. 4. Guarding Against Enthusiastic Confusion Resolving the productivity paradox does not eliminate the business cycle, inflation, or recession. This transformation is about structural change not about macro-economic smoothness or stability. In these circumstances, it is especially important to be clear about what are and are not potential economic consequences of the information technology revolution. Too often the distinction is not understood and muddled prognosis ensues. There are at least two characteristics of the structural transformation that do have positive macro-economic consequences. Potential macro consequence 1: a smaller inventory cycle: One of the principal causes of business cycles over the past hundred years has been the inventory cycle: businesses guess wrong about demand, and find themselves either drastically cutting back production to unwind excess inventories or drastically increasing production to fill goods pipelines that have suddenly emptied. Over the past century the inventory cycle has made production more volatile than demand, and has been a prime cause of cyclical unemployment. The American economy today has an inventory-sales ratio perhaps a third less than it had back in the 1970s. Improvements in materials handling and in distribution systems made possible by new data processing and communications technologies allow organizations to keep capacity utilization high with lower levels of materials in storage, goods in process, and finished goods on trains, trucks, warehouses or store shelves. Just as better computer and communications technologies reduce inventory levels they should reduce the magnitude of inventory cycles as well. Potential macro consequence 2: a better unemployment-inflation tradeoff: The rate of unemployment at which inflation neither rises nor falls but remains constant has many determinants--the costs to businesses of hiring or firing workers, the regressiveness of the tax system, the average skill level of the labor force, demographic composition, and so forth. But one principal cause is the relationship between the real wage demands of the labor force and the rate of aggregate productivity growth. One theory holds that the rate of unemployment at which inflation is constant is when real wage demands do not exceed productivity growth. Information technology is now having a visible impact on aggregate productivity growth of between one half and one percent a year. This raises the inflation ceiling on wage increases. Therefore, the rate of unemployment consistent with constant inflation has fallen: a better inflation-unemployment tradeoff. It is just as important to be clear on non-consequences of the E-conomy, then on what it does not promise. Over-enthusiastic advocates of the idea that there is a "new economy" have confounded a structural transformation with a macro-economic wonder-drug. In the business and popular press you can often be told that the "new economy" is a macro-economic panacea. The business cycle is dead. There will never be another recession. Inflation will never again threaten to move above five percent--or maybe even three percent. Central bankers worried about the return of inflation are hobbling economic growth. Measured labor productivity in the U.S. economy could grow in the future not at one to two percent per year, which we have done for a hundred years, but at four, or even five percent per year. A stock market with the Dow-Jones Industrial Average at 12,000 is, if anything, undervalued: at 40,000 is--or soon will be--the appropriate fundamental value. No one individual makes all of these arguments. But their combination in the popular press greatly distorts the case for and impact of a "new economy." Such distortion is ready-made for a backlash--it is, indeed, the reason that we have tried to avoid calling the ongoing process of structural and technological transformation by the name "new economy, and used a new-coinage, the E-conomy instead. C. The American E-conomy in A Global World The American economic landscape is being transformed as an E-conomy emerges, but our E-conomy will not evolve in isolation., The other advanced industrial economies will soon become E-conomies. They will evolve along different trajectories and at different paces. The developing worlds hopes and possibilities will be reset as well by the electronic linkages that bind production and finance. Hence we need no situate the American developments in an international perspective. Inter-connected digital networks ever more intimately weave together national economies and societies around the world. Communications are faster; the meaning of distance changes. Events in other nations have become much more important parts of our business environment. And actors in the United States have limited direct influence over them. National innovations such as the Japanese lean production system which shocked the American manufacturing establishment, play out ever more quickly on larger stages, regional and global theatres. Certainly the fact of expanding market and political interconnections is not at question.* (*Insert this as pagenote ---Although economic historians debate whether the world today is more "globalized" than it was back on the eve of World War I, there is no doubt that daily business is more extensively organized across national borders than ever before. ) However, their pattern and significance is at issue. The lesson of the past years, we are told often, is that everything is global. Globalization emerged as a code word for the uncertainty of an industrial world in which unanticipated challenges came from unanticipated directions. It is the pace and multi-directionality of the changes that gives the feel of a new era. Choices made abroad influence options and possibilities here. The globalization story, however, has several different versions, each implying different stakes, concerns, and issues. A first version of globalization presses the sense of international forces sweeping past the capacity of nations to respond, channel, or control. Indeed, the Internet does radically increase connections, generating a seemingly placeless, homogeneous, cyberspace that for some is a reality of its own. In this vision, the critical policy challenge is to assure the rapid deployment of the broadest possible network in which all have a stake. The rapid development of a broad network creates great gains for each participant, just as the value of the telephone increases with the number of your possible correspondents who likewise have phones. Certainly America is a leader in the development and deployment of information technology, and has dominated the generation and introduction of the first phases of Internet technology. (Graphs) As other countries develop and deploy this technology, they generate markets and opportunities for American companies, and new possibilities for American consumers. The global information economy and society is a network that crosses borders in a world organized into nation-states. This automatically creates a role for national governments. How fast this networked world evolves depends on how effectively governments, often jealous of their sovereignty, ensure that their separate and distinct economies are effectively connected. That in turn requires, if not common rules, then harmonization, compatible rules that allow the economic networks to operate as a single large global system. From a purely American vantage, openness is a matter not just of open networks, but of open markets for the equipment for these networks and the tools for the network . For example, since the origins and the first uses of much of this technology much of the distinctive Internet network equipment, routers and access equipment has been developed in the United States. Indeed for some, the global spread of information processing and communications technology--the world of the internet--is primarily an American innovation. Thus in this first vision of globalization the principal task is to assure a sufficient agreement on standards to permit the operation of global networks and the continued vigilance to assure markets for equipment, tools, and applications open. This is not simply a matter of taking down, dismantling, existing barriers. Rather, new rules and arrangements, both for the networks but also for services and commerce aided by the networks are being put in place. Those new rules will, unless attention is paid, themselves constitute new barriers and obstacles, sometimes intended to create national advantage and sometimes unintended as a reflection of different purposes and values. In a second vision, the national differences in rules and business practice are not simply inconveniences, unwanted obstacles to a single network, that should simply be wiped away. Rather, those varied rules and structures will generate distinctly national patterns of use and application of the Information Tools. It is not simply a matter of who leads a race toward an information future, but equally which road they are following and which future they are building. Internet access, but as important how distinctly national patterns of use emerge. They are rooted in different social principles about matters such as privacy, consumer protection, and corporate governance. In this second version of the globalization story, several distinct national E-conomies are generated as the new technologies are channeled through quite different societies. For example, the United States, France, Germany, Japan are all rich capitalist market democracies, but each has distinct patterns of corporate governance, labor relations, and social welfare. Indeed, just as new rules for privacy, security, taxation, intellectual property are being built up in each country to allow the new information technology system to operate, a new global market framework for a new global economy, to be glib, new international rules, will be required to reconcile the several national arrangements, to permit the seamless flow of information and the more integrated arrangements for product that is possible. Consequently, as the United States has first mover advantage, it must as it makes policy, ask not only how the rules it makes will affect the development of our own system but also, if they are applied abroad to our firms, whether we can live with those implications. The third view of globalization is that national innovations and developments are played out more quickly on larger stages, regional and global theatres. Globalization not simply wiping away of national boundaries but rather series of often uexpected challenges from sources on global stage. In this innovation based economy position in one phase is no guarantee of leadership in the next. Indeed, the label globalization emerged along with the unexpected Japanese challenge to American manufacturing discussed above. The American comeback was not a matter of slavish imitation. Rather it required understanding the Japanese innovations in production and the strategy advantages that permitted, then creating a distinctive response from American practice. In this global economy the source of the next market and technology disjuncture is by no means obvious. Certainly the US is in a confident position now with leadership in a broad range of innovations and applications of information technology; much as it was before. The great challenge to American manufacturing came from Asia, but the greatest challenge to American networking is coming from Europe. The clear European surge in wireless application and deployment has meant that many American companies are turning to Europe to commercialize and hone their innovations. Two of the world leader in cellular are Scandanavian, certainly a thoroughly unexpected development. Indeed, many believe that while American firms have dominated the personal computer era and the first phases of the Internet revolution, the next network phase will be defined by wireless leadership. The point simply These three versions of globalization in an information era point to the challenges, the stakes and the tasks. Our leadership today depends on: 1) sustaining the transformation at home, 2) assuring the interconnected global network with common or compatible national rules as well as assuring open markets, and 3) bench marking and absorbing in policy and business practice innovation abroad. D. Life in the Information Age It is difficult at best to forecast the longer term course of technological evolution, even harder to foresee how specific applications will unfold, but next to impossible to project exactly how the particular innovations will combine and recombine to alter how we work and live our lives. If, as argued, the amplification of brain power is to this era what the application of energy to machines and transport was to the industrial revolution, if the Internet is to the organization, storage, control of information in this era what moveable type and the book were to life before the Renaissance, then we should expect the changes to be profound.  The precise connections -- cable, DSL, and wireless -- will be a matter of market competition, heavily influenced by policy choices. But the connetions will arrive and will arrive quickly. PAGE 1 October 2, 1999 The Information Technology Revolution  PAGE 38      1A relationship called Moore's Law, after Intel Corporation founder Gordon Moore. He was somewhat overoptimistic in his every twelve months' doubling, now people say the doubling occurs every eighteen months, but largely correct. 2 And___ times the raw processing power of the microprocessors that powered the very first personal computers in the mid-1970s. 3 4(after 3Com founder and ethernet designer Bob Metcalfe). 5 Given this rapid spread of access to the Internet, how large is the Internet economy? How important is it as a support of business? Cisco Systems commissioned a study that concluded that in 1998 the Internet generated $301 billion in economic value added, and was responsible for employing 1.2 million people. The employment gain included 370,000 in the network infrastructure layer that underpins the communications; 230,000 in the tool layer that makes applications possible; 250,000 in the intermediaries and market creators and 480,000 in E-commerce Cisco study 6 (Indeed, the last decade saw the spectacular financial disaster of Federated Department Stores, as promised economies of scale turned out to be administratively unattainable.) 7 Cite to Davidowwhat are the lists of business books we might want to cite. 8 Christiansen 9Wintelism and IPNs have mattered mightily to the outcomes of competition in the electronics industry. They were the principal means by which the US electronics industry recovered from its mid-1980s nadir in competition with Japanese firms to reemerge as the global technical and market leader by the mid-1990s. In the mid-1980s, Japanese firms dominated consumer electronics and semiconductor memory, materials, and equipment, and looked entirely capable of repeating the feat in computers, office systems (e.g., copiers, faxes), and customer telecommunications equipment. There was the danger, widely debated in the industry, that US producers of the latter systems would become dependent, as had their consumer counterparts, on their competitors in Japan for supply of the underlying technologies, processes, and manufacturing capabilities that went into their products. The danger was that such competitive dependence would be, as it was in consumer electronics, a first step toward market exit. That did not happen, however. As described earlier, Wintelism shifted the industrys product-market strategies away from final assembly and toward the distinctive value-added products backed by standards strategies in which American innovations and entrepreneurial companies were strong. Simultaneously, the American IPNs created an alternative supply base in Asiaan alternative to reliance on Japanese competitors for underlying component technologies and manufacturing capabilities. Simultaneously, the networks helped to lower production costs and turnaround times while keeping pace with rapid technological progress. In the bargain, the networks spawned Asian-based direct competitors to Japanese firms in several of their stronghold markets (e.g., memory chips, consumer electronics, and displays). In effect, taken together, Wintelism and IPNs enabled US firms to pioneer a new form of competition in electronics: one that grew out of the distinctively American market environment and was adapted to overseas opportunities. It is, as we have stressed above, a form of competition in which core assets are the intellectual property and know-how associated with setting, maintaining, and continuously evolving a de facto market standarda process that requires perpetual improvements in product features, functionality, performance, costs, and quality. And a core managerial skill is orchestrating theIPN, that is, managing the continuously changing sets of external relationships and melding them with the relatively more stable core of internal activities in order to access relevant technologies, design, develop, and manufacture the products, and get them from product concept to order fulfillment in minimal time. 10 Wintellism Borrus Zysman 11 New York Review of Books 12(remember to include busines week data on retail) 13 Take cites from JZ articlescites to own work and related work 2 cd:;ef+ , ,- .,...2334445566778u:v:x::AAXCfC8ESEFaFqFFF GHGMKNKOK7LkLP$QRRRvTwTMUNUWWW!Z[½B* 6>*B* 5>*B*j0JB*U j0JU5>*B*5>*56B*H*65CJ OJQJ j0JUCJ CJ$F3[ k-6j-"&+. ././0dddd$d3[ k-6j-"&+. ././0p2q2r223333455556v:w:x:~{vspZ[    pr5ir4tI +0p2q2r2233334RI & FdEƀD;&.I & FdEƀD;&.dd$dd 455556v:w:x::K<>@F G GHGJ6L7LkLOPPd!d!ddddhddx::K<>@F G GHGJ6L7LkLOPPP$QRwT}W~WWW!Z6^_bccfff|i}i~ii mnqqq¼~xurolir J#$j ( Ighn ST/ B0!m!n!^- P)PP$QRwT}W~WWW!Z6^_bccfff|i}i~ii mnqdddddd$d[[\\_bbcfhh~iiyyyyPSόGL ?^uvwhifj<@Z\ 5R"#H $ j0JUH*>*5CJj0J56U565>*6B* j0JU6B*B*j0JB*UMqqqqFrsxyyyTO & F d hEƀD;&.ddI & FdEƀD;&.d qqFrsxyyy%~SXЌޕy>?^յ}~uvw{xuolf   j w67Vuv%; HI@ e frav  (y%~SXЌޕy>?^յ}~dddduvwy'hiz3Td3dhdd 1$d1$dddddy'hiz3Td345R %!   @ ph$¼}zwrli FP^ sQ ,  J56xo6  P)345R %!   @ pd d 8 d 8d 8ddddd  @ qL!U"V"W"$$M/S/.6366>V>@@@@@AAAAAAAAAAAAAAABBBBBBB B!B"B$B%BCCCCFFFFGGGGLCJ0JCJB*0J j0JU0JmH0J j0JU j0JU5CJCJj6CJU6CJ CJOJQJ>*6CJ56Ch${(+H/2)6*6<4>5>6>7>ddddd d !d${(+H/2)6*6<4>5>6>7>W>@@@@@@AAAAAAAAAAAAABBBBBBBBB B B B B BBBBBBBBBBBBBBB!B#B$B C CCCCCC  PQRS"{H8E7>W>@@@@@@AAAAAAAAAAA&`#$ddFdEƀ#:&.AAABBBBBBBBB B B B B BBBBBBBBBBBBB$BBB!B#B$B C CCCCCCFFGGJQQQQR5RwRyRzR{R|RxdCFFGGJQQQQR5RwRyRzR{R|R}R~RRRRRRP LLQQQQQQQ5R7RR0J CJOJQJCJj0JCJU |R}R~RRRRRRd/ =!"#$%y5s.gif9 LGIFfogle@ Ny6c.gif9 TGIFfogle8O" [(@(NormalCJmH 0@0 Heading 1$@&5FF Heading 2$<@&56OJPJQJJJ Heading 31$d<@&5OJPJQJ00 Heading 4$@&6BB Heading 5 <@&5OJPJQJBB Heading 6 <@&6CJOJQJ>> Heading 7 <@& CJOJQJ:@: Heading 8$d@&5CJ <A@<Default Paragraph Font<C@<Body Text Indent $FR@FBody Text Indent 2 dhB* 4Z4 Plain Text CJOJQJBS@"BBody Text Indent 3 dh0B@20 Body TextdhB* 0+@B0 Endnote TextCJ6*@Q6Endnote ReferenceH*2@b2 Footnote TextCJ4O4H1$dh@&5CJ$OJQJ Oq H2@&CJ 8&@8Footnote ReferenceH*,@,Header  !2O2H3 dh@&5CJOJQJ&)@& Page Number, @,Footer  !8O8H4 d@&56>*CJOJQJ&O&H5@& 56CJ6P6 Body Text 2 d56.Q@. Body Text 3!5MGMQ"N&      !"#$%&  !"#$%c:e+0NGNW^uUN!#$yz{|}&      !"#$%&  !"#$c %N$!!!!!!!!! ! ! ! !!!!!!!!!!!!!!!!!!! !!!"!#!$"!&F4; CIQ&X_Nfmn{ZxFr4ES/TS> l8"H+37:N0TaJ @ Y v S4DS Y!("# HHUUUX[LR04Pqy37>AB|RRx:q$CRUnknown Brad DeLong HORX!!l,2$yW->K@0(  B S  ?N'^(,-P./////!/"/-/./0/1/9/(2,2-24277777777788!8"8'8(8*8+?-?.?7?8?=?8ABACAFAGASABBB&B'B*BBB&D1DwP{P|P~PQQHUMUNUXUjUqUzUUUUUUUV VVVVbbbbbbhdrdKeQe~eeeenfqfFnInJnSnTnVnooooooooapbpppppppppppjqmqnqrqqqqqqqqqqqrsvsws{s|ssss&t+t_tatbtetftutDuHuIuLu~uuuuuuv'v(v4v5v9vwwwwxx x#x$x+x,x/xKxOxPxRxSxYxxxxxxxxxxxxy%z)z*z-zDLMQRU3'377<x===>#>??LLMMMMNN|N|NN'D+E+.U/T0]011"2,22244g6k6T7]7u99+;;;z>>+??8A{ABZB~BBB CCCFFFGGGG6HM MpMyMNNjOwPPQSQQQWRfR3S>SATCTUUUU VVx\ ^bc|d~d[e~ee l!lFnoojqq\srsttuuivvv x-yyyy%z+4`d`t͎ڎhyWXX̳س~½<B*6dqP^-5z2B(4!rHP`  \g%1mXaabGI !+'4'l(t()-/-a/1557769:9Z;a;|;<<=>#>>>????CCWLM|N|NNN John ZysmanD:\technet\Draft3\JZEdits.doc John Zysman0C:\WINDOWS\TEMP\AutoRecovery save of JZEdits.asd John ZysmanD:\technet\Draft3\JZEdits.doc John Zysman)D:\technet\Draft3\SectionIIEditsNov11.doc Stephen CohenC:\fall 99\IIEditsNov11,14.doc Stephen Cohen0C:\TEMP\AutoRecovery save of IIEditsNov11,14.asd Stephen Cohen0C:\TEMP\AutoRecovery save of IIEditsNov11,14.asd Stephen Cohen0C:\TEMP\AutoRecovery save of IIEditsNov11,14.asd Stephen Cohen0C:\TEMP\AutoRecovery save of IIEditsNov11,14.asd Brad DeLong&Macintosh_HD:Desktop Folder:Old 1 & 2A  }XH.& &)>DdaLdfMc8P -W?>[ I+]x|zF hhOJQJo(88o(.hho(.hhCJo(.o(.hho(.\o(.0o(.0o(.88o(. daLI+]}-Wc8P>[)>.& z  @.. ..5NP@GTimes New Roman5Symbol3 Arial;Helveticai"Helvetica (PCL6)Times New RomanABook Antiqua3Times? Courier New"1hE;&E;& #:&-O$-$$0d@%zIntroduction 2nd crack Steve Cohen Brad DeLongs FRAMEFSC.HTM91hTEXTmdosh Oh+'0  0 < H T`hpx'Introduction 2nd crack8ntr Steve CohentevNormalo Brad DeLong2adMicrosoft Word 8.0a@F#@`j@&<-5@&<-5$-Oe magnitude of the divergence, none of these points are new or would come as a surprise to an economic historian. Kuznets (1966, 1971) pointed out that the very low levels of output obs erved in the now industrialized countries historically and currently poor countries implies that their long-term growth rates must be quite low relative to modern growth. Moreover, models of economic growth based on stages, such as \ldblquote take off \rdblquote are based on the experience of the industrial revolution in which some leading countries clearly accelerated their rate of growth vis a vis the lagging countries. Moreover, even those arguing the case for conditional convergence acknowledge the moderate absolute dive rgence present in the recent data (Barro and Sala-I-Martin, 1995, Mankiw, Romer, Weil, 1992).}}}{\fs24 . \par \tab Second, absolute divergence is compatible with conditional convergence. A tendency for more rapid growth rates with lower initial income, conditional on oth er variables, is not sufficient for absolute convergence if the conditioning variables (such as physical and human capital investment rates) are themselves are functions of income. I use current data on the inverse relationship between investment rates a nd levels of income to show that even with relatively strong conditional convergence the data predict continued absolute divergence. \par \tab Third, any attempted model of growth over the truly long term must be able to rationalize a number of stylized facts abou t long run growth rates that are direct and indirect implications of the historically observed combination of absolute divergence and conditional convergence. \par \par }{\fs24\ul I) Massive divergence in per capita income since 1870}{\fs24 \par \tab The discussion of convergence and long-term growth has always been plagued by the fact that the sample of countries for which historical economic data exists, and has been assembled into convenient form, is completely biased}{\up6 \chftn {\footnote \pard\plain \qj\widctlpar\adjustright \fs20\cgrid {\up6 \chftn }{\fs24 This point was made early on in the discussion of convergence in the interchange between Baumol (1986) and DeLong (1988).}}}{\fs24 . Countries that are rich now are more likely to have devoted the resources to creating a historical time series on GDP and countries that were historically rich are more likely to have the sources that allow such estimates}{\up6 \chftn {\footnote \pard\plain \qj\widctlpar\adjustright \fs20\cgrid {\up6 \chftn }{\fs24 Just knowing the way the data is generated is enough to guess that if we took the data for the relatively reich both then and now European countries and their off-shoots (the U.S., Canada, Australia) we would find they h ave all had roughly the same growth rate, as all countries that were rich a long time ago and have stayed rich grew at about the same pace. Evans (1994) tests the hypothesis of the equality of growth rates among 13 European and offshoot countries and is we are unable to reject it. Countries that grew much faster (e.g. Japan) are now rich but were poor, countries that grew much slower (e.g. Argentina) were rich then but are now poor.}}}{\fs24 . However, the lack of historical data on incomes in the currently poor countries need not blind us to reality. Actual data on GDP for all countries is not necessary to know that there has been massive divergence in economic outcomes since the beginning of modern economic growth around 1870}{\up6 \chftn {\footnote \pard\plain \qj\widctlpar\adjustright \fs20\cgrid {\up6 \chftn }{\fs24 The year 1870 is chosen for th ՜.+,D՜.+,H hp  'BRIEuc-@: Introduction 2nd crack Title 6> _PID_GUID'AN{45B00BAA-5AFC-11D3-BA3B-080009C1632E}lly, Rostow (1990) dates the b eginning of the \ldblquote drive to technological maturity\rdblquote of the USA, France and Germany around that date (having begun earlier in Great Britain).}}}{\fs24 . Divergence is obvious from three facts we do know. \par \tab One, the leading industrial countries have had relatively rapid and remarkably similar growth in output per person since 1870. The USA, currently the richest country, has grown at roughly 1.8 percent per annum since 1870}{\up6 \chftn {\footnote \pard\plain \qj\widctlpar\adjustright \fs20\cgrid {\up6 \chftn }{\fs24 In Maddison (1991) US GDP per capita is estimated at $18,329 in 1989 and $2,181 in 1870 (both expressed in 1985 US relative prices). The implied per annum growth rate is 1.78 percent.}}}{\fs24 . Over the entire period most other currently industrialized countries growth rates are remarkably similar to that of the USA (table 1)}{\up6 \chftn {\footnote \pard\plain \qj\widctlpar\adjustright \fs20\cgrid {\up6 \chftn }{\fs24 The similarity over the long run masks large variations, especially that most of these countries grew more slowly than the USA between 1807-1950 and more since, especially in the 1950-73 period (Maddison, 1991).}}}{\fs24 . Hence using any of their historical growth rates as representative of \ldblquote rich\rdblquote country growth would not alter substantially the divergence calculations reported below. These growth rates imply that per capita income in the leading countries has increased roughly eight fold since 1870 (almost exactly in the US ( 8.14), obviously less so in Great Britain (4.8) and (even more) obviously more so in Japan (23.9)). \par }\pard \widctlpar\adjustright {\fs24 \par }\trowd \trgaph120\trbrdrt\brdrs\brdrw10 \trbrdrl\brdrs\brdrw10 \trbrdrb\brdrs\brdrw10 \trbrdrr\brdrs\brdrw10 \trbrdrh\brdrs\brdrw10 \trbrdrv\brdrs\brdrw10 \clvertalt\clbrdrt\brdrs\brdrw10 \clbrdrl\brdrs\brdrw10 \clbrdrb\brdrs\brdrw10 \clbrdrr \brdrs\brdrw10 \cltxlrtb \cellx9360\pard \widctlpar\intbl\adjustright {\fs24 Table 1:\tab Average per annum growth rates of GDP per capita 1870 to 1989 in the presently high income industrialized countries.\cell }\pard \widctlpar\intbl\adjustright {\row }\trowd \trgaph120\trbrdrt\brdrs\brdrw10 \trbrdrl\brdrs\brdrw10 \trbrdrb\brdrs\brdrw10 \trbrdrr\brdrs\brdrw10 \trbrdrh\brdrs\brdrw10 \trbrdrv\brdrs\brdrw10 \clvertalt\clbrdrt\brdrs\brdrw10 \clbrdrl\brdrs\brdrw10 \clbrdrb\brdrs\brdrw10 \clbrdrr \brdrs\brdrw10 \cltxlrtb \cellx4680\clvertalt\clbrdrt\brdrs\brdrw10 \clbrdrl\brdrs\brdrw10 \clbrdrb\brdrs\brdrw10 \clbrdrr\brdrs\brdrw10 \cltxlrtb \cellx9360\pard \widctlpar\intbl\adjustright {\fs24 Country\cell Growth rate\cell }\pard \widctlpar\intbl\adjustright {\row }\pard \widctlpar\intbl\adjustright {\fs24 USA\cell 1.78\cell }\pard \widctlpar\intbl\adjustright {\row }\trowd \trgaph120\trbrdrt\brdrs\brdrw10 \trbrdrl\brdrs\brdrw10 \trbrdrb\brdrs\brdrw10 \trbrdrr\brdrs\brdrw10 \trbrdrh\brdrs\brdrw10 \trbrdrv\brdrs\brdrw10 \clvertalt\clbrdrt\brdrs\brdrw10 \clbrdrl\brdrs\brdrw10 \clbrdrb\brdrs\brdrw10 \clbrdrr\brdrs\brdrw10 \cltxlrtb \cellx9360\pard \widctlpar\intbl\adjustright {\fs24 \tab Countries with similar growth rates (within .2)\cell }\pard \widctlpar\intbl\adjustright {\row }\trowd \trgaph120\trbrdrt\brdrs\brdrw10 \trbrdrl\brdrs\brdrw10 \trbrdrb\brdrs\brdrw10 \trbrdrr\brdrs\brdrw10 \trbrdrh\brdrs\brdrw10 \trbrdrv\brdrs\brdrw10 \clvertalt\clbrdrt\brdrs\brdrw10 \clbrdrl\brdrs\brdrw10 \clbrdrb\brdrs\brdrw10 \clbrdrr\brdrs\brdrw10 \cltxlrtb \cellx4680\clvertalt\clbrdrt\brdrs\brdrw10 \clbrdrl\brdrs\brdrw10 \clbrdrb\  !"#$%&'()*+,-./0123456789:;<=>?@ABCDEFGHIJKLMNOPQRSTUVWXYZ[\]^_`abcdefghijklmnopqrstuvwxyz{|}~Root Entry F241Tableb+WordDocumentSummaryInformationionȽD]qh]sV(Wfʡn l- g0Tx$f DocumentSummaryInformationion8$Vq^hl ;fg6 lCompObjObju֦ uEuʭɨЮY`8| (XObjectPoolool.FvXhXhWrXhWmq2424P4l0t  FMicrosoft Word DocumentNB6WWord.Document.8pard \widctlpar\intbl\adjustright {\fs24 Sweden\cell 2.32\cell }\pard \widctlpar\intbl\adjustright {\row }\pard \widctlpar\intbl\adjustright {\fs24 Japan\cell 2.70\cell }\pard \widctlpar\intbl\adjustright {\row }\trowd \trgaph120\trbrdrt\brdrs\brdrw10 \trbrdrl\brdrs\brdrw10 \trbrdrb\brdrs\brdrw10 \trbrdrr\brdrs\brdrw10 \trbrdrh\brdrs\brdrw10 \trbrdrv\brdrs\brdrw10 \clvertalt\clbrdrt\brdrs\brdrw10 \clbrdrl\brdrs\brdrw10