Investor Says Government Must Act Against Internet’s Excessive Connectivity

A veteran Silicon Valley venture capitalist says the Internet is turning nuisances into serious, persistent problems, and problems into crises, from spam to economic disasters. In a book to be published Tuesday, Bill Davidow says the availability and use of enormous amounts of information all the time, and almost instantly and worldwide, creates a snowball effect that can quickly outrun the ability of markets and governments to respond adequately.

Davidow uses the 2008 flash meltdown of Iceland’s financial system as a case study. An unspecified Wall Street banker told him that the world crisis that year “never would have happened without the Internet,” the author said in an interview. “It wouldn’t have been as big or virulent or happened as fast."

The theory applies as new controversies flare up, according to Davidow. “The State Department did not understand that the Internet concentrated and magnified the risks” of information disclosures such as those by WikiLeaks, he said in an excerpt that he provided to us from an op-ed submission to The New York Times. The key to siphoning off enormous amounts of sensitive U.S. data “was SIPRNet -- the Secret Internet Protocol Router Network,” which moved “information scattered on different physical systems into a single place in virtual space,” Davidow said. “This concentrated the risk as often happens in overconnected situations. Once somebody penetrated the perimeter, he had access to it all."

Speed bumps are needed to moderate the compounding effect of what Davidow, trained as an engineer, calls in Overconnected: The Promise and Threat of the Internet the ill effects of “positive feedback.” He said the expression applies to death spirals as well as hockey-stick successes. The solution, in engineering terms, is reducing the “gain” -- the increase in signal strength during transmission -- in the system, Davidow said. That requires additional government intervention in the operation of the Internet and crucial institutions intertwined with it, Davidow said. This may seem heresy to some in a Silicon Valley culture that has incubated a philosophy of libertarianism and technological utopianism along with the Yahoos and eBays, Googles and Facebooks, he acknowledged. “Technology carried to an extreme causes problems."

Overconnected’s promoters are angling for attention in the new year. The book has endorsement blurbs from luminaries such as John Doerr, widely recognized as the leading high-tech venture capitalist; Geoffrey Moore, the author of the classic Crossing the Chasm about innovation’s challenge to businesses; and former Sen. Bill Bradley, D-N.J. The work got a substantial, favorable mention in the Harvard Business Review, and national publicity was set for a running start with interviews, including at NPR, for distribution in January, Davidow and his PR firm said. In and near the Valley, Davidow -- a Hewlett-Packard executive before becoming a senior vice president of Intel and a founding partner of Mohr Davidow Ventures -- is scheduled to make featured appearances at both the Commonwealth Club public affairs forum in San Francisco and the Churchill Club technology-business forum in Google’s hometown, Mountain View. He’s scheduled to go back to San Francisco to deliver a keynote at a private investors conference in February.

Davidow insisted that he hasn’t become a Luddite or a statist. He said he enjoys the benefits of online technologies in his daily life and appreciates the Internet’s contributions to business and the broader society. Davidow said he arrived at his evangelism for increased government regulation only reluctantly and many of his solutions are surgically targeted to deal effectively with problems while going largely unnoticed otherwise. These include a charge of a penny or two on each e-mail message as a deterrent to spam, virus transmission and scams, and a tax of as little as one-twentieth of a percent on securities trades to deal with the volatility created by high-volume activity, he said.

Davidow said he’s no expert on net neutrality but knows enough not to be a fan of strict nondiscrimination rules. The overconnectivity of the Internet ensures “that anything that is mispriced will be exploited to the extreme,” he said. If Google and Netflix “do not have to pay for overuse, the bill will be passed onto the network providers who will charge it to the customers.” Davidow suggested a structural separation “between those who supply the content and those who carry it” and turning “the physical network into a common carrier.” But he observed that the network effects of the online world create successive monopolies, from Microsoft and Intel to Google and Facebook.

Privacy problems illustrate a need for rules against “making some connections … in the first place,” Davidow said. The big 2005 breach of consumer information at ChoicePoint shows the danger of accumulations of huge amounts of sensitive data sloshing around the globe, he said. Davidow said he still doesn’t lean toward government regulation in general. “I believe that is something you do as a last resort.” But he “can guarantee” that regarding privacy, the solution is “not going to be accomplished by the industry,” he said. “They've clearly indicated that.”