Learning from the Past to Secure the Future
“Prediction is very difficult, especially when it’s about the future.”
-- Usually attributed to Nobel laureate Niels Bohr
People love to predict the future, to see around the corner to the next idea, event or fad. But given the rapid pace of innovation, “what comes next” has taken on different shapes and forms than we ever could have imagined. This accelerated technological innovation is not always welcomed and, in fact, as it applies to blockchain technology and cryptoassets, has received resistance and dismissal. Opposition to new technology, however, is not a phenomenon unique to crypto.
A brief historical look-back at technology we now take for granted - the car, the lightbulb, the telephone (see below for more on this) - underscores that “predicting the future” should not be an exercise in choosing “winners” and “losers”. This is especially true when it comes to creating regulation for such new technology. All of these innovations, considered “novel” at the time they were introduced, faced criticisms similar to what we see today for crypto—namely, that such innovations had “no fundamental value”. Thus, policymakers crafting laws for bleeding edge technology should aim to create regulation that is evergreen, and grows with the technology, regardless of current sentiments, while also protecting end users on the path to the future.
A Theory of Technology Adoption
Studies of technological acceptance and usage consistently demonstrate incertitude and mistrust for new innovation. Articles (including a Wikipedia page), blog posts, and books have generalized these trends into a theory of the “technology adoption lifecycle,” which has three phases:
- The early market phase: when innovators create a new product or service and bring it to market. Only “early adopters”, those who want to try “the next new thing”, use and accept the technology.
- The “chasm” phase: when resistors significantly object to the new technology and try to prevent it from proliferating further. As discussed below, these objections have historically taken the form of arguments about a “lack of value” (sound familiar?) or the harm such technology could cause. During this difficult period, the “chasm” may feel so expansive that it appears “uncrossable”; however, this stage serves as a bridge between the two market phases.
- The mainstream market phase: when the number of adopters increases substantially, with resistors becoming users, and the new technology becoming an everyday product or service.
These case studies of the car, the lightbulb, the car review these “innovations” through the technology adoption lifecycle framework at their time. In particular, they focus on public and political sentiment during the “chasm” stage to underscore the need for thoughtful, measured policy decisions as it applies to blockchain-based technology which itself is in the “chasm” stage.
Early market. Although automobiles originated in Germany and France during the late 1800s, the manufacturing innovations introduced by Henry Ford quickly made America a dominant player in the industry during the first half of the 20th century. Ford revolutionized the industry with his mass-production techniques - such as assembly lines and conveyor belts - that became the industry standard and facilitated the widespread adoption of automobiles by making them affordable for the average person.
The chasm. Some intensely questioned the utility and safety and utility of the car.
- "[Cars] will never be sufficiently low to make them as widely popular as were bicycles.” - The New York Times, 1902 (Curiously, bikes experienced a similar rejection several years prior with The Washington Post declaring the activity “a passing fancy,” and the New York Sun calling it “the death of the pastime.”)
- “[T]he ordinary ‘horseless carriage’ is at present a luxury for the wealthy; and although its price will probably fall in the future, it will never, of course, come into as common use as the bicycle.” - Literary Digest, 1899
- “[T]he horse is here to stay, but the automobile is only a novelty – a fad.” - President of the Michigan Savings Bank warning Henry Ford's lawyer, Horace Rackham, not to invest in the Ford Motor Company
💡 Lightbulbs & Electricity
Early market. In 1879, Thomas Edison was granted a patent for the first electric light bulb that was commercially viable. Edison's innovative electric lighting systems posed a serious threat to the traditional gas lighting industry and shook up the established order by introducing people to a novel and unprecedented source of energy. Samuel Insull built on this innovation by creating a new business model around electricity - the power grid - which allowed him to make electricity more affordable and accessible.
The chasm. Electricity companies still had to convince citizens that electricity could provide them with value.
- “How can he [Thomas Edison] call it [the lightbulb] a wonderful success when everyone acquainted with the subject will recognize it as a conspicuous failure?” - Professor Henry Morton of the Stevens Institute of Technology, 1879
- "[The lightbulb is] suitable for our transatlantic colleagues... but not deserving of the attention of practical or scientific individuals." - A British Parliament Committee, 1878
- “Fooling around with alternating current is just a waste of time. Nobody will use it, ever.” - Edison speaking about a rival electricity invention by Nikola Tesla that has become mainstream today, 1889
Early market. Alexander Graham Bell, considered the "Father of the telephone," is credited with developing the first functional model of the telephone and was granted the first patent for the invention in 1876. The construction of the telephone line and the creation of the switchboard and telephone exchange occurred during the 1870s.
The chasm. Many misunderstood the telephone’s purpose and thought the invention would have no real use – i.e., ultimately had no fundamental value.
- “That’s an amazing invention, but who would ever want to use one of them?” - President Rutherford B. Hayes to Alexander Graham Bell, 1876
- “There are conditions in America which necessitate the use of such instruments more than here. Here we have a superabundance of messengers, errand boys, and things of that kind… The absence of servants has compelled Americans to adopt communication systems.” - William Preece, inventor and chief engineer of the British Post Office, 1879
- “[These] fanciful predictions [speaking about the benefits of the telephone], while they sound rosy, are based on wild-eyed imagination and lack of understanding of the technical and economic facts of the situation, and a posture of ignoring the obvious limitations of his device, which is hardly more than a toy … This device is inherently of no use to us.” - William Orton, President of Western Union, after Bell tried to sell his telecoms business, 1876
The “mainstream market” phase is well-known for all three of these innovations today: notwithstanding the resistance, criticism and dismissal during the “chasm” stage, modern society relies on the car, lightbulb, and telephone, as well as the technological innovations that have grown from such inventions (many of which experienced their own “chasm” stages, e.g., as recently as 2007, iPhones experienced great resistance when, for example, Microsoft’s then-CEO, Steve Ballmer said, “There’s no chance that the iPhone is going to get any significant market share.”).
There is value to the “chasm” stage: it evinces thought-provoking questions about how to build additional, even more-useful applications from the technology, and inspires developers to build such applications to make the technology easier and safer to use.
But the case studies above should caution against creating regulation that shuts down blockchain technology (explicitly or implicitly) or otherwise strips it of its inherent value. Rather, policy, as always, focuses on protecting users and ensuring market integrity, and, when it comes to cutting edge technology, must also ensure laws are evergreen and meet the realities of the technology. Policy is not meant to predict the future, it is meant to protect us on our way to the future.
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