Negroponte: Internet could make cash obsolete

May 22, 1998 Web posted at 4:02 PM EDT by Stannie Holt

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(IDG) SAN DIEGO, California-- Internet commerce is a gathering tidal wave that could totally reshape the world economy within a few years, according to technology pundit Nicholas Negroponte, director of the Media Lab at the Massachusetts Institute of Technology, in Boston.

Not only could smart cards replace cash, even for transactions as small as a pack of gum, computers could turn a handshake into a financial transaction, save books but kill bookstores, and spare you from ever wondering if you've got milk, Negroponte said.

Negroponte, giving the keynote address Sunday night at the Oracle Applications User Group convention here, scoffed at U.S. government predictions that I-commerce will reach $327 billion per year worldwide by the year 2002. Cisco Systems alone is already doing $3.5 billion per year, he pointed out.

"I think $1 trillion a year by 2000 is modest," Negroponte predicted.

But before I-commerce becomes that extensive, consumers must overcome two barriers, security and payment systems, Negroponte said.

Security is mostly a regulatory issue, since very strong encryption technology already exists, Negroponte said. Regulations banning the strongest encryption from being used in certain countries are "unbelievably silly, because terrorists and drug dealers aren't waiting for FedEx to deliver a disk to Libya or Colombia."

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So, Negroponte reasoned, honest citizens might as well get the same kind of protection, and buy, sell, and make donations as anonymously online as they can with cash.

Encryption could also help crack the other barrier -- to make transactions as fast and cheap with credit as with cash -- so that it could become cost-effective to bill a nickel or dime electronically, Negroponte said.

Microcash transactions "will change consumer behavior enormously," Negroponte said.

For one thing, readers might be more willing to pay for content if they only had to pay a few cents for each article that interested them. Shopping for groceries and other necessities via the Web might also become more common.

I-commerce is already flexing its muscles, Negroponte said. On one hand, it is giving consumers more power by broadening their choices and letting them band together, for example, by pooling car purchases to get a fleet discount.

On the other hand, it's killing off such traditional businesses as car dealerships, department stores, and bookstores, turning them into mere showrooms to tempt online shoppers, Negroponte said. And it could wipe out jobs for all kinds of middlemen in the retail and credit industries, such as accountants, data processors, and store clerks.

The future of I-commerce will depend strongly on enterprise IT users such as the Oracle Applications convention-goers, Negroponte said. In the future, whether they deal in information or physical goods, "you'd be plumb crazy to put an invoice in the mail and put on a 32-cent stamp, not to mention a 33-cent stamp," he said.

In a few years, even "walking around money" could become purely virtual, Negroponte said. The Media Lab at MIT is working on weaving computer circuits into clothing, using the body's own electrical currents to transmit information. Instead of getting money from an automated teller machine by sticking a card in and getting printed pieces of paper out, you could just press your thumbprint to the screen to get the money downloaded to a computer in your shoe. Conceivably, you could even transfer money through flesh-to-flesh contact.

"A colleague of mine said it made him think twice about kissing his wife goodbye in the morning," Negroponte quipped.

Negroponte's predictions were provocative for many in the audience.

"Well, I believe accountants will still exist," said accountant Sue Spriggs of construction services company Landis & Staefa, in Buffalo Grove, Ill. Otherwise, "it was a wonderful presentation," she added.

"He was really insightful," said Tony Vecchiet, a database administrator at Xilinx, in San Jose, Calif. "What I thought was a long way off in the future ... a toy, something nobody takes seriously... he made me think is not so far off."

"I hope he's wrong," said consultant Peter Plackowski in San Francisco. "Would you want to replace the bazaar of Istanbul, so to speak, with staring at a screen? We'd all be in the house and the drug dealers would be running the streets."

On the other hand, some of Negroponte's predictions seem useful, such as being able to make more kinds of payments electronically, Plackowski added.

"I found it kind of depressing, actually," said Anne Hartheimer, a database administrator at metals manufacturer Oremet-Wah Chang, in Albany, Ore. "It just seemed like there wasn't any connection between human values ... and gadgets. I think there's a lot more to life than computers."

Related CNN Interactive stories:

• Kiss and tell: Learning e-commerce from the matchmakers
• CNN IDG.net - Government restrictions on encryption pose obstacles for Internet security
• U.S. issues new rules on encryption exports - Dec. 27, 1996
• Tomorrow/Today: Even experts still puzzling out how-to's of Net business - March 27, 1998

Related stories at IDG.net

• Digital cash gets real: Good-bye to free Web content? (PC World)
• Biometrics, e-cash to gain ground in '98, Gartner says (Infoworld)
• Look out, here comes pay-per-click (Infoworld)
• Internet banking: Europeans see pay-offs (Infoworld)
• Vendors tailor smart cards for myriad uses (Infoworld)

Related sites:

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• M.I.T. Media Lab
• Internet Chamber of Commerce

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