ineteen years ago, in the July, 1945, issue of the Atlantic, Vannevar Bushpredicted that the "advanced arithmetical machines of the future" would be (a)electrical in nature, (b) far more versa
tile than accounting machines, (c)readily adapted for a wide variety of operations, (d) controlled byinstructions, (e) exceedingly fast in complex computation, and (f) capable ofrecording results in reusable form.Tens of thousands of computers have bee
n perfected and successfully applied inthe past two decades, and each one attests to the remarkable clarity of Dr.Bush's vision. Few of his readers in 1945 could have imagined the major stridesthat were about to be made in computer technology. Dr. Bush hi
mself was onlyextrapolating from the technology of the time in these particular predictions.He did not assume the concept of internally stored programming, described byJohn von Neumann the following year; nor did he bank on the perfection ofelectronic log
ic, magnetic cores, and transistors. Yet, in a functional sense,his predictions scored a virtual bull's-eye.
Only a decade ago, in 1954, a UNIVAC was delivered to the General ElectricCompany in Louisville for business use. Up to that point, computers ha
d beenapplied almost exclusively to scientific calculation. Quickly, payroll,inventory, and customer accounting became fair game. Today there are probablymore than twenty thousand computers in use within the United States, andcorrespondingly large numbers
are installed in many other countries around theworld. Computers run at speeds of up to millions of operations per second, anddo so with negligible rates of error. Their linguistic abilities have beenbroadened impressively through development of elaborat
e programming systems,and their memories can be virtually unlimited in size over a range of times ofrecall.
By achieving reliability along with capability, computers have won broad
commercial acceptance. But what of the future? What can we expect as computers
enter their third decade? Some conservatives have been predicting a
deceleration of computer growth for at least five years now. Is there a plateau
just over the horizon?
Not if a recent turn in computer research is as significant as many of us
believe it to be. General economic and political conditions permitting, this
work will nourish a new wave of computer expansion. Computing services and
establishments will begin to spread throughout every sector of American life,
reaching into homes, offices, classrooms, laboratories, factories, and
businesses of all kinds.
ANALOGY WITH ELECTRICITY
The computing machine is fundamentally an extremely useful device. The service
it provides has a kind of universality and generality not unlike that afforded
by electric power. Electricity can be harnessed for any of a wide variety of
jobs: running machinery, exercising control, transmitting information,
producing sound, heat, and light. Symbolic computation can be applied to an
equally broad range of tasks: routine numerical calculations, manipulation of
textual data, automatic control of instrumentation, simulation of dynamic
processes, statistical analyses, problem solving, game playing, information
storage, retrieval, and display.
Within reasonable limits the user is assured that electrical energy will always
be available to the extent required. Power failures and overloading are
relatively infrequent. Ten years ago an analogous statement for computation
would have been a misrepresentation. Error rates in the computer were
precariously high, and service was uncertain by any standards. Today, however,
improved components have all but eliminated reliability as a consideration in
the use of computers. Overloading is still a problem, but this is mostly a
consequence of burgeoning demand.
Where, then, does the analogy with electrical energy break down? Why has
automatic computation not pervaded industry as electricity has done? Is it
simply a matter of time, or do the differences between the two, by their
nature, enforce a permanent disparity?
The first difference that comes to mind is cost. Three pennies keep a large
electric light bulb burning all night, and they buy about thirty thousand
additions or subtractions or other elementary computations at current
large-computer rates (omitting overhead, communication, and programming
expense). This is enough computation to balance a large number of monthly bank
statements, and at face value seems to compare very favorably with the
equivalent amount of electricity. Furthermore, the cost of computation has been
decreasing steadily, whereas electric rates have been stable for over twenty
years now.
But a complication arises when we try to distribute small chunks of computation
widely on a regular basis. The electric utility finds it easy to accommodate
numerous customers consuming as little as I kilowatt-hour or I watt-hour at a
time. It does not even have to charge a premium for the privilege of using
small chunks if the total monthly consumption of a customer is large enough.
Not so for computation, as indicated by present experiments with computer
systems that share their time among a number of concurrent demands. These
experiments, while demonstrating the feasibility of making a conventional
computer accessible to many small remote users simultaneously, also demonstrate
the sizable hidden cost of such service. Overhead in supervising user programs,
as well as in shuffling them around memory, can increase actual costs to
several times the figure implied by a naive analysis based on more conventional
computer techniques. But today's computers were not built to be time-shared.
With a new generation of computers, overhead of the kind mentioned may shrink
to relative insignificance.
Electrical power is immediately available as soon as it is requested, no matter
how much power (up to predefined limits) is being drawn. In the time-sharing
experiments, on the other hand, some of the longer requests for computation are
delayed excessively during periods of heavy demand. Certain classes of use can
tolerate delay more than others, so it is not mandatory to eliminate it
completely. Since the delay is caused largely by the heavy (free) loading on
present time-shared systems, it is reasonable to expect alleviation of the
problem, at least in the business world, not only from better computer systems
but also from the institution of price schedules based on amount and type of
use.
The analogy of automatic computation with electrical power is subject to three
major qualifications. First, to get electricity, we simply reach over and flip
on a switch or insert a plug into an outlet; computers, by contrast, seem
complex, forbidding, and at a distance from most potential users, both in space
and time. This condition has been improving, but much work remains to be
done.
Second, a wide variety of appliances, bulbs, machinery, and miscellaneous
electrical equipment has been invented and perfected to harness electrical
power for its various uses; each piece of equipment has its function built
right into it, and each couples to its power supply in more or less the same
way. But the general-purpose computer performs almost its entire repertoire all
by itself, once it has been programmed appropriately, and employs its terminal
equipment primarily for the entrance, exit, or temporary storage of
information, and for little else. The difference will diminish as more
special-purpose terminals are designed for use in conjunction with large
memories and fast processors. Whether it will ever disappear entirely is
doubtful, but it is worth noting that the development of most electrical
appliances came well after the realization of electrical distribution
equipment.
Third, electricity is a relatively homogeneous product, produced centrally and
transmitted without interruption and without intelligent guidance by the
consumer. Computation, on the other hand, is dynamic in form, and its course is
typically guided by action of the user. The two-way dialogue and information
feedback characteristic of on-line computation is totally absent from the
electrical side of the analogy.
These three qualifications by no means kill the dream of large utilities built
around the service of computing systems, but they do raise interesting
uncertainty about how this dream will materialize.
THE INFORMATION UTILITY
The concept of an information-processing utility poses many questions. Will the
role of information utilities be sufficiently extensive and cohesive to create
a whole new industry? If so, will this industry consist of a single integrated
utility, like American Telephone and Telegraph, or will there be numerous
individual utilities, like Consolidated Edison and the Boston Gas Company? Will
the design and manufacture of computing components, terminal equipment, and
programming systems be accomplished by subsidiaries of the information utility,
as in the telephone industry, or will there be a separate industry of
independent private manufacturers, like General Electric and Westinghouse in
today's electrical equipment industry?
Perhaps the most important question of all concerns the legal matter of
government regulation. Will the information utility be a public utility, or
will it be privately owned and operated? Will some large companies have their
own information utilities, just as some companies today have their own
generating plants?
Central to all these questions is the matter of cost. Computation, like
electricity and unlike oil, is not stored. Since its production is concurrent
with its consumption, production capacity must provide for peak loads, and the
cost of equipment per dollar of revenue can soar.
The high cost of capital equipment is a major reason why producers of
electricity are public utilities instead of unregulated companies. A second
reason is the extensive distribution network they require to make their product
generally available. This network, once established, is geographically fixed
and immovable. Wasteful duplication and proliferation of lines could easily
result if there were no public regulation.
Given the advanced state of development of present communications lines, it is
unlikely that information utilities will wish to invest in their own
communication networks. This may be taken as an argument against the necessity
for stifling free competition and placing information utilities under public
regulation; yet, there is another massive investment that the information
utilities will not be able to sidestep as easily, if at all--namely, investment
in the large programming systems required to supervise the operation of the
information utility and provide its services. The information utility should be
able to shift part of this burden to the shoulders of its customers, but it
will have to bear responsibility itself for the design, maintenance, and
modification of the core of the programming system. The vast potential
magnitude of this system, plus the fact that its usefulness may not extend
beyond the physical machinery for which it was constructed, plus the
possibility of programming waste from having too many entries in the field, may
tip the balance in favor of a regulated monopoly.
In summary, a very substantial amount of capital is needed in the development
of information utilities, capital to furnish both equipment and programming.
Thus, even if no new communication lines of a proprietary nature are required,
the public-utility format may still prove to be the best answer. On the other
hand, one very persuasive reason for the private-company format is the
stimulating effect of free enterprise and competition on imagination and hard
work--vital prerequisites for realization of the information utility.
Whichever way the balance tips, it is clear that information utilities will be
enterprises of considerable size. If they form an industry of private
companies, then the industry probably will be dominated by one or two firms of
giant proportions. Logical candidates among existing companies include not only
the large communication and computer enterprises, but also the big computer
users.
BETTER THAN MONEY
The organizational impact of the information utility will extend well beyond
the one or two industries directly concerned. User industries, such as banking
and retailing, may also be greatly affected. Suppose, for example, that
businesses of all sizes have simple terminals linking them electronically to a
central information exchange. Then each business can make instantaneous credit
checks and offer its customers the convenience of universal credit cards. These
cards, referred to by some as "money keys." together with the simple terminals
and information exchange, can all but eliminate the need for currency, checks,
cash registers, sales slips, and making change. When the card is inserted in
the terminal and the amount of the purchase keyed in, a record of the
transaction is produced centrally and the customer's balance is updated. A
signal is transmitted to the terminal from the central exchange if the
customer's balance is not adequate for the sale. Positive credits to the
customer's account, such as payroll payments, benefits, dividends, and gifts
are entered in a similar way. Periodic account statements are figured
automatically and delivered to customers, perhaps directly to a private
terminal for some, or by postal service for others.
Any number of variations on this theme are conceivable, up to and including the
virtual disappearance of our traditional media for commerce. The savings
resulting from eliminating the physical handling and flow of money, as well as
the clearing and transfer of checks, would justify a considerable expenditure
for electronic equipment.
Secondary benefits might include the semiautomatic preparation of income tax
returns and the automation of most bill collection. Incidentally, we can look
forward in the process to displacing another class of manual labor:
miscellaneous thieves who prey on money. The increased possibilities for
embezzlement through fraudulent accounting may attract some of the resulting
unemployed, but there are ways that the computer can be deputized to police its
own operation, quietly and without danger of corruption.
PERSONALIZED INSURANCE
Insurance is another staid industry whose way of doing business could change
more than some may realize. Insurance policies are sold by agents at present
from a relatively fixed, relatively small number of plans formulated by the
actuarial department of the insurance company. Suppose all the actuarial
figures on which these plans are based, together with other relevant
statistics, are brought together in the store of a central computing system,
and on-line terminals are placed at the company's field offices. Then there is
no reason why policies cannot be custom-tailored to each prospect's needs and
characteristics as a regular service. Personalized insurance would have
considerable marketing appeal, and offers several subtle advantages. At least
one of the very large insurance companies is already taking steps in this
direction. Equitable Life is reputed to be planning a telephone link of 114
typewriter terminals, located at field offices and operating departments, with
a central computing system at the home office. The magnitude of the project is
estimated at $12 million and 5 years' duration.
With personalized insurance, the rates of premiums can be made to vary with the
company's changing inventory of policies and insureds. Thus, a continual
control over aggregate risk can be maintained. Since premiums are based on a
much more complete description of a prospect than at present, there is less
need for grouping of essentially different risk categories into the same
premium class. Approximately 50 percent of the insureds (the less risky half)
would receive better rates from personalized insurance than from insurance
offered by competing companies that operate with fixed plans. As a result,
there would be a gradual drift of more profitable (less risky) customers over
to personalized insurance. Thus, the rates could be made still more favorable,
and the competitive margin would grow.
A final advantage of personalized insurance is the ease with which a customer
can trade up or down. As the customer's family expands, as his children
approach college age, as they become self-supporting, as he approaches
retirement, and so on, his insurance requirements change. At any time he can go
to the nearest personalized terminal and key in information on his current
insurance portfolio and on the adjustments he wishes to make. Within minutes he
receives an indication of the differential premium due or saved, and this
permits him to decide whether to trade. An agent can act as intermediary if
self-service turned out to be unprofitable; or the computer may be able to sell
its own insurance policies via persuasive discourse with the customer.
COMPUTER-MANAGED MARKETS
Certain people who are intimately familiar with the workings of the New York
Stock Exchange see no reason why its entire operation cannot be automated.
Their thoughts go well beyond the mechanization of quotations and reporting
procedures that is currently in progress. These persons find no real need for
the floor specialists, for example. They believe that the computer could be
programmed to maintain at least as stable and fluid a market as the specialists
maintain, and serve at least as well in the public interest. Readers of the
recent SEC staff study on the security markets will appreciate immediately some
of the potential benefits of eliminating specialists, over and above the
tangible savings in commissions and paper flow.
Every investor has a "seat" on the computerized exchange, and even brokers
become dispensable (although they, like insurance agents, may remain as the
most deep-rooted of present institutions). Transactions are handled by an
information utility which feeds customer orders directly to the computer
system, keeps book, makes a market, and collects commissions on each
transaction. Similar arrangements are possible for the other security and
commodity markets, regardless of size, as well as for bond trading, mutual-fund
sales, and so on.
A St. Louis broker has suggested the formation of a National Trading
Corporation to automate the quoting and trading of securities in the
over-the-counter market. His proposal could provide a first step. Operation of
the computerized security exchange ties in naturally with operation of the
central credit exchange. Translations on the security exchange can be preceded
by checks on the appropriate accounts of the credit exchange and result in
adjustments to these accounts. Margin allowances made as part of the normal
operation of the credit exchange permit a tighter watch over excessive
borrowing and other violations than is now possible.
Computer-managed markets working together with computer-regulated credit may
sound more than a bit Orwellian, but the potential for good from this merger is
enormous. Unregulated credit in the purchase of securities was one of the chief
factors that contributed to the severe decline in stock prices of May, 1962,
just as heavy margin positions in the twenties sealed the lid on the 1929
debacle. With the information utility keeping a vastly expanded and mechanized
Federal Reserve type of scrutiny and control over the flow of credit and the
operation of markets, the United States could be within an arm's length of
stabilizing the behavior of its economy, an elusive goal that is almost as old
as the economy itself.
INFORMATION, PLEASE
The range of application of the information utility extends well beyond the few
possibilities that have been sketched. It includes medical-information systems
for hospitals and clinics, centralized traffic control for cities and highways,
catalogue shopping from a convenience terminal at home, automatic libraries
linked to home and office, integrated management-control systems for companies
and factories, teaching consoles in the classroom, research consoles in the
laboratory, design consoles in the engineering firm, editing consoles in the
publishing office, computerized communities. Different subscribers to the same
information utility will be able to use one another's programs and facilities
through intersubscriber arrangements worked out with the utility on a fee
basis.
As more and more of these services are perfected, an increasing percentage of
the day-to-day functioning of man, the economy, and society will become
documented and mechanically recorded in easily accessible form. It will no
longer be necessary to conduct costly surveys and door-to-door interviews to
acquire data on consumer tastes or investment behavior, at times only to find
that the data are inappropriate or anachronistic for the needs of research.
Research investigators will specify their precise data requirements and will
requisition custom studies from the files of the information utility. The
studies will be timely and current, and a great boon to analysts and
simulators. As their use develops, these data studies will be invaluable for
corporate decision-making and government planning, to the point where they may
be woven into the very fabric of these processes. It is not a mere flight of
fancy to anticipate the day when information automatically acquired during the
operation of the information utility feeds directly into decision mechanisms
that regulate the economy and the activity of companies.
The information service may be conducted by the information utility itself, by
a subsidiary, or by one or more of the subscribers. The information service
represents a profitable and natural fulfillment of the utility's role and
function. Revenue is created by the utility on both ends of the data line--for
example, in the production of sales data, when the utility can charge for
making a money transaction unnecessary; and again in the marketing of this same
data, when the utility can charge for providing detailed information that would
be costly and difficult to obtain any other way.
SIMULATION, PLEASE
Among the chief potential users of custom information are persons engaged in
simulation studies and dynamic modeling. Simulation is about the most promising
approach known for the general analysis of complex systems and stochastic
processes. On the operating level, it affords the user a way of asking the
question, what if. The use of simulation by staff specialists, systems
analysts, decision makers, social scientists, and others will markedly expand
as the information utility makes powerful computers and programming systems
easily accessible.
Most users of simulation will not have the knowledge or desire to build their
own models, especially as simulation starts being applied by line managers and
operating personnel. Assistance in the formulation, adjustment, and validation
of models will be provided by an on-line simulation center, joined by the
information utility to both the users and the relevant information sources.
Simulation service, like information, will be obtained by a procedure as simple
as dialing a telephone number.
A simulation service could be of great value as a proving ground for
development of an early form of information utility, and could provide a
bootstrap for further refinement of the utility. Each contemplated service
could be designed by successive approximations, simulated, and revised before
it is instituted. This is especially important for a service such as the
automated stock exchange, where design errors can cost millions of dollars and
experiments on the real system are impractical. In addition, a working
prototype of the exchange, displayed by the simulation service, could persuade
the doubtful and the wary.
Barring unforeseen obstacles, an on-line interactive computer service, provided
commercially by an information utility, may be as commonplace by 2000 AD as
telephone service is today. By 2000 AD man should have a much better
comprehension of himself and his system, not because he will be innately any
smarter than he is today, but because he will have learned to use imaginatively
the most powerful amplifier of intelligence yet devised.