The Digital Paradox

The companion driving concept of the Long Now, the Digital Paradox explains the extraordinary level of change we see in the Digital Revolution. With digital, faster means cheaper and better, so industrial trade-offs cannot be sustained. Digital always wins the race towards instant against industrial.

Faster is cheaper and better

In the industrial world speed, quality and cost are traded off against one another. It is a well-known adage in manufacturing and service that you can get two out of three from quick, cheap and good but not the three. This makes all the sense in the world in the physical world. If you want to do something quicker, you can put more resources to it. If you want it better, you probably should do it slower. This also colors how we think about product categories; we want the cheap value option or the expensive high quality option.

The Digital Paradox is the elimination of the speed, cost and quality trade-off. In Digital faster is cheaper and better. Digitization allows increasing speed by taking out human interaction and physical processes, and in turn this allows the reduction of costs and inconveniences. This is based on the ability of computers to do millions of routine operations extremely fast and extremely accurately, something we humans are not so good at. It also builds on the digital's ability to abstract time and space, while physical interactions need to occur at a given place at a given time.

"The Digital Paradox is the elimination of the speed, cost and quality trade-off"

We see it around all the time. We are all happier to do routine banking tasks instantly through a mobile app rather than go to a bank teller. With a banking app we can get a wire transfer done in 20 seconds anywhere and at anytime with no service cost to the bank. In an office the bank needs to pay for the physical space, the teller and the teller's equipment. You might find a long line that makes you waste time, you might be on a different country with no branches from your bank or you might want to do the wire transfer at 3am on a Saturday when all branches are closed.

The same reasoning can be applied to many service, sales, manufacturing, operations and administrative scenarios with similar consequences.

Image from Wikipedia. As depicted by John Tenniel 

The Red Queen's race that digital always wins

When we combine the Digital Paradox with the Long Now's accelerating move towards instant we create a race that traditional methods can not win. In Lewis Carroll's "Through the Looking Glass" Alice meets the Red Queen, that has to run as fast as she can just to stay in the same place. Accelerating customer expectations create a Red Queen race in which companies and institutions need to run down the speed curve just to keep customers satisfied.

"Institutions need to run down the speed curve just to keep customers satisfied"

This has momentous consequences for all businesses and institutions. It means that any perceived delay from instantaneous is a chink in their armor, a potential vulnerability for a competitor or a new entrant to exploit. It is also a blot in their record for customer service. Business and institutions need to embark into a Red Queen Race continuously speeding towards instant to eliminate all those vulnerabilities.

When they try to run, institutions find themselves weighed down by their industrial era legacy. They have people, management systems, physical assets, partner networks, legacy IT systems and physical processes that encumber their race. They are torn on whether to ditch their legacy with their existing revenue streams, or keep on trying to run with the extra weight. This is "The Innovator's Dilemma" that Clayton Christensen talks about. The hard truth is that as digital accelerates further the extra weight is lethal faster and faster, as unencumbered startups run faster and faster.

How the Digital Paradox killed Kodak

Kodak is a great example of how trying to run the Red Queen race using traditional methods is fatal. Kodak had built a fantastic infrastructure for amateurs photographers, which was a fixture for many of us but anyone under thirty will only remember hazily. You could buy films and find development labs in most convenience stores. Most of us were delighted, and we can still remember the magic moment when you got your developed film and could check the photos. You could do the usual industrial trade-offs, if you wanted your pictures quicker you could pay more. If you wanted extra quality you could go to a bigger lab with better equipment. Kodak was apparently unassailable with a complete value chain dominated expertly through huge physical investments in plant, people and partners.

Kodak fell swiftly to its own invention of digital photography. Once it was made digital, photography was integrated in Moore's law of exponential improvement and gradually caught-up with analog technology. Once quality was good enough the digital paradox set in and Kodak lagged further and further behind. As digital photography was faster, with instant photographs, it was cheaper, with no film or development lab network to pay for, it was also better, with choice and effects in photographs. Then when smartphones started having enough quality they quickly displaced digital cameras, they were faster because you always had them with you, they were cheaper because they were integrated into a single device, and perceived quality was better because your pictures could be shared and saved instantly.

"Industrial always loses to Digital in the race towards instant"

Kodak was a powerful transatlantic that fell to the iceberg of the digital paradox and the Red Queen's race towards immediacy. With hindsight it was clear that Kodak was lost before it even started. Its mistake was to try to run the Red Queen's race with traditional methods. Industrial always loses to Digital in the race towards instant. However, it was very difficult for Kodak to shed its 145.000 employees, endanger its $16 billion in revenue or hurt its brand, the fifth most valuable in the world (read the whole story here)

Editorial Cartoon by David G. Brown, Los Angeles Sentinel. It could be debated whether Trump or the GOP is the traditional baggage in this case.

Are you running a Red Queen race encumbered by traditional baggage?

As a business, look at your main processes. Are some of them pressured by the Red Queen race towards instant? Are your customers asking for more speed in some areas? Are there digital ways of giving that greater speed at lower cost and with better customer experience? Is your legacy preventing you from giving that greater speed and killing the trade-off? Do you have employees that are not longer necessary? Do you have physical assets you try to continue to leverage? Do you have revenue streams that would be wiped out through Digital? If you are running Red Queen races with extra weight you have a problem to solve. You need to think how you can transition in a way that recognizes your current reality, but also is realistic about the end state of your business.

"50% of US jobs have high risk of automation (...) The Digital Paradox makes automation all but inevitable"

As an individual an equally important question comes to mind. Is your job part of some organizations traditional baggage? Would taking out your job increase speed and quality while reducing cost? If the answer is yes, you need to start looking for a new one. Either the organization will shed its baggage including you or it will die trying to hold on to it. Maybe regulation can sustain you for a while, but it probably will not be long enough for retirement. You are not alone, according to an Oxford study close to 50% of jobs in the US have high risk of automation and wages are correlated negatively with the risk of automation. The Digital Paradox makes that automation all but inevitable

So is all hope lost? Will all jobs be automated? Thankfully that does not seem to be the case, at least for now. Creative jobs and delivering experiences are not subject to the tyranny of instant. A relaxing massage, a great TV series, an exciting soccer match, a concert... you would sometimes hope they lasted forever and you would certainly not be happy to seem them compressed in time. Until our robot overlords take over, we can look at the Creative Class and the Experience Economy for hope and solace.