_The Wealth Report: Historian Niall Ferguson discusses the 'internet delusion'

To find out what else is worrying Professor Ferguson read my full interview with him in the The Wealth Report. We will also be publishing more video content over the coming weeks.

The Wealth Report features research into global wealth trends and flows, explores the world’s wealthiest regions, the best performing cities for Ultra-High-Net-Worth investors, and the fluctuations of the world’s luxury residential property markets. 

_Transcript

Andrew Shirley: The issue that’s captured your attention at the moment, and it’s covered in your latest book, The Square and the Tower, is the shift from hierarchies to networks in terms of global power, with an obvious focus on social media.  I’ll ask you why in a moment, but I’d just like to come at it from a slightly different angle to begin with, and share a question that my ten-year-old son wanted me to ask you.  He was reading something about the disaster in Yemen and he said, ‘Ask the professor why everybody in the world can’t just live peacefully together.’  My first reaction was, ‘Well, I can’t really ask an eminent historian such a naive question.’  Then, in the final section of The Square and the Tower that I was reading, that was exactly what some of the commentators you mentioned, such as Ian Tomlinson predicted the Internet would achieve.  You’re far more sceptical, why is that?

Niall Ferguson:  Well, first of all, ten-year-olds generally ask great questions, and usually more interesting questions than 40-year-olds.  That’s because they haven’t been bullied by education into thinking conventionally.  That’s a perfectly good question to ask, why we can’t all just live in peace.  When you look at what’s happening in a country like Yemen, it seems baffling that an already poor country should be plunged ever deeper into misery by war.  When the Internet came into being, and particularly in the 1990s when it was in its first great investment boom, there was a story that was told by many people.  That story was that once everybody was connected, and could email one another, and share web pages with one another, everything would be awesome.  We would all be able to exchange views and news, and understand one another better, and we would form ultimately a, kind of, global community, or a republic of cyber space.  John Perry Barlow was one of those people who visualised this as a, kind of, utopia, almost like John Lennon’s ‘Imagine’, which was an earlier iteration of the same notion.  Once we all just connected, then the conflicts would disappear, because the misunderstandings would disappear.  This seemed tremendously attractive, and not for the first time in history, people imagined that greater knowledge and greater connection would lead to greater harmony.  The bad news is that history is against this hypothesis.  

We know from past experience, that when there is greater connectedness, thanks to some change in technology, far from producing a global community, the network that been created, leads to greater polarisation.  Why is that?  Well, it’s because of a phenomenon that the network science people called homophily, the tendency for birds of a feather to flock together.  We are inclined to be attracted by people like us, and when you create a large social network, we can more easily cluster into likeminded subgroups.  It just as happened 500 years ago in the reformation.  Martin Luther thought that if everybody could read the bible, and if everybody could read his sermons, thanks to the wonder of the printing press, then there would be a priesthood all of believers, as foreseen in the gospels.  What actually happened was 130 of religious strife, because not everybody agreed with Luther, not everybody became a Protestant.  A great many people violently dissented and former ultimately the counter reformations.  I think what we see today is a very similar version of the same story, where the creation of giant social networks through the Internet, has led to polarisation, and this tendency for people to cluster into likeminded groups. 

Andrew Shirley: You’re not afraid of a little bit of controversy, you’ve been quite public on your views about the (inaudible 06.12) predictions.  So, right now, we’re based right in the heart of Silicon Valley, surrounded by these titans of our social networked world, I mean, was that partly behind your decision to put networks at the heart of your latest research?  Did you mischievously think that Big Tech needed a bit of a poke?

Niall Ferguson:  Well, I suppose I was interested to come to the west coast, to Stanford, to get a little bit closer to Silicon Valley, realising that the history our times, to some extent, is being written here.  I moved to the United States back in the early 2000s, partly because I sensed that writing financial history would be more fulfilling in the United States, and in proximity to Wall Street.  In fact, the first academic job I had in the United States was at New York University which is very close.  It’s the centre of learning closest to Wall Street.  The result was a book called The Ascent of Money, which was published just around the time of the financial crisis in 2008.  Once I had had my fill of Wall Street, it was time to come to Silicon Valley and learn more about giant social networks, and network platforms and all of that.  So, it was a, kind of, natural step to cross the continent and relocate at Stanford in very close proximity, as you say, to Silicon Valley.  That was a good decision, because I’ve learnt a lot that I wouldn’t have learned in Cambridge, Massachusetts, simply by being here, and being in a position to interact with the people who built some of these giant technology companies.  Yes, the idea behind The Square in the Tower is a very simple one.  It is that people in Silicon Valley know almost no history, and people who write history know almost nothing about network science.  

So, there is an arbitrage opportunity for somebody who knows a little bit about what happens in the technology world, and a reasonable bit of history to say, ‘Look, you can learn from each other.’  Historians can learn from Silicon Valley, but Silicon Valley also has to learn from history.