Digital creativity

Compared to atoms which make up the physical world, digital bits are weightless and intangible. Digital coding is a major technological influence on how ideas are expressed, shared and communicated. Robert Metcalfe, who invented Ethernet networking and founded 3Com Inc., the maker of the Palm Pilot, proposed a law of networks which says that the community value of a network grows as the square of the number of nodes increases. The smallest possible network consists of two people. In this case, Metcalfe’s value is 4. If a third person joins, the number of connections rises to three and Metcalfe’s value is 9. If a fourth, it rises to six and the value is 16.

The Internet is not a hard-wired network, like the telephone network, but a soft network, consisting of the manners, rules and procedures by which hard network is used. It is best described as a set of administrative arrangements for connecting users to information via other networks. At first, the owners of the hard networks hardly noticed the Internet. For many years, it had no impact on their infrastructures, services or prices.

Digital economy

Money management in the creative and conventional economies does not substantially differ. Thinking and creating are not free. Research represents a long and strenuous process of investment (time and money). The cost of operating a business with intellectual assets only is lower than the cost of starting a conventional business which uses both physical and intellectual assets. The former also has the advantage that it can delay paying for the intellectual assets, or pay them with equity. But the insubstantial nature of these assets deters would-be investors, and even those who have a stake in the business have problems in valuing it and their share. That is why patents, copyrights and trademarks have seldom been used as collateral for loans and, when they are, their value is underplayed.

One of the fields where more intellectual assets are used is the digital economy. With regard to the research in software industries, I shall further develop a separate chapter in which I shall describe the main types of innovation and the impact of open source.