Silicon Valley venture capitalist William H. Davidow’s new book, Overconnected: The Promise and Threat of the Internet (Delphinium Books; $27.95 hardback), aims to show that the Internet has fundamentally changed the world, and not just in the ways we have previously noticed. A central idea of Davidow’s is that the Internet played a bigger role in the financial crisis than we realize, and it will continue to create similar situations, because funny things happen when you introduce massive levels of interconnection into a system.

The book deals heavily with recent economic troubles, but surprisingly Davidow began working on it in 2000. “I knew the Internet was doing something,” Davidow tells me in his office in Menlo Park. “And the question was: Why was it doing it?” The Internet has enabled the world to become massively interconnected. Any bit of data on a computer with an Internet connection can go about just about anywhere else in the world, nearly instantly. This fact has led not just to more communication but more interdependence. And this interdependence has made everyone in the network vulnerable to everyone else’s problems.

That’s a big issue, but according to Davidow, the real kicker is what happens when data flows through the network: you get positive feedback. Positive feedback is when the response to a signal is to produce more of that signal. In a system that consists of a microphone and an amplifier placed too close together, the initial signal of background noise is amplified, picked up and amplified over and over again, until what was initially inaudible rises to an earsplitting screech. In the global financial system, there are significantly more players to pick up and amplify signals, and there are more connections between them. The flow of positive feedback is monumentally more complex and powerful, and the results can, and do, shake up the world—sometimes for the better, sometimes for the worse. What you get is a system that is prone to wild success and wild failure.

This book is a warning, but it’s a warning coming from an optimist. “All technology has its negative aspects,” Davidow says. “The key is to figure out how you apply a technology so you get the benefit of it and not …”—then Davidow related to me a story about the dangers of skiing with a Walkman on.

Davidow’s proposed solution to the problems that face our network is fairly simple: thoughtful regulation to prevent crashes. “Is that a radical idea?” Davidow asks me. “We do it with airplanes.”

William Davidow
Jan. 19, 7pm
Kepler’s, Menlo Park