Chrystia Freeland

This is a transcript of Yuri Milner’s presentation to the Yalta Annual Meeting in September 2011. To read Chrystia’s column about the presentation, click here.

A few months ago not three but eight leaders in the world gathered at Deauville in France at their regular G-8 meeting. But for the first time ever they invited six businessmen to meet with them and talk about the future. It’s interesting that four out of six were related to internet, and then I was among those invited. Each of us was given three minutes to say something, and I will now present to you a slightly expanded version of that presentation that I gave back then.

If we can look at the slide number 1, that you hopefully can see on the left-hand side, it basically shows the unprecedented growth of internet users globally. And I just want to bring your attention to the fact that this is probably the fastest proliferation of any technology ever, and the most fundamental fact being that right now around 2 billion people are connected to the internet and in the next 10 years you will see another 3 billion added to that number to a total of 5 billion people connected around 2020.

If you turn to the next slide, one would assume that internet is only about people, but actually it’s not. Around 5 billion devices are currently connected already, and this number will zoom to more than 20 billion devices connected to internet 10 years from now, and this will add to 5 billion human beings, so you would assume that there will be 25 billion people and devices connected and producing information.

On slide 3, I would like to bring your attention to one really unprecedented and not very well appreciated fact: how much information is actually being created. If you add all information that was generated by the mankind for the last 30,000 years beginning with the first drawings on the walls of the caves until year 2003, equal amount of information was created last year for only two days. It took two days to create equal amount of information to the one that was created by all people that ever lived from the dawn of civilization until 2003. And moreover the same amount of information will be generated in ten years from now only within one hour.

On the next slide, I want to show you that not only is information being created, but it is also being shared among people. And it is being shared at the ever increasing pace, and the pace is actually accelerating. One of the companies that we’ve invested in is called Facebook. In only two years, between 2009 and 2011, the information exchanged between people increased 28 times. And that cannot be explained by new people joining Facebook. Actually every single participant in this process is exchanging multiple times more information than only two years ago. Same applies to Twitter, where in the last two years we have seen a tenfold increase of the information that is created and distributed and exchanged on Twitter. And a very small fraction of this information is created by organized institutions like news organizations, and the vast majority of it is created by people themselves, and consumed by people who are interested to hear the newsfeed that is being produced by other people. If you are not the user of Facebook or Twitter but probably user of e-mail, you might have noticed that in the past few years the number of e-mails that you have been receiving daily was actually exploding. On average we are now receiving six times more e-mails than just four years ago.

And on the next slide I want to explain where it’s all leading, and it’s all leading to really unprecedented proliferation of Internet media compared to traditional media. The largest newspaper in the United States is only reaching 1 percent of population. We are kind of assuming that Wall Street Journal, USA Today, and other newspapers are very important. Yes, they’re extremely important, but only to 1 percent of the population on a daily basis. And that compares to internet media, which is used by 25 percent of the population daily and growing. The largest TV channel is reaching maximum of 10 percent of the population, and this ratio is constantly going down with the increasing number of channels that people watch and the further fragmentation of people’s attention.

On slide 6, one can see a very important trend which is accompanying this creation of information and emergence of internet businesses that are actually much more efficient than traditional offline businesses. Big internet company on average is capable of generating revenue of $1 million per employee, and that compares to 10 to 20 percent of that—$100,000 to $200,000—that is normally generated by traditional offline business of comparable size. And this efficiency is not going away; it’s with us to stay for a long time. And that creates alongside these efficiencies serious challenges for offline businesses trying to compete with online businesses. I was really deeply impressed by one fact that became apparent to me when we first invested in Facebook. Each single engineer in Facebook is capable of supporting 1 million users. There are only around 700 engineers working at Facebook, and there are more than 750 million users of Facebook, so that level of efficiency is really unprecedented and unheard of, and it never happened before. And this efficiency will deeply influence every single sector that we recognize as a traditional sector.

And on the next slide 7 I would claim that every type of human activity will be deeply influenced by internet. And the next sectors to be impacted I would forecast will be health-care and education. With digitizing clinical records and new educational institutions emerging allowing outstanding scholars to address tens of hundreds of thousands of users at the same time. In this September semester at Stanford, there is one experimental course of teaching artificial intelligence that is read by an outstanding professor for the first time online with 58,000 students signing up—not only from Stanford, but from every corner of the world—and this course is actually free.

On slide 8, I want to emphasize the next big trend, which is the accelerated emergence of artificial intelligence, which is capitalizing on all the information that is being generated everyday and every minute. We used to think about companies like Google as really a part of our lives and pretty static. We go use Google today, we use it tomorrow, and we believe that it is the same algorithm. But in fact algorithm is changing every week based on searches that we make and based on the feedback that users provide by using the service. And that’s what makes companies like Google so pervasive and almost monopolistic that their algorithms are constantly adjusting to better cater to our needs based on our feedback. And this virtual cycle continues at an ever increasing pace, making these companies even harder to catch up with. The same applies to Amazon which is trying to sell us new goods based on the ones that we already purchased, and Facebook, which is trying to form our relationships based on the relationships we already have. They have a very interesting feature that suggests new relationships to us, and these algorithms are so good right now that there is a more than 50 percent chance that we will accept friendship based on this artificial intelligence recommendation. And I clearly see that times that are not so far off where companies like Facebook will be in fact forming our social connections to a very significant extent.

And on the last slide today, I just want to draw a little bit of a futuristic picture, which is the emergence of the global brain, which consists of all the humans connected to each other and to the machines and interacting in a very unique and profound way creating an intelligence that does not belong to any single human being or computer but really spread out and living its own life and defining significantly the actions of each particular individual in the not so distant future. One striking fact is that about 20 percent of the global energy 10 years from now will be dedicated solely to maintain this global intelligence, and this number is around 10 percent already today in developed countries. And that actually can comfortably compare to 20 percent of calories that our human brains consume daily to support our traditional intelligence.

Get ready for the global brain. That was the grand finale of a presentation on the next generation of the Internet I heard last week from Yuri Milner. G-8 leaders had a preview of Milner’s predictions a few months earlier, when he was among the technology savants invited to brief the world’s most powerful politicians in Deauville, France.

Milner is the technology guru most of us have never heard of. He was an early outside investor in Facebook, sinking $200 million in the company in 2009 for a 1.96 percent stake, a decision that was widely derided as crazy at the time. He was also early to spot the potential of Zynga, the gaming company, and of Groupon, the daily deals site.

His investing savvy propelled Milner this year onto the Forbes Rich List, with an estimated net worth of $1 billion. One reason his is not yet a household name is that he does his tech spotting from Moscow, not a city most of us look to for innovative economic ideas.

Milner was speaking in the Ukranian city of Yalta, at the annual mini-Davos hosted by the Ukrainian pipes baron and art collector Victor Pinchuk (disclosure — I moderated at the event). What was striking about Milner’s remarks was how sharply his tone differed from that of the other participants.

The Americans — among them the economists Lawrence H. Summers and Paul Krugman — were glum about their country’s economic stagnation and its political inability to adopt policies that could end it. The Europeans — a group that included the foreign ministers of Sweden and Poland, and Jürgen Fitschen, who has been named co-chief executive of Deutsche Bank — were worried about the sovereign debt crisis.

Even the Turks and the Indians, whose economies grew more than 8 percent last year, were anxious about uneven development at home, and the threat of economic tsunamis coming from abroad.

Milner’s perspective was entirely different. For one thing, at a time when where you sit so often determines where you stand, Milner almost perfectly represents a global technology elite whose frame of reference is planet Earth. He mostly lives in Moscow, but has recently purchased a palatial home in Silicon Valley. He addressed the Ukrainian conference by video link from Singapore.

From that vantage point, the most pressing issue in the world today isn’t recession and political paralysis in the West, or even the rapid development and political transformation in emerging markets, it is the technology revolution, which, in Milner’s view, is only getting started. Here are the changes he thinks are most significant:

• The Internet revolution is the fastest economic change humans have experienced, and it is accelerating. Milner said that two billion people are online today. Over the next decade, he predicts that number will more than double.

• The Internet is not just about connecting people, it is also about connecting machines, a phenomenon Milner dubbed “the Internet of things.” Milner said that five billion devices are connected today. By 2020, he thinks more than 20 billion will be.

• More information is being created than ever before. Milner asserted that as much information was created every 48 hours in 2010 as was created between the dawn of time and 2003. By 2020, that same volume of information will be generated every 60 minutes.

• People are sharing information ever more frequently. The pieces of content shared on Facebook have increased from 140 million in 2009 to four billion in 2011. We are even sending more e-mails: 50 billion were sent in 2006, versus 300 billion in 2010.

• The result, according to Milner, is the dominance of Internet platforms relative to traditional media. “The largest newspaper in the United States is only reaching 1 percent of the population.” he said. “That compares to Internet media, which is used by 25 percent of the population daily and growing.”

• Internet businesses are much more efficient than brick-and-mortar companies. This was one of Milner’s most striking observations, and a clue to the paradox of how we find ourselves simultaneously living in a time of what Milner views as unprecedented technological innovation but also high unemployment in the developed West. As Milner said, “big Internet companies on average are capable of generating revenue of $1 million per employee, and that compares to 10 to 20 percent of that which is normally generated by traditional offline businesses of comparable size.” As an illustration, Milner cited Facebook, where, he said, each single engineer supports one million users.

• Artificial intelligence is part of our daily lives, and its power is growing. Milner cited everyday examples like Amazon.com’s recommendation of books based on ones we have already read and Google’s constantly improving search algorithm.

• Finally — and Milner admitted this was “a bit of a futuristic picture” — he predicted “the emergence of the global brain, which consists of all the humans connected to each other and to the machine and interacting in a very unique and profound way, creating an intelligence that does not belong to any single human being or computer.”

More than most of us, Milner understands that changes in what he calls “the offline world” can have real bite: He lived through the collapse of the Soviet Union, and the politics and economy of Russia today are no cakewalk. But, in a year that has seen the Arab Spring and the threat of the collapse of the euro, Milner’s predictions are an important reminder that the most significant revolution may be happening in cyberspace.

The uprising in Egypt has provoked the familiar “realism-versus-idealism” foreign policy debate in many Western capitals, as diplomats and politicians struggle to balance their ideological sympathy for the protesters against fears of chaos and the threat of a future anti-Western and anti-Israel policy from Cairo if the people do win.

What we have paid less attention to is that the demonstrations have forced some of the world’s hottest technology companies to engage in a very similar debate. The conclusions these technorati end up drawing may be as significant as the verdicts of Western governments. This new intellectual battleground is a further sign that in the age of the Internet and the global economy, foreign policy doesn’t belong just to professionals or to states any more.

The quandary Egypt poses for technology companies – particularly the power troika of Google, Facebook and Twitter – goes far beyond the classic corporate social responsibility concerns that have become standard operating practice at big multinationals.

On one hand, the Egyptian revolt and the ways in which it has been facilitated by the Internet is the apotheosis of hacker culture and its worldview. That is the powerful conviction of the digerati: that they are on the side of freedom, small-d democracy and of doing good in the world. This self-image is easy to mock – that Google pledge to “do no evil” makes a pretty juicy target for satirists – but it is also deeply felt.

Egypt has helped confirm this view of technology companies being on the side of angels. For example, Wael Ghonim, the Google executive who helped organize the protests, was jailed and has emerged this week as an important face of a movement looking for leaders. Before that, there was the much publicized workaround that Google and Twitter technologists devised to help evade the Egyptian government’s communications crackdown. As Adrian Chen noted on the Gawker blog, “the amount of positive press generated [for Facebook] by Egypt’s uprising … could only be greater if Mark Zuckerberg had parachuted in and started beating back riot police himself.”

On the other hand, the problem for technology companies in many parts of the world is that doing good – or even doing no evil – is very much in the eye of the beholder. The views, and the self-interest, of twentysomething programmers in Silicon Valley, or in Bangalore, India, are unlikely to coincide with those of eightysomething dictators. And that can spell trouble for companies intent on building a global business.

“Facebook is trying to expand into China, so it is hard for them to take the side of the protesters,” said Evgeny Morozov, author of The Net Delusion, which argues the Internet will not necessarily make the world a freer, better place.

“They don’t want to be considered the digital equivalent of Radio Free Europe,” he explained. “If they take the side of the protesters, their global business model will come under pressure.”

Mr. Morozov is pretty certain that in this conflict between “the hacker ethos” and “the capitalist ethos,” it is the hackers who will have to compromise.

But even if he is right that technology company shareholders and executives, like any others, care overwhelmingly about maximizing profits, Mr. Morozov may be underestimating the expectations users and employees have of companies whose founding premises are the empowerment of the individual and the democratization of information.

Facebook, in particular, has been blasted by the Internet’s emerging punditocracy for failing to adapt its no-pseudonyms policy to the needs of democracy activists in authoritarian regimes who, for obvious reasons, can’t use their real names.

Facebook has a sophisticated policy team that understands these concerns. But they are also worried about weakening the “real names only” policy, which is crucial to the power of the platform, by administering a policy that permits some people to have pseudonyms and not others.

Richard Edelman, the boss of the PR firm that carries his name, works with businesses around the world. In his firm’s annual survey of which institutions people trust, technology companies are near the top. They are “seen as legitimate forces for good,” he said.

That halo brings many benefits. But as technology emerges as a force for real good in some of the grimmest parts of the world, that reputation may force technology firms to stick with their idealism even if realism might be better for the bottom line.

“There is a higher expectation of technology companies than of any others,” Mr. Edelman said. “There would be a lower expectation of resource companies, for instance. It is why, ultimately, Google walked in China.”

We used to say that Western missionaries came to do good, and ended up doing well. Technology firms could find themselves forced to do good, even if it sometimes means doing badly.