Sunday, 14 February 2016

How the Internet of Things Can Make the Invisible Hand Work and Societies Thrive

By Dirk Helbing

Managing data-rich societies wisely and reaching sustainable development are among the greatest challenges of the 21st century. We are faced with existential threats and huge opportunities. If we don't act now, large parts of our society will not be able to economically benefit from the digital revolution. This could lead to mass unemployment and social unrest. It is time to create the right framework for the digital society to come.

Cloud storage, Big Data, Artificial Intelligence, Self-Driving Cars, and the Internet of Things (IoT) are just a few of the technological revolutions we have recently seen. In the meantime, big IT companies and "smart nations" attempt to steer societies in a certain direction. This process can involve the manipulation of people's opinions, decisions, and behaviors by "Big Nudging", based on "(super-)intelligent" computer systems using large amounts of personal data. To serve us well, this technology must now be made compatible with European law and values, e.g. by embedding it in a scientific, democratic and responsible ethical framework. Otherwise, we may see more and more democracies turn into autocratic regimes.

Societies are not just the sum of their parts and of individual actions. Families, friendships, social networks, solidarity, and culture are "emergent" phenomena resulting from interactions between people; what really matters are the interrelations between individual behaviors. Therefore, steering individual behaviors cannot solve important problems such as resource shortages, environmental issues, and climate change, fairness, justice and peace, financial stability and socio-economic well-being, innovation and jobs for all. These challenges require a different, complementary approach, focusing on interactions between people, companies, different kinds of organizations, authorities, and the environment.

As the connectivity in today's techno-socio-economic systems increases steeply, systemic complexity does so, too. This prevents the successful optimization and steering of societal-scale systems in a centralized way. The main reasons for this are the hardness of some optimization problems and limitations of predictability and calibration (due to parameter sensitivity and over-fitting). However, highly performing solutions can often be realized in real time by means of decentralized approaches. These specify self-organizing systems, which are efficient and can flexibly adapt to changing conditions.

Importantly, decentralized solutions leave space for diversity in the locally pursued goals and enable solutions that fit the respective context and local culture. Diversity is often favorable for innovation rates, for collective intelligence, and for socio-economic resilience to unexpected, disruptive events, as they will surely happen during the digital transformation.

In complex dynamical systems – think about traffic or the financial markets – the properties of the system components are often less important than their interactions. This makes such systems hard to control from the outside, but they tend to produce certain structures, properties, and functions by self-organization, almost like magic. Unfortunately, the systemic outcome is not always desirable, as stop-and-go traffic and financial crises show. Now, however, we can make the "invisible hand" work by means of the Internet of Things, if we operate it using knowledge from complexity science.

To reach desirable systemic outcomes by self-organization (i.e. particular structures, properties, or functions) one has to find suitable kinds of interactions between the system components. These interactions can be identified by means of so-called "exploratories": (agent-based) simulations on supercomputers or multi-player online games in virtual worlds. For example, cooperation can be supported by information systems that promote reputation, merit-based matching, costly communication, and co-opetition (a kind of competition that is compatible with cooperation). Additional work demonstrates how decentralized traffic assistance mechanisms can be used to improve the traffic performance on freeways and in cities by 30-40% as compared to today's operation. 
The implementation of such mechanisms for self-organization ("design for emergence") requires real-time measurements, which can now be performed with the Internet of Things: wirelessly communicating sensors allow us to measure the external effects ("externalities") of interactions between people, companies, and the environment. It is, for instance, possible to increase awareness and make progress towards the UN sustainable development goals.

For this, my team at ETH Zurich and TU Delft's PhD program "Engineering Social Technologies for a Responsible Digital Future" have started to create the Nervousnet platform together with international partners (see It allows people, companies and devices to engage in three ways: (1) by contributing data, (2) by analysing the crowd-sourced datasets, and (3) by sharing code and ideas. Anyone is able to create data-driven services and products using a generic programming interface. The aim is to yield societal benefits, business opportunities and jobs. Nervousnet uses distributed data storage and distributed control, so that it is more robust to attacks and centralized manipulation attempts, easy to scale up, and tolerant to faults. Nervousnet's approach is also compatible with the principles of informational self-determination and, according to our judgment, with the new EU Data Protection Directive.

Today, there are several Internet of Things platforms and data science projects that share Nervousnet's vision. These projects focus on participatory data collection, on decentralized communication services, or on big data analytics. Nervousnet aims to meet all three objectives. Furthermore, Nervousnet will be able to change the interactions in techno-socio-economic-environmental systems by introducing suitable feedbacks in the system, such that desirable interactions and self-organization effects result. For example, special driver assistance systems will dissolve many freeway traffic jams, and self-organized traffic light control will reduce urban gridlocks. Generally, such feedback loops could be created with a new exchange system for externalities. I call this system "finance 4.0". It would be a multi-dimensional, multi-currency bottom-up system, which also brings benefits for public authorities, as services and goods would be easily taxable. Eventually, this could be the basis of a thriving economy 4.0 and a digital society that creates opportunities for all.

Nervousnet and finance 4.0 will build a participatory framework complementing top-down governance approaches with bottom-up elements to unleash the power of innovation and the potential of civil society. Imagine something like an Apollo program coordinating and integrating efforts from international FabLabs, universities, startups, and other stakeholders. This could create the framework for "governance 4.0". Online deliberation platforms, for example, could help to bring knowledge and ideas of many minds (and machine intelligence) together and support collective intelligence. Platforms for resilience could empower citizens in crisis situations to help themselves and each other. Sharing economy platforms should enable the efficient coordination and use of resources, to help us master resource shortages, the energy transformation and climate change. There are numerous other potential applications of this framework. We just have to decide to embrace the positive aspects of the digital era now.

If the digital transformation of our economy and society ought to succeed, we must create culturally fitting, value-sensitive information and communication technologies, which benefit as many companies, institutions, employees, customers and citizens as possible. To be a world leader in responsible innovation, we need to integrate approaches from the natural, engineering and social sciences. For example, a "CulturePedia" could reveal the success principles of the diverse cultures of the world and produce new solutions, intercultural exchange and new social and economic value. These approaches can largely benefit from crowd sourcing and citizen science, and enable the engagement with and between the citizens, as projects such as Wikipedia and OpenStreetMap have shown.

In short: The digital economy is not a "zero-sum game". The combination of Internet of Things technologies with complexity science and participatory approaches allows us to create an information, innovation, service and production ecosystem to boost our economy and society in times where today's jobs are challenged by automation. We should use the unlimited opportunities offered by the digital world, where information can be reproduced as often as we like and used in millions of different ways. It is possible now to reach a higher quality of life for many more people. Therefore, let us build participatory platforms for governance 4.0 and finance 4.0 together, to create a suitable framework for our digital future!