Lots of predictions are made. Lots of predictions are wrong. That is the nature of these things.

What do we know about computing? It is cheaper, faster, better, with cheaper cycles, more bandwidth, falling price of memory, falling price of transmission. We all know that.

We also know that we have had a lot of changes over the last number of years, and right now we are in a world that is mostly distinguished by the existence of a network - the Internet - and the existence of an increasing number of devices that are attached to that that are also either mobile or embedded, but are increasingly communicative. What does this all mean? Please focus on what this means in terms of information.

There are two important trends. One is that all kinds of information are increasingly digitized. That means that information is easy to manipulate, easy to copy, easy to distribute.

The second trend is that, increasingly, the way we get this digital information is not the way that we get other products. The software you acquire, the information available, even the music on a CD; these are increasingly leased. They are licensed to you. When you get a piece of software you sign the license agreement. The license agreement may say that you cannot criticize the product; that you have to use it under certain terms and conditions; that you cannot change the product; that you cannot redistribute it.

Thirdly, added to these factors: intangible goods are at least as important as physical goods in our society. The fourth piece of this is that we now have an extraordinary vehicle for distributing this information: the Internet.

Now we have what the National Academy of Science in the United States describes as the "digital dilemma": information is virtually free, copying it is easy, distribution is without cost; leasing tries to control it. Digital rights management and copy protection are the other side of the "digital dilemma."

What is openness? For my purposes, openness is based on two characteristics: accessibility (available to anyone) and responsiveness (can be changed, repurposed, redistributed). One critical point is that openness is not binary. Things are not usually open or closed, but somewhere in between.

If we look at the World Wide Web, the old view was that it was like a library open to everyone. Now we think that not only do you have access to the world's knowledge, but the Web enables everyone to participate and collaborate in expanding that knowledge. What is interesting about openness is this possibility of creation that was not in our minds before. Before, we thought about access, but not about responsiveness: the possibility of collaboration, the ability to modify and add.

In intellectual property law, we have traditionally thought that the way you get innovation is by letting the creator of the innovation control it for some limited period of time. The arguments for that were that they know that innovation best, and to give them a chance to profit from their creation. However, we also want to allow others to build on it, too. So, for the purposes of innovation, we are trying to think about how to get the most innovation. How do you allow people to follow on innovation while allowing what is appropriate for the creator?

How would economists think about intellectual property? They would say, at one level, monopolies are generally bad, but temporary monopolies can be allowed if there is a social purpose. In the realm of copyrights and patents we do give temporary monopolies, with the idea that that monopoly provides an incentive for creation and gives a chance for the recouping of investment made in the creation, so that there would be more creation in the future. We also know that at the end we would like people to have unlimited access, so we have a notion of a "public domain" or a "commons."

In the process of creation there are first creators and then there are follow-on creators. Every first creation has a group who make follow-on creations, and in fact most first creators are follow-on innovators from somebody else. As Isaac Newton put it, like other "first creators," he was able to innovate only because he was "standing on the shoulders of giants."

Intellectual property law and the control we give to creators are like a tax. Too much control given to the first creator causes underproduction of innovation from the second innovators. However, if too little or no control is given to the first creator, there will be underproduction of first creations. It is all about balance: both balance in respect to openness and balance in respect to what rights are given to first creators and follow-on innovators. Traditionally we have thought that monopolies allow creators to monetize their innovations, get rewards for giving people access to it, and that is how they recoup their investment. That is the incentive for the work put in for innovation.

Value is not necessarily obtained only by controlling access and charging for it, but value for an innovation can be obtained by sharing it. This is the case with Wikipedia and with Linux. The more it is shared, the more valuable it becomes. That is very different from the idea controlling access and responsiveness in order to get value. I am not saying one is better or worse, but I am saying they can coexist and both need to be evaluated as to what is appropriate in a given situation. The old view of value mirrored the physical world. It cost a lot of money to produce and distribute physical innovations. The new view says perhaps we need to rethink that, as digital intellectual property in non-rivalrous: everybody can share it without it being diminished. It is virtually free to share.

Piracy was what caused this question of the "digital dilemma." Everybody was stealing music and movies, so the record and movie companies wanted more control. That sounds right, or does it? What was happening was about people getting access to this digital property, and there not being good means to be able to compensate the creators for the use of it. Then, along comes iTunes; a force that says: "We have ways of compensating creators." It is not about the studios. What we want to do is not lock everything down, but in fact give compensation to the creators of the underlying works. The digital dilemma and the response to piracy gave two choices: putting the "tax" on follow-on innovators or finding ways of compensating creators and allowing this follow-on innovation.

We now literally have the capability of tagging every bit. What if we had a "rights engine" that could sort out all the rights that people have traditionally had under intellectual property law, and told you how the payment should go? The technology now allows us to track that.

What was interesting about this was the case of movie studios. They were distribution mechanisms, not the writers or creators. They were important and powerful with physical goods, but less important and less powerful with digital distribution. The interest in that case was not to find a digital way and go out of business.

You cannot have digital distribution with the same profit margins as from the distribution of physical goods, but you can find different ways than saying that everything should be locked down and all computers and digital devices should have Digital Rights Management (DRM) software in them to protect the distribution companies. I do not think that would be a good idea.

The traditional way of thinking about how to profit is to gain a monopoly, like Microsoft Word or Microsoft's OS, and to get monopoly rents through licensing. Perhaps another way of thinking of it would be to give the technology away if that would enable you to get the standard. Even if you do not get licensing revenue, you know that technology better than anybody, so maybe the best strategy would be to contribute that technology, get the standard, and build upon it as innovation continues, because the chances of getting the monopoly position otherwise may be very limited, and progress and innovation would not necessarily follow the rate of innovation that would keep people ahead in the market place. Interoperability is absolutely essential; not just something that comes as a byproduct. For the markets to grow they must be interoperable and they must be global.

The old view of R&D was that it was held close, not shown to others. Now, an alternative is that there is a lot more out there that you may be able to use than is going to be discovered in your R&D activities. Anybody can be a contributor; it does not have to be people in the research laboratories. In the United States there was a phrase when something was not used from the outside: it was known as the "not invented here" syndrome. I think that may apply to some Japanese firms too. Now Procter & Gamble, an enormously successful engine of innovation, want 50% of the innovation to come from outside: being more open to innovation elsewhere.

There are now distributed innovation companies, like InnoCentive, which has 80,000 researchers connected via the Internet, where researchers can work on firms' problems if they are interested, and get paid for it. This is not like the old idea of R&D. In general, the team with the most smart people wins. Would you rather have a research group of 10 people or a million people? That is what openness is about.

It is not only about accepting innovation. 75%-95% of patents are not used. Should you say "I do not sell these things, so I am going to put this technology in the vault?" "Not sold here" is as stupid as "not invented here." Why not use the patents by sharing them with others who can add value to them and provide value to you? Again, that is openness: thinking about things differently.

Openness is not just about software, it is also about business models; sharing, making yourself accessible, making use of other people's ideas, making your ideas available to other people who can use them.

What is the world's fastest supercomputer? Is it something that Fujitsu built, or Hitachi, or NEC? No. It is the collective computing power of the Search for Extraterrestrial Intelligence (SETI), built of little machines brought together by software, voluntarily collaborating.

Napster, Flickr, podcasting, blogs, eBay listings and ratings; you know you can earn 10% more on eBay in an auction if you have good seller ratings from your customers? It is all voluntary. It is all open. Part of the reason that Amazon have a higher return on the same commodity - a book - as Barnes & Noble is that they allow people to come and review books, giving buyers another source of information, and the fact that Amazon use information about purchases to make recommendations. It is open; it uses information that you generate by your purchases to give you back value.

Even the nature of firms is being changed by this. Firms used to be vertically integrated because it was easier to have things inside the firm than try to control them outside. Now, firms are being though of horizontally; partnering with people, loosely coupled, everyone adding value, because coordination costs through the internet have diminished so much.

Even the way we think about the organization of labor changes if we have this vehicle. We used to think that the only way to control workers and production is if you legally control them; if they were your employees. Now, think about open source project leaders. They have no power over the people recruited to their projects; the person can quit the next day. The leaders have to persuade them that what they are doing is valuable enough to make their voluntary contribution. That is a very different way of leading. Think about what kind of leadership you would like either to exercise or to have for yourself.

The human genome project was a most revolutionary change: having access to information about the human genome, and it is all open. The research was published openly, it was shared openly, and that is why it moved quickly. We are beginning to see the need for being able to take the information underlying clinical trials, patient records, and research and making it more available so that the rate of learning and discovery move more quickly.

It takes between 12 and 17 years for information to move from the research phase in science to doctors. Now it is on the internet. What if there was information about the cost and the quality of medical procedures at different hospitals on the Internet, just as there are reviews of cost and quality of restaurants in newspapers? That could change the ways in which hospitals act.

Openness is not binary. Openness is not always good. How do you know what is a good contribution and what is a bad contribution? How do you deal with issues of authentication? Security? How do you figure out the appropriate level of openness? I think the notion of openness provides us with a way of looking at things to help us understand why we are doing things the old way or the new way, and what we might gain from being more open or not. This is a useful way of thinking about what we can now do, because of the Internet and digitization, that we could not do before, and the possibility of collaboration broadly.

Thinking about globalization: now we can have collaborators around the world. We can get good ideas, value, and contributions from people with vastly different experiences than our own that are likely to make what we do much more valuable.

In the end, "Everybody knows more than anybody." There is someone, somewhere, who has the experience, the intellect, and the inclination to be able to help add value to what you do.

Q: What is the status of the "tug of war" between economists and the minority of lawyers who support openness against the majority of lawyers who oppose this view?

A: In the long run, I am quite hopeful because technology undermines the notion of control. What is needed is one or more parties demonstrating that openness works better for it to overcome the institutional arrangements that have been built over the last 100 years. There are examples of it now, but it is a long way from being accomplished.

Q: With the change in Congress and the change in the White House in two years' time, will there be short-term change in the political environment on this issue?

A: I do not know. You see on both sides some people in favor of openness and some people not.

For example, the National Institutes of Health (NIH) recommends that the researchers who receive federal grants from them should make their research broadly available within 12 months after publication. Only 4% do that, which is shockingly low. A piece of legislation was introduced by a very liberal democrat and a very conservative republican, for totally opposite reasons. The democrat supported it in the interests of openness, and the republican in the interests of the taxpayers, so strange pairings do occur.

I think it would be wonderful if we could all keep this engine going, and I think that openness is the way things will work in future; that is why I support it.

Q: On security; how do we protect the world from "bad" elements?

A: Firstly, I worked with the Senate Intelligence Committee, and the people said there were two approaches to security. One is to keep everything secret; the other is to use all your energy to protect only the things that are really important. I support the latter.

Secondly, which do you think would be more robust, stable, and secure: a piece of software which is made and kept within a company, or one which is made open to everyone when debugging? There are no guarantees, but these are different theories.

Lastly, there are some things that need to be made secure at one moment, and in the next moment need not. Security is temporal. It is a difficult question especially for governments. I do not have a good answer for where the trade-off should be between openness and security, but I know that all impacts need to be considered, not just the negative ones.

Q: All the examples you have given of open companies are new, young companies. Do you think that older companies are also moving towards openness?

A: Procter & Gamble is a good example with its R&D. IBM spends US$100 million a year supporting Linux.

The companies mentioned are young companies because they are Internet-based, but what I was trying to suggest is that openness applies to business models, to research, to customer-generated content. Even Rupert Murdoch in buying MySpace has shown that he realizes that money can be made from advertising based on the use of user-generated content. Openness is occurring not only in Internet space, but also in the old and the new.

Q: What is the future of the relationship between broadcasting or mass media and the computer network information system?

A: Binary choices are usually wrong, and nature tends to be heterogeneous. Will there be a broadcast media for the foreseeable future? Yes; it happens to be a pretty robust technology. Will it be as important as it was? No; the Internet happens to be a very effective way of moving bits around and is more easily customizable. I see them as complementary.

I do not see the changes as being very dramatic, but ones which over time will show the decline of one and the rise of the other, but the power of the old should not be underestimated. The ones who adopt openness as a way of learning are the ones who will be really successful.

Q: To what extent is openness a Western or neo-colonial idea that we are projecting on others, and to what extent does is jibe with Eastern societies?

A: There is a phrase in Japanese - sannin yoreba monju no chie - which roughly translated means, "If you put three people together you have a genius." It is not an American phrase, nor a Western idea.

In the 1980s, with the issues of kaizen and continuous improvement, Toyota allowed workers who noticed any defect in production to close the line, while at GM only a supervisor could do so. I think this reflects the idea that all workers had a valuable contribution that they could make. I do not therefore think that the notion of the value of people is inherently Western.

Q: In Japanese society especially there is a tendency to look towards people with authority; legitimate or not. Therefore, might not the Western perception of openness be different from the Japanese perception?

A: Different societies have different patterns relating to authority; there is no question about that. Any description of this is bound to be more general than empirical, but I think there is always the possibility, whether in the U.S. or in Japan, of having the ability to take in from other places and to value that contribution. As a historical example there is the Meiji Restoration, during which things from other countries were not implemented in exactly the same way but were instead localized, so I do not see this as something peculiarly Western.

Q: I am worried about your suggestion that hospitals could be reviewed like restaurants, because hospitals work with limited budgets unlike the competitive market of restaurants. Hospitals are not businesses, so would it not be dangerous for them to have to react according to whatever was the "hype of the day"? Is that not a problem?

A: The U.S. government, as it pays for half the cost of health care, has a huge amount of data on the cost and quality of procedures at various hospitals. I think that if that information were appropriately analyzed, that information as a resource would be very important for patients to have.

This was tried in New York State, with information about the quality of cardiac interventions being released. A list of the hospitals with the numbers and results were released, and they varied enormously. The hospitals with low success rates of interventions very quickly got rid of doctors who did not perform well. Before this, the data was not used to evaluate who was doing good work and who was not. I want the information to be available as I think that it makes the hospitals do better and I think it is important for patients to know so that they can make an informed choice about which hospital to go to.

Also, in part, I am talking about issues like service, where hospitals can do better. Obviously, the results of surveys of patients' opinions will not be perfect, but these are taken as data inputs; not as absolute truth or the end of decision-making, but a contributing factor. It is useful, but I am more interested in real data about real cost and real quality about real medical activity.