Technology Day 2000—"The Future of Atoms in an Age of Bits"

HECHT: Let me introduce myself for those handful of you who don't know me. I'm Bill Hecht, class of '61, your senior employee, and for the past 20 years, and I suppose in perpetuity, Executive Vice President of the Alumni Association.

I want to welcome you to Saturday classes. Those of you who are my age and older remember Saturday classes. Some of us are age will look around and notice that a lot of the younger classes are still missing, and they don't have Saturday classes today. And therefore, some of them haven't figured out that we are going to have class this Saturday.

We provided you with a real, genuine fire hose yesterday evening, and I hope some of you stayed dry. I didn't. This is the intellectual part of the fire hose. Before I introduce this morning's program, a number of alumni have buttonholed me and asked about Mrs. Vests health. For those of you who don't know, Mrs. Vest suffered a massive coronary about two months ago. The miraculous thing is she's made a remarkable recovery.

And you will note that Chuck and Becky were far less visible at this event and then they normally are. She's doing quite well, and we hope to see her at lunch, but I can't guarantee that. It is, in the words of Chuck Vest, a miraculous recovery. So to those of you who've sent your good wishes, and I know many alumni have, thank you very much.

Today's technology programs are put together by a committee. And one of the first things a committee does, because we're here at MIT, is to call on a distinguished faculty member to help us. And this year it was fairly easy to decide what to do because we had Bill Mitchell, who's the Dean of Architecture, a Professor of Architecture and Media Arts and Sciences, who has come to us in the last several years and brought an enormous amount of excitement not only to the School of Architecture and Planning, but to the whole campus with his ideas, his vision, and his sense of excitement about how physical spaces are just as important in the digital age as they were in the analog age and in the Stone Age and in the Bronze Age and all of those ages that have gone before.

Today's program, as you know, has an interesting and catchy title. It's "The Future of Atoms in an Age of Bits." I'm always encouraged that atoms still have a place since I seem to acquire a few more every week. And I haven't been able to figure out how to do something about that. My wife teases me occasionally that I'm just becoming a real candidate for cloning, and someday there will be enough of me actually to go around.

Without further ado, let me introduce Bill Mitchell who will introduce the speakers in today's program and his own set of remarks. Bill?

[APPLAUSE]

MITCHELL: Well, good morning. I'm delighted to be here, and very happy to introduce a, I think, very exciting group of speakers for you this morning. Let me quickly sketch out the program for you-- what we're going to do-- and then I'm going to jump right into a presentation.

I'm going to lead off, and I'm going to talk about the future of all cities in general terms. I'm going to try and lay out a general framework for what's really happening to cities? What's really happening to architecture? What's really happening to our physical environment as the digital revolution unfolds all around us?

I'll be followed by Yossi Sheffy, who's Professor of Civil and Environmental Engineering and Director of the Center for Transportation Studies. And he's going to talk about-- well, the title is, "Transportation Auctions and Exchanges," but from talking to Yossi just before we started, I think his talk a little wider than that.

After the break, we'll have a talk from Rodney Brooks, who's the Fujitsu Professor of Computer Science and Engineering and Director of the Artificial Intelligence Laboratory, and a real pioneer in some very, very exciting areas of artificial intelligence.

And then finally, we'll have Roz Picard, who's an Associate Professor in the Media Lab, the program in Media Arts and Sciences. And she'll talk about the emotionally smart machine.

We are going organize things in this fashion. We'll have the first two talks, then we'll take a break. And then we'll have the second two presentations. And then following those second two presentations at about 11:30, if we stay on time, and I hope we will, we'll have a question and answer session.

And the way we're going to do this to make it work in this auditorium is that we'll handout cards for you to write questions on, and we'll ask you to write your questions out, hand them to somebody who will be very visible at the time. And we'll pick up those questions and take it from there.

So let me jump in and-- good, the technology worked. I got my first slide up here. I'm going to talk about a subject I've called e-topia, digital telecommunications and the future of cities. Now, in architecture and urban design, the term utopia has been around for a long time.

Architects and urban designers have often dreamt about the ideal cities, ideal futures, and the term the utopia from the Greek follows nicely to describe all of that. Or if you want to take a less optimistic view, sometimes people speak about the possible dystopias of the future.

What I really want to talk about today is our electronically mediated future. So I've taken the Greek root that generates utopia and dystopia and put an "e" front of it as we put an "e" in front of many things today. And I'll talk about e-topia. And I'll leave open the question about whether the future that we face is a future filled with remarkable positive possibilities, or whether the downsides are going to dominate. I'll try and frame the questions for you and ask you to think about where some of this leads.

I'm going to base what I talk about on three recent books. I wrote a book several years ago called City of Bits-- Space, Place and the Infobahm that looked very early on in the evolving internet era, looked at what might be happening to cities.

We in the School of Architecture and Planning then moved on and did some very interesting work on the question of high technology and low-income communities. What does this set of developments mean for social equity, for the gap between the haves and the have nots? Is digital telecommunications technology increasing that gap? Is it reducing that gap? What are the potentials for the future?

And most recently, from the MIT Press, I did a book called e-topia that pulls a number of these ideas together with the subtitle Urban Life, Jim-- But Not as We Know It. You have no idea how difficult it was to get to a subtitle like that through a respectable academic press, but we succeeded.

So in order to open up this topic, let me go right back to some basics-- really this is an urban design 101-- and say something about the relationship between networks and urban structure. As cities have evolved over the centuries, you see that they've acquired increasingly numerous and sophisticated networks to tie them all together, networks of tracks and roads, street systems, road systems, networks of pipes, networks of wires, more recently wireless channels, joining together patterns of production locations, storage locations, switching locations of various kinds, and consumption locations of various kinds.

Now, these networks have never been distinct in their functions, but as we'll see, through today, they start producing all sorts of complex, joint effects. And historically, we've seen that when new networks are overlaid on existing cities, existing urban patterns, they change the distribution of resources and opportunities within the urban fabric. They restructure the urban fabric, and this often creates winners and losers, and some very, very important social equity issues. And I'll come back to these a little bit later on.

Now, digital telecommunications infrastructure is the latest overlay that's transforming cities in this way. It's an infrastructure physically that consists of copper channels, glass channels, and wireless channels of various kinds, and then a collection, as you all know, of systems of servers at various locations, switching nodes, and incredibly numerous end user consumption points.

I want to say something about-- just to characterize what's going on, I'll try to illustrate to you how old and new infrastructures often overlay. It happened a week or so ago. I was driving down the El Camino Real in Palo Alto.

And as you probably know, this is one of the oldest pieces of urban infrastructure on the North American continent. It's the old road that tied together the Spanish missions and settlements way back in the 18th century and made a connection up the coast, as you see here. It was a channel for pedestrian traffic, for horse traffic, for horse drawn vehicles.

As I was driving along there the other day, I noticed a scar down the center of the road. And I drove a little further along, and I found a backhoe continuing that scar down the road. And you could probably guess what happened.

As I took a closer look at it, I saw that in fact, what's happening here is that right down this ancient right of way, this ancient piece of infrastructure, there's a new, very high speed fiber optic backbone being laid. So rather poetically, in exactly the same location that the first infrastructure in this area was laid down, the latest infrastructure is being located.

Let me show you something else about this just to set the scene a little bit. This is a famous monument of modern architecture that you see on the slide here right now. It's in the City of Chandigarh in the North of India, a capital city that was designed by the architect Le Corbusier to be the capital of the Punjab.

And at the heart of his design there's a large open piazza which was intended to function as a face-to-face meeting place, a place where people could come together, exchange ideas, really be something like the ancient Greek Agora. And the center of this was this famous Open Hand Monument grasping at the sky and symbolizing that notion.

Now, it turns out to be the case that this piazza never worked partly because it was too big, partly because it was too hot, partly because it's too difficult to get to. But it represents this ancient idea of the way that people can come together face to face to constitute their community.

Now, down the southern end of Chandigarh, exactly the opposite end of the city from this monumental center, is another monument grasping at the sky, I noticed the last time I was there. Of course, this one actually catches something, unlike the first one.

And this is a satellite dish, a new piece of-- it's a satellite earth station. This is a new piece of infrastructure, and it's making, if you like, a digital oasis in this area. It's a location that it connects this point on the surface of the Earth to the international digital telecommunications network, the global digital telecommunications network.

There's a little switching station there-- microwave tower behind it. And everything within line of sight of that microwave tower is digitally connected to the outside world. So this is a center of community in a very different sense from the center of community symbolized by the open hand monument.

Now, what I want to do quickly is go through some questions relating to what's really going on in cities as a result of this. How is new telecommunications technology changing urban patterns? Is it simply substitutional? Are we merely replacing familiar means by e-this and cyber-that? Or do these new ways of doing things add up to a much more profound structural change?

And I'd like to suggest to you that in fact the changes are fundamental, and that we cannot plan for future urban patterns, and indeed we cannot plan the campus of the future without taking account of cyberspace as well as physical space.

How might we think about this? Well, let's go back to the idea of networks and what they do. Essentially, networks of various kinds that tie cities together support interactions among activities, and they provide the "glue" that hold systems of production and exchange, cities, and regions together.

They have a couple of different functions. Transportation and telecommunications technologies support dispersed interaction among activities. Storage technologies of various kinds, beginning with writing, support asynchronous interaction.

Means you don't have to be in the same time and the same place in order to interact. You can leave a message somewhere, and then somebody can pick it up later. And the great thing about packet switching, the internet, and the World Wide Web is they really combine the two, so we have the possibility of interactions both dispersed and asynchronous.

If you lay out the sorts of possibilities that result from this, you find that something very interesting emerges-- a whole spectrum of different sorts of possibilities begin to develop. I apologize for showing you a rather boring table, but this is useful as a way of beginning to understand what's going on.

If you think about firstly the possibilities for dispersal of interactions, you can have local face-to-face interaction, so the traditional kind of urban pattern, the idea that you do things face-to-face. It's the idea behind the Greek Agora, behind the traditional village, behind the traditional nine to five workplace, and so on.

If you introduce some simple forms all communication at a distance, things like church bells, minarets, smoke signals, semaphores, and so on, you can begin to get partially dispersed interaction. Add a capacity to harness the electromagnetic spectrum for communication, and you get all of the possibilities that we've seen since the telegraph-- the telephone, radio, television, and so on. So there are whole bunch of possibilities for synchronous interaction that begin to develop.

Now, if we start to introduce storage technology, if you think about ephemeral storage like Post-it notes, which don't last very long, local semi synchronous interaction-- you leave a Post-it note somewhere and you get a message communicated that way at a particular location. You can begin to disperse that sort of interaction by introducing some simple transportation technology, so things like pedestrian and bicycle messenger systems disperse things a bit further.

And then if you introduce large scale, high speed transportation systems, you get the whole business of mail systems, these sorts of things. And then with telecommunications, voicemail and email become techniques for semi-synchronous dispersed interaction.

And then finally, if you really make large scale use of storage technology, if you keep things around for a long time, for example, you get the idea of the non-circulating library, the old fashioned manuscript library, for example. Or old-fashioned database systems, where you actually had to go to the computer to get access.

Disperse that a bit further through computer networking, you get things like intranets. And disperse a over wider area, we get the whole structure of the World Wide Web, supporting Dot-com enterprises and so on.

So what's going on these days is that our cities, our campuses, our buildings are held together by a combination of all of these sorts of things, but of course, we're seeing a significant shift towards that bottom left-hand corner. There's a kind of shift across the diagonal going on.

Now, the key question for architects and urban design generally is, how do you find some combination of land use pattern, transportation, and telecommunication capabilities that effectively supports the life of a community? And as technologies change, you end up with different sorts of patterns.

Now, let me show you an interesting example of how a very unusual pattern developed out of a couple of new technologies. This is in the 1920s and the 1930s in the Outback of Australia where, firstly, the land use pattern was a pattern of a very geographically dispersed population. People scattered over thousands of square miles working in the cattle industry and the mining industry and very widely separated from each other.

There are a couple of interesting new technologies, however, at that point. There was a thing called the pedal-powered short-wave radio that enabled telecommunication very effectively over those distances. And air transportation using light airplanes was becoming increasingly feasible. So it was possible to put together some systems that held that community together in a very unusual new way.

Here's the technology. This is a pedal-powered generator of that era. I've actually pedaled one of these things. It's terrific. Keeps you very fit as you're communicating, of course. Here's somebody back in the '20s using one of these things. This is the internet of its era, if you like. This is like sitting at your personal computer and logging into AOL.

Except what's going on here is the pedal generator, an old valve short-wave radio, and this is so early here, he's actually using a Morse key. And this is hooked up to a piece of wire that's hooked up to a eucalyptus tree, and this will allow you to communicate.

And this supported a couple of very interesting systems. It supported a thing called the Royal Flying Doctor Service that enabled you remotely to summon medical advice, or if you're a bit more seriously ill, a medical practitioner would jump in a light plane from someplace like that Alice Springs or Broken Hill or Cloncurry and come out and get you, and take you back to where you could get more effective medical service.

So a combination of telecommunication and transportation-- two new technologies at that point-- two new kinds of telecommunication and transportation technologies providing a new way to deliver medical service. And it also provided a new way to deliver education.

We hear a lot of talk today about remote education and dispersed campuses, and so on. Well, this happened here back in the '20s. And there was a thing called the School of the Air that still operates. And you see the wonderful logo here with the transmission tower and the slogan, "Parted but united."

The kids would assemble in their school rooms every morning, but their school rooms were in their houses dispersed across the Outback. The teachers would be in places like Broken Hill, and everybody would communicate via the radio, and you got a dispersed classroom.

This is today. Actually, it still operates. This is the School of the Air in Broken Hill, except today the technology is a little different. You see a satellite dish there, and very sophisticated telecommunications is used these days.

Let me give you one more example of this kind of new way of holding a city together or a community together by combining technologies. This is something that you'll see in Singapore if you're around there these days-- a system for putting together a road transportation system with some new telecommunications capabilities in order to achieve efficiencies in this case.

This is exactly the opposite situation. This is where you have a very condensed population, very high density, a great demand on the roads. Important issue is making efficient use of available road capacity. So a system is being put together that, at one level, is a sophisticated kind of taxation, an infrastructure funding mechanism.

At another level, it's a demand management and resource allocation system that can give you considerable efficiencies. And it can be used in other ways too, which may not be so positive. A system like this can be used as a kind of surveillance system. It can also be used as a sort of insidious access control system that really starts to control the way people can move around the urban fabric.

And this is what it's like. On the dashboard of every automobile, there's a device like this, a little electronic box that has a debit card in it and a readout showing the amount of money in your debit card in Singapore dollars. And as you drive around, you see these electronic road pricing rates posted. And these can-- depending on the sophistication of the system, and I'm not quite sure how sophisticated this one is in operation, you can vary these rates according to time of day, according to congestion, according to the type of vehicle, and so on.

So what this is showing, it's going to cost you more to drive a large vehicle down this street then it's going to cost you drive a small vehicle down this street. As you drive around then, as you start to move down various streets, you see these kinds of devices that have these kind of booms across the roadway.

And as you drive under one of these things, it sucks the money out of your debit card. And so you may or may not think this is a good thing, but you get the idea of how this is a very, very different way of organizing the flow of traffic. And Yossi Sheffi, I'm sure, will talk about some of these sorts of things probably in some more detail.

And then you can put this together with other things. Many of you are familiar with these kinds of automobile navigation systems now that depend on a GPS satellite system, and keep you located in the city. Well, you can put these together with these road pricing systems, for example, and you can ask these things to find the cheapest route from one location to another, and so on.

Once again, I want to emphasize what's going on here is very sophisticated and complex interaction between a particular pattern of land occupation, pattern of land use, and some modes of transportation, and some telecommunication capabilities. And all of this is being put together in really a very complex system to support the interactions within a community.

Now, I want to take a few minutes to talk about what this really means to the future of cities as we start to introduce more and more sophisticated electronic capabilities, things like the World Wide Web and the internet, things like increasingly intelligent automobiles connected to large scale digital infrastructure systems-- all of the sorts of things that we hear so much about today.

Essentially, the effect of all of these things is to start to loosen spatial and temporal linkages among activities. There's less need for everything to be clustered together spatially because many things can be done at a distance. Not everything, but many things can be done at a distance. And there's less need to coordinate activities because of the capacity for asynchronous interaction.

And the consequences of this on cities are very complex. It turns out that when you loosen these linkages, some components of activities want to decentralize to achieve wider coverage to get to larger markets and so on. Other components want to centralize to achieve economies of scale, to get knowledge spillover effects and these sorts of things.

Yet other components of activities form desirable new alliances. For example, if you can do your work at a distance, maybe you move your residential location to a scenic location or a location that offers particular recreational advantages and so on.

Yet other components of activities begin to float freely so that they can respond flexibly to dynamic conditions. So if the cost of labor is important to an enterprise, for example, if it's very sensitive to that, maybe what happens is activities move around chasing the labor markets, move offshore to places where it's particularly attractive and so on.

And the consequence of this is something that I've called fragmentation and recombination of familiar building types and urban patterns. The ways that things have clustered together in the past begin to break up and new sorts of patterns begin to crystallize out. You can think of it as a bit like a chemical reaction in which on some bonds get broken, some new ones get formed, and a new kind of structure begins to develop that functions in a different kind of way.

And this is a consequence of some of these locational connections among activities being broken but others remaining. For example, you might go to Amazon.com and buy books at a distance. But if you want your hair cut, then you probably want to do that face to face. I can imagine Rod Brooks developing some technology that would enable that to happen at a distance, but it's not a common everyday thing at the moment anyway.

So let me just analyze a couple of these examples of fragmentation and recombination, and then I'm going to draw it all together and leave you with some questions. Here's a traditional building type, a much loved traditional building type, the traditional bookstore. And what this does is combine several functions at one side.

It combines an advertising function by virtue of the banner out front in the display window. It's a place for storage of books. It's a place for browsing by actually physically walking among the books. It's a point of transaction that happens right at the front counter there. And the back office work related to this enterprise literally takes place in the back office back behind all of the books.

And it's all wrapped up in a neat little architectural package. It's all in a box, if you like, because the traditional way of relating all of these activities is through adjacency and through the possibility of direct, face-to-face interaction.

Now, of course, what happens when something like Amazon comes along is that some of these functions are virtualized and decentralized. So the browsing and purchasing functions are virtualized and decentralized, and they fragment, they blow apart, and they recombine with domestic space-- the space for this recombines with domestic space, with workspace, with these kinds of locations. So that aspect of what was accommodated by the bookstore decentralizes.

At exactly the same time, however, there's a radical centralization of the distribution function. You end up with large, national distribution centers where millions and millions of books are kept, highly automated so you get economies of scale, very large so you can keep in stock larger numbers of titles than is possible in that little physical bookstore.

And these, of course, are at different locations. These are located at national airline hubs. And so a very different kind of spatial pattern develops in which one aspect of the activity is decentralized, another aspect is highly centralized, and the back office work, because of business-to-business e-commerce capabilities, is able to float freely to wherever appropriately skilled labor is available at an attractive price. So some of it's centralizes, some of it decentralizes, and some of it mobilizes.

And there are direct and immediate consequences of this sort of thing for cities. Retail space, for example, has changed over the years, firstly, as a result of changes in transportation and the development of the suburban mall. More recently as a result of these new patterns of commerce.

And you see, for example, the kind of thing that I'm showing here. This happens to be in downtown Vancouver. And it's literally a white elephant. This is a large Eaton's department store, totally unoccupied and totally derelict as a consequence of the sorts of shifts in retail patterns that have taken place firstly through changes in transportation, secondly as a result of changes more recently in telecommunication.

Let me go very quickly through a couple more examples. You all know what's happened to banking, I think. It used to be that you had to go to a branch bank to transact your business. It was a place to synchronous, face-to-face interaction, literally across the counter with the teller. The bank building was a very important civic kind of structure, often celebrated as this one on Massachusetts Avenue.

The architecture carry some symbolic freight. It was a place-- the architecture, this solid, cut stone, classical architecture of course is intended to symbolize the permanence, the solidity, the power, the respectability of this institution in the community. So that's how that worked.

Then along came automated teller machines. And firstly, these were asynchronous. They allowed 24-hour-a-day, seven-day-a-week service. You didn't have to come face to face with a teller in banking hours. And we've got this fragmentation and recombination once again.

These sorts of things ended up in all kinds of locations-- in supermarkets, in airports, in student union buildings, in gambling casinos-- any place where people needed cash, in fact. So a classic example of this fragmentation and recombination process.

And then more recently, the development of electronic home banking systems has further virtualized and decentralized customer interactions. And this has had all sorts of consequences, in fact, revealed by the slide because this is a slide from a few months ago showing Bank Boston providing this kind of service, and now it's Fleet providing this kind of service.

The consequence of this has been direct and profound for cities. We've seen branch banks being shut down in the thousands all over the world. This is just a clipping from a little while ago from London Guardian, for example, about hundreds more Barclays branch banks being shut down.

And we've reached a kind of situation-- it's very interesting-- where a different combination of use of physical space, use of telecommunications, and use of transportation has developed. Some of the branch bank looks something like this. Banking organizations now have electronic fronts and bricks and mortar backs. The main street facade mostly is replaced by a screen logo on an ATM machine or a website.

Often very much on the downside, there's a loss of local, physical presence in communities. And you have very practical questions-- what do you do with these old buildings? And my observation is that Starbucks often takes over the sites. You've probably seen this in many locations. And then the back office facilities, once again, are off chasing inexpensive labor in some offshore location.

New living patterns. I don't have time to go through this in detail, but one of the things we're starting to see is a recombination of the home and the workplace as a consequence of the possibility of telecommuting. As a result of business-to-consumer e-commerce, the home becomes an intensified delivery site.

We're seeing in many contexts the development of 24-hour live/work neighborhoods where people don't commute away, but in fact live and work in the same small-scale neighborhood, Small-scale local environments with global connections is a very interesting pattern starting to develop, for example, in the area around South Park in San Francisco. You can see this developing in a very interesting sort of way.

We're also seeing the reinvention of some traditional building types, if you like, pre-industrial patterns becoming viable once again in the post-industrial year. For example, right throughout Southeast Asia, the traditional packing of the shophouse, which we here in Singapore, is a very, very common traditional type where you have workspace downstairs, living space upstairs.

And this is also common in Europe in a slightly different pattern. A very typical European street, this one in Geneva, shows workspace on the ground floor and then apartments on the upper floors. This sort of fine-grained combination of living and workspace is a traditional pattern.

In the industrial era, we saw something different. We saw the development of bedroom suburbs, industrial and commercial zones in different parts of the city, commuting back and forth among these things and so on. What we're seeing now is a reinvention of the shophouse among other things.

This again is in Palo Alto. Sorry for the slightly fuzzy photograph. But this shows reinvented, high-tech electronic shophouses. On the ground floor here-- and this happens to be on El Camino Real incidently-- on the ground floor, there are workspace all occupied by little internet start-ups, and on the upper floors there are apartments where typically the folks who work these and start-ups live.

It's pretty disgusting actually. All full of futons and underwear on the floor and kids occupying the space 24 hours a day. But it works. It works. And it's very interesting to see this kind of reinvention going on.

Finally, what's happening to public space? Well, turns out that in the digital era, many traditional attractions that pull people to public space no longer work in the way they used to. We're seeing a shift to dispersed from more focused interaction in many contexts. We're seeing a shift of many activities from public space to private space.

And this has some interesting and difficult consequences. I'll show you one example of how this kind of thing works. Here's a very important public space in Hong Kong-- one of the racecourses in Hong Kong. You may know if you know Hong Kong that the racecourse is a very important place. People love to go to the races.

And it functions very much as a public space because many people show up there. It's a place to network. It's a place to do deals. It's a place to be known as a prominent member of the community and so on. And this is all held together by adjacencies.

Traditionally at a racecourse, you had to be in the stands to see the races run. The bookies were there on the rails to take your money. All of these sorts of things were both synchronous and tightly focused at a particular location.

This enabled, as many of you know, in this particular context, The Hong Kong Jockey Club to be a very rich and powerful organization. But now what's starting to happen is, for example, a development of these sorts of devices. This is an online betting device that enables you to plug in to a telephone outlet anywhere, place your bets any time up to the running of the race from any location.

You can listen to the race on the radio, or you can watch it on television, or you may not even bother. And then, of course, what happens is that immediately the race is run. Your account is electronically credited or debited. Inevitably, in my case, debited.

And then here's a clipping from the South China Morning Post just showing a slightly more up-to-date version of this kind of thing, and nicely packaged as you can see-- and I think this is rather good-- packaged in a little pouch with your cell phone and a place to keep your business cards. It's a rather elegant kind of summary of the way that things are moving.

Now, what does this mean socially? Well, what it means is that if this happens on a large scale, the old modes of social interaction structured by synchronous assembly in particular urban locations begins to break down. And this nice New Yorker cartoon begins to illustrate quite nicely this sort of mechanism.

If you can't read it, this is a typical New Yorker barroom cartoon. And the customer is saying to the bartender, "To avoid the tedium of this endless socializing, Eddie, I've decided beginning Monday, to obtain all my future booze from Amazon.com" And you can begin to understand the sort of social consequences that can flow from this.

So to summarize and wrap up, you can trace these sorts of processes of fragmentation and recombination of the urban fabric in any kind of field that you want to look at. You could look at in retailing. You could look at it in the pattern of housing. You can look at in the workplace. You can look at it in education. You can look at it in medical services.

Any kind of traditional building type or urban pattern, you can begin to see the changes that are taking place as a consequence of this massive shift of activity across the diagonal of this table from the traditional way of doing things, which was entirely face to face, synchronous, based on physical assembly, across to a context where not everything happens electronically, at a distance, asynchronously-- far from it-- but a much larger proportion happens that way, loosening the traditional bonds among activities and allowing new sorts of patterns to develop.

This affects markets. It affects organizations. It affects communities. We see this process of fragmentation and recombination of familiar building types and urban patterns, and this leaves us with some very interesting questions to face. There are some design questions, and this particularly affects architects and urban designers. How do you organize systems of physical and virtual places connected by transportation telecommunication links that operate in some of the new ways I've described?

There are some interesting empirical research questions. How do these systems actually work out in practice when you put them in place? What the consequences? How do people actually use these things? Does telecommuting, for example, reduce traffic, reduce number of trips, or does it restructure, or is the complementarity effect? Lots of interesting questions like this.

There are some real estate questions. What new opportunities start to be created? What opportunities traditionally have been there become history? And then the questions I want to leave you with are some very fundamental questions of what this means to social equity within our communities.

There are some short-term issues that follow from the impossibility of deploying new infrastructure everywhere at once. We have to dig a lot of ditches and erect a lot of towers and so on. So in the short-term, there's an inevitable digital divide. Some people are going to get new technology before other people. So there's a difficult, complex, very, very important question of managing the transition to new patterns and new technologies so that very difficult questions of inequity are not created on too large a scale.

There's a longer-term question that the new infrastructure very heavily mediated by digital communications is potentially ubiquitous, potentially provides a very efficient mechanism for distribution of access to economic opportunity and basic services. That doesn't happen automatically as a consequence of the availability of the technology. But with the right sorts of social policies, with the right sorts of design interventions, those are very attractive possibilities that can begin to be realized in the longer term.

And then in the very long term, we face an issue that almost certainly education, to a level that enables people to operate effectively with these new capabilities, education rather than physical access to the infrastructure and to the technology is probably the key issue. So it's a moment of dramatic and sweeping change that raises some very profound questions, and I encourage you to think about these questions and raise some questions for us to discuss later in the morning. Thank you.

And let me now introduce Yossi Sheffi. Yossi?

SHEFFI: Good morning, everybody. I'll start right from the beginning. Two steps back. Good Morning, everybody. The crowd is alive. Okay. We'll talk a little bit about lots of stuff. And I'll try to talk fast to gets us-- not back on time. This is hopeless. But get close to back on time. Because originally, I thought I had 40 minutes for the presentation. I came in at 30. Now I have less, but I'll try to make it to work.

The outline which we'll cover is as follows. Ah, it works. We'll talk about the internet and electronic commerce in general, some business models on the internet, business-to-consumer issues, e-retailing, transportation issues related to this, and intelligent transportation systems and congestion all in one. This is actually a long agenda. We'll try to go through relatively quickly.

This graph is the obligatory graph. Anybody who talks about the internet has to show something that goes like this. So this is mine. It can be anything. The number of servers. The business-to-business transaction, business-to-consumer transaction-- anything tied to the internet. I did it. We're okay.

In fact, because of this, this is tied many times to network phenomenon and the winner-take-all that happens sometimes in network type of businesses, of which many internet businesses are. And it's the reason to try to get there first. He who gets there first many times wins the battle.

But in general, we're facing with millions of servers and billions of devices and trillions of dollars in e-commerce and a world connected like never before. And the question is, what does this mean? We developed certain competencies now.

For example, we can manage large communities online. We can run huge auctions and match buyers and sellers in a very effective way. And we can communicate very, very effectively large amounts of data through the Web.

Let me very quickly go through three basic business models that sprung up mainly on the internet. These are not totally new business models, but on the internet, you can look at three types of businesses. One is when a buyer is trying to connect to several sellers. This is mainly a business model where it prevalent in business-to-business type transactions.

When one buyer-- for example, when I try to buy something from MIT, I try to buy a box number two pencils, I actually go into a website and hit a box of number two pencils. MIT ties to several providers on the Web, and somehow this box of pencils finds its way to my office. So this is a business model that in fact MIT Procurement is using.

The other one is a seller-side business model, when it's all the catalogs. And you go to LL Bean, J Crew, or industrial catalogs to buy what the seller puts online. The last model is the aggregation model, when you try to aggregate many buyers and sellers together. In the consumer-to-consumer space, the most famous example is, of course, eBay when it brings together to one digital place a lot of buyers and a lot of sellers at the same time the transact, to go through business.

I'm not going to spend too long on this. But just mention that these various business models are in fact tied to all kinds of auctions. Many times, seller-based business models are ties to seller-based auction of people auctioning off capacity or ability to do work.

On the buyer's side, there are many times you'll find so-called reverse auction or RFP, RFQ type bids when buyer put their business online and sellers are bidding against it. And you'll find also double-sided sellers in exchanges just like the New York Stock Exchange.

There are exchanges popping all over the world. The United States now, there are about 800 industrial exchanges operating where people are trading anything from transportation services to chemicals to plastics to paper to paper clips-- what have you.

Let's now go closer to home and look at the effect of e-commerce going from business to the consumer with an emphasis on transportation. The traditional business model before the Web was that stuff got from a factory to a distribution center to a store, and then we all came to the store and picked it up.

Of course, after the Web, it's done a little differently where it's just sitting there, not going anywhere, and the hope is that the little vans will come and drop some stuff right next to us as we do whatever it is that we do, which is kind of nirvana, right? We're just sitting there doing what we're doing, and the stuff comes and just appears.

This, in fact, is a scheme, is kind of a model of various delivery systems that are being used in practice. In practice, actually in some cases like Peapod, they actually do not bypass the store. The delivery is actually from the store. Or they used until lately.

Well, now they're not doing anything at all. But until a few months ago, they were collecting-- they started doing from warehouses. But before that, when you got an order from Peapod, they went to the local Stop and Shop here in Boston, collected your stuff, and brought it to your home.

Sometimes these outfits like PetSmart are tied to distribution centers of retailers, like in this case for Kmart, and they will use exactly this model. They will collect at the distribution center and deliver it to the home. Officedepot.com does not use its own warehouses.

Actually, does not use the same warehouses. The storage, this was a specialized warehouse. eToys is using other parties. Amazon.com is trying many cases to go directly from the supplier to the home. They found out actually it's not working very well, and they have to build their own distribution center.

But the challenges here-- there are several challenges in all these models of delivering. First the all, take Amazon for example. From '96 to '99, these sales went up 100 fold. The losses went up 120 fold. You don't need to be a graduate of MIT to lead the trend-- is not promising.

So the question is, how do you make money in this business? It's a serious question. And a lot of it is tied to the delivery. A lot of it is ties to how we can deliver efficiently. And when you look at the carriers, at UPS, FedEx, and the Postal Service who are doing the bulk of the e-commerce delivery, first of all, they are facing real challenge in the future. Right now, less than 10% of what they deal with is tied to e-commerce, and most of this, by the way, is business-to-business deliveries still, even on e-commerce front.

So if everybody would start really doing home delivery, they'll face real capacity problems. They just can't do it. Right now, FedEx and UPS have very similar cost structure. They make about-- the revenue is about $29 on a package delivered to business. And they deliver on the average to business, about 25 times per hour. 25 deliveries per hour to business.

To home, the average package cost between $10 and $15, and they can go do only five to eight deliveries an hour. Without getting into the cost again, you start realizing there's a problem there. The home deliveries are not making money for this outfit. They are all still riding on the business delivery.

All of them have problems with perishables-- how to deliver perishables. It cannot go through their distribution center. All of them have problems with delivering heavy stuff. When you want to order your sofa online, it's hard to imagine the FedEx guy running with a sofa up the stairs. It just doesn't work, right?

And of course, there's a problem of congestions of all these vans running around the city and all these trucks running around the city and creating a hell of a lot of congestion, which you can see in downtown New York today.

So how do we deal with some of this? Well, there are some alternatives. With perishables, people are dealing with dedicated fleets like webvan is trying to do, put a system of warehouses and their own fleets to deliver perishables. NationStreet is a system for dealing with large packages.

They use commercial deliveries between urban centers, and then they tie to agents that deliver anyway large stuff for stores and for other outfits to deliver the sofa and refrigerator and whatever else they want to do. It's a company in fact right here in the Boston area. The challenge still is to provide good service, and to make it profitable, and to develop the systems to control this, which nobody has actually figured out yet.