Recently the International Trade Commission (ITC) hosted a hearing entitled “Fighting the Unauthorized Trade of Digital Goods While Protecting Internet Security, Commerce and Speech” here in Silicon Valley. The aim was to investigate the possibility of better protecting the interests of digital information owners. Rambus participated in the hearing and I had the privilege of hosting several members of the ITC delegation here at Rambus to provide some background on our product history, the role of digital goods in developing computer and consumer hardware, and the role of security hardware in protecting digital goods.
Coincidentally, days before the ITC hearing I happened to be reading Ray Kurzweil’s “The Singularity Is Near” which posits that we are just at the beginning of a new economy where digital information is the most valuable asset:
“We see information at every level of existence. Every form of human knowledge and artistic expression – scientific and engineering ideas and designs, literature, music, pictures, movies- can be expressed as digital information.”
As I reflect on the ITC’s intentions and on Kurzweil’s predictions, I’m coming to see Rambus products in a broader light. Over the last 25 years, we have generated billions of dollars of value creating highly-differentiated products, through licensing the underlying intellectual property and digital information used to manufacture them. Importantly, our value in these products was delivered not in the physical sense, but in the informational sense.
Kurzweil goes on to predict that even physical products will become purely a function of the information used to create them…
“The real cost, of course would be the value of the information describing each type of product – that is, the software that controls the assembly process. In other words, the value of everything in the world, including physical objects, would be based essentially on information. We are not that far from this situation today since the information content of products is rapidly increasing, gradually approaching an asymptote of 100 percent of their value.”
Today, much of our most valuable property is protected through cryptographically-managed digital information. Whether it’s a password for a bank account, the contents of a phone call, or an email, cryptography allows people to participate in the life-changing benefits of digital communication while preserving and protecting their financial and intellectual assets, as well as their privacy. One of the things that we as a society struggle with is how to place value on information since there is no meaningful physical way to measure it. The value of information isn’t proportional to the size or extent of its digital expression. In fact, encryption shifts the ratio of digital storage to value. Using a single 256-bit key to encrypt a video consolidates all of the value of that information not in the storage of the video but in the key itself. In this case, our natural association of value with capacity is misplaced. This makes placing a value on digital information difficult, as its value is not proportional to any measurable quantity.
With but a few exceptions, the semiconductor industry has done little to measure value in the information it carries or the information used in its creation.. The industry is quick to measure the cost and price of a silicon device by its total number of transistors, but the true value of those transistors is more substantially a function of the digital information used to connect them. Silicon is no more than a physical carrier for an intellectual idea or digital information.
Businesses like our Cryptography Research division are responding to the need for protecting digital goods; governments are becoming aware of this need as well. Today entire business models, like cable television and the cellular phone network, rely on securely managing access to either physical or intellectual assets that are metered and managed through cryptography. While a two-year phone contract may be an annoyance, the convenience of a subsidized or free cell phone is a nice option to have that would otherwise not be possible without providing the carrier with the ability to monitor and control access to that network. It is safe to say that the most developed cellular networks in the world would not exist without the ability to protect the property rights of the companies that paid for the installation of that network.
Kurzweil recognizes the need to protect the rights of digital information owners:
“If the primary value of products and services resides in their information, then the protection of information rights will be critical to supporting the business models that provide the capital to fund the creation of valuable information. … Clearly, existing or new business models that allow for the creation of valuable intellectual property (IP) need to be protected, otherwise the supply of IP will be threatened…. IP business models invariably exist on the edge of change.”
In summary, I’m proud of Rambus’ pioneering role as a fabless semiconductor company, as an early provider of IP cores willing to protect underlying intellectual property rights, and now as a leading provider of security cores that are essential in enabling the owners of digital goods to maintain their value. The power of digital security through cryptography and key management to secure and maintain the value of digital information is a critical enabler of future economies. As Ray Kurzweil predicts, in the next 30 years nearly all economic value will come in the digital information used to describe “things”. I believe that we are only in the beginning stages of a transition from value being measured based on a physical metric to an informational one, and this means that tools and regulations to protect information are becoming even more essential.