The DNA of Information1

Bits and Atoms

The best way to appreciate the merits and consequences of being digital is to reflect on the difference between bits and atoms. While we are undoubtedly in an information age, most information is delivered to us in the form of atoms: newspapers, magazines, and books (like this one). Our economy may be moving toward an information economy, but we measure trade and we write our balance sheets with atoms in mind. GATT is about atoms.

I recently visited the headquarters of one of America's top five integrated circuit manufacturers. I was asked to sign in and, in the process, was asked whether I had a laptop computer with me. Of course I did. The receptionist asked for the model and serial number and for its value. "Roughly, between one and two million dollars," I said. "Oh, that cannot be, sir," she replied. "What do you mean? Let me see it." I showed her my old PowerBook and she estimated its value at $2,000. She wrote down that amount and I was allowed to enter the premises. The point is that while the atoms were not worth that much, the bits were almost priceless.

Not long ago I attended a management retreat for senior executives of PolyGram in Vancouver, British Columbia. The purpose was to enhance communications among senior management and to give everybody an overview of the year to come, including many samples of soon-to-be-released music, movies, games, and rock videos. These samples were to be shipped by FedEx to the meeting in the form of CDs, videocassettes, and CD-ROMs, physical material in real packages that have weight and size. By misfortune, some of the material was held up in customs. That same day, I had been in my hotel room shipping bits back and forth over the Internet, to and from MIT and elsewhere in the world. My bits, unlike PolyGram's atoms, were not caught in customs.

The information superhighway is about the global movement of weightless bits at the speed of light. As one industry after another looks at itself in the mirror and asks about its future in a digital world, that future is driven almost 100 percent by the ability of that company's product or services to be rendered in digital form. If you make cashmere sweaters or Chinese food, it will be a long time before we can convert them to bits. "Beam me up, Scotty" is a wonderful dream, but not likely to come true for several centuries. Until then you will have to rely on FedEx, bicycles, and sneakers to get your atoms from one place to another. This is not to say that digital technologies will be of no help in design, manufacturing, marketing, and management of atom-based businesses. I am only saying that the core business won't change and your product won't have bits standing in for atoms.

In the information and entertainment industries, bits and atoms often are confused. Is the publisher of a book in the information delivery business (bits) or in the manufacturing business (atoms)? The historical answer is both, but that will change rapidly as information appliances become more ubiquitous and user-friendly. Right now it is hard, but not impossible, to compete with the qualities of a printed book.

A book has a high-contrast display, is lightweight, easy to "thumb" through, and not very expensive. But getting it to you includes shipping and inventory. In the case of textbooks, 45 percent of the cost is inventory, shipping, and returns. Worse, a book can go out of print. Digital books never go out of print. They are always there.

Other media has even more immediate risk and opportunity. The first entertainment atoms to be displaced and become bits will be those of videocassettes in the rental business, where consumers have the added inconvenience of having to return the atoms and being fined if they are forgotten under a couch ($3 billion of the $12 billion of the U.S. video rental business is said to be late fines). Other media will become digitally driven by the combined forces of convenience, economic imperative, and deregulation. And it will happen fast.

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Updated on April 15, 1996