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0:11 Well, good morning. You know, the computer and television both recently turned 60, and today I'd like to talk about their relationship. Despite their middle age, if you've been following the themes of this conference or the entertainment industry, it's pretty clear that one has been picking on the other. So it's about time that we talked about how the computer ambushed television, or why the invention of the atomic bomb unleashed forces that lead to the writers' strike. And it's not just what these are doing to each other, but it's what the audience thinks that really frames this matter.

0:47 To get a sense of this, and it's been a theme we've talked about all week, I recently talked to a bunch of tweeners. I wrote on cards: "television," "radio," "MySpace," "Internet," "PC." And I said, just arrange these, from what's important to you and what's not, and then tell me why. Let's listen to what happens when they get to the portion of the discussion on television.

1:06 (Video) Girl 1: Well, I think it's important but, like, not necessary because you can do a lot of other stuff with your free time than watch programs.

1:19 Peter Hirshberg: Which is more fun, Internet or TV?

1:21 Girls: Internet. Girl 2: I think we -- the reasons, one of the reasons we put computer before TV is because nowadays, like, we have TV shows on the computer. (Girl 3: Oh, yeah.) Girl 2: And then you can download onto your iPod.

1:32 PH: Would you like to be the president of a TV network?

1:36 Girl 4: I wouldn't like it. Girl 2: That would be so stressful. Girl 5: No.

1:41 PH: How come?

1:42 Girl 5: Because they're going to lose all their money eventually. Girl 3: Like the stock market, it goes up and down and stuff. I think right now the computers will be at the top and everything will be kind of going down and stuff.

1:53 PH: There's been an uneasy relationship between the TV business and the tech business, really ever since they both turned about 30. We go through periods of enthrallment, followed by reactions in boardrooms, in the finance community best characterized as, what's the finance term? Ick pooey.

2:14 Let me give you an example of this. The year is 1976, and Warner buys Atari because video games are on the rise. The next year they march forward and they introduce Qube, the first interactive cable TV system, and the New York Times heralds this as telecommunications moving to the home, convergence, great things are happening. Everybody in the East Coast gets in the pictures -- Citicorp, Penney, RCA -- all getting into this big vision. By the way, this is about when I enter the picture. I'm going to do a summer internship at Time Warner. That summer I'm all -- I'm at Warner that summer -- I'm all excited to work on convergence, and then the bottom falls out. Doesn't work out too well for them, they lose money. And I had a happy brush with convergence until, kind of, Warner basically has to liquidate the whole thing.

2:56 That's when I leave graduate school, and I can't work in New York on kind of entertainment and technology because I have to be exiled to California, where the remaining jobs are, almost to the sea, to go to work for Apple Computer. Warner, of course, writes off more than 400 million dollars. Four hundred million dollars, which was real money back in the '70s. But they were onto something and they got better at it. By the year 2000, the process was perfected. They merged with AOL, and in just four years, managed to shed about 200 billion dollars of market capitalization, showing that they'd actually mastered the art of applying Moore's law of successive miniaturization to their balance sheet.

3:40 (Laughter)

3:41 Now, I think that one reason that the media and the entertainment communities, or the media community, is driven so crazy by the tech community is that tech folks talk differently. You know, for 50 years, we've talked about changing the world, about total transformation. For 50 years, it's been about hopes and fears and promises of a better world. And I got to thinking, you know, who else talks that way? And the answer is pretty clearly -- it's people in religion and in politics.

4:10 And so I realized that actually the tech world is best understood, not as a business cycle, but as a messianic movement. We promise something great, we evangelize it, we're going to change the world. It doesn't work out too well, and so we actually go back to the well and start all over again, as the people in New York and L.A. look on in absolute, morbid astonishment. But it's this irrational view of things that drives us on to the next thing.

4:34 So, what I'd like to ask is, if the computer is becoming a principal tool of media and entertainment, how did we get here? I mean, how did a machine that was built for accounting and artillery morph into media?

4:46 Of course, the first computer was built just after World War II to solve military problems, but things got really interesting just a couple of years later -- 1949 with Whirlwind, built at MIT's Lincoln Lab. Jay Forrester was building this for the Navy, but you can't help but see that the creator of this machine had in mind a machine that might actually be a potential media star. So take a look at what happens when the foremost journalist of early television meets one of the foremost computer pioneers, and the computer begins to express itself.

5:19 (Video) Journalist: It's a Whirlwind electronic computer. With considerable trepidation, we undertake to interview this new machine.

5:26 Jay Forrester: Hello New York, this is Cambridge. And this is the oscilloscope of the Whirlwind electronic computer. Would you like if I used the machine?

5:36 Journalist: Yes, of course. But I have an idea, Mr. Forrester. Since this computer was made in conjunction with the Office of Naval Research, why don't we switch down to the Pentagon in Washington and let the Navy's research chief, Admiral Bolster, give Whirlwind the workout?

5:49 Calvin Bolster: Well, Ed, this problem concerns the Navy's Viking rocket. This rocket goes up 135 miles into the sky. Now, at the standard rate of fuel consumption, I would like to see the computer trace the flight path of this rocket and see how it can determine, at any instant, say at the end of 40 seconds, the amount of fuel remaining, and the velocity at that set instant. JF: Over on the left-hand side, you will notice fuel consumption decreasing as the rocket takes off. And on the right-hand side, there's a scale that shows the rocket's velocity. The rocket's position is shown by the trajectory that we're now looking at. And as it reaches the peak of its trajectory, the velocity, you will notice, has dropped off to a minimum. Then, as the rocket dives down, velocity picks up again toward a maximum velocity and the rocket hits the ground.

6:46 How's that? Journalist: What about that, Admiral? CB: Looks very good to me.

6:52 JF: And before leaving, we would like to show you another kind of mathematical problem that some of the boys have worked out in their spare time, in a less serious vein, for a Sunday afternoon. (Music)

7:09 Journalist: Thank you very much indeed, Mr. Forrester and the MIT lab.

7:14 PH: You know, so much was worked out: the first real-time interaction, the video display, pointing a gun. It lead to the microcomputer, but unfortunately, it was too pricey for the Navy, and all of this would have been lost if it weren't for a happy coincidence.

7:31 Enter the atomic bomb. We're threatened by the greatest weapon ever, and knowing a good thing when it sees it, the Air Force decides it needs the biggest computer ever to protect us. They adapt Whirlwind to a massive air defense system, deploy it all across the frozen north, and spend nearly three times as much on this computer as was spent on the Manhattan Project building the A-Bomb in the first place. Talk about a shot in the arm for the computer industry. And you can imagine that the Air Force became a pretty good salesman. Here's their marketing video.

8:12 (Video) Narrator: In a mass raid, high-speed bombers could be in on us before we could determine their tracks. And then it would be too late to act. We cannot afford to take that chance. It is to meet this threat that the Air Force has been developing SAGE, the Semi-Automatic Ground Environment system, to strengthen our air defenses. This new computer, built to become the nerve center of a defense network, is able to perform all the complex mathematical problems involved in countering a mass enemy raid. It is provided with its own powerhouse containing large diesel-driven generators, air-conditioning equipment, and cooling towers required to cool the thousands of vacuum tubes in the computer.

9:07 PH: You know, that one computer was huge. There's an interesting marketing lesson from it, which is basically, when you market a product, you can either say, this is going to be wonderful, it will make you feel better and enliven you. Or there's one other marketing proposition: if you don't use our product, you'll die. This is a really good example of that.

9:25 This had the first pointing device. It was distributed, so it worked out -- distributed computing and modems -- so all these things could talk to each other. About 20 percent of all the nation's programmers were wrapped up in this thing, and it led to an awful lot of what we have today. It also used vacuum tubes. You saw how huge it was, and to give you a sense for this -- because we've talked a lot about Moore's law and making things small at this conference, so let's talk about making things large. If we took Whirlwind and put it in a place that you all know, say, Century City, it would fit beautifully. You'd kind of have to take Century City out, but it could fit in there.

10:00 But like, let's imagine we took the latest Pentium processor, the latest Core 2 Extreme, which is a four-core processor that Intel's working on, it will be our laptop tomorrow. To build that, what we'd do with Whirlwind technology is we'd have to take up roughly from the 10 to Mulholland, and from the 405 to La Cienega just with those Whirlwinds. And then, the 92 nuclear power plants that it would take to provide the power would fill up the rest of Los Angeles. That's roughly a third more nuclear power than all of France creates. So, the next time they tell you they're on to something, clearly they're not. So -- and we haven't even worked out the cooling needs. But it gives you the kind of power that people have, that the audience has, and the reasons these transformations are happening.

10:44 All of this stuff starts moving into industry. DEC kind of reduces all this and makes the first mini-computer. It shows up at places like MIT, and then a mutation happens. Spacewar! is built, the first computer game, and all of a sudden, interactivity and involvement and passion is worked out. Actually, many MIT students stayed up all night long working on this thing, and many of the principles of gaming today were worked out. DEC knew a good thing about wasting time. It shipped every one of its computers with that game.

11:15 Meanwhile, as all of this is happening, by the mid-'50s, the business model of traditional broadcasting and cinema has been busted completely. A new technology has confounded radio men and movie moguls and they're quite certain that television is about to do them in. In fact, despair is in the air. And a quote that sounds largely reminiscent from everything I've been reading all week. RCA had David Sarnoff, who basically commercialized radio, said this, "I don't say that radio networks must die. Every effort has been made and will continue to be made to find a new pattern, new selling arrangements and new types of programs that may arrest the declining revenues. It may yet be possible to eke out a poor existence for radio, but I don't know how." And of course, as the computer industry develops interactively, producers in the emerging TV business actually hit on the same idea. And they fake it.

12:24 (Video) Jack Berry: Boys and girls, I think you all know how to get your magic windows up on the set, you just get them out. First of all, get your Winky Dink kits out. Put out your Magic Window and your erasing glove, and rub it like this. That's the way we get some of the magic into it, boys and girls. Then take it and put it right up against the screen of your own television set, and rub it out from the center to the corners, like this. Make sure you keep your magic crayons handy, your Winky Dink crayons and your erasing glove, because you'll be using them during the show to draw like that. You all set? OK, let's get right to the first story about Dusty Man. Come on into the secret lab.

12:54 PH: It was the dawn of interactive TV, and you may have noticed they wanted to sell you the Winky Dink kits. Those are the Winky Dink crayons. I know what you're saying. "Pete, I could use any ordinary open-source crayon, why do I have to buy theirs?" I assure you, that's not the case. Turns out they told us directly that these are the only crayons you should ever use with your Winky Dink Magic Window, other crayons may discolor or hurt the window. This proprietary principle of vendor lock-in would go on to be perfected with great success as one of the enduring principles of windowing systems everywhere. It led to lawsuits --

13:33 (Laughter) --

13:34 federal investigations, and lots of repercussions, and that's a scandal we won't discuss today.

13:40 But we will discuss this scandal, because this man, Jack Berry, the host of "Winky Dink," went on to become the host of "Twenty One," one of the most important quiz shows ever. And it was rigged, and it became unraveled when this man, Charles van Doren, was outed after an unnatural winning streak, ending Berry's career. And actually, ending the career of a lot of people at CBS. It turns out there was a lot to learn about how this new medium worked.

14:06 And 50 years ago, if you'd been at a meeting like this and were trying to understand the media, there was one prophet and only but one you wanted to hear from, Professor Marshall McLuhan. He actually understood something about a theme that we've been discussing all week. It's the role of the audience in an era of pervasive electronic communications. Here he is talking from the 1960s.

14:27 (Video) Marshall McLuhan: If the audience can become involved in the actual process of making the ad, then it's happy. It's like the old quiz shows. They were great TV because it gave the audience a role, something to do. They were horrified when they discovered they'd really been left out all the time because the shows were rigged. Now, then, this was a horrible misunderstanding of TV on the part of the programmers.

14:51 PH: You know, McLuhan talked about the global village. If you substitute the word blogosphere, of the Internet today, it is very true that his understanding is probably very enlightening now. Let's listen in to him.

15:02 (Video) MM: The global village is a world in which you don't necessarily have harmony. You have extreme concern with everybody else's business and much involvement in everybody else's life. It's a sort of Ann Landers' column writ large. And it doesn't necessarily mean harmony and peace and quiet, but it does mean huge involvement in everybody else's affairs. And so the global village is as big as a planet, and as small as a village post office.

15:33 PH: We'll talk a little bit more about him later. We're now right into the 1960s. It's the era of big business and data centers for computing. But all that was about to change. You know, the expression of technology reflects the people and the time of the culture it was built in. And when I say that code expresses our hopes and aspirations, it's not just a joke about messianism, it's actually what we do. But for this part of the story, I'd actually like to throw it to America's leading technology correspondent, John Markoff.

16:00 (Video) John Markoff: Do you want to know what the counterculture in drugs, sex, rock 'n' roll and the anti-war movement had to do with computing? Everything. It all happened within five miles of where I'm standing, at Stanford University, between 1960 and 1975. In the midst of revolution in the streets and rock and roll concerts in the parks, a group of researchers led by people like John McCarthy, a computer scientist at the Stanford Artificial Intelligence Lab, and Doug Engelbart, a computer scientist at SRI, changed the world. Engelbart came out of a pretty dry engineering culture, but while he was beginning to do his work, all of this stuff was bubbling on the mid-peninsula. There was LSD leaking out of Kesey's Veterans' Hospital experiments and other areas around the campus, and there was music literally in the streets. The Grateful Dead was playing in the pizza parlors. People were leaving to go back to the land. There was the Vietnam War. There was black liberation. There was women's liberation. This was a remarkable place, at a remarkable time. And into that ferment came the microprocessor.

17:04 I think it was that interaction that led to personal computing. They saw these tools that were controlled by the establishment as ones that could actually be liberated and put to use by these communities that they were trying to build. And most importantly, they had this ethos of sharing information. I think these ideas are difficult to understand, because when you're trapped in one paradigm, the next paradigm is always like a science fiction universe -- it makes no sense. The stories were so compelling that I decided to write a book about them. The title of the book is, "What the Dormouse Said: How the '60s Counterculture Shaped the Personal Computer Industry." The title was taken from the lyrics to a Jefferson Airplane song. The lyrics go, "Remember what the dormouse said. Feed your head, feed your head, feed your head." (Music)

18:37 PH: By this time, computing had kind of leapt into media territory, and in short order much of what we're doing today was imagined in Cambridge and Silicon Valley. Here's the Architecture Machine Group, the predecessor of the Media Lab, in 1981. Meanwhile, in California, we were trying to commercialize a lot of this stuff. HyperCard was the first program to introduce the public to hyperlinks, where you could randomly hook to any kind of picture, or piece of text, or data across a file system, and we had no way of explaining it. There was no metaphor. Was it a database? A prototyping tool? A scripted language? Heck, it was everything. So we ended up writing a marketing brochure.

19:13 We asked a question about how the mind works, and we let our customers play the role of so many blind men filling out the elephant. A few years later, we then hit on the idea of explaining to people the secret of, how do you get the content you want, the way you want it and the easy way? Here's the Apple marketing video.

19:34 (Video) James Burke: You'll be pleased to know, I'm sure, that there are several ways to create a HyperCard interactive video. The most involved method is to go ahead and produce your own videodisc as well as build your own HyperCard stacks. By far the simplest method is to buy a pre-made videodisc and HyperCard stacks from a commercial supplier. The method we illustrate in this video uses a pre-made videodisc but creates custom HyperCard stacks. This method allows you to use existing videodisc materials in ways which suit your specific needs and interests.

20:05 PH: I hope you realize how subversive that is. That's like a Dick Cheney speech. You think he's a nice balding guy, but he's just declared war on the content business. Find the commercial stuff, mash it up, tell the story your way. Now, as long as we confine this to the education market, and a personal matter between the computer and the file system, that's fine, but as you can see, it was about to leap out and upset Jack Valenti and a lot of other people.

20:29 By the way, speaking of the filing system, it never occurred to us that these hyperlinks could go beyond the local area network. A few years later, Tim Berners-Lee worked that out. It became a killer app of links, and today, of course, we call that the World Wide Web. Now, not only was I instrumental in helping Apple miss the Internet, but a couple of years later, I helped Bill Gates do the same thing. The year is 1993 and he was working on a book and I was working on a video to help him kind of explain where we were all heading and how to popularize all this. We were plenty aware that we were messing with media, and on the surface, it looks like we predicted a lot of the right things, but we also missed an awful lot. Let's take a look.

21:22 (Video) Narrator: The pyramids, the Colosseum, the New York subway system and TV dinners, ancient and modern wonders of the man-made world all. Yet each pales to insignificance with the completion of that magnificent accomplishment of twenty-first-century technology, the Digital Superhighway. Once it was only a dream of technoids and a few long-forgotten politicians. The Digital Highway arrived in America's living rooms late in the twentieth century. Let us recall the pioneers who made this technical marvel possible. The Digital Highway would follow the rutted trail first blazed by Alexander Graham Bell. Though some were incredulous ... Man 1: The phone company! Narrator: Stirred by the prospects of mass communication and making big bucks on advertising, David Sarnoff commercializes radio. Man 2: Never had scientists been put under such pressure and demand. Narrator: The medium introduced America to new products. Voice 1: Say, mom, Windows for Radio means more enjoyment and greater ease of use for the whole family. Be sure to enjoy Windows for Radio at home and at work. Narrator: In 1939, the Radio Corporation of America introduced television. Man 2: Never had scientists been put under such pressure and demand.

23:00 Narrator: Eventually, the race to the future took on added momentum with the breakup of the telephone company. And further stimulus came with the deregulation of the cable television industry, and the re-regulation of the cable television industry. Ted Turner: We did the work to build this, this cable industry, now the broadcasters want some of our money. I mean, it's ridiculous. Narrator: Computers, once the unwieldy tools of accountants and other geeks, escaped the backrooms to enter the media fracas. The world and all its culture reduced to bits, the lingua franca of all media. And the forces of convergence exploded.

23:43 Finally, four great industrial sectors combined. Telecommunications, entertainment, computing and everything else. Man 3: We'll see channels for the gourmet and we'll see channels for the pet lover. Voice 2: Next on the gourmet pet channel, decorating birthday cakes for your schnauzer. Narrator: All of industry was in play, as investors flocked to place their bets. At stake: the battle for you, the consumer, and the right to spend billions to send a lot of information into the parlors of America. (Music)

25:10 PH: We missed a lot. You know, you missed, we missed the Internet, the long tail, the role of the audience, open systems, social networks. It just goes to show how tough it is to come up with the right uses of media. Thomas Edison had the same problem. He wrote a list of what the phonograph might be good for when he invented it, and kind of only one of his ideas turned out to have been the right early idea. Well, you know where we're going on from here. We come into the era of the dotcom, the World Wide Web, and I don't need to tell you about that because we all went through that bubble together. But when we emerge from this and what we call Web 2.0, things actually are quite different. And I think it's the reason that TV's so challenged. If Internet one was about pages, now it's about people. It's a customer, it's an audience, it's a person who's participating. It's the formidable thing that is changing entertainment now.

26:01 (Video) MM: Because it gave the audience a role, something to do.

26:04 PH: In my own company, Technorati, we see something like 67,000 blog posts an hour come in. That's about 2,700 fresh, connective links across about 112 million blogs that are out there. And it's no wonder that as we head into the writers' strike, odd things happen. You know, it reminds me of that old saw in Hollywood, that a producer is anyone who knows a writer. I now think a network boss is anyone who has a cable modem. But it's not a joke. This is a real headline. "Websites attract striking writers: operators of sites like MyDamnChannel.com could benefit from labor disputes." Meanwhile, you have the TV bloggers going out on strike, in sympathy with the television writers. And then you have TV Guide, a Fox property, which is about to sponsor the online video awards -- but cancels it out of sympathy with traditional television, not appearing to gloat. To show you how schizophrenic this all is, here's the head of MySpace, or Fox Interactive, a News Corp company, being asked, well, with the writers' strike, isn't this going to hurt News Corp and help you online?

27:10 (Video) Man: But I, yeah, I think there's an opportunity. As the strike continues, there's an opportunity for more people to experience video on places like MySpace TV.

27:18 PH: Oh, but then he remembers he works for Rupert Murdoch.

27:21 (Video) Man: Yes, well, first, you know, I'm part of News Corporation as part of Fox Entertainment Group. Obviously, we hope that the strike is -- that the issues are resolved as quickly as possible.

27:30 PH: One of the great things that's going on here is the globalization of content really is happening. Here is a clip from a video, from a piece of animation that was written by a writer in Hollywood, animation worked out in Israel, farmed out to Croatia and India, and it's now an international series.

27:52 (Video) Narrator: The following takes place between the minutes of 2:15 p.m. and 2:18 p.m., in the months preceding the presidential primaries.

28:00 Voice 1: You'll have to stay here in the safe house until we get word the terrorist threat is over.

28:05 Voice 2: You mean we'll have to live here, together? Voices 2, 3 and 4: With her? Voice 2: Well, there goes the neighborhood.

28:13 PH: The company that created this, Aniboom, is an interesting example of where this is headed. Traditional TV animation costs, say, between 80,000 and 10,000 dollars a minute. They're producing things for between 1,500 and 800 dollars a minute. And they're offering their creators 30 percent of the back end, in a much more entrepreneurial manner. So, it's a different model. What the entertainment business is struggling with, the world of brands is figuring out.

28:37 For example, Nike now understands that Nike Plus is not just a device in its shoe, it's a network to hook its customers together. And the head of marketing at Nike says, "People are coming to our site an average of three times a week. We don't have to go to them." Which means television advertising is down 57 percent for Nike. Or, as Nike's head of marketing says, "We're not in the business of keeping media companies alive. We're in the business of connecting with consumers."

29:04 And media companies realize the audience is important also. Here's a man announcing the new Market Watch from Dow Jones, powered 100 percent by the user experience on the home page -- user-generated content married up with traditional content. It turns out you have a bigger audience and more interest if you hook up with them. Or, as Geoffrey Moore once told me, it's intellectual curiosity that's the trade that brands need in the age of the blogosphere. And I think this is beginning to happen in the entertainment business.

29:31 One of my heroes is songwriter, Ally Willis, who just wrote "The Color Purple" and has been an R and -- rhythm and blues writer, and this is what she said about where songwriting's going.

29:41 Ally Willis: Where millions of collaborators wanted the song, because to look at them strictly as spam is missing what this medium is about.

29:52 PH: So, to wrap up, I'd love to throw it back to Marshall McLuhan, who, 40 years ago, was dealing with audiences that were going through just as much change, and I think that, today, traditional Hollywood and the writers are framing this perhaps in the way that it was being framed before. But I don't need to tell you this, let's throw it back to him.

30:11 (Video) Narrator: We are in the middle of a tremendous clash between the old and the new. MM: The medium does things to people and they are always completely unaware of this. They don't really notice the new medium that is wrapping them up. They think of the old medium, because the old medium is always the content of the new medium, as movies tend to be the content of TV, and as books used to be the content, novels used to be the content of movies. And so every time a new medium arrives, the old medium is the content, and it is highly observable, highly noticeable, but the real, real roughing up and massaging is done by the new medium, and it is ignored.

30:55 PH: I think it's a great time of enthrallment. There's been more raw DNA of communications and media thrown out there. Content is moving from shows to particles that are batted back and forth, and part of social communications, and I think this is going to be a time of great renaissance and opportunity. And whereas television may have gotten beat up, what's getting built is a really exciting new form of communication, and we kind of have the merger of the two industries and a new way of thinking to look at it.

31:25 Thanks very much.