Friday, January 04, 2008

"Social Production" vs. "Greed" Online

I want to start my comparison of Yochai Benkler's tome, "The Wealth of Networks: How Social Production Transforms Markets and Freedom", and Nick Carr's "The Big Switch: Rewiring the World from Edison to Google" with coverage of the direct critique of the former in the latter.

Benkler proposes that we are entering a new phase of economic history, which he calls the "networked information economy". Counter to the prior industrial economy, this phase is highlighted by the rising effect of "non-market" production on the creation of intellectual capital, made possible by the near zero cost of creating and sharing content on the Internet.

According to Benkler, in a network based economy:

  1. "Individuals can do more for themselves independently of the permission or cooperation of others."

  2. "Individuals can do more in loose affiliation with others, rather than requiring stable, long-term relations, like coworker relations or participation in formal organizations, to underwrite effective cooperation."
As a result of this, says Benkler, "we can make the twenty-first century one that offers individuals greater autonomy, political communities greater democracy, and societies greater opportunities for cultural self-reflection and human connection."

In chapter 7 of Carr's book, titled "From the Many to the Few", Carr makes an argument for the inequitable effects of social networking and unpaid content creation. With specific reference to Benkler and others writing about the rising importance of the so-called "gift economy", he notes that

"[t]here's truth in such claims, as anyone looking at the Web today can see...[b]ut there is a naivete, or at least a short-sightedness, to these arguments as well. The Utopian rhetoric ignores the fact that the market economy is rapidly subsuming the gift economy."
As evidence, Carr notes that two of the most important Web 2.0 acquisitions of the last couple of years--that of Flickr by Yahoo, and YouTube by Google--were driven in large part by the incredible economics of these companies. When Flickr was acquired for $35 million, there were less than 10 people on staff. YouTube had less than 70 employees when they were bought for 1.65 billion.

However, perhaps the most astounding comparison between the two is that both had millions of people producing, organizing and promoting content, but effectively none of them got a single dime of equity. When YouTube was sold, each of the 3 founders got about a third of a billion dollars for 10 months of work. Its hard to argue that Google bought the web site software for that price. Google bought content and traffic, both of which were largely attributable to those unpaid millions.

I think Carr is right, unfortunately, that we overestimate the influence that "open" technologies will have on the incumbent industrial system. Carr notes important evidence like the growing income gap between the richest Americans and the rest of us, as well as the struggle that newspapers and other media companies are having to generate sufficient income to sustain their businesses--and, in turn, their employee's standard of living. I will add that even the distinct line between "open source" and "proprietary" projects is blurring, as Anne Zelenka notes on GigaOM today. The result of this trend will, of course, be mixed. At times the content created out of love, frustration or even narcissism will loosen the grip of corporate systems on our society, but these may always be offset by new controls and entrepreneurial successes by these same systems.

On the other hand, I think Nick is too skeptical about the amount of change that will beset business in the coming decades. It is easy to think of ways to provide equity to those that produce content, and I believe someone will come up with a business that does so in the next year or two. Furthermore, the process of democracy itself may be changed significantly in the next two decades, as both the government and entities seeking influence over the government (or seeking to loosen the control of government) find new ways to tweak the system. John Udell at Microsoft has covered an interesting corollary, public access to government data, and noted some of the progress made in that space.

Those of you that have read me for a while know that I am extremely interested in complexity theory and its applications to technological development. In the end, I believe what we are going to see in the next data is an "edge of chaos" process, where the forces of liberalization continually struggle against the forces of social and economic inertia. In the long term, however, I believe that this process will continually better the lives of those swept up in it; with (significant) luck, the lives of everyone on Earth. What is left to chance, however, is the amount of pain and suffering that may be felt as change takes place.

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