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Sunday, June 12, 2005

The Power Of Us - Economy Of The People, By The People, For The People

(Via Businessweek) Mass collaboration on the Internet is shaking up business.Excerpts with edits:
Skype is able to shake the behemoths - by dialing up a vast, hidden resource: its own users. Skype also lets people share their resource legally. Users automatically allow their spare computing power and Net connections to be borrowed by the Skype network, which uses that collective resource to route others calls. The result: a self-sustaining phone system that requires no central capital investment. The nearly 1 billion people online worldwide - along with their shared knowledge, social contacts, online reputations, computing power, and more - are rapidly becoming a collective force of unprecedented power. For the first time in human history, mass cooperation across time and space is suddenly economical. "There's a fundamental shift in power happening," says Pierre M. Omidyar, founder and chairman of the online marketplace eBay Inc. "Everywhere, people are getting together and, using the Internet, disrupting whatever activities they're involved in.". Virtual supercomputers,stitched together from millions of volunteers PCs, are helping predict global climate change,analyze genetic diseases, and find new planets and stars. Hollywood is under full-scale assault by 100 million people sharing songs and movies online via programs such as Kazaa and BitTorrent. The situation is the same with ad-supported media: Google Inc.'s ace search engine essentially polls the collective judgments of millions of Web page creators to determine the most relevant search results to create a multibillion-dollar market for supertargeted ads. Traditional companies, from Procter & Gamble Co to Dow Chemical Co., are beginning to flock to the virtual commons, too. The potential benefits are enormous. If companies can open themselves up to contributions from enthusiastic customers and partners that should help them create products and services faster, with fewer duds - and at far lower cost, with far less risk. At another level, peer power presents difficult challenges for anyone invested in the status quo. Corporations, those citadels of command-and-control, may be in for the biggest jolt. Increasingly, they will have to contend with ad hoc groups of customers who have the power to join forces online to get what they want. Indeed, customers are creating what they want themselves - designing their own software with colleagues, for instance, and declaring their opinions via blogs instead of waiting for newspapers to print their letters. "We are seeing the emergence of an economy of the people, by the people, for the people." says, C.K.Prahalad.

Howard Rheingold, author of Smart Mobs: The Next Social Revolution, sees a common thread in such disparate innovations as the Internet, mobile devices, and the feedback system on eBay, where buyers and sellers rate each other on each transaction. He thinks they're the underpinnings of a new economic order. Yochai Benkler, a Yale Law School professor who studies the economics of networks, thinks such online cooperation is spurring a new mode of production beyond the two classic pillars of economics, the firm and the market. "Peer production," as he calls work such as open-source software, file-sharing, and Amazon.com Inc.'s millions of customer product reviews, creates value with neither conventional corporate oversight nor market incentives such as payment. "The economic role of social behavior is increasing," he says. What's driving all this togetherness? More than anything, an emerging generation of Net technologies. They include file-sharing, blogs, group-edited sites called wikis, and social networking services such as MySpace and Meetup Inc.Those technologies are finally teasing out the Net's unique potential in a way that neither e-mail nor traditional Web sites did. The Net can, like no other medium, connect many people with many others at the same time.

What sets these new technologies apart from those of the Internet's first generation is their canny way of turning self-interest into social benefit - and real economic value. James Surowiecki, shows, crowds can go mad, of course, but by and large, it turns out, they're smarter at solving many problems than even the brightest individuals.Collaborative open-source development is rapidly moving beyond basic utility software like Linux to mainstream applications as well. The same scary prospect lies ahead for other information-based industries, such as entertainment, media, and publishing, that are rapidly going digital. People are not only sharing songs and movies - legally or not - but also creating content themselves and building sizable audiences. Wikipedia, OhmyNews are enjoying great success. At Amazon.com, thousands of volunteers write buyer's guides and lists of favorite products. Amazon also lets thousands of merchants, sell on Amazon pages. Amazon is also opening up the technology behind product databases, payment services, and more to 65,000 software developers. They're creating new services, such as the ability to compare brick-and-mortar store prices with Amazon's by scanning a bar code into a cell phone. That raises a key point: All of us will have to take on more responsibility. And to get the most out of the new cooperative tools and services, we'll have to contribute our time and talent in new ways - such as rating a seller on eBay or penning a short essay in Wikipedia. The rewards will be more personalized products and services that we don't merely consume, but help create.
Ultimately, all this could point the way to a fundamental change in the way people work together. In 1968, ecologist Garrett Hardin popularized the notion of the tragedy of the commons. He noted that public resources, from pastures and national parks to air and water, inevitably get overused as people act in their own self-interest. It's a different story in the Information Age, contends Dan Bricklin, when he says, there's a cornucopia of the commons. That rich reward may be worth all the disruption we've seen and all the more still to come.

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