[Paleopsych] Business Week: Howard Rheingold's Latest Connection

[Premise Checker]

Howard Rheingold's Latest Connection 
http://msnbc.msn.com/id/5671750/

    The tech guru sees a "new economic system" in the unconscious
    cooperation embodied by Google links and Amazon lists

    Updated: 8:00 p.m. ET Aug. 11, 2004

    Howard Rheingold is on the hunt again. With his last book, Smart Mobs:
    The Next Social Revolution, in 2001, the longtime observer of
    technology trends made a persuasive case that pervasive mobile
    communications, combined with always-on Internet connections, will
    produce new kinds of ad-hoc social groups. Now, he's starting to take
    the leap beyond smart mobs, trying to weave some threads out of such
    seemingly disparate developments as Web logs, open-source software
    development, and Google.

    At the same time, Rheingold is worried that established companies
    could quash such nascent innovations as file-sharing -- and
    potentially put the U.S. at risk of falling behind the rest of the
    world. He recently spoke with Robert D. Hof, BusinessWeek's Silicon
    Valley bureau chief. Here are excerpts from their conversation:

    Q: Where do you see the social revolution you've been talking about
    going next?

    A: It's too early to say. The question is: What does it point toward?
    Some kind of collective action...in which the individuals aren't
    consciously cooperating. A market is a great example as a mechanism
    for determining price based on demand. People aren't saying, "I'm
    contributing to the market," [they say they're] just selling
    something. But it adds up.

    Q: Can you give me some specific examples of what you mean, beyond the
    market?

    A: Google is based on the emergent choices of people who link. Nobody
    is really thinking, "I'm now contributing to Google's page rank." What
    they're thinking is, "This link is something my readers would really
    be interested in." They're making an individual judgment that, in the
    aggregate, turns out to be a pretty good indicator of what's the best
    source.

    Then there's open source [software]. Steve Weber, a political
    economist at UC Berkeley, sees open source as an economic means of
    production that turns the free-rider problem to its advantage. All the
    people who use the resource but don't contribute to it just build up a
    larger user base. And if a very tiny percentage of them do anything at
    all -- like report a bug -- then those free riders suddenly become an
    asset.

    And maybe this isn't just in software production. There's [the idea
    of] "open spectrum," coined by [Yale law professor] Yochai Benkler.
    The dogma is that the two major means of organizing for economic
    production are the market and the firm. But Benkler uses open source
    as an example of peer-to-peer production, which he thinks may be
    pointing toward a third means of organizing for production.

    Then you look at Amazon (AMZN) and its recommendation system, getting
    users to provide free reviews, users sharing choices with their
    friends, users who make lists of products. They get a lot of free
    advice that turns out to be very useful in the aggregate. There's also
    Wikipedia [the online encyclopedia written by volunteers]. It has
    500,000 articles in 50 languages at virtually no cost, vs.
    Encyclopedia Britannica spending millions of dollars and they have
    50,000 articles.

    Q: What will all those trends produce ultimately?

    A: All these could dramatically transform not only the way people do
    business, but economic production altogether. We had markets, then we
    had capitalism, and socialism was a reaction to industrial-era
    capitalism. There's been an assumption that since communism failed,
    capitalism is triumphant, therefore humans have stopped evolving new
    systems for economic production.

    But I think we're seeing hints, with all of these examples, that the
    technology of the Internet, reputation systems, online communities,
    mobile devices -- these are all like those technologies...that made
    capitalism possible. These may make some new economic system possible.

    Q: If so, it's a good bet not all companies will be happy with the
    changes.

    A: New digital technologies are creating a crisis in the business
    models of the companies that depend on having a monopoly on
    distribution. Look at MP3 blogs: We're now seeing bands that are
    saying, "Please pirate my material. Here it is." They make money from
    that. They get bookings from that. They build an audience on that.

    Q: Are there more such conflicts and opportunities to come?

    A: Assigning frequencies to license holders...is an old-fashioned
    scheme...based on technologies of the 1920s. We now have technologies
    that make it possible to use the spectrum the way packets use the
    Internet. Instead of having a circuit-switched analog system in which
    you have to have an end-to-end connection, you just send your packets
    out with their addresses through this network and they find their way.
    It's much more efficient. It makes for millions more broadcasters in
    the Internet space. This is all pointing to a kind of voluntary
    sharing of your property.

    Q: Does the pushback by companies threatened by these trends, such as
    the record and movie companies, threaten innovation?

    A: Yes. Never before in history have we been able to see incumbent
    businesses protect business models based on old technology against
    creative destruction by new technologies. And they're doing it by
    manipulating the political process. The telegraph didn't prevent the
    telephone, the railroad didn't prevent the automobile. But now,
    because of the immense amounts of money that they're spending on
    lobbying and the need for immense amounts of money for media, the
    political process is being manipulated by incumbents.

    Q: What might keep these powerful incumbents from holding back this
    tide?

    A: You've got to have some huge force outside of the United States,
    where it's getting locked down. What if China says, "The FCC doesn't
    rule us. We're going to stop assigning frequencies within our borders.
    We're going to regulate devices so that they play fair with each
    other, and we're going to open up spectrum." That's going to make the
    U.S. an economic and technological backwater.

    Then there's always the idea that maybe we're just beginning to see
    disruptive technologies. Maybe something is just going to blow it
    away. Certainly we've seen that over and over again in recent decades.

    Q: Where will we see that happen?

    A: We now have a world out there where billions of people have in
    their pockets technologies for innovation that far surpass what entire
    industries had just a couple decades ago. If you're talking about the
    communications industry, your innovation is happening with 15-year-old
    girls. That was where [Japanese cellular network provider NTT] DoCoMo
    (DCM) won big. I think the total number of text messages sent is
    approaching 100 billion a month. Of course, the revenues on that are
    only a fraction of a cent each, but multiply a fraction of a cent by
    100 billion, and it begins to add up to real money.

    You're seeing that now with the picturephones. People are not using
    them the way it was predicted. They're using them to share their days:
    Here's a picture of somebody's haircut. Here's a picture of somebody's
    melon. Look at this shoe in a store. It wasn't determined by an
    expensive R&D lab. It was determined in practice by young people who
    appropriate these devices in unexpected ways. There's nothing more
    inventive than a 15-year-old.

    I don't think that's going away. If I was a Nokia (NOK) or a
    Hewlett-Packard (HPQ), I would take a fraction of what I'm spending on
    those buildings full of expensive people and give out a whole bunch of
    prototypes to a whole bunch of 15-year-olds and have contracts with
    them where you can observe their behavior in an ethical way and enable
    them to suggest innovations, and give them some reasonable small
    reward for that. And once in a while, you're going to make a billion
    dollars off it.

    Q: A focus group on steroids.

    A: This would be more like ethnography, where you let them loose and
    watch what they do. If you want to think out of the box about
    innovation, let's not put all of our bets on 50-year-old PhDs in
    laboratories. We now have dispersed the means of individual and
    collective innovation throughout the world.

    Here's where Wikipedia fits in. It used to be if you were a kid in a
    village in India or a village in northern Canada in the winter, maybe
    you could get to a place where they have a few books once in a while.
    Now, if you have a telephone, you can get a free encyclopedia. You
    have access to the world's knowledge. Knowing how to use that is a
    barrier. The divide increasingly is not so much between those who have
    and those who don't, but those who know how to use what they have and
    those who don't.

    Q: Some folks in the U.S. are worried about the competition from
    overseas that comes from that dispersal of knowledge.

    A: We should have thought about it when we sold all those computers
    and chips overseas. These aren't just widgets. These are the building
    blocks of innovation.