Web 2.0 unchains free market
On the Internet democracy has established itself as the main engine of commercial success:
- Successful website are and have always been democratic: YouTube, Myspace, eBay, Amazon, facebook…
- Net neutrality finally prevailed
- YouTube’s traffic passed Microsoft’s corporate website.
- Lately even The New York Times surrendered to social news.
Symbolically, the latest developments parallel the takeover of free countries over non free countries in 1989.
This graph shows the number of nations in the different categories given above for the period for which there are surveys, 1972-2005 (Source: Wikipedia)
Websites = Companies = States?
Is it fair to compare countries with websites, websites with corporations? Think about it:
- Countries, websites, corporations form social groups that obey to a form of government.
- Political systems turn globally to democracy as their preferred form of government
- Websites (at least the successful ones) turn globally to democracy as their preferred form of government
The question is not whether corporations will abandon their pyramidal management models, the question is: Which companies are smart enough to read the sign of the times?
Companies that don’t realize their markets are now networked person-to-person, getting smarter as a result and deeply joined in conversation are missing their best opportunity.
The Cluetrain Manifesto, 1999
Microsoft (red) vs. YouTube (blue): Democracy takes over.
(Source: Alexa)
Example1: Facebook
Facebook’s CEO Mark Zuckerberg has made the experience before; he now certainly knows that Facebook users own Facebook. Those high profile users and their data are Facebook’s capital. It is not the code. In consequence, if Facebook gets sold for one or two or eight billion Dollars, every Facebook user should get a share - depending on their contribution. Of course Mark’s individual share would be still much higher than everybody else’s, as his personal contribution is the highest.
Imagine how many users they would attract with a democratic profit sharing model - it would explode. Imagine, the marketing power of such a model. And it wouldn’t be crazy, it would be consistent not just with Mark’s biography, it would go hand in hand with with everything else that is happening lately:
Number of nations 1800-2003 scoring 8 or higher on Polity IV scale, another widely used measure of democracy.
(Source: Wikipedia)
Imagine Facebook’s code becomes opensource. Imagine: Millions of high profile users would trust you with their credit card number; after all you need their credit card number to pay them.
Of course, before selling it you would create a user council with elected Facebook representatives, elected by the Facebook user base that decides where Facebook goes and - whether Facebook gets sold or not. They might decide to close it again, take out the RSS feeds, or maybe they don’t; but they’d probably take the right decision in the end, because as a collective they’re smarter than any individual - as long as they choose representatives and are not allowed to decide as individuals over the collective.
If Mark Zuckerberg were that courageous, imagine how much money he’d make as a president of a website with twenty million high profile users willing to share their credit card number? So much that selling it would seem ridiculous.
Example 2: Microsoft
Her majesty 14 Billion USD Steve Ballmer probably still believes that as a CEO he owns Microsoft, and if he does, he’s 99.999% wrong. Microsoft customers own 99.999% of what Microsoft is; and that is - software. It’s simple: You bought it, you own it. He might be able to brainwash his kids…
I’ve got my kids brainwashed: You don’t use Google, and you don’t use an iPod.Source: Wikipedia
…fortunately we are still able to judge and allowed to choose by ourselves. That sticker that says Microsoft XP there on your machine doesn’t state that Microsoft owns your computer, it states that you own a piece of Microsoft. And, if you ask me, it suggests that the collective of Microsoft buyers are the overall Microsoft owners. I know that in reality they act like it’s the other way round but fact is: The brand doesn’t own you. You own the brand. Not convinced? Prefer to stay a slave? Then let me put it this way:
No matter how much he loves his company, Steve Ballmer is not (supposed to be) the King of Microsoft, as a CEO he is supposed to act as a governing president, and as such he is supposed to act in the best interest of his citizens, the Microsoft customers. If Microsoft were a democratic company, it would let its users decide on the product, decide on the representatives, decide on the president. Think that’s crazy? No it’s democratic. And obviously the crazy one is Ballmer, the notorious president of Microsoft:
Corporations as multinational states?
After all, corporations owe their commercial success to democracy and the democratic concept of a free market. Without a free market they would not have been able to grow that much and become so popular.
Unfortunately many corporations have become states in states; in many parts of the world, absolutist multinationals gained more power that the democratic states in which they operate. Some even claimed they own the rain of a country.
The current concept of corporations as legal persons is not just obsolete, it’s absurd. If ever, international corporations should be treated under international law as political entities, i.e. states.
As a consumer I say: If companies have political aspirations to become multinational states, they should first adapt to established political rules they profit from and become democratic. Get out of the middle ages:Democracy (literally “rule by the people”, from the Greek δημοκρατία-demokratia demos, “people,” and kratos, “rule”) is a form of government in which the political power is held by the people. […] While the term democracy is typically used in the context of a political state, the principles are also applicable to other bodies, such as universities, labor unions, public companies, or civic organizations.
The consumers, being citizens of those multinationals, already start demanding their rights. With the Internet the consumers have achieved the right to speak, and recently we demand the right to vote. And if you think that’s obnoxious think again: Who pays the companies? So: Who owns them?
Another question. If you look at the states considered democratic and try spot the headquarters of international corporations within those states, what happens? Why on earth are corporations, born in democracies and grown through the power of the free market not democratically governed?
This map reflects the findings of Freedom House’s survey Freedom in the World 2006, which reports the state of world freedom in 2005. It is one of the most widely used measures of democracy.
Green: Free.
Rose: Partly Free
Red: Not Free
(Source: Wikipedia)
There is no such thing as too much democracy
In a democracy the people own the state. And that is good. Most companies (and unfortunately many politicians) don’t understand this. They are afraid of “too much democracy”. There is no such thing as too much democracy. The fear of too much democracy comes from political ignorance. CEO’s all too often don’t know what democracy really is.
What about anarchy?
Democracy is based on the idea that an intelligent collective will always make a better decision that an intelligent individual. But the collective has to be organized. Democracy doesn’t mean that the individual decides. Decision making has to follow collective rules. Randomness is not a democratic tendency it’s actually what we are reigned by right now:
Fucking Eric Schmidt is a fucking pussy. I’m going to fucking bury that guy, I have done it before, and I will do it again. I’m going to fucking kill Google.
Microsoft CEO Steve Ballmer on Google’s CEO Eric Schmidt (Wikipedia)
Why is a healthy democracy the best form of government? Because collective intelligence ultimately works in favor of the collective and thus at the same time has a strong corrective towards individual mistakes. I guess that explains why the Americans voted for Bush and now vote against him. Bush stood for the profit of the American collective against the rest of the world and now, in a time of multinational states - stands for massive individual mistakes. So will Steve Ballmer.
That democratic rules apply to multinational corporations is even more obvious if you look at the mass of people they need to serve. Customers don’t care about macho talk. If shouting and jumping and public obscenity is what he offers, Microsoft is going down. Not because of the shouting and jumping or the obscenity. Because of what it stands for. We don’t like to be dictated and shouted at, we like to talk and choose.
You need representatives
The mere collective as such obviously cannot take decisions. The collective has to elect representatives. This is where the many forms of democracies differ and are similar at the same time. There are many ways to elect those representatives and there are many ways to empower them, but the common denominator of all democracies is that there are representatives. Now imagine, customers elect their representatives and those representatives elect their leader. Crazy? No, democratic. Given the political power corporations have nowadays it’s more than fair to apply democratic rules to choose the people in power.
Dangerous idea? I don’t think so. If the customer and not the stakeholders elect the president, what do you think happens to the product? It gets better and better. And what happens to good products? They are bought. And what is the basic job of the CEO of Nike, Pfizer, Microsoft? He needs to make good products that sell. Yes, basically, it’s simple.
Okay, that might be true in theory but in practice…
In general, there is no such thing as good theory that fails in practice. There is only good (verifiable) theory and bad (unverifiable) theory.
Of course there are bad (criminal) practices that contradict the theory of a good (legal) practice. But the existence of criminals does not contradict the reason of law, it constitutes it. That democracy fails at times doesn’t mean it’s wrong. As long as there is no better form of government it’s the best. Now why should this form of government not apply to companies?
Churchill’s ironic saying that “democracy is the worst form of government except all the others that have been tried” applies to political states as well as to multinationals. And the new economy proves it. The most recent success stories of websites like MySpace, YouTube, Flickr are all success stories of democratic models defeating hierarchical models.
Slashdot
Slashdot is famous for it’s high quality content and the usually high level of discussion. Why is that? Because the citizens of Slashdot have a democratic way in valuing each others contributions. Comments of long time quality users of Slashdot get more weight. They become representatives of the collective. The most recent redesign of Slashdot was set up as a competition among Slashdot users (iA tried to compete - unfortunately without success).
Digg
Digg is a mere democratic phenomenon. Users vote for good content. Apparently there are ways for spammers to abuse Digg. Digg’s answer so far is not really convincing: They put an algorithm in place to avoid spamming. Much more efficient and in the spirit of Digg: Start electing representatives that watch over the quality.
Another democratic media shooting star. Reddit users can vote on links posted, on users and on comments. They can vote up, down or neutral. Popular users gain karma (and thus representative weight), popular links gain exposure, comments gain weight in the discussion and karma points for the users. The Reddit backend tracks people to not use several profiles to push their stuff. Reddit connects different profiles and identifies them as one based on a number of factors that make different profile identifiable. It is almost impossible to trick.
Delicious
Delicious tracks how many users bookmark a link. In order to avoid spamming they built a time delay system. While it’s possible to get on the Digg homepage through some instantaneous mass hysteric voting, Delicious builds on slow growth, making it a more serious bookmark directory than Digg which is more sensational and fun.
D-Zone
D-Zone is democratic link sharing site for developers. Its success stems from a very alert and at the same time friendly group of moderators that are not afraid to integrate active quality users into their moderating team.
Conclusion
Companies that learn from the recent success of democratic websites will not just be able to cut cost on market research, branding, advertising and R&D, they will ultimately make quality products that sell better and market themselves.
The democratization of the economy is not just a fair development; given, that the currently often tyrannical corporate structures owe their success to the free market, it is a development that will enhance companies in the same ways political democracy enhanced the political quality of states. It is a movement that is based on high communicational sophistication, the readiness to interact and the reasonability of the collective to elect representatives. All these factors seem to be a given if you look how successful democratic web projects are.
People love to interact, people love to discuss, people love to vote, people love to deal, people love to buy. Hopefully the most recent development on the web is the end of the couch potato as we know it.
iA is currently not just redesigning all of our customers websites to meet the E2R readability standard, we are also in the process of convincing all of our clients to leave the control over their websites not to us, and not their web department, but to their customers. As long as you make good products, there is no need to be afraid of that. And as long as you listen to your customers you will make good products.
The democratization of business is an irreversible movement. You can join it now and be one of the first, or you can join in later and be the third. What do you think, Mark?
This article is part 2 of 2. Part one was: Web 3.0: You say you’re on a revolution…
12.10.2006
22:29
Great thoughts!
I often have wondered why a democratic software company doesn’t arise… sure, there’s open source, but that’s not exactly the same thing. A for-profit corporation that really allowed the users to choose the direction of the company would probably be a very profitable one.
As far as democratic “news” sites:
12.11.2006
01:29
I think its what happens in the AGM and board meetings where the shareholders can or at least are supposed to be able to cast their vote or something.
Granted, its not entirely the same, and there is lesser social responsibility tagged to a CEO than a stateman.
I kinda like the idea of how consumers should get to choose their product. But in a sense, we do right? Let me explain.
Extending your idea, instead of thinking of say, Microsoft, as a single ‘country’, think of it as a political party in the country called “Operating System Market” or “Software Market”. There are different parties (companies) running for election and they put up their campaign programs to vie for votes. Citizens ‘vote’ by buying the programs they like or want.
In the case of MS in the PC OS arena, its like a country where one party is dominant and reigns perpetually. Guess that’s why DOJ is important eh?
12.11.2006
09:43
I think revenue sharing is a great idea. I wonder if it’s primarily the accounting side of it that deters many sites from implementing it. Splitting up the IPO/acquisition money from Facebook’s sale would probably be a nightmare, even with credit card payment implemented. What about people with multiple accounts, fake accounts, people who signed up the day before the sale, etc? The hypothetical facebook representatives would be probably have to take on representation as their full time jobs.
I think the most sensible way to implement revenue sharing is by producing some physical or at least sell-able product in collaboration with your users, such as CafePress or Threadless does. Some sites like Newsvine (click the rightmost button on their tour) and Revver (look how much staff they have already!) are giving it a go in a somewhat democratic manner already.
12.11.2006
10:40
Thanks, Mr Geek. How could I forget to mention open source? And how could I forget about mentioning Dzone? Shame on me! Those need to be featured. First thing I did this morning. Thanks again.
12.11.2006
19:59
Interesting read. And interesting idea.
enter the mouse potato
12.12.2006
05:09
I would like attribution for the Ballmer on Google quote, please.
And that video is years old. It was years old when I was at the Empire. You can do better than that.
I have no loyalty to them, other than gratitude for the personal projects my salary let me fund, and I know this is a blog and all, but some standards of journalism might be good.
I don’t think Ballmer is evil. I don’t think Gates is evil. But I also think there’s nothing wrong with capitalism.
12.12.2006
08:49
Tech Agnostic,
You do have the attribution in the article. The quotes are all from Wikipedia. But you can find them spread all over the net.
I don’t criticize the free market, I criticize the obsolete form of government within the majority of our corporations. But dude, communism is dead for almost 20 years now. It’s not the time to defend old capitalism anymore. It’s time to develop capitalism. New Economy has developed and proven a more efficient and more reasonable form of economic government: Democracy.
That this form of government corresponds with our political system is not an accident, as it has developed out of it. If you’re against that, then please tell me: What’s wrong with democracy?
I believe that most corporations still follow 19th century oligarchic patterns, some even follow 18th century absolutist ones, and that it’s time to move on. Being grateful for the work and the know how you got from working for your former employer is okay. I don’t say Ballmer or Gates are evil, that’s your interpretation (I don’t even talk about Gates). Yet Ballmer’s management style is overdue. And, old or not old video: He is still the same dude:
The old video just shows much better what I intend to say. Maybe I should have used this one though:
Of course you need a sense of humour to understand what I’m saying…
12.12.2006
21:54
Since I own this website according to your tagline, I’m requesting you forward me my root login password!
I have a few small changes I’d like to make …
12.12.2006
23:00
Great article, but “reign anarchistically”? You call this anarchy? I beg to differ.
Anarchy is defined by any anarchist as opposition to power and authority. There’s nothing anarchistic about one guy pummeling another. Anarchy is in action whenever and wherever people choose, without any form of coersion, to respect each other. Everything else, from governments to the school yard bully, is nothing more than power seeking more power, and it is the polar opposite of anarchy.
For fuck sake’s, can’t you guys talk about democracy without spreading ridiculous misconceptions about anarchism? We’re not evil! We just hold different ideas about right and wrong, about human nature, and about what exactly it is we’re living in right now. “Reign anarchistically” is an oxymoron in its truest sense.
Look it up: http://en.wikipedia.org/wiki/Anarchism
12.12.2006
23:31
Sorry Mario,
Good point. I was afraid a true anarchist in the strict political sense of the word might come along and deconstruct my superficial notion of anarchy. I used the word not as a political term but how it’s commonly used and understood as “randomness”. Which in this context is unprecise and thus: I corrected it.
You guys do have a problem with that term though. Most people just don’t know what anarchy really is and they will never know, as the common usage is so negative and associated with jungle and beasts that no one cares for looking it up…
12.13.2006
07:33
Ballmer is intense and passionate and he’s not afraid to show it. That’s an out-of-band leadership attribute and I, for one, thought it was worthwhile when I was doing my time at the Empire. He was willing to live the company, and the people who will do that will be successful personally and financially. I was never willing to give up my life, so I eventually hit that ceiling and I left. But I still admire Ballmer.
12.14.2006
00:59
Hey Oliver
We most certainly do have a problem with the word. Unfortunately I can’t think of a better one and frankly its historical importance is too great for me to want to give it up. So, I just deal with it.
Thanks a million for the correction, and I apologize for the outburst.
1.7.2007
02:49
Great post! I agree with you 100 percent. I’m the CEO of NuConomy (www.nuconomy.com), a new start up company that actually enables to do exactly what you write about! It’s been almost 10 months ago, way before the days of Reever and other revenue sharing sites, when I had a vision about a collective company. A company where its employees are paid exactly by their contribution to the business. A company that “hire and fire” employees all the time dynamically. A company that has employees from all over the world and from all the range of demographics. A company that is ruled simply by talent. In order to achieve this we developed a platform (which we give for free) that any web site can easily use in order to measure the exact contribution of each of its users to its business. After that, we enable the development of financial formulas to decide how to reward the users. For example, it means that Mark Zuckerberg for example could know exactly who are the most contribution users and share Facebook earnings with them accordingly. This is democracy at best. If you are good – you will get paid. If not, you won’t. In my vision, this kind of business model can even give chances for talented people from third world countries to earn some decent living and compete directly with people who were fortunate enough to be born in the states.
1.31.2007
13:16
There is a difference between rewarding talent, popularity, success AND democracy.
NuConomy and the recent move by YouTube to share advertising revenue with popular contributors is different to the users actually OWNING the system. The former is a popularity system, an old fashioned Star System owned by an elite who share some of theprofit generated by the talent that they own, with that talent. The later, ideal organisation, is a community run and owned enterprise. A worker owned factory. Not a new idea. These are dreams of the labour movement. I mean labour movement, not New Labour.
YouTube’s new rewards system is not meritocratic. Merit is a value judgement. The YouTube clip, History of Dance may be funny and hugely popular with 40 million hits, but it isnt meritorious. Its popular but not important.
Tony Blair’s New Britain was to be a meritocracy, and so he reformed the old aristocratic stronghold, the House of Lords. What did he replace it with? His friends and political donors (mostly the same). Not political supporters ( i.e. voters) but rich and powerful people. Loans for Lordships.
Workplace democracy has been worked on by MIT Sloan business school professor in his book and the Sloan Business school
Industrial democracy (the idea behind this post) versus industrial fascism (the reality of most corporations now) is covered by such writers as Noam Chomsky (MIT Linguistics an Philosophy Institute Professor) at great length and is the core of the critique of corporations and US foreign policy: Corporations are private tyrannies owned by a tiny elite that are taking decision making and resources away from the general population.
Chomsky describes himself as as an anarcho-syndicalist or libertarian socialist. In ‘Government in the Future” he makes the case that anarcho-syndicalism (or libertarian socialism) is actually more a decendant of classical liberalism (which spawned the liberal democratic model that this post describes as ‘democracy’) than state-capitalism (US) or state-socialism (Cuba, North Korea etc). The union movement has been working on industrial democracy and workers councils for at least 100 years.
Participatory economics is a part of the participatory democracy movement being developed as an extension of the anarcho-syndicalist or libertarian socialism advocated by Noam Chomsky and the Boston/New England radical scene.
The Pentagon are interested in this self-organising, bottom-up, non-hierarchial, distributed, anarchic, network-centric warfare model. Gulf 2 was based on net technoolgy and principles and my guess this is part of the reason why they invited Noam Chomsky anarcho-syndicalist to talk at West Point about Just War. Conservatives who disdain Chomsky might also ask why he has been funded and supported by the Pentagon system for all these years via MIT. What does the Pentagon system learn from an anrcho-syndicalist? Why did they fund the Internet and the W3C via DARPA?
The tiny rewards for content contribution are a bit like the affliate systems of Amazon etc. There will be a threshold and most people wont be able to trigger. The corporate calculus will be that say YouTube will get more money from increased and targeted advertising and more valuable, quality content. Its also good for BIG MEDIA, they suddenly get paid for Seinfold or whatever clips, as the rightful copyright owner. Suddenly Advertisers and Contributors are the customers and Viewers are the product.
I’d also point out that meaningful FREEDOM is declining in the USA and around according to the International Press Council. Nominally democratic institutions exist and are spreading but are empty of purpose or corrupt, all form and no function. Citizens periodically ratify the will of the powerful. Those charts from Freedom House which is supported by the Bush administration
Sites like Myspace and Wikipedia are not democracies, they are dictatorships where people work for free.
Ultimately a single, unaccountable individual controls the website. Users work for free and get little or no reward. In the case of Myspace News Corp owns it, and gets ad money and a marketing environment. Jimmy Page, the founder of Wikipedia working out ways to make money, see Wikisearch and the private company… Times ‘ exploit. Not coincidentally, the other Wikipedia co-founder Larry Sangler gets little credit but did nearly all of the actual work in the early days, but he was only an emply so he doest count.
does that sound like ‘democratic media’ to you?
Larry Sangler has started another wikipedia fork, Citizendium.
I’ve had a similar dream for a member owned and controlled media organisation, for a while too, but I reckon the poltical economy of any internet media needs to factor popularity, importance, timeliness and timelesness, novelty, succinctness, density, clarity, credentials, accessibilty, richness AND popularity. I’d say that the users should get rewarded for contributions, have control over decision making and the framework for decision making and also own that system. Legally. As in some kind of membership organisation
Athenian democracy contained randomness as a major organising principle: sortition. Sortition is public office allocated by lottery, so as to avoid corruption. Voting is liable to manipulation and corruption by power seeking indivduals and factions (corporations). Real democracies have many more organising principles and mechanisms than simply popularity.
So, if freedom and democracy have any real chance of gaining meaningful advances we need to go deeper than ideas of ‘democratic media’. We are headed in the right direction, but dont be suprised to find the powerful there already entrenched and happily exploiting ‘free’ labour.
There is an opening for real progress. But there is no gurantee the internet will not go the way of all media, consolidated, controlled and a system for manufacturing consent. Thought control in democratic societies.
The latest argument by elites is that the internet is so powerful, we dont need to worry about increasing concentration of media ownership. But the problem is, the internet is becoming part of that corporate control system.