[A2k] Wikinomics - THE DEATH OF BIG COMPANIES?

[Michelle Childs]

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[ Picked text/plain from multipart/alternative ]
http://media.guardian.co.uk/newmedia/story/0,,2162714,00.html

The wiki way


Don Tapscott, the author of an eye-opening new book called
Wikinomics, says that we have barely begun to imagine how the
internet will change the way we live and work. He tells Oliver
Burkeman how everything from gold mining to motorcycle manufacturing
is being transformed - and why huge companies as we know them may
simply cease to exist

Wednesday September 5, 2007
The Guardian

The Red Lake gold mine covers 55,000 acres of western Ontario, amid
mountains, creeks, and pine forests populated by wild caribou. In its
main shaft, which plunges 1,023m into the earth, drilling machines
called jumbos extract gold ore, along with massive quantities of muck
and rock, which is hauled away by "scoop-trams" and 16-tonne trucks.
Twice a day, an electrical blasting system sends explosions through
the mine, shattering the walls to release more gold. Mining at Red
Lake, in other words, is pretty much the definition of heavy
industry. So one can only imagine the despairing looks that must have
been exchanged among the geologists at Goldcorp, which owns the mine,
when their chief executive, Rob McEwen, bounded into the office with
an idea.

It was 1999, and times were tough: Red Lake's gold was drying up, and
the firm was in serious danger of collapse. But McEwen was just back
from a conference at the Massachusetts Institute of Technology, where
he'd had the kind of giddying brainwave that irritating people like
to call "thinking outside the box". Why not do gold-mining on the
internet?

Clearly, this was a stupid idea. But stupid ideas appeal to Don
Tapscott, the Canadian thinker who highlights the Goldcorp story in
his new book, Wikinomics: How Mass Collaboration Changes Everything,
co-authored with Anthony Williams. The book has shaken the US
business world with its claim that we've barely begun to imagine the
ways in which the web will transform our lives as workers and consumers.

In the late 1970s, when he worked as a communications researcher,
Tapscott and his colleagues hooked some neanderthal computers up to
each other - a "network", you might call it, or even a "web" - and
soon realised how this might change working life. He tried preaching
this message to senior executives, but, he says, they dismissed
computer networks as stupid, too. "The big objection, for years, was
that managers would never learn to type," says Tapscott, who speaks
in italics. "I'm not kidding. For years, with all these profundities
and great visions, my entire life was reduced to me making the case
that you can learn how to use a keyboard."

But managers did learn to type. And Goldcorp did use the internet to
mine gold: in 2000, it abandoned the industry's tradition of secrecy,
making thousands of pages of complex geological data available
online, and offering $575,000 in prize money to those who could
successfully identify where on the Red Lake property the undiscovered
veins of gold might lie. Retired geologists, graduate students and
military officers around the world chipped in. They recommended 110
targets, half of which Goldcorp hadn't previously identified. Four-
fifths of them turned out to contain gold. Since then, the company's
value has rocketed from $100m to $9bn, and disaster has been averted.

When "web gurus" like Tapscott start hyperventilating about the new
economy, a common reaction is uneasy scepticism. An economy, surely,
has to be built on real things - bricks, and bread, and pints of
milk, not just Facebook, MySpace, Second Life, Wikipedia and
blogging? Man cannot live by social networking alone. So it is to
Tapscott's credit that the idea he calls "wikinomics" - he is, after
all, a web guru, and seems unable to resist buzzwords - goes back to
1937, and to a young socialist academic born in Willesden.

Ronald Coase had noticed something odd about capitalism. The received
wisdom, among western economists, was that individuals should compete
in a free market: planned economies, such as Stalin's, were doomed.
But in that case, why did huge companies exist, with centralised
operations and planning? The Ford Motor Company was hailed as a
paragon of American business, but wasn't the Soviet Union just an
attempt to run a country like a big company? If capitalist theory was
correct, why didn't Americans, or British people, just do business
with each other as individual buyers and sellers in the open market,
instead of organising themselves into firms?

The answer - which won Coase a Nobel prize - is that making things
requires collaboration, and finding and linking up all the people who
need to collaborate costs money. Companies emerge when it becomes
cheaper to gather people, tools and material under one roof, rather
than to go out looking for the best deal every time you need a few
hours' labour, or a part for a car. But the internet, Tapscott
argues, is radically lowering the cost of collaborating. Companies -
certainly big companies - are losing their raison d'etre.
Individuals, and tiny companies, can collaborate without corporate
behemoths to organise them. Considering how many of us spend our
weekdays working for big companies, and then spend our weekends
giving our money to them, this is a far-reaching thought.

It should come as no surprise that large companies, from media
outlets to clothes shops, are trying to profit from making their
customers feel "involved" in the creation of their products. But
that's arguably an old-fashioned, condescending point of view, with
the company still firmly in the driving seat. Wikinomics implies
something far more radical: it's not a given that the company will
stay in the driving seat at all. "We're talking about a new means of
production," Tapscott says. "Collaboration can occur on an
astronomical scale, so if you can create an encyclopedia with a bunch
of people, could you create a mutual fund? A motorcycle?"

The natural tendency, in a book such as Wikinomics, is to exaggerate
for the sake of making an impact. But the signs are there. Take the
Chinese motorcycle industry, which has tripled its output to 15m
bikes per year over the past decade. There aren't really any Chinese
equivalents of the big Japanese and American firms - Honda or Harley.
Instead, there are hundreds of small firms, many of them based in
Chongquing, the world's fastest-growing metropolis. Their
representatives meet in tea-houses, or collaborate online, each
sharing knowledge, and contributing the parts or services they do
best. The companies that assemble the finished products don't hire
the other companies; assembling the finished product is just another
service. A "self-organised system of design and production" has
emerged - the kind of system we usually associate with phenomena in
cyberspace, like Wikipedia, or software released without copyright,
so that others can tweak and improve it, such as the web browser
Firefox. The Chinese motorcycle industry, in other words, is "open
source".

Earlier this year, the comedians David Mitchell and Robert Webb
addressed the media cult of interactivity in a sketch, and if you
heard it and laughed, it's probably because you share some of the
ambivalence it exudes towards the idea of a world in which everyone
is a creator of content:

"Are you personally affected by this issue? Then email us. Or if
you're not affected by this issue, can you imagine what it would be
like if you were? Or if you are affected by it, but don't want to
talk about it, can you imagine what it would be like not being
affected by it? Why not email us? You may not know anything about the
issue, but I bet you reckon something. So why not tell us what you
reckon. Let us enjoy the full majesty of your uninformed, ad hoc
reckon, by going to bbc.co.uk, clicking on 'what I reckon' and then
simply beating on the keyboard with your fists or head."

The implications of wikinomics, in this context, are surprising. It
has become an article of faith in the blogosphere that the internet
has given rise to a new, Renaissance-style era of the amateur, and
that the mainstream media - or "MSM", to use the scornful acronym -
will perish unless it learns that the efforts of the crowd, working
collaboratively, can usually outstrip those of a small body of
professionals. Those who object to this position often give the
impression of trying to pick a fight, as did the British-American
author Andrew Keen this year in his book, The Cult of the Amateur.
Keen argued that the web revolution "is really delivering us
superficial observations of the world around us, rather than deep
analysis, shrill opinion rather than considered judgment". The
result, predictably, was that he was shouted down by the baying
online crowd. No real debate ensued.

But most people are neither populist-absolutists nor snooty elitists:
they are in the middle. They like being able to start blogs, or
comment on news stories, or build sites such as YouTube from the
ground up. On the other hand, they don't believe that "citizen
journalism", or other forms of crowd creativity, is ever going to
fully replace the unique, individual voice of a 6,000-word essay in
the London Review of Books, or a novel by Philip Roth - or, for that
matter, a newspaper column by Richard Littlejohn. And this is where
wikinomics gives rise to a startling new thought.

What if the "rise of the amateur" is just a passing phase on the way
to something far more radical? After all, there's a major economic
problem with Wikipedia, YouTube, MySpace and the like: people
contribute to them without any financial reward, even as the content
they contribute makes millions of dollars for the sites' owners. That
may not matter on a small scale, but it's no way to run an entire
economy: at some point, people are going to need money for food and
mortgages. Most of the "amateurs" who make up the blogosphere, for
example, are only amateur in their capacity as bloggers. They're
professional bankers, or nurses, or technologists, or students, or
something. Doing things "professionally" is how people stay alive: we
can't afford to be amateurs all the time. If the new online world
relied on amateurs, there would be a limit to how far it could expand.

Don Tapscott, therefore, finds himself in the odd position of arguing
that social networking and citizen journalism, far from being
pioneering, are really rather old hat. ("Social networking - that's
so 2006," he sighs.) From a wikinomics perspective, the true power of
the internet isn't in harnessing the freely given wisdom of the
crowd: it's in giving more people the opportunity to become the
professionals who do things for money. "This is not the crowd versus
the individual genius," he says. "If anything, it's a new
distribution channel for the individual genius."

One of the best examples of this is InnoCentive, a web forum with a
community of 1.5m scientific experts from around the world - full-
time scientists, spare-time scientists, retirees and students. When a
major multinational firm such as Procter & Gamble needs to develop a
new cleaning product, it sometimes posts its requirements on
InnoCentive, rather than relying on in-house researchers. Crucially,
it offers a payment for a successful solution. "If they're looking
for a new molecule to take red wine off a shirt - well, you do the
math," Tapscott says. "They have 9,000 scientists inside their
company boundaries, and 1.5m outside their boundaries. And sure
enough, there's a retired chemist in London, or a grad student in
Taipei, who comes up with a molecule, and they get paid." This is the
real economy - people getting paid for making or doing stuff that
other people want. And it's easy to see how the next step might be to
do away with the large firm entirely, as in the case of the Chinese
motorbikes.

If anything, it is tempting to suggest that Tapscott is too kind to
large companies. (His multimillion-dollar research was, after all,
funded by a consortium of them.) Wikinomics is a book for existing
corporations who want to learn how to survive: he suggests, for
example, turning consumers into "prosumers", with an active role in
product design, as with Lego Mindstorms, a range of construction toys
with robotic bricks, aimed at adults. And he's scathing about record
labels and others who don't see that the internet is a platform on
which they can build new, profitable products, rather than something
to be fought with lawsuits. But in the very long term, there's no
particular reason why large corporations should survive at all. If
Ronald Coase's 1937 insight remains valid, we could yet see the day
when big companies such as Google begin to look rather prehistoric -
because they are still, after all, big companies.

Coase is now 96, and a few years ago, Tapscott called him up and went
to see him. For the younger man, it was a kind of pilgrimage. "I
tried to explain to him that his writings were the key to
understanding how the internet was going to change business,"
Tapscott says. "But he was completely uninterested. He said: 'I've
moved on to other things'".

=B7 Wikinomics: How Mass Collaboration Changes Everything by Don
Tapscott and Anthony D Williams is published by Atlantic Books,
priced =A316.99.

The 'self-organisers'

China's burgeoning motorbike industry isn't dominated by a handful of
corporate behemoths employing thousands of employees, or outsourcing
tasks to smaller subcontractors. Instead, a self-organised system has
emerged in which many smaller companies collaborate to share the
risks and the profits - often, admittedly, by copying Japanese designs.

The 'prosumers'

When hobbyists started hacking the computerised parts at the heart of
the Lego Mindstorms range, the toy company initially threatened to
sue them. Then it had a change of heart, and started encouraging them
to be 'prosumers': consumers who play far more than a superficial
role in the creation of products.

The new gold rush

The gold mine at Red Lake in Ontario, operated by Goldcorp, was
ailing and facing collapse until its chief executive Rob McEwen heard
a talk about Linus Torvalds, the Finnish inventor of the open-source
computer operating system, Linux. Why not place Goldcorp's secret
geological data on the internet, McEwen wondered, and see if there
were experts outside the company who could suggest where to mine? The
'Goldcorp Challenge' reaped handsome profits, turning a company worth
$100m into one worth $9bn.

Michelle Childs
Head of European Affairs
Knowledge Ecology International
michelle.childs@cptech.org