That Business Conversation

Case One: Lists

I moved to San Francisco in 1991, because I wanted to work in the brand-new field of virtual reality, and San Francisco was the epicenter of all commercial development in VR. The VR community came together for meetings of the Virtual Reality Special Interest Group at San Francisco’s Exploratorium, the world-famous science museum. These meetings included public demonstrations of the latest VR technology, interviews with thought-leaders in the field, and plenty of opportunity for networking. At one of the first of those meetings I met a man who impressed me by his sheer ordinariness. He was an accountant, and although he was enthusiastic about the possibilities of VR, he wasn’t working in the field – he was simply interested in it. Still, Craig Newmark was pleasant enough, and we’d always engage in a few lines of conversation at every meeting, although I can’t remember any of these conversations very distinctly.

Newmark met a lot of people – he was an excellent networker – and fairly quickly built up a nice list of email addresses for his contacts, whom he kept in contact with through a mailing list. This list, known as “Craig’s List”, because a de facto bulletin board for the core web and VR communities in San Francisco. People would share information about events in town, or observations, or – more frequently – they’d offer up something for sale, like a used car or a futon or an old telly.

As more people in San Francisco were sucked into the growing set of businesses which were making money from the Web, they too started reading Craig’s List, and started contributing to it. By the middle of 1995, there was too much content to be handled neatly in a mailing list, so Newmark – who, like nearly everyone else in the San Francisco Web community, had some basic web authoring skills – created a very simple web site which allowed people to post their own listings to the Web site. Newmark offered this service freely – his way of saying “thank you” to the community, and, equally important, his way of reinforcing all of the social relationships he’d built up in the last few years.

Newmark’s timing was excellent; Craigslist came online just as many, many people in San Francisco were going onto the Web, and Craigslist quickly became the community bulletin board for the city. Within a few months you could find a flat for rent, a car to drive, or a date – all in separate categories, neatly organized in the rather-ugly Web layout that characterized nearly all first-generation websites. If you had a car to sell, a flat to sublet, or you wanted a date – you went to Craigslist first. Word of mouth spread the site around, but what kept it going was the high quality of the transactions people had through the site. If you sold your bicycle through Craigslist, you’d be more likely to look there first if you wanted to buy a moped. Each successful transaction guaranteed more transactions, and more success, and so on, in a “virtuous cycle” which quickly spread beyond San Francisco to New York, Los Angeles, Seattle, and other well-connected American cities.

From the very beginning, everything on Craigslist was freely available – it nothing to list an item or to view listings. The only thing Newmark ever charged for was job listings – one of the most active areas on Craigslist, particularly in the heyday of the Web bubble. Jobs listings alone paid for all of the rest of the operational costs of Craigslist – and left Newmark with a healthy profit, which he reinvested into the business, adding capacity and expanding to other cities across America. Within a few years, Newmark had a staff of nine people, all working out of a house in San Francisco’s Sunset District – which, despite its name, is nearly always foggy.

While I knew about Craigslist – it was hard not to – I didn’t use it myself until 2000, when I left my professorial housing at the University of Southern California. I was looking for a little house in the Hollywood Hills – a beautiful forested area in the middle of the city. I went onto Craigslist and soon found a handful of listings for house rentals in the Hollywood Hills, made some calls and – within about 4 hours – had found the house of my dreams, a cute little Swiss cottage that looked as though it fell out of the pages of “Heidi”. I moved in at the beginning of June 2000, and stayed there until I moved to Sydney in 2003. It was perhaps the nicest place I’d ever lived, and I found it – quickly and efficiently – on Craigslist. My landlord swore by Craigslist; he had a number of properties, scattered throughout the Hollywood Hills, and always used Craigslist to rent his properties.

In late 2003, when I first came to Australia on a consulting contract – and before I moved here permanently – I used Craigslist again, to find people interested in sub-letting my flat while I worked in Sydney. Within a few days, I had the couple who’d created Dora the Explorer – a very popular children’s television show – living in my house, while they pursued a film deal with a major studio. When I came back to Los Angeles to settle my affairs, I sold my refrigerator on Craigslist, and hired a fellow to move the landlord’s refrigerator back into my flat – on Craigslist.

In most of the United States, Craigslist is the first stop for people interested in some sort of commercial transaction. It is now the 65th busiest website in the world, the 10th busiest in the United States – putting it up there with Yahoo!, Google, YouTube, MSN and eBay – and has about nine billion page views a month. None of the pages have advertising, nor are there any charges, except for job listings (and real estate listings in New York to keep unscrupulous realtors from flooding Craigslist with duplicate postings). Although it is still privately owned, and profits are kept secret, it’s estimated that Craigslist earns as much as USD $150 million from its job listings – while, with a staff of just 24 people, it costs perhaps a few million a year to keep the whole thing up and running. Quite a success story.

But everything has a downside. Craigslist has had an extraordinary effect on the entire publishing industry in North America. Newspapers, which funded their expensive editorial operations from the “rivers of gold” – car advertisements, job listings and classified ads – have found themselves completely “hollowed out” by Craigslist. Although the migration away from print to Craigslist began slowly, it has accelerated in the last few years, to the point where most people, in most circumstances will prefer to place a free listing in Craigslist than a paid listing in a newspaper. The listing will reach more people, and will cost them nothing to do so. That is an unbeatable economic proposition – unless you’re a newspaper.

It’s estimated that upwards of one billion dollars a year in advertising revenue is being lost to the newspapers because of Craigslist. This money isn’t flowing into Craig Newmark’s pocket – or rather, only a small amount of it is. Instead, because the marginal cost of posting an ad to Craigslist is effectively zero, Newmark is simply using the disruptive quality of pervasive network access to completely undercut the newspapers, while, at the same time, providing a better experience for his customers. This is an unbeatable economic proposition, one which is making Newmark a very rich man, even while it drives the Los Angeles Times ever closer to bankruptcy.

This is not Newmark’s fault, even if it is his doing. Newmark had the virtue of being in the right place (San Francisco) at the right time (1995) with the right idea (a community bulletin board). Everything that happened after that was driven entirely by the community of Craigslist’s users. This is not to say that Newmark isn’t incredible responsive to the needs of the Craigslist community – he is, and that responsiveness has served him well as Craigslist has grown and grown. But if Newmark hadn’t thought up this great idea, someone else would have. Nothing about Craigslist is even remotely difficult to create. A fairly ordinary web designer would be able to duplicate Craigslist’s features and functionality in less than a week’s worth of work. (But why bother? It already exists.) Newmark was servicing a need that no one even knew existed until after it had been created. Today, it seems perfectly obvious.

In a pervasively networked world, communities are fully empowered to create the resources they need to manage their lives. This act of creation happens completely outside of the existing systems of commerce (and copyright) that have formed the bulwarks of industrial age commerce. If an entire business sector gets crushed out of existence as a result, it’s barely even noticed by the community. This incredible empowerment – which I term “hyperempowerment” – is going to be one of the dominant features of public life in the 21st century. We have, as individuals and as communities, been gifted with incredible new powers – really, almost mutant ‘super powers’. We use them to achieve our own ends, without recognizing that we’ve just laid a city to waste.

Craigslist has not taken off in Australia. There are Craigslist sites for the “five capital cities” of Australia, but they’re only very infrequently visited. And, because they are only infrequently visited, they haven’t been able to build up enough content or user loyalty to create the virtuous cycle which has made Craigslist such a success in the United States. Why is this? It could be that the Trading Post has already got such a hold on the mindset of Australians that it’s the first place they think to place a listing. The Trading Post’s fees are low (fifty cents for a single non-car item), and it’s widely recognized, reaches a large community, etc. So that may be one reason.

Still, organizations like Fairfax and NEWS are scared to death of Craigslist. Back in 2004, Fairfax Digital launched Cracker.com.au, which provides free listings for everything except cars and jobs, which point back into the various paid advertising Fairfax websites. Australian newspaper publishers have already consigned classified advertising to the dustbin of history; they’re just waiting for the axe to fall. When it does, the Trading Post – among the most valuable of Testra/Sensis properties – will be almost entirely worthless. Telstra’s stockholders will scream, but the Australian public at large won’t care – they’ll be better served by a freely available resource which they’ve created and which they use to improve their business relations within Australia.

Case Two: Listings

In order to preserve business confidentiality, I won’t mention the name of my first Australian client, but they’re a well-known firm, publishers of traveler’s guides. The travel business, when I came to it in early 2006, was nearly unchanged from its form of the last fifty years: you send a writer to a far-away place, where they experience the delights and horrors of life, returning home to put it all into a manuscript which is edited, fact-checked, copy-edited, typeset, published and distributed. Book publishing is a famously human-intensive process – it takes an average of eighteen months for a book from a mainstream publisher to reach the marketplace, because each of these steps take time, effort and a lot of dollars. Nevertheless, a travel guide might need to be updated only twice a decade, and with global distribution it has always been fairly easy to recover the investment.

When I first met with my client, they wanted to know what might figure into the future of publishing. It turns out they knew the answer better than I did: they quickly pointed me to a new website, TripAdvisor.com. Although it is a for-profit website – earning money from bookings made through it – the various reviews and travel information provided on TripAdvisor.com are “user generated content,” that is, provided by folks who use TripAdvisor.com. Thus, a listing for a particular hotel will contain many reviews from people who have actually stayed at the hotel, each of whom have their own peccadilloes, needs, and interests. Reading through a handful of the reviews for any given hotel will give you a fairly rounded idea of what the establishment is really like.

This model of content creation and distribution is the exact opposite of the time-honored model practiced by travel publishers. Instead of an authoritative reviewer, the reviewing task is “crowdsourced” – literally given over to the community of users – to handle. The theory is that with enough reviews, some cogent body of opinion would emerge. While this seems fanciful on the face of it, it’s been proven time and again that this is an entirely successful model of knowledge production. Wikipedia, for example, has built an entire and entirely authoritative encyclopedia from user contributions – a body of knowledge far larger and at least as accurate as its nearest competitor, Encyclopaedia Britannica.

It’s still common for businesses to distrust user generated content. Movie studios nicknamed it “loser generated content”, even as their audiences turn from the latest bloated blockbuster toward YouTube. Britannica pooh-poohed Wikipedia , until an article in Nature, that bastion of scientific reporting, indicated that, on average, a Wikipedia article was nearly as accurate as a given article in Britannica. (This report came out in December 2005. Today, it’s likely an article in Wikipedia would be more accurate than an article in Britannica.) In short, businesses reject the “wisdom of crowds” at their peril.

We’ve only just discovered that a well-networked body politics has access to deep reservoirs of very specific knowledge; in some peculiar way, we are all boffins. We might be science boffins, or knitting boffins, or gearheads or simply know everything that’s ever been said about Stoner Rock. It doesn’t matter. We all have passions, and now that we have a way of sharing these passions with the world-at-large, this “collective intelligence” far outclasses the particulars of any professional organization seeking to serve up little slices of knowledge. This is a general challenge confronting all businesses and institutions in the 21st century. It’s quite commonplace today for a patient to walk into a doctor’s surgery knowing more about the specifics of an illness than the doctor does; this “Wikimedicine” is disparaged by medical professionals – but the truth is that an energized and well-networked community generally does serve its members better than any particular professional elite.

So what to do about about travel publishing in the era of TripAdvisor.com, and WikiTravel (another source of user-generated tourist information), and so on. How can a business possibly hope to compete with the community it hopes to profitably serve? When the question is put like this, it seems insoluable. But that simply indicates that the premise is flawed. This is not an us-versus-them situation, and here’s the key: the community, any community, respects expertise that doesn’t attempt to put on the airs of absolute authority. That travel publisher has built up an enormous reservoir of goodwill and brand recognition, and, simply by changing its attitude, could find a profitable way to work with the community. Publishers are no longer treated like Moses, striding down from Mount Sinai, commandments in hand. Publishing is a conversation, a deep engagement with the community of interest, where all parties are working as hard as they can to improve the knowledge and effectiveness of the community as a whole.

That simple transition from shoveling books out the door, into a community of knowledge building, has far reaching consequences. The business must refashion its own editorial processes and sensibilities around the community. Some of the job of winnowing the wheat from the chaff must be handed to the community, because there’s far too much for the editors to handle on their own. Yet the editors must be able to identify the best work of the community, and give that work pride of place, in order to improve the perceived value their role within the community.

Does this mean that the travel guide book is dead? A book is not dynamic or flexible, unlike a website. But neither does a book need batteries or an internet connection. Books have evolved through half a millennium of use to something that we find incredibly useful – even when resources are available online, we often prefer to use books. They are comfortable and very portable.

The book itself may be changing. It may not be something that is mass produced in lots of tens of thousands; rather, it may be individually printed for a community member, drawn from their own needs and interests. It represents their particular position and involvement, and is thus utterly personal. The technology for single-run publishing is now widespread; it isn’t terribly to print a single copy of a book. When that book can reflect the best editorial efforts of a brand known for high-quality travel publications plus the very best of the reviews and tips offered by an ever-growing community of travelers, it becomes something greater than the sum of its parts, a document in progress, an on-going evolution toward greater utility. It is an encapsulation of a conversation at a particular moment in time, necessarily incomplete, but, for that reason, intensely valuable.

Conversation is the mode not just for business communications, but for all business in the 21st century. Businesses which can not seize on the benefits of communication with the communities they serve will simply be swept aside (like newspapers) by communities in conversation. It is better to be in front of that wave, leading the way, than to drown in the riptide. But this is not an easy transition to make. It involves the fundamental rethinking of business practices and economic models. It’s a choice that will confront every business, everywhere, sometime in the next few years.

Case Three: Delisted

My final case study involves a recent client of mine, a very large university in New South Wales. I was invited in by the Director of Communications, to consult on a top-down redesign of the university’s web presence. After considerable effort an expenditure, the university had learned that their website was more-or-less unusable, particularly when compared against its competitors. It took users too many clicks to find the information they wanted, and that information wasn’t collated well, forcing visitors to traverse the site over and over to find the information they might want on a particular program of study. The new design would streamline the site, consolidate resources, and help prospective students quickly locate the information they would need to make their educational decisions.

That was all well and good, but a cursory investigation of web usage at the university indicated a larger and more fundamental problem: students had simply stopped using the online resources provided by the university, beyond the bare minimum needed to register for classes. The university had failed to keep up with innovations in the Web, falling dramatically out-of-step with its student population, who are all deeply engaged in emailing, social networking, blogging, photo sharing, link sharing, video sharing, and crowdsourcing. Even more significantly, the faculty of the university had set up many unauthorized web sites – using university computing resources – to provide web services that the university had not been able to offer. Both students and faculty had “left the farm” in search of the richer pastures found outside the carefully maintained walls of university computing. This collapse in utility has led to a “vicious cycle,” for the less the student or faculty member uses university resources, the less relevant they become, moving in a downward spiral which eventually sees all of the important knowledge creation processes of the university happening outside its bounds.

As the relevant information about the university (except what the university says about itself) escapes the confines of university resources, another serious consequence emerges: search engines no longer put the university at the top of search queries, simply because the most relevant information about the university is no longer hosted by the university. The organization has lost control of the conversation because it neglected to stay engaged in that conversation, tracking where and how its students and faculty were using the tools at hand to engage themselves in the processes of learning and knowledge formation. A Google search on a particular programme at the university could turn up a student’s assessment of the program as the first most relevant result, not the university’s authorized page.

This is a bigger problem than the navigability of a website, because it directly challenges the university’s authority to speak for itself. In the United States, the website RateMyProfessors.com has become the bane of all educational institutions, because students log onto the site and provide (reasonably) accurate information about the pedagogical capabilities of their instructors. An instructor who is a great researcher but a lousy teacher is quickly identified on this site, and students steer clear, having learned from their peers the pitfalls of a bad decision. On the other hand, students flock to lectures by the best lecturers, and these professors become hot items, either promoted to stay in place, or lured away by strong counter-offers. The collective intelligence of the community is running the show now, and that voice will only become stronger as better tools are developed to put it to work.

What could I offer as a solution for my client? All I could do was proscribe some bitter medicine. Yes, I told them, go forward with the website redesign – it is both necessary and useful. But I advised them to use that redesign as a starting point for a complete rethink of the services offered by the university. Students should be able to blog, share media, collaborate and create knowledge within the confines of the university, and it should be easier to do that – anywhere – than the alternative. Only when the grass is greener in the paddock will they be able to bring the students and faculty back onto the farm.

Furthermore, I advised the university to create the space for conversation within the university. Yes, some of it will be defamatory, or vile, or just unpleasant to hear. But the alternative – that this conversation happens elsewhere, outside of your ability to monitor and respond to it – would eventually prove catastrophic. Educational institutions everywhere – and all other institutions – are facing similar choices: do they ignore their constituencies or engage with them? Once engaged, how does that change the structure and power flows within their institutions? Can these institutions reorganize themselves, so that they become more permeable, pliable and responsive to the communities which they serve?

One again, these are not easy questions to answer. They touch on the fundamental nature of institutions of all varieties. A commercial organization has to confront these same questions, though the specifics will vary from organization to organization. The larger an organization grows, the louder the cry for conversation grows, and the more pressing its need. The largest institutions in Australia are most vulnerable to this sudden change in attitudes, because here it is most likely that sudden self-organizations within the body politic will rise to challenge them.

Conclusion: Over?

As you can see, the same themes appear and reappear in each of these three case studies. In each case some industry sector or institution confronts a pervasively networked public which can out-think, out-maneuver and massively out-compete an institution which formed in an era before the rise of the network. The balance of power has shifted decisively into the hands of the networked public.

The natural reaction of institutions of all stripes is to resist these changes; institutions are inherently conservative, seeking to cling to what has worked in the past, even if the past is no longer any guide to the future. Let me be very clear on this point: resistance is futile, and worse, the longer you resist, the stronger the force you will confront. If you attempt to dam up the tide of change, you will only ensure that the ensuing deluge will be that much greater. The pressure is rising; we are already pervasively networked in Australia, with nearly every able adult owning a mobile phone, with massive and growing broadband penetration, and with an increasing awareness that communities can self-organize to serve their own needs.

Something’s got to give. And it’s not going to be the public. They can’t be whipped or cowed or forced back into antique behaviors which no longer make sense to them. Instead, it is up to you, as business leaders, to embrace the public, engaging them in a continuous conversation that will utterly transform the way you do business.

No business is ever guaranteed success, but unless you embrace conversation as the essential business practice of the 21st century, you will find someone else, more flexible and more open, stealing your business away. It might be a competitor, or it might be your customers themselves, fed up with the old ways of doing business, and developing new ways to meet their own needs. Either way, everything is about to change.

Why Copyright Doesn’t Matter

 

If you overvalue possessions, people begin to steal.- Lao Tzu, Tao Te Ching
IAlthough the New York Times found the new film Alternative Freedom a sloppy, disjointed, jingoistic mess, the movie does break new ground, highlighing the growing threat to public expression posed by restrictive copyright laws and digital rights management technologies. Supporting the “copyfight” thesis – that copyright law is slowly strangling the public’s ability to sample, remix and redistribute the ideas sold to them by entertainment companies – Alternative Freedom ventures beyond these familiar tropes: as video game systems, mobile phones and even printer toner cartridges become ever-more restrictive in the way they operate, we’re being sold devices which dictate their own terms of use. Any deviation from that usage is, in effect, a violation of copyright law. With appropriate legal penalties.Coincidentally, this week the US Congress began to deliberate strong and almost draconian extensions to the nation’s copyright laws, adding odious criminal penalties for what have – until now – been civil violations. Large-scale, commercial violators of copyright have always been criminals; now even the casual user could become a felon for any redistribution of content under copyright. As peer-to-peer filesharing networks grow ever broader in scope, become ever more difficult to detect, and ever harder to disrupt and destroy, the pressure builds. In essence, this is the last legal gasp of the entertainment industry to maintain control over the distribution of their productions.I have previously discussed the futility of “economic censorship” – which this proposed law before Congress equates to – and I can see nothing in these new laws which will slow the inexorable slide to an era where any media distributed anywhere on the planet becomes instantly available everywhere on the planet, to everyone. This is the essence of “hyperdistribution,” a recently-discovered, newly-emergent quality of our communications networks. You can’t make a network that won’t hyperdistribute content throughout its span – or rather, if you did, it wouldn’t look anything like the networks we use today. It seems unlikely that we would suddenly replace our entire global network infrastructure with something that would give us significantly less capability. Yet this must happen, if the long march to hyperdistribution is to be stopped.IIThis is a war for eyeballs and audiences. An entertainment producer spends significant time and money carefully crafting content for a mass audience, expecting that audience to pay for the privilege of enjoying the production. This is possible only insofar as access to the content can be absolutely restricted. If the producer only makes physical prints of a film, and only shows it in a theatre where everyone has been thoroughly searched for any sort of recording device (these days, that list would include both mobile phones and iPods), they might be able to restrict piracy. But only if there are no digital intermediates of the film, no screeners for reviewers mailed out on DVDs, no digital print for projection in the latest whiz-bang movie theatres. As soon as there is any digital representation of the production, copies of it will begin to multiply. It’s in the nature of the bits to generate more and more copies of themselves. These bits eventually make their way onto the network, and hyperdistribution begins.There is, in this evaluation, an assumption that this content has value to an audience. Many films are made each year – in Hollywood, Bollywood, Hong Kong, and throughout the world – yet, most of the time, people don’t care to see them. Films are big, complex, and frequently flawed; there is no such thing as a perfect film, and, more often than not, a film’s flaws outweigh its strengths, so the film fails. This wasn’t an issue before the advent of television – before 1947, film was the only way to enjoy the moving image. Over the last sixty years, the film industry has learned how to accommodate television – with cable and free-to-air broadcasts of their films, and, most profitably, with the huge industry created by the VCR and the DVD. Even so, in the era of the VCR viewers had perhaps five or six channels of broadcast television to choose from. When the DVD was introduced, viewers had perhaps fifty or sixty channels to watch – more substantial, but still nothing to be entirely worried about. Now the number of potential viewing choices is essentially infinite. In a burst of exponential growth, the video sharing site YouTube is about to surpass CNN in web traffic, and in just one week went from 35 million videos viewed to over 40 million. That kind of growth is clearly unsustainable, but it’s also just as clearly indicative that YouTube is becoming a foundation web service, as significant as Google or Wikipedia. And this is why copyright doesn’t matter.IIIIt’s frequently noted that much of the content up on YouTube is presented in violation of someone else’s copyright. It might be little snippets from South Park, The Daily Show, or Saturday Night Live. The media megacorporations who control those copyrights are constantly in contact with YouTube, asking them to remove this content as quickly as it appears – and YouTube is happy to oblige them. But YouTube is subject to “swarm effects,” so as soon as something is removed, someone else, from somewhere else, posts it again. Anything that is popular has a life of its own – outside of its creator’s control – and YouTube has become the focal point to express this vitality.At the moment, many of the popular videos on YouTube fall into this category of content-in-violation-of-copyright. But not all of them. There’s plenty on YouTube which has been posted by people who want to share their work with others. A lot of this is instructional, informational, or just plain odd. It’s outside the mainstream, was never meant to be mainstream, and yet, because it’s up there, and because so many people are looking to YouTube for a moment’s diversion or enlightenment, it tends, over time, to find its audience. Once something has found just one member of its audience, it’s quickly shared throughout that person’s social network, and rapidly reaches nearly the entirety of that audience. That’s the find-filter-forward operation of a social network in an era of hyperdistribution and microaudiences. YouTube is enabling it. That’s why YouTube has gotten so popular, so quickly: it’s filling an essential need for the microaudience.Is there a place for professionally-produced content in an age of social networks and microaudiences? This is the big question, the question that no one can answer, because the answer can only emerge over time. Attention is a zero-sum: if I’m watching this video on YouTube, I’m not watching that TV show or movie. If I’m thoroughly caught up in the five YouTube links I get sent each day – which will quickly become fifty, then five hundred – how can I find any time to watch the next Hollywood special effects extravaganza? And why would I want to? It’s not what my friends are watching: they’ve sent me links to what they’re watching – and that’s on YouTube.So go ahead, Congress: kill the entertainment industry by doing their bidding. Let them lock their content up so completely that its utility – with respect to the network – approaches zero. If people can’t find-filter-forward content, it won’t exist for them. Lock something up, and it becomes less and less important, until no one cares about it at all. People are increasingly concerned with the media they can share freely, and this points to a future where the amateur trumps the professional, because the amateur understands the first economic principle of hyperdistribution: the more something is shared, the more valuable it becomes.

Bass Ackward

I

There is a phrase that rings out across the meeting rooms of Silicon Valley so frequently it has an almost comic quality. Comic, because all replies to this phrase are lies, damned lies, and spreadsheets. Yet this phrase has become the axis mundi, around which orbits the enormous influence of California’s venture capital community.

“What’s your business model?”

It seems an innocent question. Businesses, after all, must have some mechanism in place to earn money. Manufacturers make things. Retailers sell things. Creatives license things. All very neat, straightforward, and – through the clarity of hindsight – absolutely simple. Yet radio had no business model for almost 20 years after its invention. Commercial radio did not emerge until the mid-1920s, when advertising and sponsorship drove the development of an industry. The personal computer, born in 1975, had no real business model behind it until VisiCalc was released in 1979. Commodore, Apple and Tandy sold tens of thousands of computers to hobbyists, but the spreadsheet created an industry.

This story can be told again and again. There’s that famous line from the founder of IBM, Thomas J. Watson, who predicted the market for computers in the “few tens of units, worldwide.” Or HP’s executives knocking back Steve Wozniak’s suggestion that HP manufacture a personal computer – they didn’t see the market for it. (HP is now the second largest producer of personal computers, worldwide.) We could blame these ridiculous miscalculations on a lack of foresight, the peculiar human ability to imagine an eternal present, where nothing ever changes. But time is change. Nothing remains the same. Novelty emerges continuously, often from the most unexpected quarters.

So why, then, when confronted with something new, does anyone ask, “What’s your business model?” How, with any confidence, could anyone know? Here’s the uncomfortable truth: no one knows. Instead, entrepreneurs lie, dissemble, and build spreadsheets which, like the fabric of the universe, emerge from random quantum noise, hoping that no one can see through to the reality of the situation – nothing truly novel has a business model.

This makes entrepreneurship less an exercise in creativity than salesmanship: it is up to the entrepreneur to convince venture capitalists that yes, this wholly novel invention is well-understood, and revenues from it can be calculated using a formula. While charismatic entrepreneurs can make that statement seem believable, they can not make it true.

This friction between novelty and predictability forms the essential feature of a “disruptive” technological innovation; novelty must emerge before its benefits can be forecast. An invention, in its earliest days, has not grown into its full properties. We do not ask of children, “What’s your business model?” Why, then, do we demand an answer when confronted by novelty?

II

We have just passed through an era of failed Internet business models. In the explosion of novelty which followed the advent of the Web in the mid-1990s, the charisma of the Web led many venture capitalists to behave irrationally, predicting too much upside for innovations which simply were not that novel. When – as was bound to happen – most of these businesses failed, the venture capitalists resolved to do better next time, and thus the mantra – “What’s your business model?” – began its steady echo throughout Silicon Valley.

In other cases, the causes for failure can be laid directly at the feet of these same venture capitalists, who forced immature innovations into “exit strategies” – either through acquisition or an initial public offering. But innovation, like human maturity, can not be hurried along. Grow up too quickly, and a lifetime of therapy follows. Push an innovation where it doesn’t belong, and it fails, catastrophically. Time is needed; time to nurture the innovation, and time for careful observation. That observation will tell the entrepreneur how the innovation is being used by the world. Before that happens – and it will normally take some years – any attempt to “guide” the innovation will thwart its true potential.

Novelty is a constructivist process. Like a child, intent on learning about the world by playing in the world, the novel innovation must be free to explore its own capabilities. It does this through the agency of many individuals and organizations who adopt the innovation for their own ends. The role for the entrepreneur (and the venture capitalist) during this phase of development is simply to keep the innovation in an enriched environment, constantly introducing new scenarios and communities who might benefit from the innovation. As William Gibson wrote, “The street finds its own use for things, uses its makers never intended.” Entrepreneurs must surrender an innovation to the world-at-large if they expect that innovation to come into its own. Innovations nurture their own language, coming into being hand-in-hand with the words that make them apprehensible, sensible, and predictable. Only after this has happened can any exploration of business models begin.

III

In recent months I’ve talked to individuals working to revitalize the film industry in Australia. Their approach? Think up ways to make filmmaking look like less of a gamble than it really – always – is. So they’ll bombard investors with spreadsheets, surveys, financial models, in an effort to answer the eternal question – “Will I make my money back?” Most films lose money in their theatrical release – here in Australia, and everywhere else – but that hasn’t kept the studios from earning lots of money; the money’s not in the films themselves, but in all the ancillary licensing and distribution deals enabled by the films. That’s not a business model that emerged overnight: the motion picture studios nearly collapsed in the 1970s, as they foraged around for a business model that could thrive in a world thoroughly colonized by television. Eventually, after the success of Star Wars and the VCR (which the studios fought, until it emerged that the VCR would make them more money than they’d ever earned in theatrical release), the business model became clear: make intellectual properties and license the hell out of them.

Why would the technology industry insist on a form of surety guaranteed to no other industry? Why would venture capitalists demand something they know, in their heart of hearts, is all smoke and mirrors? Why can’t they simply say, “We don’t care about business models. We’re looking for novel innovations with a capacity to emerge into successful businesses.” Part of it comes down to training: most venture capitalists have MBAs, and that education has made them painfully aware of the difference between successful and unsuccessful business models. Furthermore, having been so badly burned in the Web 1.0 bubble, venture capitalists are naturally suspicious of anything that doesn’t seem immediately substantial. Here we see the paradox: venture capitalists haven’t the discernment to know if, in the long term, any innovation has substance. No one does.

We need to enter an era where we simply do not care about business models. Entrepreneurs need to build something, get it out there, and let the street find its own use for it. They have to sit back, listen intently, and let things emerge on their own, in their own good time. That’s the lesson of Flickr, which started as a game, and ended as part of Yahoo! That’s the lesson of del.icio.us, which started as a project to allow individuals to share their ever-growing lists of bookmarks, before it, too, became part of Yahoo! And that’s the lesson of Wikipedia, which began as an alternative to a locked-up Encyclopedia Britannica, and matured to become the 16th most-visited site on the Internet. None of these, in their earliest incarnations, portrayed the potential of what they would become. The street had not yet found its own use for them. In hindsight, everything seems perfectly obvious. But an innovation, raw and new, can not be judged on its merits or its models: only the sunshine of time and the rain of the street can grow value from novelty.

The Ecologies of Wikipedia

I

Last week, another bombshell exploded in the slow, cold war between Encyclopedia Britannica and Wikipedia. Toward the end of 2005, the prestigious British science journal, Nature, conducted an analysis of a number of articles in both Britannica and Wikipedia, and proved that, on the whole, both publications seemed equally accurate – and equally inaccurate. Now Britannica claims that Nature cooked their data – there’s been a fair bit of that going on in the scientific community lately – and that, in fact, they’re far more accurate than upstart Wikipedia.

Does anybody care?

For a brief shining moment in 1999, Encyclopedia Britannica was freely available online in its full glory, and it was good. So good, in fact, that the site crashed shortly after its launch – many, many people wanted the high-quality facts in Britannica. These millions of visitors quickly overloaded its servers. Britannica upgraded its web infrastructure, relaunched itself, and quickly became one of the hundred-or-so most popular sites on the web.

Somehow Britannica managed to lose money. The reasons for this colossal case of business malfeasance remain shrouded in mystery: web-based advertising paid more in 1999 than it did in 2001. With a steady stream of millions of visitors a day, it shouldn’t be hard to earn a fair bit of money. Yahoo! does it. Google does it. Somehow, Britannica couldn’t, or wouldn’t, and this failure was the death of Britannica. For, late in 2000, Britannica locked itself behind a “walled garden,” charging subscribers $6.95 a month for access, promptly losing nearly 100% of their audience. Even worse, they laid the ground for the perfect competitor: Wikipedia.

I first heard of Wikipedia in January of 2002, at a conference celebrating the life and achievements of Douglas Engelbart, who gave the world the mouse, hypertext, computer videoconferencing, and did it all nearly 40 years ago. Engelbart believes that computers can be used as “intelligence amplifiers,” and he’s spent his lifetime developing techniques to make us all more intellectually productive. But early in 2002, even as we celebrated his life, Engelbart seemed downcast, preoccupied with the failure of the World Wide Web to live up to his expectations as a medium for intelligence amplification. Yet – during a series of presentations about way his work has influenced others – one of the presenters showed a nifty web technology known as “Wiki”. The Hawai’ian word for “quick,” a wiki is really nothing more than a technology which supports editable web pages. That seems simple enough, but the overall effect is profound: with Wiki, every web page becomes dynamic, and every person who visits a web page can leave their own mark upon it. Instead of performing as a presentation medium, like a newspaper, Wiki turned the web – potentially the entire web – into a palimpsest. Erase what you don’t like on a web page, and begin again. Then multiply that by the billion-plus web pages in the world of 2002.

Somewhere during that talk, the presenter showed us “Wikipedia” – an editable encyclopedia – as a shining example of the power of Wiki technology. At the time, Wikipedia had about 40,000 entries on a fairly broad range of topics. Hardly comprehensive, but not bad for a freely available and user-created resource.

As of today, Wikipeda has one million, fifty four thousand, two hundred and eight articles in the English language, and nearly double that count if all entries in all languages are added together. That’s about eight times the size of Britannica. It seems that people aren’t just hungry for facts: they’re more than willing to add their own facts to the commonweal. Britannica, obsessed with rapidly-obsolescing models of professional knowledge production, sees Wikipedia as little more than a million monkeys typing at a million keyboards. Wikipedia lacks every time-honored methodology of review, fact checking and careful consideration which Britannica considers essential to the creation of an encyclopedia. Yet, somehow, Wikipedia works – and works far better than Britannica. Late in 2005 Wikipedia zoomed into the top twenty most-visited websites in the world. Despite Britannica‘s critiques, the online world has voted with its virtual feet.

The question has never been “Is Britannica better than Wikipedia?” The question – always, and only – is this: is Wikipedia good enough? The answer, it’s now apparent, is a resounding yes. Instant access to the entries of Wikipedia – even if slightly less accurate – always trumps the careful and carefully protected information of Britannica. In some ways, this is another example of Gilmore’s Law at work: Britannica got locked up – damaged, if you will – so the net routed around it by creating an effective alternative.

II

This week I became a person. Oh, I had an existence before, circles of friends, some prominence in the Australian media, but I lacked that essential signifier of individual presence in the 21st century – my own Wikipedia entry. I had considered creating my own entry, but could never bring myself to do it, out of some combination of humility and fear. How can you write about yourself with any accuracy? What if others learn you wrote your own Wikipedia entry? Wikipedia exposes the editing history of every entry – so a self-created entry wouldn’t look very good. Instead, I talked one of my friends into doing it.

This wasn’t pure vanity on my own part; I am mentioned at several points in Wikipedia – most notably in the articles on VRML and “peer-to-peer (meme)” – both of which reflect some of the significant work I’ve done over the last decade. Given these mentions, it made sense to have my own Wikipedia entry. So, as a birthday present, my friend Gregory Pleshaw offered to author my Wikipedia entry. I was happy to accept, and offered him all the support he might need.

In early 2006, Gregory created a basic page about me. Within 18 hours, that page no longer existed on Wikipedia, having been wiped out by one of the wizards of Wikipedia, the mavens who make it their life’s work to see that standards of content and factuality are maintained within Wikipedia. I fired off a message to the wizard in question, and asked her why the page had been deleted. She, in turn, pointed me to an extensive set of guidelines for biographical pages for living persons. Not everyone can have their own Wikipedia entry; you have to be a person of some renown. There are different ways of measuring that fame, such as whether you’re regularly written about in the media, or the number of hits a Google of your name returns, etc. The article itself must clearly lay out the reason(s) why this person is well known. Then – and only then – will the biographical entry be accepted into Wikipedia.

Here’s the first thing that most people don’t yet know about Wikipedia: it’s not just a dumping ground for random facts. There are standards, and there are several thousand people who make it their business to keep Wikipedia clean and pure and up to the standards developed by the Wikipedia community for the good of the community. If an entry doesn’t meet those quality requirements, it gets flushed. Different pages have different requirements: an entry about an obscure theorem of mathematics can drone on in decidedly technical language – with lots of nice mathematical formulae – while an entry on a more prosaic subject must be written clearly, accessibly, and must link broadly both into Wikipeida and other sources.

Wikipedia is evolving its own internal ecology of standards and practices, and these are necessarily embodied both in its editors and its readers – given that the line between an editor and a reader is modal. I can flip back and forth between self-as-editor and self-as-reader several times a minute. Most pages I would never want to edit – except to correct an obvious spelling mistake or grammatical error – but some pages, such as my own, or on subjects where I know I possess some recognized authority, demand my own input. I apply my own expertise, and improve Wikipedia. Some others have taken on Wikipedia as a whole – these are the wizards who are recognized authorities on Wikipedia itself – and they add the necessary ecology of self-reflection which makes the whole process so successful.

Thus, we’re seeing the emergence of a “priestly class” of Wikipedians, who have been judged by their peers as experts in Wikipedia – initiates into the mysteries – and hence have been given the keys to the kingdom: the ability to delete unsatisfactory entries or edits. This means that Wikipedia has become a civilization in its own right – after all, we judge the birth of civilization in the Near East by the emergence of the priestly classes in Egypt and Mesopotamia. These priests gave us writing and arithmetic and centralized worship – necessary innovations for civilization.

The downside of this is obvious: the priestly class places all of the rest of us at a remove from Wikipedia. We can create, but they have the power to expunge the record, cleansing it of apostasy. They are developing their own bureaucracy, their own arcana, their own mysteries. As time goes on, it will become ever more difficult to fathom their logic. Increasingly, we will rely on faith alone: faith that the priests have got it right, that this collective project of human civilization is headed in the right direction. And that means we’ll need to find individuals who can act as intercessors between ourselves and the gods.

III

When Gregory Pleshaw and I first discussed the creation of my Wikipedia entry, he mentioned that he might offer this as a service to some of his clients. I had a flash, and in that moment foresaw the future of Wikipedia, the next logical point in its evolution: Wikipedia is about to become a commercial ecology. We will soon see the rise of a professional class of Wikipedians, who – because of their professional relationships – can never be part of the priestly class, for fear of conflicts of interest, but who will make it their life’s work to create high-quality entries for those individuals and organizations which recognize the importance of Wikipedia as the definitive human reference work.

While I contend that this will be honest work, there will undoubtedly be any number of communities that will object to this proposal, because it seems to strike directly against the idea of a free and freely available resource. First and foremost among the protesters will likely be the priestly class of Wikipedians, who might see the emergence of any commercial ecology as a “pollution” of the ideas of Wikipedia. Nothing could be further from the truth: in fact, a commercial ecology is the ultimate validation of Wikipedia. If Wikipedia is so important, so powerful, so vital that people can earn a living by writing high-quality Wikipedia entries, doesn’t that mean Wikipedia has met its own standards of quality? A professionally-created entry isn’t locked away. It isn’t owned. Like everything else in Wikipedia, it is given away freely under a Creative Commons license. Even though someone paid a professional to create an entry, that rule doesn’t change. In effect, they’re paying to create something that will be given away. That, as I’ve already written elsewhere, is a smart 21st-century business practice.

I suspect that we already have a professional class of Wikipedians among us; but, because of the nearly religious tenor of the open-source ethos that surrounds Wikipedia, they’re keeping a very low profile. Some of these folks are in Marketing & Communications agencies, managing Wikipedia as part of a client’s online-presence and branding. Some others, like Gregory Pleshaw, are free-lancers who have stumbled into this newest commercial ecology of the Information Age. But make no mistake: these people already exist. Wikipedia is too powerful, too important, and too central to our lives for it to be any other way.

A final point: this is an example of a professional class emerging from a strictly amateur ecology. The amateur ecology won’t fundamentally change: all of us can continue to be Wikipedia dilettantes, dropping in occasionally to correct a word or add a sentence. But now, we amateurs will face real competition from professional Wikipedians, who have studied the mysteries of Wikipedia, and mastered them. That competition can only improve Wikipedia, making it even more comprehensive, reliable and indispensable.