Dealing with “Digital Maoism” in web 2.0

Jaron Lanier, the man credited with popularizing virtual reality in the 1980s and who has become somewhat of a philosopher on the societal effects of technology, told the BBC World Service’s “Culture Shock” program this week that the collective intelligence movement, as spawned by the masses who utilize the internet, has created a “digital Maoism.” In this world, he contends, the “mob mentality” of the masses will always be right, and the views held by individuals will be less valued.

            Among others, he criticized Wikipedia and news aggregators as being facilitators of this societal deterioration.

His argument is well-taken and by no means new. In January of 2005, Bill Gates expressed worry over intellectual property in the digital age, believing that true thinkers might not be rewarded for their inventions and contributions to the world economy. In that interview, he said, “There are some new modern-day sort of communists who want to get rid of the incentive for musicians and moviemakers and software makers under various guises. They don’t think that those incentives should exist.”

That comment touched off controversy as people assumed (perhaps rightly) that Gates was referring to Creative Commons, a non-profit organization that is working to reform copyrighting by making licenses more open and that allow a more free-flowing sharing of information.

So Lanier’s and Gates’ overall point:

If we live in a society where everyone collectively contributes to information hubs (like a Wikipedia), and where a gang of developers and engineers create new inventions (like open source software), wouldn’t it then stand to reason that we would live in a world where knowledge is no longer rewarded monetarily?

Absolutely not.

In basic micro-economics, you have the conditions for “perfect competition.” One of these conditions is perfect and complete information. Where equal information does not exist, we say there are information asymmetries. Traditional economic theory holds that where these asymmetries exist, firms can take advantage of the information “gap” and make a profit, probably a larger one than if the condition of equal information were met. What we see happening today is that this “gap” between the haves and have-nots (in terms of information) has narrowed. Perfect information is no longer restricted to the Fortune 500 corporations of the world.

And this fact cuts right to the whole argument of web 2.0 or whatever you prefer to call it (I like the term, so you’ll see it frequently here). It’s been said by many, including on the pages of this website by experts my senior by a decade or two with business and technology knowledge I can only hope to emulate a fraction of in future years, that the web 2.0 crowd is in denial about the fact their nice little movement doesn’t create value for the world economy. Usually framed in the narrow context of examples like MySpace and other social networking sites, they express doubt such entities can create value monetarily (I guess the fact that Rupert Murdoch, a shrewd businessman hardly attracted to fads, bought Myspace for $580 million is not germane to that discussion. But I digress). They’ve compared it the excess of the late 1990s (you wonder if they worry about getting burned again since a lot of these critics bought into that first movement? But never mind that now.).

The typical response to those critics would be this: No, you’re the one in denial. You just don’t want to believe that value creation in the 21^st century is changing, and something that you’ve been typically paid to do will no longer be rewarded monetarily, so get over it and figure out what innovation you can create as an individual or a company. If you don’t, don’t go hiding behind a bunch of IP lawyers because it’s ultimately not going to get you anywhere. The web 2.0 supporters’ favorite examples might be that Google made billions by tapping into the collective intelligence of the masses with its PageRank system, or, as Don Tapscott noted in his new book Wikinomics, companies that have made millions by letting the masses help them with their R & D projects.

So there are the two extremes: those who think collective intelligence of the masses equates to communism (or Lanier’s Digital Maoism, which is a much more fun term!) or those who believe this collaborative movement actually provides greater democracy in the world, where barriers to entry are lower and value will be determined by those who learn how to use it correctly.

Though the name of this blog would suggest I fall on the latter extreme, I actually land somewhat boringly in the middle. Saying that web 2.0 doesn’t yield monetary value beyond a superficial level is foolhardy and contrarian just for the sake of it. Granted, perhaps with the exception of Google (which I think most of you agree isn’t going anywhere) and some other companies, the tangible value of these entities is harder to quantify. MySpace (if we still care to use that as an example) allows millions of people to communicate with each other each day. While that directly doesn’t raise lots of money (though Rupert Murdoch and his plans for advertising might prove you wrong there, too), the results of the connectedness of those users unquestionably leads to monetary value. They’re not just chatting and communicating about their tremendous weekend getting wasted in Tijuana or who was making out in the employee break room. Like it or not, they’re also talking about how to make innovations at their companies. And I’m willing to guess that some of those companies are making lots of money as a result. (Disclaimer: This won’t just be 20-somethings; the demographic is going to widen).

On the other hand, the bubble bursting did give us a dose of humility, realizing that short-sighted investment can lead to disastrous consequences. In addition, it’s undeniable that brilliant people need to be rewarded for their contributions to society.

But I’m interested:

Where do you fall?