ShareMany ideas about how the Internet will effect the world are right only in certain situations, yet they are held to be true about all situations and stated in a manner that leads to overly broad interpretations.
Let’s examine some commonly held ideas about the Internet more closely:
The Idea of Disintermediation: “The Internet allows people to contact each other directly without a middleman, and in so doing eliminates the economic value of the middle man.”
When people interact they do so in an environment that has been paid for by someone and potentially benefits someone. If you meet someone at a club, it is paid for by the club owners, and potentially benefits the club owners. If the environment is a sidewalk or other public location, it is paid for by taxes, and may benefit retail stores or billboard companies nearby that location. If people interact over a phone it is paid for by one or more of the participants and benefits the telecommunications companies that provide the service.
Changes in technology can cause the manner and types of human interaction to change significantly. People now interact on Google, Amazon, Yahoo, Youtube, Ebay, Skype, Flickr, blogs, and countless other places on the Internet. These environments and tools clearly can generate tremendous benefits for those setting up the meeting place.
More powerful digital tools and distribution are becoming available to greater numbers of people, allowing Youtube celebrities, Ebay store owners, and others to prosper. Yet the largest single monetary reward goes to the founders of the companies that create the most useful environments. New companies may unseat old ones in creating the environments and tools that people want to use, but until all the services that all people want done for them can be done best without cost or advertising, the creator of the environment will continue to receive a generous helping of the monetary rewards.
The Idea of the Death of Distance: “Technology allows digital work to be done from anywhere with an Internet connection and is driving down the cost of transporting goods, so technology is eliminating the importance of location.”
This idea is correct only in a certain context. Yes, American tax returns are being created by Indian workers, Russian programmers create some Chinese websites, and the coffee beans you just imbibed travelled a great distance to find you. Capital, workers, information, and goods are being transported and organized in global supply chains more efficiently than ever. You can hire a tutor from abroad to teach you a language through video chat (see edufire.com) or help you gain new skills. These changes are very important economically and socially.
Yet it is also true that even as the market economy gives significant rewards to creative people who can devise new ways of serving other people, such people are flocking to certain physical locations. The maps that Google makes of the search queries it receives across the globe are not distributed equally according to population density, they are focused in certain cities rich in human capital. This is because creative people want to cross pollinate in ways that are difficult to do across just the Internet. They want to get a feel for what tools and ideas others are adopting, and that’s hard to follow purely on the Internet. It’s also sometimes hard to spot a business opportunity if you’re not immersed in the local environment, at least for part of the time.
We live very important parts of our lives in the location we are at, establishing friendships that teach us, pick us up when we stumble, and are rewarding in their own right. Digital tools can supplement those needs, but are unlikely to completely supplant them because many types of experience are linked irrevocably to sharing a location. In some ways, particularly in finding people who will share major life milestones and experiences, location is more important than ever.
The Idea that Open always beats Closed: “Information wants to be free of constraints, walled systems are always defeated by open systems, and open source products will always beat closed source products.”
This idea rose to prominence largely due to the distaste that many had for the media company’s takedown of Napster, for the contempt they had for the design of AOL’s service, and for the hatred they held for the product design and market dominance of Microsoft. It’s easy when there are dominant companies with inconvenient rules or poorly designed products to imagine the benefits of taking products out of their control or creating a product that is free and open.
Even frustration over a single feature in a proprietary product can lead those who want to tinker to demand a more open system. The low and diminishing cost of distributing the best, cheapest solution to everyone suggests all products and services in a digital age should be easy to tinker with and free of cost to the user.
Yet many of the most respected technology companies that provide services today are not completely open, are not open sourced, and are not free. They are adept at leveraging free or commodity services and products in building proprietary products that have closely controlled elements which are hard for their competitors to duplicate.
Apple is perhaps the poster child for the economic value and dominance that can be created using closed designs and systems. Although it uses open source components for significant parts of its software stack, it does not reveal the source code for its operating system or any of its major applications, it requires the coupling of its hardware and software, it is famously secretive about the design of future products, and in the ipod, iphone and iTunes system it has created a very dominant closed system. Apple has allowed media companies some measure of control over their content, telecommunications companies some measure of reward, and provide software developers some ability to innovate, but Apple retains both ultimate control and the primary share of the monetary reward.
Google uses linux, cheap commodity computing hardware, and makes many contributions to open source projects. Yet it also closely protects its brand and it does not release the source code for any of its major products (gmail, Google news, Google Apps, etc.). It is highly secretive about future products, the methods it uses to rank search results, the methods it uses to serve relevant advertising, and the ways in which it has organized itself.
Ebay closely controls the reputation system which gives buyers and sellers historical information about each others trustworthiness. Facebook opened its system to application developers, but keeps close control of the stream of activities your friends are up to. Even Craigslist charges for some listings to reduce spam. None of these companies reveal the source code for their websites. Even the companies that do reveal the source code for their products charge for certain levels of support and installation services, which is in effect charging for certain kinds of proprietary information.
When do companies do well with closed products? Sometimes closed systems have a design purity that creates the right customer environment or solution, sometimes closed systems discourage behavior that would detract from the community that is formed, and sometimes they simply serve people better than open systems. Sometimes they don’t. Firefox is a great web browser, but Apple thought it could create something simpler and faster and more ubiquitous in Safari. To think that one is destined to be better than the other in the marketplace simply because of their open or closed nature is to grossly oversimplify the factors that lead to product distribution and adoption.
In trying to understand a new phenomena, it’s important to form ideas about it, but also understand when those ideas don’t apply. A trail of wrong predictions and sloppy writing can drill into our heads ideas that are sometimes very false. I have learned that if I can’t name a context in which an idea is false, it is a dangerous idea to rely on. As Emile Chartier stated, “Nothing is more dangerous than an idea when it is the only one you have.” (see my favorite quotes)
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