Web 2.0 Unchains the Free Market

On the Internet democracy has established itself as the main engine of commercial success:

  1. Successful website are and have always been democratic: YouTube, Myspace, eBay, Amazon, facebook…
  2. Net neutrality finally prevailed
  3.  var infolink_pid = 63535; var infolink_wsid = 0;

  4. YouTube’s traffic passed Microsoft’s corporate website.
  5. 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.

free world

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)

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Websites = Companies = States?

Is it fair to compare countries with websites, websites with corporations? Think about it:

  1. Countries, websites, corporations form social groups that obey to a form of government.
  2. Political systems turn globally to democracy as their preferred form of government
  3. 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

graph.png

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:

democracy trend.gif

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.
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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?
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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?

freecountries.gif

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.
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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 MySpaceYouTubeFlickr 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.

Reddit

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.
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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?
Courtesy by:  www.informationarchitects.jp

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