Inbetween

I’m pretty sure that the concepts of co-operation,  platforms, webs of data and webs of functions will be central to understanding how the internet and web will continue to change our world and the way technology companies can make defensible long term value.  In the next few post I will look at web1.0, web2, the semantic web from the point of view of ecosystems, drawing on the very useful new view of economics known variously as evolutionary or complexity economics.  Over on Nodalities you can follow how Talis is putting these ideas to work in the real work of high tech innovation lead business. It is this special combination of theory and practice that makes Talis such an intense and wonderful company to work for.  

Ecosystem
It is the constant dance between physical and social technology, these most fundamental forces in life, that has driven much of our history.  From family to tribes to city states to the country wide government, we are social creatures. It is no surprise then that physical technologies like the spear or the plough have effected huge changes in our social structure.

It well worth then taking at look at technology, especially the internet, web2.0, semantic web…call it what you will… from the point of view of the interaction of social and physical technology.  Lets call this ecosystem.

Today in the world of high tech innovation it is easy to forget or undervalue this interplay.  Unsurprisingly, technologists (and I count myself in this camp) tend to think about the history of human progress from the point of view of physical technology and miss the far more subtle, but perhaps more profound, history of social technology. The internet, being a communication technology, is having and will have massive impact on social technology and economy. Just think of how the telephone changed the world.

What do I mean by social technology?
 By this I mean ways humans have discovered to organise themselves. Society, Law, government, companies, the economy….etc
Humans have worked together for millennia, but the joint stock company has only existed for a few hundred years. The rule of law only replaced the rule of “big man” (aka King, tribal leader….man with biggest club) also in the last few hundred years,  a blink of the historic eye.

What do I mean by physical technology?
A big wooden club, gunpowder, software, the internet…you get the drift.

What do I mean by ecosystem?
I define here an ecosystem as a group of interacting agents e.g. groups of people.  The patterns of cooperation in the ecosystem between people are the social technology (like companies, markets, government, group of friends, reading clubs) and the objects used in interactions are the physical technologies ( like a nice axe I’ve made for trading, books for storing agreed laws, prisons, mass production, the telephone, the internet). 

So it is useful to consider society and the economy from the point of view of a network of interacting agents. Clearly network theory and evolutionary theory are crucial here. In fact there is a sea change in economic theory from the classical view to what could be called evolutionary economics. For an overview of this see The origin of wealth by Eric Beinhocker.

Why do I keep using the term agent? Because its not just people that can interact. Companies can for instance. So if you want to talk about the economy as ecosystem the agents can include companies. More on this later.

Why do humans form themselves into ecosystems?
Because cooperation increases the total amount of wealth in a system. 
Focusing on doing one thing a lot tends to make you far better and more efficient at doing that one thing. If person just makes ploughs they will get very good at it and make much better ploughs than someone who is spending most of their time farming. Problem is, you can’t eat a plough, just doing this would cause you to starve. So for specialisation you need trading. In addition, four men with axes might be able to fight off a bear attack where one alone cannot i.e. Their are also things that no person can do alone.  We are all better off, their is more wealth, if we work together. An ecosystem creates more wealth than individuals alone, the social technology used in the ecosystem defines how the wealth is distributed. Traditional economics has focused much more on how wealth is distributed than on how it is created in the first place.

How ever, if we are all cooperating according to a set of agreed rules, an individual can gain much more wealth for them selves by breaking those rules e.g. knocking someone over the head and taking their stuff. I will talk about this in the next blog, it is very important to understanding issues such as trust and wide spread gaming of systems.

Communication Technology is Special
Once you see society, markets and the economy as an ecosystem, as a network of interacting agents, then communications technology is obviously critical. It defines the way in which agents can physically interact. Think of the book as the first mass communication device and the printing press as making that communication medium scaleable. Think of the telegraph as allowing instant non-local communication followed quickly by the telephone. Think of the blog as the ability for anyone to become an author with almost zero publishing costs.
Communications technology defines the practical possible size of the network with which each person or agent can interact with.

The internet is very special
The most important aspect of the internet is that is was built from the ground up to be a generalised communications network with the explicit expectation that other logical networks could be layered on top.
The cost of making physical connections between agents is huge, just consider the miles of PSTN lines that have been laid. If every new communications network needed a new infrastructure (like the mobile network did, or the television broadcast network) then enormous capital is required to create a new network. With the internet, in theory every communications network can be layered on top. We can see this happening right before our eyes with telecoms convergence.  The internet is a physical technology that allows virtually any agent in the world to interact in very complex ways with any other agent in the world, instantly and almost for free. It massively increases the possible size and complexity of ecosystems whilst radically reducing the cost and setup time, effectively removing the capital barrier for ecosystem creation. Witness 20 months old youTube being sold to Google for billions. It wasn’t the technology Google bought (Google can easily copy that technology) but the youTube ecosystem. It is easy to copy a software product (even if the IPR is protected) but it is very difficult to copy an ecosystem. If your are thinking about defensibility of innovation, you had better be thinking about the value of the ecosystem around your innovation including both the social and physical.

The internet ecosystem
If you think this only applies to software innovation and PCs. Think again! Your not thinking ecosystem. Spend a little time thinking about the iPod and iTunes.  Take a look at the new Skype phones that need no PC allowing you to make free calls as long as you have broadband and wifi at home. Think of the Nintendo DS and its wifi capability and of course the Xbox360, the playstation3 and new mobile phones that support wifi VoIP as well as mobile networks.

Then realise that this is just the beginning of the  internet consumer ecosystem. It is not just about connecting PCs together. Once critical mass of homes have wifi and always on broadband, and every person carries a blue tooth mobile phone with flat fee internet access, any device or product in your house or close to your mobile can connect to the internet and participate in any number of ecosystems almost effortlessly.

It is always hard to imagine what things we could do with the ability to connect almost everything together. There are of course huge issues such as privacy and security i.e. social technology takes a much longer to change than physical technology.  I’m sure that no one could imagine the consumer electronics industry when the first homes were being wired to power the electric light. That industry required standardisation of connection to the electrical network e.g. 240 volts a.c. 13 amps, with a three pin plug (in the UK). Its not hard to see wifi and bluetooth and IP providing the standards for the consumer networked products industry.

That’s is for part 1. Look out for part 2 which will address patterns of cooperation such as companies, platform ecosystems, architectures of participation and government.