Thursday, June 21, 2012

Matt Ridley: How Facebook captured capitalist "Kumbaya"

Human beings love sharing. We swap, collaborate, care, support, donate, volunteer and generally work for each other. We tend to admire sharing when it's done for free but frown upon it-or consider it a necessary evil-when it's done for profit. Some think that online, we're at the dawn of a golden age of free sharing, the wiki world, in which commerce will be replaced by mass communal sharing-what the futurist John Perry Barlow called "dot communism."

Certainly, in recent years we all rushed to put our reviews on Amazon, our travel experiences on TripAdvisor, our photographs on Flickr, and our innermost secrets on Facebook without expecting to profit from doing so.

But as the float of Facebook shows, commerce still seems alive online. The law professor and economist Thomas Hazlett of George Mason University jokes, "There sure are a lot of billionaires in this new wiki economy."

Facebook's founders, like Google's, once expressed their disdain for profit-motivated sharing. Mark Zuckerberg told the Harvard Crimson in 2004 that he did not create the website with the intention of generating revenue. In the same way, Sergey Brin and Larry Page initially resisted supporting their search engine with advertising: "The issue of advertising causes enough mixed incentives that it is crucial to have a competitive search engine that is transparent and in the academic realm," they wrote in 1998.

This is not necessarily hypocritical. Many entrepreneurs genuinely want to change the world, rather than make a living, and these three were almost certainly no exception. It's just that they discovered that the best way to change the world was to take venture capital, or ad revenue, and then to have an IPO, as a means to sharing the product with as many people as possible. The market is the ultimate "commons" in that it is a forum granting powerful incentives to share.

Just as farmers with privately owned real property grow ever more food so they can share it with others, not to hoard it, so private enterprises in the virtual world share the innovations that allow people to share information. Dr. Hazlett points out that the ultimate sharing forum, the mobile Web (which enabled Web surfing from cellphones), had its first big success in Japan, on a private platform owned by NTT DoCoMo.

Yet online sharing keeps defying the gloomy prophets who have been forecasting the enclosure of the digital commons by selfish landlords, wielding patents, for more than a decade. (Lawrence Lessig's "Code and Other Laws of Cyberspace," written in 1999, was notably pessimistic about the chances of the Web staying open to all.) "From each according to his ability, to each according to his need" has come closer to realization in cyberspace than it ever did in, say, Minsk.

Even profit, once you look at it more closely, seems more like sharing than most people think. After all, the "consumer surplus" of Facebook-the estimated value that people get from using it-is far greater than the firm's profit, while "shares" issued to shareholders make these investors members of the Facebook corporate commons. Says Dr. Hazlett: "Capitalism really knows how to appropriate all the good kumbaya, doesn't it?"

There may be an ancient parallel. The very first hunter-gatherers to start trading (about 120,000 years ago, according to the hazy archeological evidence) probably already had an ethos of communal sharing within the tribe-and an ethos of violent predation of other tribes. That's roughly how chimpanzee society works today. Then they gradually discovered a way to share with other tribes that was mutually beneficial: trade.

When the limitations of barter became too obvious-what the other lot has in surplus may not be what you need right now-a common currency was invented. But that only encouraged sharing through trade. Likewise the monetization of the Internet's sharing ethos will only spread it.

Matt, an acclaimed author and former Science and Technology Editor for the Economist blogs at

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