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NOTE: I know many on this listserv will have a field day with this interview! Somehow, Howard Rheingold thinks, capitalism's new info tech will help teens create a global social revolution?? Am I missing something here? Or has the inner workings of late monopoly capitalism really "mushyfied" into a humane form of capital accumulation driven by 15-year olds?

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Howard Rheingold's Latest Connection

     The tech guru sees a "new economic system" in the
     unconscious cooperation embodied by Google links
     and Amazon lists

Updated: 8:00 p.m. ET Aug. 11, 2004
<http://msnbc.msn.com/id/5671750/>

Howard Rheingold is on the hunt again. With his last
book, Smart Mobs: The Next Social Revolution, in 2001,
the longtime observer of technology trends made a
persuasive case that pervasive mobile communications,
combined with always-on Internet connections, will
produce new kinds of ad-hoc social groups. Now, he's
starting to take the leap beyond smart mobs, trying to
weave some threads out of such seemingly disparate
developments as Web logs, open-source software
development, and Google.

At the same time, Rheingold is worried that established
companies could quash such nascent innovations as file-
sharing -- and potentially put the U.S. at risk of
falling behind the rest of the world. He recently spoke
with Robert D. Hof, BusinessWeek's Silicon Valley bureau
chief. Here are excerpts from their conversation:

Q: Where do you see the social revolution you've been
talking about going next?

A: It's too early to say. The question is: What does it
point toward? Some kind of collective action...in which
the individuals aren't consciously cooperating. A market
is a great example as a mechanism for determining price
based on demand. People aren't saying, "I'm contributing
to the market," [they say they're] just selling
something. But it adds up.

Q: Can you give me some specific examples of what you
mean, beyond the market?

A: Google is based on the emergent choices of people who
link. Nobody is really thinking, "I'm now contributing
to Google's page rank." What they're thinking is, "This
link is something my readers would really be interested
in." They're making an individual judgment that, in the
aggregate, turns out to be a pretty good indicator of
what's the best source.

Then there's open source [software]. Steve Weber, a
political economist at UC Berkeley, sees open source as
an economic means of production that turns the free-
rider problem to its advantage. All the people who use
the resource but don't contribute to it just build up a
larger user base. And if a very tiny percentage of them
do anything at all -- like report a bug -- then those
free riders suddenly become an asset.

And maybe this isn't just in software production.
There's [the idea of] "open spectrum," coined by [Yale
law professor] Yochai Benkler. The dogma is that the two
major means of organizing for economic production are
the market and the firm. But Benkler uses open source as
an example of peer-to-peer production, which he thinks
may be pointing toward a third means of organizing for
production.

Then you look at Amazon (AMZN) and its recommendation
system, getting users to provide free reviews, users
sharing choices with their friends, users who make lists
of products. They get a lot of free advice that turns
out to be very useful in the aggregate. There's also
Wikipedia [the online encyclopedia written by
volunteers]. It has 500,000 articles in 50 languages at
virtually no cost, vs. Encyclopedia Britannica spending
millions of dollars and they have 50,000 articles.

Q: What will all those trends produce ultimately?

A: All these could dramatically transform not only the
way people do business, but economic production
altogether. We had markets, then we had capitalism, and
socialism was a reaction to industrial-era capitalism.
There's been an assumption that since communism failed,
capitalism is triumphant, therefore humans have stopped
evolving new systems for economic production.

But I think we're seeing hints, with all of these
examples, that the technology of the Internet,
reputation systems, online communities, mobile devices
-- these are all like those technologies...that made
capitalism possible. These may make some new economic
system possible.

Q: If so, it's a good bet not all companies will be
happy with the changes.

A: New digital technologies are creating a crisis in the
business models of the companies that depend on having a
monopoly on distribution. Look at MP3 blogs: We're now
seeing bands that are saying, "Please pirate my
material. Here it is." They make money from that. They
get bookings from that. They build an audience on that.

Q: Are there more such conflicts and opportunities to
come?

A: Assigning frequencies to license holders...is an old-
fashioned scheme...based on technologies of the 1920s.
We now have technologies that make it possible to use
the spectrum the way packets use the Internet. Instead
of having a circuit-switched analog system in which you
have to have an end-to-end connection, you just send
your packets out with their addresses through this
network and they find their way. It's much more
efficient. It makes for millions more broadcasters in
the Internet space. This is all pointing to a kind of
voluntary sharing of your property.

Q: Does the pushback by companies threatened by these
trends, such as the record and movie companies, threaten
innovation?

A: Yes. Never before in history have we been able to see
incumbent businesses protect business models based on
old technology against creative destruction by new
technologies. And they're doing it by manipulating the
political process. The telegraph didn't prevent the
telephone, the railroad didn't prevent the automobile.
But now, because of the immense amounts of money that
they're spending on lobbying and the need for immense
amounts of money for media, the political process is
being manipulated by incumbents.

Q: What might keep these powerful incumbents from
holding back this tide?

A: You've got to have some huge force outside of the
United States, where it's getting locked down. What if
China says, "The FCC doesn't rule us. We're going to
stop assigning frequencies within our borders. We're
going to regulate devices so that they play fair with
each other, and we're going to open up spectrum." That's
going to make the U.S. an economic and technological
backwater.

Then there's always the idea that maybe we're just
beginning to see disruptive technologies. Maybe
something is just going to blow it away. Certainly we've
seen that over and over again in recent decades.

Q: Where will we see that happen?

A: We now have a world out there where billions of
people have in their pockets technologies for innovation
that far surpass what entire industries had just a
couple decades ago. If you're talking about the
communications industry, your innovation is happening
with 15-year-old girls. That was where [Japanese
cellular network provider NTT] DoCoMo (DCM) won big. I
think the total number of text messages sent is
approaching 100 billion a month. Of course, the revenues
on that are only a fraction of a cent each, but multiply
a fraction of a cent by 100 billion, and it begins to
add up to real money.

You're seeing that now with the picturephones. People
are not using them the way it was predicted. They're
using them to share their days: Here's a picture of
somebody's haircut. Here's a picture of somebody's
melon. Look at this shoe in a store. It wasn't
determined by an expensive R&D lab. It was determined in
practice by young people who appropriate these devices
in unexpected ways. There's nothing more inventive than
a 15-year-old.

I don't think that's going away. If I was a Nokia (NOK)
or a Hewlett-Packard (HPQ), I would take a fraction of
what I'm spending on those buildings full of expensive
people and give out a whole bunch of prototypes to a
whole bunch of 15-year-olds and have contracts with them
where you can observe their behavior in an ethical way
and enable them to suggest innovations, and give them
some reasonable small reward for that. And once in a
while, you're going to make a billion dollars off it.

Q: A focus group on steroids.

A: This would be more like ethnography, where you let
them loose and watch what they do. If you want to think
out of the box about innovation, let's not put all of
our bets on 50-year-old PhDs in laboratories. We now
have dispersed the means of individual and collective
innovation throughout the world.

Here's where Wikipedia fits in. It used to be if you
were a kid in a village in India or a village in
northern Canada in the winter, maybe you could get to a
place where they have a few books once in a while. Now,
if you have a telephone, you can get a free
encyclopedia. You have access to the world's knowledge.
Knowing how to use that is a barrier. The divide
increasingly is not so much between those who have and
those who don't, but those who know how to use what they
have and those who don't.

Q: Some folks in the U.S. are worried about the
competition from overseas that comes from that dispersal
of knowledge.

A: We should have thought about it when we sold all
those computers and chips overseas. These aren't just
widgets. These are the building blocks of innovation.

Copyright (c) 2004 The McGraw-Hill Companies Inc. All
rights reserved.