Welcome to the Google Economy

http://seekingalpha.com/article/99711-welcome-to-the-google-economy

In the financial crash, we are seeing two forces at work: first, a
corrupt system of unregulated leverage gone mad — virtual value (which
is to say, bullsh*t) created in derivatives — but second, a world whose
fundamental structure is changing in ways we can’t yet fully fathom.

I
can’t yet get my head around the new structure; no one can. So I want
your help in cataloguing differences from a high altitude (and calm
heart) as we figure out not only their dangers but also their
opportunities and as we try to understand the new architecture of
things.

I can’t help seeing this through the lens of Google, having just finished my book, What Would Google Do?
Google is built for this new order – and not necessarily by design.
That’s why I try to reverse-engineer Google to figure out what makes it
succeed. I used those rules to re-envision various industries and
institutions. Where do we land if we use them to reinterpret the ways
of our world? Here are some of the laws I intuited:

* The link changes everything.
We live in a hyperconnected world. Look at the financial crisis as a
metaphor for what can happen in systems of information, news, commerce,
regulation, education, culture, design. It’s not that one piece of
information can spread fast; it’s that information is connected to
information in interdependent and complex ways impossible to unravel.

But
don’t see just the danger in that; see the opportunity. If we could
build this tower of bullshit in derivatives through connections, what
of worth can be built? Knowledge, wisdom (about, say, medicine), new
understanding of the world (through data about our behavior)? And what
efficiencies can be found because we can do what we do best and link to the rest?

* Atoms are a drag. “Stuff ” stinks. GM could collapse into GMDaimlerChrysler
(or eventually ToyotaTata). Nobody wants to be in the business of stuff
anymore: building cars, printing newspapers, selling CDs, making gas.

The
digital economy, Google’s economy, is far more appealing. In a sense
it, too, is derivative as it creates value on such intangibles as
knowledge and behavior. Except unlike financial bets, Google’s
metaknowledge creates real value. There’s the other side of the coin of
the virtual value that is tearing us down now – a way to build assets
quickly and without dependence on and the limitations of stuff.

The
reflexive response to this collapse of finance would be to return to
the real: Buy real estate. No, not anymore. Buy into manufacturing.
Nope, not now. Atoms aren’t safe. Dollars aren’t safe. Now the retreat
has to be to knowledge of value.

* Small is the new big. On the one hand, big has never been bigger: Wal-Mart (WMT),
$100 trillion derivatives markets, Google itself. But big is, more and
more, made up of networks of smalls. Countless small retailers on eBay
now make up a market bigger than our largest department-store chain,
Federated. The long tail of culture (and the big butt to which it is
attached, as Google’s Matt Cutts calls it) adds up to huge attention.
Or, as I say in a law in the book, the mass market is dead; long live
the mass of niches. We know this already and have discussed it here on
the blog.

The added implication of the networked,
small-is-the-new-big world today is a loss of control. A single CEO and
board do not manage those commerce and entertainment markets. They are
open marketplaces. And though marketplaces may have bad karma right
now, that’s because they were manipulated by the few. Large, flat
markets that can control themselves will be safer.

In business,
we still need to reach critical mass. But we won’t do that anymore by
buying up companies and going into debt to do so. Not gonna happen. No,
we will reach critical mass by building networks: Google AdSense, eBay (EBAY), Glam…. The key is no longer to control scarcity but to manage abundance.

* Be a platform.
In an economy built on networks, you want to be a platform. Google is.
It enables countless businesses to run thanks to its revenue (AdSense),
its content (Google Maps), its functionality (Google Docs), its
services (Google App Engine), not to mention its distribution. Amazon (AMZN)
has become a platform for businesses, first stores and now anything.
Add eBay, Glam, Skype, craigslist, PayPal. They’re platforms.

In
the book, I make a fanciful argument that a car company – any of the
once-big three – could become a platform for more car companies to
build atop it – if it came out with an open-source car. If it did, its
capital needs and risk and labor and benefits coasts would decline; it
could grow again without going into debt to do so. I have other ideas
for what a car platform is. Universities should become platforms for
aggregated educations. Doctors’ offices should be platforms for health.
In this new world, you don’t want to own everything – indeed, if you’re
like Google, you want to own as little as possible. Instead, you want
to enable everything.

* Be transparent. We got
into this mess thanks to opaqueness. At every stop along the financial
trail, somebody was hiding something: homeowners their bad histories,
loan sellers their bad loans, financial instruments their toxins,
financial institutions their stockpiles of poison. The solution we hear
more often than any other is transparency. If only we’d had – or rather
required – disclosures, so much of this wouldn’t and couldn’t have
happened. The tower of bullsh*t that is collapsing around us now was
built on willful, wishful obfuscation and ignorance. Ignorance is both
their indictment and their alibi.

Transparency will come through
regulation: decrees that require financial institutions to reveal their
holdings. But it will also come through the transactions themselves.
That is what appeals to me about Prosper:
I know who I’m lending to and for what. Prosper’s not going to replace
Citibank (well, I didn’t think it could…). But Citibank (C) has much to learn from Prosper.

I often say that transparency is a key ethic I learned online in blogs. This is just my symbol of it. Transparency is a system of trust and what we lack right now is trust. Transparency is the solution.

The
ethic and attitude of transparency reaches into society and our lives.
I say in the book that life is public now and so is business. Value is
built now on being found – everybody needs a little Googlejuice – and
on listening to the data our constituents create by their actions.
Friendships will be maintained and built differently because of our new
publicness.

* Give the people control and we will use it; don’t and you will lose us. I call this Jarvis’ First Law.
It will become the law of the lands as we no longer have cause to trust
our leaders in finance and business or government. We will not just
demand control; the internet gives us the means to exercise it. Trust
will not be restored from the top but from the bottom.

David Weinberger saw that when he decreed his own law:

* ‘There is an inverse relationship between control and trust.’
I come out of that saying that before the people can learn to trust the
powerful, the powerful must learn to trust the people. They won’t get
away with treating us like idiots who just wouldn’t understand
derivatives and credit default swaps.

Return to my list of
successful enterprises and you’ll see that many of them build platforms
for trust: Google knows which sites we trust with our links and clicks
and which are trying to spam it; eBay sets up the means for customers
to anoint merchants with trust; Amazon learned that we will trust the
opinions of fellow readers over reviewers; PayPal and Prosper help us
to make trusted transactions. We don’t trust banks anymore; hell, they
don’t trust each other.

* Don’t be evil. Why
should it be surprising and rare – even amusing – that a company would
make that vow as Google has? Shouldn’t it be assumed? No, it isn’t. And
that’s a key to the mess we’re in: the bullshit was always someone
else’s responsibility and that responsibility could always be passed on
to the next and bigger fool.

Google executives say that they use
their vow just to enable the question to be raised in discussions.
Wouldn’t it have been wonderful if somewhere, anywhere, just one loan
buyer or seller or financial institution had just asked whether
knowingly buying and selling assets they now so freely describe as
toxic would be evil?

There are more lessons from Google and its
age that I explore in the book, such as our new speed. Life is live and
mobs and problems can form in a flash. Middlemen are doomed by the
direct connections the internet and Google make possible. Simplicity is
an ethic; complexity is what masked our problems from us. To innovate
and grow, though, we still need to make mistakes well. It would be a
mistake to clamp down and outlaw every risk. It’s not the mistakes that
matter so much as what you do about them. Life is a beta.

It’s
dangerously short-sighted, I think, to focus on home mortgages and bank
stocks to explain and solve this crisis and rebuild. I fear that we are
seeing the implosion not of a bubble but of a void that is the fake
value built into a $100 trillion market in derivatives that are nothing
but gambles on margin. It’s a fiction and I don’t know how we find
reality, how we erase perceived – only perceived – value that is far
greater than every stock market in the world. But that’s the crisis. I
don’t know how we will come out the other end.

I do know that
when we come out the other end, we will see – or finally recognize – a
different world. We have to see differently. When we do, we can build
new value on platforms of openness, transparency, collaboration,
networks, connections, knowledge, niches, abundance, trust, speed, and
innovation. Success tomorrow will not be defined by controlling us –
whether you are a bank or a cable company or an entertainment
conglomerate or a politician – but by enabling us.

Our myth was that credit did all that, enabling innovation and growth. It didn’t. Credit was merely a tool.

The
good news is that in web 2.0 – where you can build a useful
application, product, and company on Google or Amazon or eBay or Etsy
or open-source tools as platforms – you won’t need money and so won’t
need credit and so you’ll keep control. You only need what you’ve
always needed to succeed in a rational world: intelligence, insight,
innovation, courage. That much won’t change.

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