September 1999 Archives

From: Michael Wilson

To: Joichi Ito

*** Joi, you sent the notice to the open list, so I figured it wouldn't piss you off to have me comment. You're either very busy, or I got on your 'bad side' somehow, but if you have time, just drop me a note and let me know you're doing well, and when you think you might be Stateside. I'm kicking around, and it might be fun to link up.

NPO Buyouts and Sustainable Communities DRAFT 0.1 9/21/99 I recently had a discussion with my sister about what we should do about the "Momoko Ito Foundation" and the bicultural community project that we have. I have been thinking a lot recently about community recently. Amano and I had talked a bit about how Japanese seem to be taking a different angle, but that personal communication seems to be quite important. Hector and I talked a bit about multi-cultural and multi-lingual community sites. I also recently exchanged some messages with Howard Rheingold, Jeff Shapard and Lisa Kimball about the state of community sites these days.

*** I'd actually love to hear more about the Foundation; the links to the details on eccosys are dead. Obviously I think any communication aspect of the study is critical; genes get passed on in reproduction, but memes require the linguistic infrastructure. It's made more complicated by the 'locality' issue; Town A and Town B are next door, and are pretty congruent, which is the same for Town B and C, C and D, etc. When you try to shift context from A to (arbitrarily) M, though, the little differences add up; you'll notice it first, particularly, in language. This has dramatic impact on what are viewed as homogeneous 'culture' and interrelationships between cultures. Anyway, my sister mentioned that she thought that many of the community sites were too commercial looking these days. We all agree that the business model for community sites has not yet been discovered. my sister (Mimi) is studying from an anthropological point of view, small communities and how people in small communities are tied together. She is focusing on Net communities. She talked about the educational software market where there is no good model for the evaluation of software and mothers end up buying what is on the shelf. What is on the shelf, being driving more by advertising and marketing than real evaluation. A community might be able to evaluate and develop this market. There are many communities which straight advertising is not serving well.

*** Ha! The business model for realworld community has yet to be discovered. It's tied up in a sense of identity, obviously, and we all know how that varies across individuals. Have your sister look up the old PLATO system; there are lots of interesting details from that era on why net-based community works and doesn't. It ends up breaking along lines of affinity (notice the common elements of language in any affinity group, incidentally); you see it in computer communities, cults, gamers, otaku, etc. Language as a tool of group-identity, which means it defines inclusively and exclusively. This is when you start to skew over into reputation capital and trust issues--key elements of any community--where you have the test underlying of 'what are you good at, and just how good?' It might be 'great company, but never be in business with them' or 'good physician, but avoid any stock tips.' I agree that advertising is a poor indicator of reputation or trust; branding is supposed to be one way to approach a quantification, but the technology world is missing the equivalent of an Underwriter's Labs (UL). Look at a piece of US electronic equipment, and you find it had to meet a certain standard and safety. Software/hardware are still a wild context, and it's why the risks and threats exist, not to mention shoddy products and systems. In some ways, it's a good thing, because the lack of embeddedness to that sort of structure helps keep the tempo up; it's also the crack that a lot of problems flow through. Shibuya-san of Keio recommended that I read "An Introduction to Post-Keynesian and Marxian Thories of Value and Price" by Peter M. Lichtenstein. In this book Lichtenstein explains that neo-classical economics says that the market and "demand" determine the price and value of something. Marx stated that the labor that goes into production should determine the value. One can also discuss the actual utility of an object to determine value. The idea that a single market should determine everything is actually a product of our very neo-classical economic view on society. In small communities, it is possible that new forms of value and exchange are more relevant and dynamic than large markets.

*** True. Marx missed the point, at the edge of the information age. Keynes ended up recanting before he died, but his process of economy lived on (mostly dead now, particularly with Bretton Woods gone). If you remember my 'new econ, same as the old econ' paper, you know I'm tackling some of these issues as well. Certainly value and price are context dependent; one way to think of a localized context is as community, particularly where the emphasis is on relationships (you could just as easily use ecological models, but again, ecology gets fuzzy with politics). We're on the edge of having to come to a better understanding conceptually of community; so far, they're organic, and occur naturally rather than being engineered. Quantification and association of metrics are first steps in the direction (which direction? one is as good as another right now...) needed. As you're aware, economics already copes with 'spot' issues and arbitrage; we could bat around the relationship aspect, and get into the sociology of it, which might be useful

. I have recently begun reading "Towards a New Economics" by Kenneth E. Boulding which Jiro Kokuryo of Keio recommended to me and it also seems quite relevant, discussing the area where economics ends and sociology takes over.

*** Ahhh. Time to brush back up on statistical theory. I'm not familiar with the book, but one of the key factors I keep running into at the interface between sociology and economics is the resolution. Fine grain of relationships is sociology; pull back and abstract a bit, and you get back to economics. Lump that with all those things you can't get metrics on (motivation) and it gets interesting.

These recent exchanges and readings sparked an idea that maybe the users of community should form an NPO and buyout the community platform. The NPO could be governed in a way that suits the community the best.

*** Interesting. So you're modifying the old Kelso approach to equity distribution, and turning the community participants into owners and de facto management. I think this might be a real disaster. The hierarchical tendency would get ugly fast. I'm very interested in watching what's going down with slashdot and andover, with slashdot doing a karma/repcap implementation and andover doing the dutch auction. I wonder if that was part of what prompted your line of thinking.

One case would be if the users of a large community such as AOL offered to buy AOL and take it private. Another would be if we collected various community tools, managed them as an NPO, and as users increased and donations/tax increased, the NPO could acquire more and more technology and resources.

*** Hmmm. AOL would never work that way I suspect, it's too much a creature of 'entry point for newbies' and that's a heavy overhead price on a community. Your other model is very congruent to the open source and linux model, but you would lack the test of code (does it function according to design). I don't think you can sustain community past a certain threshold (undefined) well, and I think you run into steep overhead issues as your scale increases (diseconomy of scale due to complexity of relationships).

Several thoughts on this. Takao Nakamura said that he thought it might be boring to work in an NPO with a bureaucratic governance model. Similarly, Austin Hill described similar schemes where ISP's have been run bo Co-ops where the committee becomes polulated by boring people or the decision making becomes slow. It is necessary to invent a robust and exciting governance model which includes a leadership that allows the organization to make deals, be quick and be visionary.

*** Heh. Let me just point to Granovetter here, and you know how I tie heterarchical org structures into tempo, particularly optempo. I think you have to lock down on a purpose, have association based on that, and when the 'purpose' grows too big to have freeform org around it, you spawn. What you're describing are what I've outlined as opfor from personal experience; you have to keep small, cadre, decisions made where the event is, allow mistakes (which means plenty of room for failure, with the network able to catch you when you fall), etc.

Politically speaking, this NPO would have to be similar to a nation-state. It would have to have strong beliefs, policies, likes and dislikes, intelligent people, vision. It should exclude people who are not interested in dropping out of the current advertising and market driven consumer market.

*** Hmmm. I don't think the nation-state functions quite along those fashions. I agree on the strong focus and solid people, but hierarchical org structures still associate authority upon position, and you can't afford that in what you're talking about.

It could be financed by donations and by savings on purchasing of infrastructure and products directly. The users would own the platform. Isozaki-san of Netyear mentioned that most Internet companies are already owned by the user. I think the main difference will be that there will no exit for the shareholders, only voting power. This would cut out speculators and shift the managment from growth of revenue to happiness of the users...

*** Hmmm. The old co-op model, which killed a lot of biz in Berkeley. You get hammered on both the scale and scope issues. I think you also have to build in the spawn/schism function, otherwise you screw yourself.

Finally, I think that Japan is an interesting place to start such a venture. The US high-tech ventures require 150% growth to be classified as a "growth" company. Without such a classification, there is no option value. Without option value, there is no incentive for the jaded high tech employee. It is currently too easy to make money in Silicon Valley and too difficult to incent people without it. Japan is currently still in a depression and there are quite a few people who are willing to make enough to survive if the work is interesting.

*** Worse, those of us who are interested in good work are poorly understood. There's a pretty big rush on the cash in on the bubble, make the paper profits, and let the market crash to hell. On the other hand, you really can't plan well beyond a 24/36-month horizon. We're starting to radically up-tempo in a lot of technological directions, but we have unaddressed, unsolved problems that nobody is working on because they won't show the turnaround (yes community, but what about the representation issue?).

I also believe that eventually the US growth will slow down and option value will decrease. Management structures and ethics developed around the growth model may not be able to manage talent in such a state. If the NPO structure I propose can manage to set a vision and incent intelligent individuals without option value, such a structure may be able to accumulate dissillusioned talent from the Silicon Valley market after a market depression.

*** Well, they'll consolidate and embed. We're already seeing it happen. It isn't a problem as long as the larger players don't use their market clout to keep the tempo down so they can cope with their own slowing tempo and installed base anchor. Incidentally, the military, which is horribly hierarchical, has internally a culture similar to what you're setting out, where squad through platoon have an internal sense of community, and you sure as hell don't take 'reward' seriously where your buddies are concerned. Note, though, that that generally occurs among parallel in rank.

I have been listening to young and intelligent bureacrats and academics talk about the lack of accountability. Many feel that solid policies necessary to change society are disregarded on not implemented. These people are used to working with option value. If organized properly, I feel that calling on the resources of the academic and government worker community might yield a great deal of people who would help develop the governance model. If a global network of policy designers used the community and the Net to study and propose technically, economically and globally solid proposals to governments, it may be possible to make such proposals so indisputabily "right" that access to such policy would become political power for compliant politicans. Such a group could gain a great deal of reputation value on "vision" and global acceptability. This coupled with the economic power of group buying and acquisition of vital assets, may allow the community to grow to nation-like size.

*** Bah, accountability. Authority needs to equal responsibility. More important from the angle you're talking about is -what are they willing to be committed to?- Break apart an option, and what you see is a mechanism to reward commitment to a goal that someone can put a metric onto. What's the value in being committed? You get the pay-off. In your community model, you need to look long and hard at what motivates (pays off) the committed behaviour to the community. From there, technology is an enabler, economics reward and test viability, 'government' provides your constraints. The social contract is already evolving, we're just seeing most of the unsuccessful mutations die off. The net, in particular, is already achieving the level of 'power' you're speaking of (power, of course, being the ability to provide or deny dependencies). On the other hand, the point of the community would not be to be dominant or overbearing, but to serve the interests of pro-active and visionarily aligned users.

Companies, governments and other outside organizations could serve both the needs of this community and others including the traditional markets. This community would just be a sustainable community, or an island in the market.

*** Hmm, I think you're dropping into Sterling at the end there, but I don't read his stuff. Think ecosystem. As the ecosystem grows, you get increasing room for additional niches (roles in the system); plenty of microecologies can exist locally, with occasional competition. If you lose homeostasis in the ecosystem, everything falls out of the relationships necessary to holding the microecology, and it all goes to hell.

*** M

To: Joichi Ito

From: Mizuko Ito

Subject: Re: Bcc: NPO Buyout

Some comments on your essay:

"... She talked about the educational software market where there is no good model for the evaluation of software and mothers end up buying what is on the shelf. What is on the shelf, being driving more by advertising and marketing than real evaluation. A community might be able to evaluate and develop this market. There are many communities which straight advertising is not serving well. ..."

it is not only that the consumers are not being served well. The developers aren't either. There is basically this dense layer of distribution and marketing which is taking a huge cut of the resources in the industry and also filtering the content in particular ways. For example, it is the consensus in the industry now that you can't have a successful kids title now without a strong license at the level of Disney, Lucas, Barbie, or the "Sim" brand. This means that it is impossible for independent developers to survive and for originally characters to be developed. The fact that the industry has "matured" means that the stakes are higher but also that you need major backing to be a player now. It also means that the majority of the budgets these days are being spent on marketing and distribution, which means less dollars proportionally for development and creating quality products.

"The idea that a single market should determine everything is actually a product of our very neo-classical economic view on society. In small communities, it is possible that new forms of value and exchange are more relevant and dynamic than large markets. "

Right. And if you look more wholistically at exchange systems rather than just market economies, you would see that people actually have all kinds of "economies" that are not supply and demand based or even "utilitarian" in the narrow economic sense. The gift economy is one, but there are all sorts of other "regimes of value" that are moblized ever day, like sexual exchange, the "home" economy of families, status economies in professional communities, citational economies in publications, and all sorts of different kinds of cultural capital that are only recently being colonized by monetary systems are valulation. In my kids software case, yes, parents and kids care about getting a good "value" but they care more about what other kids are playing with, what is relevant to the school curriculum, and what happens to be available at WalMart during their fifteen minutes of discretionary shopping time. Decisions are very local. And on the other side of the equation, it is not as if the labor of development is translated transparently into the value or price of the product anymore. Value and price tend to be an effects of a kind of collective social system of exchange rather than something that can be attached to labor input or use value. Things are much more complex and it is much harder to be reductive about valuation when you are looking at cultural commodities.

"Takao Nakamura said that he thought it might be boring to work in an NPO with a bureaucratic governance model. Similarly, Austin Hill described similar schemes where ISP's have been run bo Co-ops where the committee becomes polulated by boring people or the decision making becomes slow. It is necessary to invent a robust and exciting governance model which includes a leadership that allows the organization to make deals, be quick and be visionary.

" Are there any examples of this? I think it will all depend not only on a governance model, but on the actual personalities involved. Maybe MUDs are an example in microcosm... "Politically speaking, this NPO would have to be similar to a nation-state. It would have to have strong beliefs, policies, likes and dislikes, intelligent people, vision. It should exclude people who are not interested in dropping out of the current advertising and market driven consumer market. "

Probably you would see different layers of participation. Again, looking at MUDs there are the gods, wizards, generic players etc. I think most people would participate in the broader community through a specific niche community that meets their local needs, such as wanting support for parenting, bicultural community etc. The larger structure or governance model may be largely invisible, trasnparent to the generic user, but through their participation, they would be supporting the organization. Yes, the wizards need to hold the torch and carry the vision to make it work, but for the end user it just needs to work. It's got to be foremost just the best place to meet certain needs. Kind of like the Internet at large works because there are a lot of activists holding the torch on a variety of issues, but most users don't know or care why. So I'm not sure if it would be a literal co-op model, but some hybrid maybe.

"It could be financed by donations and by savings on purchasing of infrastructure and products directly. The users would own the platform. Isozaki-san of Netyear mentioned that most Internet companies are already owned by the user. I think the main difference will be that there will no exit for the shareholders, only voting power. This would cut out speculators and shift the managment from growth of revenue to happiness of the users... "

Yeah, kind of more a popularity contest in a social sense than market competition. Like you say below, hybrid political economic.

"I have been listening to young and intelligent bureacrats and academics talk about the lack of accountability. Many feel that solid policies necessary to change society are disregarded on not implemented. These people are used to working with option value. If organized properly, I feel that calling on the resources of the academic and government worker community might yield a great deal of people who would help develop the governance model. If a global network of policy designers used the community and the Net to study and propose technically, economically and globally solid proposals to governments, it may be possible to make such proposals so indisputabily "right" that access to such policy would become political power for compliant politicans. Such a group could gain a great deal of reputation value on "vision" and global acceptability. This coupled with the economic power of group buying and acquisition of vital assets, may allow the community to grow to nation-like size. "

A lot of current marketing and distribution was born in an era that was still constrained by a lot of physical geography issues which the net circumvents. You needed to worry about inventory, print distribution, buying shelf space etc. etc. I think we are at a good moment because the net is only just being commercialized, and you still don't have serious net distribution yet. i.e. the old systems haven't reproduced successfully on the net yet. I think it's time for a new model. Like you say, there are a lot of people in the academic community that have been thinking about this stuff, like CPSR, say.

NPO Buyouts and Sustainable Communities DRAFT 0.2 9/22/99

I recently had a discussion with my sister about what we should do about the "Momoko Ito Foundation" and the bicultural community project that we have. I have been thinking a lot recently about community recently. Amano and I had talked a bit about how Japanese seem to be taking a different angle, but that personal communication seems to be quite important. Hector and I talked a bit about multi-cultural and multi-lingual community sites. I also recently exchanged some messages with Howard Rheingold, Jeff Shapard and Lisa Kimball about the state of community sites these days.

Anyway, my sister mentioned that she thought that many of the community sites were too commercial looking these days. We all agree that the business model for community sites has not yet been discovered. my sister (Mimi) is studying from an anthropological point of view, small communities and how people in small communities are tied together. She is focusing on Net communities. She talked about the educational software market where there is no good model for the evaluation of software and mothers end up buying what is on the shelf. What is on the shelf, being driving more by advertising and marketing than real evaluation. A community might be able to evaluate and develop this market. There are many communities which straight advertising is not serving well.

Shibuya-san of Keio recommended that I read "An Introduction to Post-Keynesian and Marxian Theories of Value and Price" by Peter M. Lichtenstein. In this book Lichtenstein explains that neo-classical economics says that the market and "demand" determine the price and value of something. Marx stated that the labor that goes into production should determine the value. One can also discuss the actual utility of an object to determine value. The idea that a single market should determine everything is actually a product of our very neo-classical economic view on society. In small communities, it is possible that new forms of value and exchange are more relevant and dynamic than large markets.

I have recently begun reading "Towards a New Economics" by Kenneth E. Boulding which Jiro Kokuryo of Keio recommended to me and it also seems quite relevant, discussing the area where economics ends and sociology takes over.

These recent exchanges and readings sparked an idea that maybe the users of community should form an NPO and buyout the community platform. The NPO could be governed in a way that suits the community the best.

One case would be if the users of a large community such as AOL offered to buy AOL and take it private. Another would be if we collected various community tools, managed them as an NPO, and as users increased and donations/tax increased, the NPO could acquire more and more technology and resources.

Several thoughts on this.

Takao Nakamura said that he thought it might be boring to work in an NPO with a bureaucratic governance model. Similarly, Austin Hill described similar schemes where ISP's have been run by Co-ops where the committee becomes populated by boring people or the decision making becomes slow. It is necessary to invent a robust and exciting governance model which includes a leadership that allows the organization to make deals, be quick and be visionary.

Politically speaking, this NPO would have to be similar to a nation-state. It would have to have strong beliefs, policies, likes and dislikes, intelligent people, vision. It should exclude people who are not interested in dropping out of the current advertising and market driven consumer market.

It could be financed by donations and by savings on purchasing of infrastructure and products directly. The users would own the platform. Isozaki-san of Netyear mentioned that most Internet companies are already owned by the user. I think the main difference will be that there will no exit for the shareholders, only voting power. This would cut out speculators and shift the management from growth of revenue to happiness of the users...

Finally, I think that Japan is an interesting place to start such a venture. The US high-tech ventures require 150% growth to be classified as a "growth" company. Without such a classification, there is no option value. Without option value, there is no incentive for the jaded high tech employee. It is currently too easy to make money in Silicon Valley and too difficult to incent people without it. Japan is currently still in a depression and there are quite a few people who are willing to make enough to survive if the work is interesting.

I also believe that eventually the US growth will slow down and option value will decrease. Management structures and ethics developed around the growth model may not be able to manage talent in such a state. If the NPO structure I propose can manage to set a vision and incent intelligent individuals without option value, such a structure may be able to accumulate disillusioned talent from the Silicon Valley market after a market depression.

I have been listening to young and intelligent bureaucrats and academics talk about the lack of accountability. Many feel that solid policies necessary to change society are disregarded on not implemented. These people are used to working with option value. If organized properly, I feel that calling on the resources of the academic and government worker community might yield a great deal of people who would help develop the governance model. If a global network of policy designers used the community and the Net to study and propose technically, economically and globally solid proposals to governments, it may be possible to make such proposals so indisputably "right" that access to such policy would become political power for compliant politicians. Such a group could gain a great deal of reputation value on "vision" and global acceptability. This coupled with the economic power of group buying and acquisition of vital assets, may allow the community to grow to nation-like size.

On the other hand, the point of the community would not be to be dominant or overbearing, but to serve the interests of pro-active and visionarily aligned users. Companies, governments and other outside organizations could serve both the needs of this community and others including the traditional markets. This community would just be a sustainable community, or an island in the market.

-- 9/22/99

Met with Takano-san of One Galaxy and he agrees with many of my points. We discussed the "no-exit" business model and he had similar thoughts. It is possible that a platform provider to the community could be a good business. It could be an "exit" style business, or a sustainable business servicing the community. The point would be to gain the economy of scale and have it fairly priced so that the community would not want to switch. High switching cost could be built in to the platform, but it would not be necessary.

On Trust... Using e-bay and after talking to Kokuryo-sensei about trust and pricing on e-bay. It appears that trust in a community context may be more important than trust in technology or brand. I recently bought a fountain pen on e-bay and they offered to send me the pen before they received the check because "pen collectors are trustworthy people." Ebay manages reputations.

A platform provider could be trustworthy in a political, person, or other way, relying not necessarily on price, technology or brand to keep customers. This reminds me of "old style" business. Like traditional trading companies. Are we going backwards?

The observation that Kokuryo-sensei had on ebay was that prices for equivalent products fluctuated greatly depending on the timing and the person selling the product. The net is not creating a perfect economy where all prices are equalized by the great market, but a more non-linear community oriented pricing mechanism heavily influenced by consumer to consumer interaction. Fun fun! ;-)

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