Joi Ito's Web

Joi Ito's conversation with the living web.

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! ;-)