Capitalism and the Web

[John Simkin]

There is an interesting new book out by Don Tapscott and Anthony Williams entitled Wikinomics: How Mass Collaboration Changes Everything. The book claims that we've barely begun to imagine the ways in which the web will transform our lives as workers and consumers.

An article in the Guardian by Oliver Burkeman discusses this book. He explains the importance of Ronald Coase in this story.

http://www.guardian.co.uk/g2/story/0,,2162394,00.html

So it is to Tapscott's credit that the idea he calls "wikinomics" - he is, after all, a web guru, and seems unable to resist buzzwords - goes back to 1937, and to a young socialist academic born in Willesden.

Ronald Coase had noticed something odd about capitalism. The received wisdom, among western economists, was that individuals should compete in a free market: planned economies, such as Stalin's, were doomed. But in that case, why did huge companies exist, with centralised operations and planning? The Ford Motor Company was hailed as a paragon of American business, but wasn't the Soviet Union just an attempt to run a country like a big company? If capitalist theory was correct, why didn't Americans, or British people, just do business with each other as individual buyers and sellers in the open market, instead of organising themselves into firms?

The answer - which won Coase a Nobel prize - is that making things requires collaboration, and finding and linking up all the people who need to collaborate costs money. Companies emerge when it becomes cheaper to gather people, tools and material under one roof, rather than to go out looking for the best deal every time you need a few hours' labour, or a part for a car. But the internet, Tapscott argues, is radically lowering the cost of collaborating. Companies - certainly big companies - are losing their raison d'etre. Individuals, and tiny companies, can collaborate without corporate behemoths to organise them. Considering how many of us spend our weekdays working for big companies, and then spend our weekends giving our money to them, this is a far-reaching thought.

It should come as no surprise that large companies, from media outlets to clothes shops, are trying to profit from making their customers feel "involved" in the creation of their products. But that's arguably an old-fashioned, condescending point of view, with the company still firmly in the driving seat. Wikinomics implies something far more radical: it's not a given that the company will stay in the driving seat at all. "We're talking about a new means of production," Tapscott says. "Collaboration can occur on an astronomical scale, so if you can create an encyclopedia with a bunch of people, could you create a mutual fund? A motorcycle?"