I recently wrote the following essay with John H. Clippinger as part of the ongoing work of ID3, the Institute for Data-Driven Design, which is building a new open source platform for secure digital identity, user-centric control over personal information and data-driven institutions.
As the Internet and digital technologies have proliferated over the past twenty years, incumbent enterprises nearly always resist open network dynamics with fierce determination, a narrow ingenuity and resistance. It arguably started with AOL (vs. the Web and browsers), Lotus Notes (vs. the Web and browsers) and Microsoft MSN (vs. the Web and browsers, Amazon in books and eventually everything) before moving on to the newspaper industry (Craigslist, blogs, news aggregators, podcasts), the music industry (MP3s, streaming, digital sales, video through streaming and YouTube), and telecommunications (VoIP, WiFi). But the inevitable rearguard actions to defend old forms are invariably overwhelmed by the new, network-based ones. The old business models, organizational structures, professional sinecures, cultural norms, etc., ultimately yield to open platforms.
When we look back on the past twenty years of Internet history, we can more fully appreciate the prescience of David P. Reed’s seminal 1999 paper on “Group Forming Networks” (GFNs). “Reed’s Law” posits that value in networks increases exponentially as interactions move from a broadcasting model that offers “best content” (in which value is described by n, the number of consumers) to a network of peer-to-peer transactions (where the network’s value is based on “most members” and mathematically described by n2). But by far the most valuable networks are based on those that facilitate group affiliations, Reed concluded. When users have tools for “free and responsible association for common purposes,” he found, the value of the network soars exponentially to 2n – a fantastically large number. This is the Group Forming Network. Reed predicted that “the dominant value in a typical network tends to shift from one category to another as the scale of the network increases.…”