The WWGD? world

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, bullshit) 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 sucks. 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, growing food.

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, $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, 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 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 bullshit 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 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.

Welcome to the Google economy.

  • “I can’t yet get my head around the new structure; no one can.”

    I suggest reading Revolutionary Wealth by Alvin Toffler and Heidi Toffler.

    I think they nailed it, just like they did with Poweshift back in 1990.

  • What have you been smoking? I’d like some of it.

  • You seem to be looking through the wrong end of the telescope. What will remain after the national governments get finished “bailing out” the various financial firms is even fewer, bigger players. We are seeing a period of forced consolidation of firms. If Teddy Roosevelt was a “trust buster” the governments this time are trust makers.

    Firms are being designated as “too big to fail” which means that they can continue to make profits for their owners while the loses will covered by the taxpayers.

    I think you extrapolate too much from a few startup industries where consolidation has yet to take place. Perhaps there will be millions of people posting on YouTube or running their online businesses through a front end like ebay or Amazon, but this isn’t where the real money will be made.

    Those who control access to the market (your beloved Google) will take the lion’s share of the revenue. This is not a new model, it has existed in agriculture for a long time. We have thousands of “independent” farmers, but only a handful of grain and meat purchasers. The farmers get about 4% of the retail price while ADM or Tyson or the like get 40%.

    A bit of online advertising, some web print and video are not going to change the way big business works. I think you need to interview people in other industries to get a true picture of the way the world is heading.

  • Jeff, congrats on finishing the book! You raise some nice points here. But I’m not sure how transparency or giving people control has to to with Google. Google aspires to give users relevant results based on an average of 1.7 search terms, using a highly guarded proprietary algorithm. Indeed, Google’s success makes the case that you can get pretty far without offering users transparency or control.

  • There was an awful lot in that post! Much to think about, but the thing that stuck with me, the part that I think it brilliant and needs much greater expansion, is the idea of the platform. The idea that car companies could be a platform for the small innovative car start-ups a la Amazon is a fascinating idea. I doubt it could happen given their current structure, but it’s not hard to imagine that it could be structured that way. Amazon not only is a platform for it’s competition, it also explores and finances dozens of parallel businesses.

    I think this idea is huge and one that could and should re-shape the way all businesses think. Be an ecosystem not just the biggest guy on the block.

    Thanks for a great post.

  • I don’t think the thing about transparency holds up. The transactions were transparent – people tracked them. What they couldn’t work out was what the transactions were *worth*. That’s a result of complexity, not transparency. A third-order partial differential equation is transparent – but it’s complex, so much so that it’s very hard to work out.

    So WWGD is a nice try, but not all situations cede to it.

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  • Great post – and I’ve pre-ordered the book. I hope everyone who reads your blog does that right away (hint!).

    Google tripped up in 2004, arguably, when it quickly released the Gmail privacy policy before the service itself was open to many people – analogy here might be to the three-page Paulson initial proposal, and the obvious (to us now) necessity of coordination with many other central banks. That seems like a story that is about more than transparency. It’s also about situation-awareness, peripheral vision, many-mindedness, and a certain humility.


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  • “Stuff sucks”?? WTF???

    Jeff, what is your book if not physical “stuff”? If “atoms aren’t safe,” then why aren’t you offering your book as a 100% eBook product—–completely free, ad supported, transparent, capable of being a platform, and other buzzword/phrase you can summon at the moment—–instead of selling in a physical, tangible form over which readers will have no control other than the ability to highlight sections with a yellow marker or fold over the corner of a page to mark the point where they stop reading???

    There’s a disconnect between your rhetoric and your reality, Jeff. While I normally applaud your efforts to bring the communications industry into the digital age, you’re doing an Evel Kneivel leap of logic here.

  • “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.”

    Yes, you won’t need money to set up a business on somebody else’s platform (at least, less than in the physical world), but then you’ll have to play by their rule book. Amazon & eBay are both becoming more buyer-oriented in their terms of service, and sellers on those platforms are squeezed for every penny and have little recourse but to leave when things become intolerable.

    On the other hand, it’s a lot easier to take down your eBay storefront than it is to close down your bricks ‘n’ mortar storefront.

    Interesting posts. I’m looking forward to reading your book.

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  • Harry,
    I fully confess my hypocrisy in the book for publishing a book about the future of books not being books.
    When I say that stuff sucks (which in the book is the end of a George Carlin cover), what I’m saying is just that stuff is hard. It used to be the basis of business and advantage – I own the press and you don’t, nya-nya-nya – but now it can bring unbearable cost burdens and limitations.
    There’re always be stuff, of course, and businesses made on it. But these days, digital is easier, especially because it requires less capital and thus credit, eh?

    Thanks. Yes, I point out that eBay built a strong network by extracting the minimum possible from it. Then when it thought it was in a position to put a vice on its sellers and raised it take, that opened the door for Amazon, Etsy, and others.

    You inspired (as you often do) the post above.

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  • Nice article, but…
    1) “Don’t be evil” is a marketing slogan, not a policy. See Google in China.

    2) Don’t blame anyone but yourself for not understanding and/or not profiting from (or losing your shirt on) derivatives. They’re not that complex and many avenues of trading them for individuals exist (now the margin requirements are probably a bit large, but they were not recently).

    Just because you, personally, don’t understand something doesn’t make it bad. Probably many of the derivatives trades don’t understand the points you are trying to make.

    3) “unregulated leverage gone mad” – note how very few of the completely unregulated hedge funds have gone under. The failures are all in VERY regulated banks. Why should a “platform” be unregulated (open access for all according to the Platform 3.23 standard by government mandate?) but a financial “platform” requires regulation?

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  • Steve

    Agree that stuff is hard and requires lots of capital investment. For your average self-employed media type, there might be a living to be had in the thin air of the web, and one would expect it to grow rather faster than the dead-tree publishing industry.

    But you appear to overreach yourself a little when talking about other industries. If the rich countries buy all their cars from China, then eventually their aeroplanes, then their pharmaceuticals, I doubt they’ll all be able to make a living on the thin air of selling each other stuff and taking in each other’s washing. You can borrow for a while, but one day you have to pay the Chinese and Saudis for producing all that stuff. I’m sure that they’ll accept enough of the “products” that America is offering in exchange for their goods.

    So, the web brings opportunities for efficiency in publishing, marketing, even customisation of products (like cars). I don’t see what that has to do with the fundamental ability of American manufacturers to compete with the East. People DO want to be in the business of stuff, such as oil, cars, planes, machine tools, servers etc. Most of the dollars spent on such things are retained in the USA. But ultimately those dollars won’t be able to buy so much stuff (like oil) from overseas unless there is a fundamental improvement in productivity. As far as I can recall, the only notable improvements in productivity in the dotcom boom were in IT itself, without any actual benefit to the rest of industry.

  • The Global Bubble Economy is finally popping right before our eyes. There are no more mini-bubbles left to ride on. I agree the world is changing in ways we cannot yet fully fathom. Google does need to help all of us invent the new economy together:

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  • Jardinero1

    As I read this I got the feeling that this was satire or the author was on drugs. I am going to assume that is not the case and make the following comments. This sentence struck me:

    “Google’s metaknowledge creates real value”

    This was my first indication that this was some kind of joke. What constitutes value is arguable and highly subjective. The pragmatic answer is that value exists in peoples minds at the moment of exchange. I trade my 10 marbles for your yo yo. We agree, at that moment, that 10 marbles and one yo yo are equivalent. This is the only definition of value that stands the test of time. All the other definitions are verifiably false.

    The value of Googles’ meta data is, essentially, zero, since the data is collected for free and the metadata is freely given with nothing returned. Now wait, Google does invest a lot of money creating meta-data. They still give it away, no value there.

    The second statement that struck me was:

    “The key is no longer to control scarcity but to manage abundance.”

    I thinks this is backwards. If things have a value in a person’s mind, it is because that person believes a thing is finite and scarce. If a thing were infinite I wouldn’t trade any of my scarce or finite stuff for it. Why should I? The only way to create value with something that is abundant is to manage its abundance, that is, create scarcity. The correct wording should be:

    “the key is to create scarcity by controlling abundance”.

    This is seen on a daily basis through the use of copyright in the content distribution industries, like music and video. Music and videos can be copied and distributed for nothing these days. It takes an artificial scarcity induced by copyright and enforced by the state to create a market where people are willing to give up something scarce to have a video or a song.

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  • Really enjoyed this post, Jeff.

    I think you’re spot on.

    We need more solid reflections like this.

    Well done :)


  • Great thoughts Jeff,
    Really made me have a look at this from a completely different angle which was great.
    The great commodities of the future will be trust and transparency.

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  • Fantastic article. I enjoyed reading it. I would only like to add that people can save themselves from a lot of troubles if reading the Payday Loan News regularly. They will find really interesting offers there.

  • Trust never goes out of style. Without it, you can’t run a company, get a roommate, or make a good marriage.