Wikinomics: How Mass Collaboration Changes Everything

Can you help me write this book review?

According to Wikinomics, you can and will, and the review will be all the better for it. Indeed, Wikinomics' authors ask you to help write the final chapter of their book. And it doesn't stop there: Your collaboration in hosts of other global efforts will help develop products, improve the political system, create a cleaner environment and find cures for diseases.

Mass collaboration changes everything!

That is the basic premise of the book: The more you let outsiders use and shape your work, the better life becomes. Whatever your work, mass collaboration will improve on it by introducing new ideas, better processes and superior products. This should be a virtuous circle because technology will build on itself, and technological advancement should occur at an even faster pace. The result is a better world. This is evident, write the authors, in the "explosive growth of phenomena such as MySpace, InnoCentive, flickr, Second Life, YouTube, and the Human Genome Project."

Skeptical? Just like "always" and "forever," the word "everything" should caution you that too much is being promised, that "mass collaboration" likely has problems as well as advantages.

For example, it can be very risky for a corporation to give up its intellectual property. Much of IP's perceived value derives from the legal protection afforded by copyrights and patents. And while it may be viable for some companies to open source the portion of their IP that has secondary value in order to make inroads on a competitor whose main value is that IP type, this strategy isn't going to work in every market.

Nonetheless, once you get past "always," "forever" and "everything," the book has merit, and it starts from solid economic theory.

Coase's law

By expanding on standard microeconomics, the authors suggest that new technologies have transformed the way economies produce and consume. The authors rely on Nobel laureate economist Ronald H. Coase and his seminal 1937 article, "The Nature of the Firm." From this paper, the authors explain "'Coase's law': A firm will tend to expand until the costs of organizing an extra transaction within the firm become equal to the costs of carrying out the same transaction on the open market."

The Internet and globalization, say the authors, have reduced the cost of participating in markets. Now firms can decrease their reliance on internal resources and instead open themselves up to outside collaboration. However, the authors neglect the point that technologies like e-mail and enterprise resource planning systems have shrunk the costs of organizing within the firm, which would tend to make firms larger.

The hook

The book begins with an excellent hook, an almost-impossible-to-believe rags-to-riches example of their theory. A Canadian gold mining company, Goldcorp Inc., was near bankruptcy because of declining known reserves and other internal issues. The company's property in northern Ontario showed strong indications of gold deposits, but its expensive internal geologists were having trouble finding the exact location and needed more time and money.

Taking a page from the open source playbook, the head of the mining company decided to give up terabytes of the company's proprietary information to the World Wide Web and provide a modest $575,000 in prize money to anyone who could find gold on the company's land. Responses from around the world, many from disciplines outside geology, led to discovery of 8 million ounces of gold. The contest "catapulted his underperforming $100 million company into a $9 billion juggernaut."

A platform for collaboration

The book continues with a few chapters on the technological and social changes that provided the platform for mass collaboration. One prominent change was the huge investment in telecommunications infrastructure in the late 1990s. Large amounts of fiber optic cable were laid under oceans and across land to form connections around the globe. The excess capacity created by these investments caused communication prices to fall drastically, leading to increased demand for global services and a greater supply of mass collaborators.

The authors don't address what happens when these communication pipes become filled. As congestion on fiber optic cables increases because of multimedia and other traffic, costs can skyrocket, putting a damper on mass collaboration. However, mass collaboration might also provide the solution. Large groups of people are finding new ways to cram more traffic onto the same pipes, delaying congestion.

The authors point out that demographic changes are also affecting the emergence of mass collaboration. Young people reared on the Internet are used to using open source software, sharing files, collaborating on discussion boards and living in virtual worlds. (See the Synthetic Worlds book review in the June 2006 Region.)

Four trends

The book goes on to detail the four trends of mass collaboration: virtual meeting places to share ideas, consumers that produce, virtual libraries of Alexandria and global production.

The authors call the online meeting places for dissemination of creative ideas and innovation "ideagoras." This trend of mass collaboration relies heavily on the concept of the wisdom of crowds. (See the book review in the September 2005 Region.) According to Wikinomics, "A large, diverse network of talent will solve well-defined problems faster and more efficiently than an internal R&D group."

These online marketplaces have a twofold purpose: finding answers for people with questions and providing questions for people with answers. An example of the latter is companies not fully utilizing their intellectual property and looking for someone in need of their solutions. The book illustrates this point with Procter & Gamble selling some of its unused patents on the patent marketplace yet2.com.

"Prosumption"

Another trend is companies intentionally allowing their IP to be compromised by customers. The authors call this "prosumption," where consumers help with production. For example, several musical artists allow everyday listeners to remix parts of their songs in the creation of new songs. As people listen to the remixed songs, awareness and sales of the original song may increase. A more extreme example is the Apple iPod. This device was hacked by consumers to act as a fully functional personal digital assistant, not just a music device. The hack increased demand for iPods by broadening the product's purpose and customer base. The same has happened to iPhones.

This "hack this product, please" attitude has two primary benefits: Consumers get more of what they want, and companies get free enhancements to their products. "Prosumption is becoming one of the most powerful engines of change and innovation that the business world has ever seen," claim the authors. Still, they again seem to be overstating benefits; some companies may well be better off reaping the monopoly rents of products protected by patents.

Digital libraries

Another trend in mass collaboration is the "new Alexandrians," which refers to online repositories of information, or a new-age Great Library of Alexandria. Despite the potential legal challenges, several digital libraries are compiling a huge inventory of books, music, articles, pictures, videos and other information forms to share with the world.

Reduced cost of sharing information has also increased activity in many scientific disciplines, resulting in new "technological hybrids and recombinations." Openness of scientific knowledge breeds on itself with new inventions and cross-disciplinary research generating new ideas and tools. Collaboration can occur around the clock and the world with thousands of contributors adding to the knowledge base. The "new Alexandrians," made possible with low-cost databases and communications networks, accelerate technology creation and adoption. A good example is the open source Human Genome Project that has spun off many new drugs and treatments.

Global production

The fourth mass collaboration trend described in Wikinomics is what the authors call the "global plant floor": firms creating and joining global networks to produce value. "Winning companies today have open and porous boundaries and compete by reaching outside their walls to harness external knowledge, resources, and capabilities." The global plant floor appears as a continuation of the long-term globalization trend with the twist that the production of the good is not controlled directly.

One example the authors use is Boeing. Airplanes are complex and expensive and have numerous technologies integrated into a single product. It is very difficult for one company to have the best and latest research on all components. By embracing mass collaboration and partnering with thousands of suppliers around the world, Boeing now designs and produces some of the most advanced aircraft on earth.

Putting theory into practice

The book ends with the authors asking for the reader's help in writing their final chapter, "The Wikinomics Playbook," by going to their Web site and joining the collaborative masses. The result, in this reviewer's opinion, isn't pretty. The Web site suggests that contributors "feel free to leave pages messy" and "dump in rough drafts and raw material for others to work with." Contributors have done exactly that, in a disjointed, anything goes, top-10 list fashion.

Which leads to Wikinomics' subtitle: How Mass Collaboration Changes Everything. The implicit assumption is that these changes are for the better. However, as evident in the final chapter, changes aren't necessarily improvements. Quality control is an issue that mass collaboration has to address; witness the struggles of online encyclopedia Wikipedia to avoid libel lawsuits.

A final gripe: It seems a bit hypocritical that the authors advocate freely sharing original content, but have placed a copyright on their book. In the introduction, the authors state that they hope to revolutionize book creation by allowing mass collaboration on their content. But the pages just preceding this claim warn readers that "no part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form or by
any means."

The Region, on the other hand, has anticipated and embraced this particular principle of Wikinomics. You are free to share with the world this book review or any other Region article. Just two conditions: Give the Federal Reserve Bank of Minneapolis credit for creation, and send us a copy. Thanks for your collaboration.