Escapable Logic

Escapable Logic
Design Study for a New MicroEconomy

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Wednesday, September 25, 2002

Sex and Money

Have you noticed that of the many topics routinely discussed, sex and money are the two that most get our attention?

My wife Tamara, a urologist, is a medical director for a major pharmaceutical company, working on a team running clinical trials on a drug to treat erectile dysfunction. Therefore we're at a major meeting in Montreal - the 10th World Congress of the International Society for Sexual and Impotence Research. Dr. Ruth and Pele are here, raising awareness among other things, but it's a sober crowd, perhaps the only group in the world that doesn't crack Viagra jokes. (That's also why the blogs have been sporadic - too much ambience here in Montreal and a persistence-averse 800 connection from my ISP.)

Last night I found myself as the only layperson (pun intended) in a broad-ranging conversation among Tamara, an innovator in trigger point therapy for female pelvic floor disorders, a British male researching clinical responses to drugs and a California-based female psychologist specializing in couples' sex therapy. For a compulsive conversationalist, this was a promising constellation of banter.

Sure enough, the issues ranged from female genital mutilation in Eritrea, America's entry into the colonialist stage of its new imperialism, Howard Bloom's brilliant books Lucifer Principle and The Global Brain, Jared Diamond's Guns, Germs and Steel and how men's and women's sexual responses differ. On that topic, these experts agreed that a major factor keeping a woman from sexual enthusiasm is financial pressure.

We bloggers will have to leave sexual sattisfaction to the experts, but we can do something about the money part.

What do You Mean We?
Seriously, we bloggers have some collective experience with web-based data solutions. We'll eventually get our collective minds around the fact that money is just data and the economy is just the transmission of money-data among buyers and sellers. Then we can act on the imperatives of the Peer Economy.

The premise of the Peer Economy is that our peers are more likely to meet our needs than are the companies they work for. If that is true, then we should consider companies to be intermediaries which have locked up the most productive resources - people - and locked us in as customers for the work of their people. So, if the Peer Economy's endoscope, the Internet, allows buyers to locate and transact with people inside the corporation in significant numbers, then the Internet is acting as a disintermediary in the same way it does when it connects us directly to carmakers, airlines, produce warehouses, book distributors and software publishers.

Just as the retail intermediaries now being cut out of the distribution channel are screaming foul, so will the corporations whose knowledge workers depart to freelance from home, not fromm downsizing but by choice. Suppose my previous premise is accurate enough to be useful:

All transactions are forms-based

All forms are data-based

All databases are controlled by sellers

All sellers seek to charge more and reduce service costs

All sellers use data to grow profits, contrary to their buyers' interests

If so, then it's clear that a change in the fundamental data architecture underlying transactions can be the catalyst for a renaissance in the market-based economy of customers collaborating with customizers which predated the industrial age model of passive consumers locked in by mass producers. Thanks to Doc Searls for the important distinction between enfranchised customers and passive consumers.

I believe a new peer-to-peer customer-centric data architecture is inevitable and obvious. If/when it occurs, we'll note retrospectively that the consumer era was an artifact of the seller-centric data model - an architecture that couldn't scale to the rich data types required in a market-based economy: quality, timeliness, courtesy and expertise.

Open Resources

"The best expert for your most important project doesn't work for your company."
- Bill Joy
Companies are based on closed data resources. Even when open source tools are used, they are only used to manage closed-source data, locking customers into using company resources to solve the entire class of solutions the company claims to excel at. Of course, that's untrue and the customers know it.

I'd argue that the closed-resource lock-in model cannot and is not scaling to the Internet. Whenever a web-based solution is good enough to be viral it breaks under the strain. Microsoft can't make HotMail reliable. AOL/TW can't deliver enough dial tones or ad-free utility.

Let's do the math.

Viral growth is exponential by definition: your many HotMail or AOL messages may inspire, say, 2 new accounts every month. By the time Microsoft even heard of HotMail, it had 8 million users. Let's assume no growth that was still the number of members when they bought it for $400 million. Again, this is based on a viral growth model, not an advertising-based model: we're imagining a web application so compelling that each user inspires 2 new users every month (could be years - doesn't really matter.

As long as the service is satisfactory and there are potential users, the demands on Hotmail's server farm will grow by the same exponent - twice the members every period. Cool: 16, 32, 64, 128 million users in four additional months. During one of those incremental periods, the server farm will be under-provisioned and will break under the load. We all know that exponential growth is unmanageable but we've failed to apply that wisdom when lured by the siren of limitless success.

This is quite different from Nicholas Negroponte's vision of wireless repeater stations proliferating like lilies in a pond. In that case, the capital comes from private citizens accessing as many data servers as there are ISPs. The costs of growth are so broadly scattered that its energy is like the sun, available everywhere, and not like HotMail's large gro-lite, dependent on Microsoft's single electric line.

If the Water Lily Model works for WiFi, it will work for a range of services. Imagine an RSS-based service index aggregated from the customer-certified reports of an exponentially expanding network of competence:

A transaction stolen from American Express A travel agent leaves the agency and specializes in custom tours for which she charges a flat $250 administaration fee, payable based on the quality of the memories upon your return. As an expert, she passes on to you better deals than you could find or agencies would disclose and designs uniquely satisfying itineraries. As her global reputation grows and becomes more visible, customers rely on each others' glowing recommendations to bid for her availability. Her systems grow in efficiency so each booking takes less time.

A transaction stolen from Home Depot You need a power washer for Saturday afternoon. You could rent it from Home Depot for $150 and also hassle with picking it up using the trailer they provide, towing it home and back, screw around with the instructions, nozzles and starting ritual. But it occurs to you to check the P2P service index and discover there's a retired dude in the next block who's accumulated all the power tools you could imagine. He'll rent it to you for $75, bring it by, show you how to run it, volunteers to stop back for any help you need and picks it up at your convenience. And he'll let the satisfaction of the relationship determine whether he gets all of his $75.

A transaction stolen from Roto-Rooter Your drains are backed up when you return from travel at 6:30pm, so you check the P2P index and discover a plumber in your zip code with a tiny Yellow Pages ad but with a disproportionately huge regard by past customers. Because he has a network of quality apprentices he's mentored into service, he can have someone there in 17 minutes, charging half of RotoRooter's service which won't happen until tomorrow morning. And his charge varies with your satisfaction with his apprentice's responsiveness, professionalism and competence.

A transaction stolen from Kinko's About noon, you discover that your small company needs a brochure for tomorrow morning's presentation. In the past you spent the evening at the office and Kinko's transforming your Word doc into an obviously amateur flyer. The P2P Index leads you to a specialist 5 states away who charges you $125 to create and print a knock-out, graphically interesting and well-written piece that's FedExed to you by 8am. The printing quality - all originals - is better than Kinko's high-speed color copier, and its excellence rubs off on your presentation.

Imagine your own transactions. We all know there's an expert in Bangalore who could finish our messy code by the end of the week and there's someone in our zip code to build our deck masterfully, if only we could find them.
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