3Di as a Platform for Entrepreneurial Capitalism?

In an earlier blog I mused on whether or not SL could become a platform that ushered in the experience economy. I have been reading Henry Jenkins’ blog where he admonishes folks for talking about continuums or waves of web evolution, but I am still compelled to throw out a few ideas that have been coming to mind on this topic. I am not suggesting in any way that Web 1.0 or 2.0 disappears in this visual rendering, but rather that each iteration technological discontinuity weaves new strands of value that coalesce in a new architecture (social and technical) that discovers new ways to create and share value.

FROM BROWSING TO WIKITECHTURE
Having the benefit of perspective, I’d like to suggest that the Web 1.0 revolution was all about the democratization of ACCESS. Industries like Financial Services, Banking, Retail, Travel and Government predictably saw value in providing their customers with access to information about their accounts so they could drive more transactions and thus generate more fees. Support industries to Web 1.0 like Technology Services, IT and Telecom rode the wave to support these industries in bringing the access value proposition to their clients.

The read-only web provided us with the opportunity to access more information than ever before and clever new businesses like Google, Amazon and e-bay found ways to monetize that access for their own gain. The attention and energy in the read-only web orbited around the value exchanged for finding and accessing information.

Napster served as the relay-baton between Web 1.0 and Web 2.0. The read-write web is all about the democratizaiton of sharing, participation and collaboration. Industries like Media and Entertainment, Publishing and Education see the participatory web a discontinuity and threat to their meat and potatoes (or couch potato) audience that were traditionally passive consumers of media/content.

The millennial generation is NOT passive. They want to interact and collaborate. That is why the average MySpace page gets 30 hits a day. They want to be engaged in the creative process rather than just being a consumer of it. Rupert Murdoch seems to get this and bought MySpace. Google follows suit it and bought You Tube and we are witnessing a huge redefinition of how the Media and Entertainment industry develops and distributes content and a shift in business models around that new dynamic in how they extract value from the market for doing so.

This democratization of participation and collaboration is also buttressed by a new set of economic platforms and a redefinition of the employer/employee contract. Sites such as e-Bay provide a platform for member driven value creation. The people who generate incomes from eBay are not eBay employees, They participate in the use of the platform provided by eBay (and Paypal etc.) to allow them to find/create their own value.

If you have not yet seen this powerful clip on Web 2.0, I urge you to spend the few minutes to grok it.

The Web 2.0 era ushers in a number of new value exchange platforms that are oriented around reputation capital (how good an e-Bayer are you) and referant capital (How many eyeballs does your name/blog attract and what is it worth to be associated with you? Adding to that the availability of a commerce and advertising platform from Web 1.0 and we see lots of different channels for value creation. More importantly these channels are leveraged less by enterprise and more by entrepreneur. The deeper we go into Web 2.0 the more we create a platform for entrepreneurial capitalism as popularized by Karl Schramm.

If Napster was the relay baton from Web 1.0 to Web 2.0, then Wikipedia and Linux are the bridge to the 3D internet (3Di). Wikipedia and Linux were all about the collaborative co-creation. In one case the development of a dictionary in another an operating system. Wikipedia was created by a volunteer workforce for the benefit of everyone worldwide. Thus the notion of virtual co-creation is firmly established as a pattern at the edge of Web 2.0. With the advent of 3Di I see significant opportunities for collaboration and innovation. Innovation is a creative process. It is socially constructed and emerges from interactivity.

The 3Di environment is naturally suited to that and so it is only a matter of time before we move from Web 1.0 (Democratization of Access) to Web 2.0 (Democratization of Participation and Collaboration) to Web 3D (Enablement of true generative learning and co-creation distributed virtually across the world). If you buy into Michael Schrage’s notion that the prototype is the engine of innovation (and I do), we now have a socially immersive environment where people all around the world can convene to communicate, collaborate and co-create in real time.

Throw on top of that the fact that even more sophisticated alternate-currency and currency exchange platforms are emerging to enable value exchange for that which is created in these 3D spaces and things get interesting. Joe Miller (Linden Lab) mentioned in a discussion the other day that 12 Wal-Marts worth of objects were bought and sold within 2L last month. That is a lot of trade.

Yes, I did read Ed Castranova’s piece on this too…I agree that SL is only an economy the size of Mayberry, but hey, New York was only the size of Mayberry once too. It is the possibility I am trying to get you to contemplate. If you stay there long enough you might actually come up with ways of capitalizing on this new and pliable value creation mechanism.

VALUE EXCHANGE PLATFFORMS AND ENTREPRENEURIAL CAPITALISM
In this new world, entrepreneurs are creating and leveraging new value exchange platforms for their own benefit as well as for those who participate in their use. Another phenomenon I observe is that these platforms again start to challenge the notion of enterprise. Instead of just having “employees” work for them, places like e-bay and Second Life are enabling “members or citizens” to work through them. Imagine you opened up a new digital nation, and people moved there, became citizens and started paying taxes. You get to make the rules and tax people. But why would anyone move to your nation? Short answer is better roads, telephones, and opportunities to work (create and capture value). Sound familiar? There are over 720,000 Americans whose primary or secondary income comes from e-Bay and there are at least half a million folks in SL spending $1M in hard currency on a daily basis.

Here is how Jim Spohrer from IBM Services Research explains how these platforms work:

    Google Platform; Members can add AdLinks to their own website, and if somone clicks and buys via their link, Google gives them a small percentage.

    eBay Platform: Members can buy and sell, and eBay gets to tax each transaction (building up a reputation dossier on everyone, to make the world safer for commerce – governments keep citizens safe).

    Amazon Platform: Members can add links to books, etc. to their own website, and if someone buys via their link, Amazon gives them a small percentage.

    SecondLife Plaftorm: Members create products and services to sell, and SecondLife provides the infrastructure and currency markets in Linden dollars (the most direct analogy to setting up an “island nation”).

Our own work at IBM suggests that this generation is more interested in the endeavor than the enterprise and that they would rather be an entrepreneur than an employee.

The interesting thing Jim notes is that most businesses in the “Real World” need employees to make money. However, platform providers like Google, eBay, Amazon, and SecondLife have a small number of employees that run the platform, but a large number of members or citizens who leverage that platform in unique ways to create and capture value.

The entrepreneurial capitalists generate wealth proportional to the number of members or citizens, more like a nation. Solow production functions for economic growth show that production increases in proportion to population, capital intensity, and knowledge and innovation growth.

Entrepreneurial Capitalists endeavor to create platforms that enable members/citizens to do work that they would have to pay employees to do, and the member/citizens are willing to do the work without being an employee, because they too are entrepreneurial capitalists with opportunities to create value and be rewarded for it. Again, Joe Miller had a great illustration of this in calculating how much work SL citizens have contributed to build out the islands.

Furthermore, when we move into the research IBM has been doing in MMORPGs it is clear that economies and affordance structures play a huge part in making the experience a success. So, as we shift from Web 1.0 to 2.0 it is not only the value proposition that is changing (i.e. From Access to Participation/Collaboration) but the underlying economic model that incents participation without requiring employment that is very interesting.

With the advent of 3Di we see significant opportunities for collaboration and innovation. Innovation is a creative process. It is socially constructed and emerges from interactivity. The 3Di environment is naturally suited to that and so it is only a matter of time before we move from Web 1.0 (Democratization of Access) to Web 2.0 (Democratization of Participation and Collaboration) to Web 3D (Enablement of true generative learning and co-creation distributed virtually across the world).

If we believe Schrage that the prototype is the engine of innovation, with 3Di we now have a socially immersive environment where people all around the world can convene to communicate, collaborate and co-create in real time. As Ron Burns from Proton Media suggests perhaps we are moving from an era of Social Capital to Social Capitalism!

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4 Comments

  1. Doug McDavid

     /  November 14, 2007

    Hi Tony — Would just like to note that there is no real way to know what kind of value is being generated by Second Life today, and this will be increasingly the case. The *real* money is external to other Linden economy — NMC building facilities for universities for real dollars, IBM consulting with clients where the platform is a communication mechanism, etc.

    I keep coming back to the comparison to the telephone network. How much commerce is generated by the existence of the telephone system? I don’t mean for the telcos, but for the totality of everyone in the world using the telephone to conduct business? Who can know? Why would we care?

    Reply
  2. Wow, that was an exciting post. Second Life has it made — not everyone gets a billion dollar “staff”. Hehe.

    Reply
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