The Madness of E-Crowds


Professor Thomas Hazlett wrote an interesting piece in the Financial Times about the madness of e-crowds. The crux of the article is that in an era of open source, community driven products, proprietary content becomes even more valuable. Searching costs are still high, and as the masses create more and more junk, the good stuff becomes more difficult to find. Professor Hazlett uses cell phones vs. Wifi as one example.

Our buzz-coloured shades block out key drivers of innovation. Take wireless. While 2.5bn people were subscribing to mobile networks, the tech spotlight was on … WiFi. While a handy way to make a DSL connection cordless, the disruptive technology claims – that the exclusive rights used for wide area cellular networks were now eclipsed by unlicensed spectrum governed by power limits and regulatory standards – were wrong. Not many folks dropping their mobile subscription to talk from their "hotspot."

He also points to the success of iTunes another proprietary standard.

Yes, he does recognize Linux, the prototypical example of a successful open source project. But it is the exception, not the rule. If you don't believe me, just visit SourceForge and see how many open source products really make it.

Community and collaboration are real trends that are changing the way things work, but they have become overhyped and receive a disproportionate amount of focus from the web media. There is an old saying that the man with a hammer sees every problem as a nail. Community and collaboration have become hammers for VCs and programmers.

Nick Carr has some good thoughts on the matter.

  • Excellent point here. It is easy to get into the hype of community driven tools, but in reality there are only a few gems. Sometimes the answer is in having a good foundation with all the basics, and a nice, clear product definition.

  • I was stunned to read (in Steve Jobs’ own words) that “under 3% of the music on the average i pod, is purchased from i tunes.” From all the hype I was sure i tunes was much, much more popular.
    I guess the common note from both the professor and from my mistaken impression about i tunes is that you have to “do the math” to separate hype from reality. Unfortunately most of the time I find doing the math incredibly hard and boring. It’s easier to just buy the hype.

  • David G

    This guy should read the Wealth of Networks. Benkler proves time and again that assigning proprietary rights to information stifles both innovation and value. Just yesterday, Steve Jobs described DRM as a limitation to iTunes success so that anecdote holds absolutely no water. And that comparison of mobile to wifi “buzz” truly demonstrates that this author has no clue — until we have wifi everywhere this is an apples to oranges comparison — but when we do, the cellular industry is dead — and the fact he doesn’t see that is laughable.

  • Rob

    That’s a valid point, and WiFi will beat cellular in the future, but I think we can step back and say that cellular was a good bridge, and that WiFi was hyped as a replacement before it was ready. That’s really the point with crowds and communities. They are useful, but the old ways of doing things still have value.

    One could argue that in some ways, proprietary information encourages innovation. People attempt to solve new problems because they know that they will have an advantage initially b/c of their proprietary knowledge. But new knowledge needs to go through stages, which end with it being opened up for anyone to use. That’s where the problem arises. I don’t mind Gartner charging for a 2007 report, but if I had to pay for statistics from 2005, well, both parties would probably benefit more if that were free data.