What Is The Network Economy?

I’m working with Andrius Kulikauskas of Minciu Sodas on finding the right set of business intuitions and rules for the “Network Economy.” (Kevin Kelly’s New Rules for the New Economy is an excellent introduction to the New Economy, and how it makes sense.)

I wrote the following for a discussion on the Minciu Sodas group thinkingrelevantly:

The New Economy is being driven by two things: the prosperity and abundance wrought by our control over the physical world, and the human connectivity afforded by information and communication technologies.

(As William Gibson said, the future is already here, just not evenly distributed. I acknowledge that prosperity, abundance and communication are not globally pervasive, yet — but they will continue to be spread farther and farther.)

Since society is really just communication, introducing a dense communications network into society changes what the society wants to do and how it wants to do it.


Dense communication and information networks allow for massive decentralization of intention and control. As basic needs are met more efficiently by the systems manipulating physical things, humans will turn more and more to an economy of ideas and creativity. This kind of information economy turns centuries-old business rules, based on scarcity, upside-down. And in many ways, returns us to a time when the village, and the people that lived there with you, were your entire world.

So what we need to do is re-discover how to work together, person to person, instead of working as components of something larger which we don’t understand.

I made a table for myself of things in the old economy and how they’re different in the new economy:

(thing: old/new)

Power comes from being: big / many

Decisions are: centralized / distributed

Organizational knowledge resides in: rules, instructions / values, decisions

Large problems are tackled by: aggregation / diffusion

Valuable measurements are: precision, volume / relevance, accuracy

People have more influence or importance by having more: span of control /

distribution of their ideas

Individual economic resources gain more by: hoarding / sharing

Responsibility is generally handled by: somebody else / us

People measure success by: money / relationships

These shifts have dramatic effects on many assumptions made in business logic, such as competition, intellectual property, authorship and attribution, or capital accounting. These are the sorts of intuition — and even rules — that we need work on. I wrote in another venue: “It’s going to messy, ad hoc, and will require everybody to roll up their sleeves and start doing, instead of waiting for someone else to get the right idea.”

Here are a few pointers to resources for further reading about the network economy:

“New Rules for the New Economy”, Kevin Kelly

http://www.kk.org/newrules/

Really excellent, makes sense, has a great bibliography.

“Old Rules, New Economy”, J Bradford DeLong

http://econ161.berkeley.edu/Econ_Articles/Reviews/Information_Rules.html

http://backissues.worldlink.co.uk/articles/161198140511/17111998141322.htm

A tandem review of Kelly’s “New Rules” and Shapiro/Varian’s “Information Rules”. Cool scorpion metaphor. Wouldn’t it be better if the scorpions all cooperated instead?

“Centralism Vs Decentralism”, Peter Kaminski

http://www.istori.com/cgi-bin/wiki?September11/CentralismVsDecentralism

(and also the articles linked from this page)

“Why Every Business Will Be Like Show Business”, Joel Kotkin

http://www2.inc.com/incmagazine/articles/2182.html

A side issue is re-thinking money. What sorts of currencies are best to help us exchange things of value? Do we need to re-shape money, so that it’s issued in a more distributed fashion? How do we implement micro-currency, or networks of trust? I’ve got an Alternative Currency link list for further exploration.

Comment (1)

  1. Hadi Maleki wrote::

    Hello
    I am a student of IUST in iran.I am researching about network economy.please guide me.
    thanks

    Monday, February 13, 2006 at 11:11 #