Umair Haque / Bubblegeneration
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Design principles for 21st century companies, markets, and economies. Foreword by Gary Hamel. Coming January 4th. Pre-order at Amazon.

Monday, May 15, 2006

The Problems With Gutopia

You know, it's quotes like this (from Kevin Kelly's recent article for the NYT Mag):

"...Brewster Kahle, an archivist overseeing another scanning project, says that the universal library is now within reach. "This is our chance to one-up the Greeks!" he shouts. "It is really possible with the technology of today, not tomorrow. We can provide all the works of humankind to all the people of the world. It will be an achievement remembered for all time, like putting a man on the moon."

That amaze me. Of course, the difference between now and then is that doing gives a single company - Google - enormous market power.

And if history is any guide, not once has a firm with absolute power - Standard Oil, Microsoft, you know the score - been anything less than evil.

Google is, in a very real sense, profiting enormously from the utopian naivete of the Valley. And though Kevin's article is a great read - and I'm a huge fan of his new work - this flaw makes his conclusion - a utopian vision of ubiquitous, "free", information totally invalid.

Has Kevin used Google Scholar? If you haven't, try a simple query like this.

That screen is the polar opposite of ubiquitous, free information - it is a set of links which send you to walled gardens built by academic publishers who want to charge $20, $50, or $100 or more for a single article.

But it is the future the Googleverse leads to. It's the inevitable result of handing informational market power over to Google - just like physical distribution economies (and price hypersensitive consumers) inevitably lead to Wal-Mart. Either one is just as evil as far as consumers are concerned.

Kevin argues that we should scan books because there is a "moral imperative to scan" - a moral imperative to make information free, essentially.

Are you kidding? That's like saying there's a moral imperative to buy gas, or to buy the cheapest goods possible - because this so-called moral imperative has a single economic effect: to line Google's pockets, handing market power over to it.

Take books - what we're talking about here. The so-called moral imperative is only valid if there's a level playing field for scanning; if the scanning market can be made competitive.

Of course, it can't - it's a natural monopoly; who scans the most wins, because the average cost is always falling.

And this - profiting from the natural monopoly dynamics of information - is, make no mistake about it, exactly Google's game - not creating some kind of Gutopia.

I find all this amazing, given the intensity of anti-corporate feeling amongst the digerati. Here's another version of the same specious argument from Tim O'Reilly, for example, completely misinterpreting the economic implications of a Long Tail - just assuming consumers will be better off because demand is amplified.

The real question is: will natural monopoly dynamics give producers enough market power to impose hidden costs that outweigh the benefits consumers realize from saving search costs? How big will the deadweight loss of the Googleopoly (or whoever) be?

Look, this isn't a hard argument to grasp - why do brilliant guys like Kevin keep missing it?

-- umair // 6:02 PM // 1 comments


Google Monopoly?
// Anonymous Anonymous // 8:10 PM

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