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.

Tuesday, January 08, 2008

The Economics of Data, or Why Edge Principles Rock

So here's a particularly powerful mini case-study of competition at the edge - if you're interested in this stuff, you can use it to think about how the Edge Principles help guide and shape strategy.

Google + Facebook join the Data Portability Group.

Lulz. It's exactly what we were talking about last week.

At the risk of repeating myself...

"...Success isn't determined by how hard I can exclude you from scraping your data - but how effectively and efficiently I can help you share/use/reuse/hack/etc it.

Let me try and put it more simple. Data is inherently valueless in the edgeconomy, because it's infinitely replicable. Any structure seeking to limit access to data will simply be too radically inefficient for the market to bear in the medium-long run. So a massconomy strategy of "owning" a massive stock of data is destined to crash and burn."

Look. I've been trying to explain for a while (and taking a lot of heat for doing so) why openness (vs closure) and good (vs evil) were going to be, inevitably, the equilibrium points of this particular contest.

So here you go - voila.

But that's not really the point: the real point is that it was less a prediction than a simple extrapolation: these competitive dynamics are utterly and deterministically coded into the economics of data.

So this should be pretty strong evidence of the deeper lesson: you can't beat the economics. Fighting deep economics shifts is a certain path to strategic error.

No matter how lame and evil Facebook is, no matter how behind the curve Google is - these moves are written into the structure of the edgeconomy. Google and Facebook had to make them, and will continue to have to make them - there no real alternative.

Yeah, yeah - they just joined the group, nothing's really changed yet, etc. Don't miss the forest for the trees - there's a deeper economic logic at work here: my data is (far) more valuable when it can be remixed with yours.

The next step, of course, is to learn how these new economics lead to new sources of advantage...

Think about it this way: if either Facebook or Google had followed either of the Edge Principles we've been discussing in this case (good beats evil, open beats closed), how much better off would they be - and, consequently, how much better off would everyone be? A very, very large amount.

-- umair // 8:38 PM // 5 comments


You always get it better than most ;)
// Blogger Chris // 10:11 AM

Umair: talk to me here.
"These economics lead to new sources of advantage"- agreed, but doesn't capitalizing on these new vantage points require collaboration on some fronts: web services/info. sharing, breakdown of the walled garden into gated(and self-policing) communities, saas, etc.?

Point one's really talking seriously about these, which can actually help capitalize quickly on the economics you're talking about.

Or am I off?
// Anonymous preetam // 5:25 PM

Great post - it's good to read more from people who are excited about the business potential of open data.
// Anonymous chris keane // 6:33 PM

Why must everyone seek "an advantage" instead of aiming for a solution for society as a whole?

It sounds like you buy the overwhelmingly common misconception that profit is more important than product.

But profit is nothing more than "price above cost". Why would we (anyone seeking to solve the economic troubles we face) want to keep price above cost? Must we perpetuate poverty to insure profit?

If everyone in world had "at cost" access to bread, would you say bread has no value? I'll bet the starving Hatians wouldn't agree. Isn't "use value" worth considering?

Of course things lose "exchange value" as we approach abundance, but that only proves that profit is an inverse measure of development.

We don't NEED to keep price above cost when the users and the owners are the same set. Wage is also a cost, and work is paid before profit is even calculated.

Users are willing to invest in "for product" production for the purpose of "use value" alone.

Users already pay all costs anyway, and they ALSO pay "price above cost" (profit) whenever they do not yet have sufficient ownership in the means of production (the physical sources) required to meet those objectives.

Governments at all levels and every non-profit corporation and/or organization keep control away from the users they claim to serve by not understanding the "price above cost" those users pay should be considered an INVESTMENT from the very user that paid it - for the only reason a user pays the portion called profit is because the do not yet have enough control to achieve those goals "at cost".
// Anonymous AGNUcius // 11:57 PM

Hey man, i am reading all the posts because this is good stuff. Though i have to ask, the good beats evil, open beats closed is that yours? I am sure i read it elsewhere several times before, especially open beats closed
// Blogger Ismail D // 12:40 AM
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