As the Internet and digital technologies have proliferated over the past twenty years, incumbent enterprises nearly always resist open network dynamics with fierce determination, a narrow ingenuity and resistance. It arguably started with AOL (vs. the Web and browsers), Lotus Notes (vs. the Web and browsers) and Microsoft MSN (vs. the Web and browsers, Amazon in books and eventually everything) before moving on to the newspaper industry (Craigslist, blogs, news aggregators, podcasts), the music industry (MP3s, streaming, digital sales, video through streaming and YouTube), and telecommunications (VoIP, WiFi). But the inevitable rearguard actions to defend old forms are invariably overwhelmed by the new, network-based ones. The old business models, organizational structures, professional sinecures, cultural norms, etc., ultimately yield to open platforms.
When we look back on the past twenty years of Internet history, we can more fully appreciate the prescience of David P. Reed’s seminal 1999 paper on “Group Forming Networks” (GFNs). “Reed’s Law” posits that value in networks increases exponentially as interactions move from a broadcasting model that offers “best content” (in which value is described by n, the number of consumers) to a network of peer-to-peer transactions (where the network’s value is based on “most members” and mathematically described by n2). But by far the most valuable networks are based on those that facilitate group affiliations, Reed concluded. When users have tools for “free and responsible association for common purposes,” he found, the value of the network soars exponentially to 2n – a fantastically large number. This is the Group Forming Network. Reed predicted that “the dominant value in a typical network tends to shift from one category to another as the scale of the network increases.…”
What is really interesting about Reed’s analysis is that today’s world of GFNs, as embodied by Facebook, Twitter, Wikipedia and other Web 2.0 technologies, remains highly rudimentary. It is based on proprietary platforms (as opposed to open source, user-controlled platforms), and therefore provides only limited tools for members of groups to develop trust and confidence in each other. This suggests a huge, unmet opportunity to actualize greater value from open networks. Citing Francis Fukuyama’s book Trust, Reed points out that “there is a strong correlation between the prosperity of national economies and social capital, which [Fukuyama] defines culturally as the ease with which people in a particular culture can form new associations.”
A Network Architecture for Group Forming Networks
If we take Reed’s analysis of network dynamics seriously, and apply his logic to the contemporary scene, it becomes clear that the best way to unlock enormous stores of value on networks is to develop tools that can facilitate GFNs. This will be the next great Internet disruption. But to achieve this, we must develop a network architecture and software systems that can enable people to build trust and social capital in user-centric, scalable ways.
Necessarily, this means that we must begin to re-imagine the very nature of authority and governance. We must invent new types of digital institutions that are capable of administering authority recognized as authentic and use algorithmic tools to craft and enforce “law.”
The idea that conventional institutions of governance (and government) may have to change may seem like a far-fetched idea. Who dares to question the venerable system of American government? Traditions are deeply rooted and seemingly rock-solid. But why should government be somehow immune from the same forces that have disrupted Encyclopedia Britannica, retailing in all sectors, the music industry, metropolitan daily newspapers and book publishing? Based on existing trends, we believe the next wave of Internet disruptions is going to redefine the nature of authority and governance. It is going to transform existing institutions of law and create new types of legal institutions – “code as law,” as Lawrence Lessig famously put it.
Governance is about legitimate authority making decisions that are respected by members of a given community. These decisions generally allocate rights of access and usage of resources, among other rights and privileges. Such governance generally requires a capacity to assert and validate who we are – to determine our identity in one aspect or another. That’s what is happening when the state issues us birth certificates, passports, Social Security numbers and drivers’ licenses. It is assigning us identities that come with certain privileges, duties and sanctions. This is the prerogative of institutions of governance – the ability to do things to you and for you. Institutions set criteria for our entitlements to certain civic, political, economic and cultural benefits. In the case of religious institutions, such authority even extends to the afterlife!
The power to govern is often asserted, but it may or may not be based on authentic social consent. This is an important issue because open networks are changing the nature of legitimate authority and the consent of the governed. User communities are increasingly asserting their own authority, assigning identities to people, and allocating rights and privileges in the manner of any conventional institution. Anonymous, Five Star Movement, the Pirate Party, Arab Spring, Lulzsec and Occupy are notable examples of such grassroots, network-enabled movements – and there are plenty of other instances in which distributed networks of users work together toward shared goals in loosely coordinated, bottom-up ways. Such “smart mobs” – elementary forms of GFNs – are showing that they have the legitimacy and legal authority and the economic and cultural power to act as “institutions” with a modicum of governance power.
This is where Reed’s Law and the proliferation of open networks, amplified by the ubiquity of mobile devices, is starting to make things very interesting. If the means to facilitate GFNs can be taken to more secure and trusted levels, empowering cooperative action on larger scales, it opens up a vast new realm of opportunity for value-creation above and beyond Web 2.0 platforms.
This vision is especially attractive in light of the structural limitations of large, centralized institutions of government and commerce. By virtue of their (antiquated) design, they simply are not capable of solving the challenges we are demanding of them. Conventional legislation, regulations and litigation are simply too crude and unresponsive to provide governance that is seen as legitimate and responsive. As for social networking platforms, they typically rely upon proprietary business models that collect and sell personal information about users, which is exposing another sort of structural barrier: social distrust. Businesses based on such revenue-models cannot help but stifle the GFN potential described by Reed’s Law.
Group Forming Networks and Big Data
The promise of self-organized network governance – a new type of Group Forming Network – holds a great deal of appeal when it comes to Big Data. We now live in a world of ubiquitous digital networks and databases that contain vast amounts of personal information about individuals. GFNs could help us overcome the legal and regulatory impasse that we now face with respect to the management of such personal data. Neither Congress, executive agencies nor the courts are likely to come up with a set of responsive policies that can keep pace with technological innovation and thwart players of ill-intent.
Ever since Hobbes proposed the State as the only viable alternative to the dread state of nature, citizens have entered into a notional “social contract” with