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I also thought this was interesting ;)
----- Original Message -----
From: Carole E.
Scott
Sent: Monday, July 10, 2000 7:14 PM
Subject: [mises] self-organizing article Carole Scott July 10, 2000 The OutlookThe Outlook WASHINGTON In the early 1990s, you had to travel
in fairly esoteric circles to hear about self-organizing systems. The notion
wasn't on the lips of practical businesspeople. It was the sort of idea that
percolated far outside the mainstream, at think tanks such as the Santa Fe
Institute.Today, self-organization is rapidly becoming a very hot idea, the essence of which is that top-down master plans aren't the only way to build something big and lasting. Unorganized assemblies of people can create everything from marketplaces to computer systems almost spontaneously, on the fly, from the bottom up. The Linux operating system is a good example of what self-organization is all about. Unlike Windows, where an army of Microsoft Corp. programmers churn out proprietary code, Linux software is an evolving collaboration of thousands of software writers around the world. While there are companies that provide Linux-oriented services, such as customer support, the brains behind Linux programming exist not within the walls of any company but inside the heads of people who amount to volunteers. What really put self-organization on the map, though, is eBay Inc., the auction site, where buyers and sellers do much of the company's heavy lifting. It's the customers who create all the content, and it's their ratings that put sellers on the recommended lists. Suddenly, it seems, lots of people like the idea of unloading the work onto their customers. For one thing, it keeps expenses down in this season of Internet burn-rate angst. "We liked eBay. It was the original uber-platform. And the key was to make the company self-organizing," says Nirav Tolia, chief executive of Brisbane, Calif.-based Epinions.com. His 100-person company runs an Internet site that assembles amateur and professional reviews on a multitude of different products. The reviewers collect royalties every time someone reads the review. In addition, reviewers' reputations can rise if readers salute their opinions. The top reviewers might make a few thousand dollars a month, but by most accounts, it's the ego boost of being a recognized expert that fuels the amateurs' efforts. These so-called expert sites are growing quickly on the Internet. A study by Datamonitor Inc., a New York research outfit, recently estimated that revenue from such information-exchange sites could rise to $6.77 billion by the year 2005 from an estimated $108 million this year. Some, such as Soapbox.com, feature amateur stock analysts hawking their reports. Others give expert advice -- medical, tax, technical -- by phone, and split with the site the per-minute fees that the customers pay. It's impossible to say whether this is the next big thing on the Internet. In some ways, that's the worst possible curse these days. But venture capitalists are circling the field. Benchmark Capital, a big early backer of eBay, has backed Epinions, for instance. Others, too, are pouncing. "Every portal is going to do big deals with this stuff. It's happening in the next three to six months," says Robert Shavell, an associate at Softbank Venture Capital. The dangers also are considerable, though. Just how valuable is content? Doesn't expertise matter? And, as with many Internet businesses, it isn't clear how steady streams of revenue are going to pour into the pockets of companies creating the self-organizing exchanges. Still, the rise of self-organizing systems in general seems to fit the Internet culture very well. It doesn't respect traditional hierarchies. It brings in expertise from the edges of the networks. To proponents of self-organizing as a business model, these can be profound and commercially powerful. "Take America Online. What's the value of the self-organizing community known as 'chat'?" asks John Sviokla, a former Harvard Business School professor, today a consultant at Diamond Technology Partners. "Teenage chat and drivel purchased the most powerful media company [Time-Warner] on the face of the earth." The democratization of financial services could take some strange new turns. It may well be in financial services that the self-organizing enterprise flowers in full. One new company is launching a mutual fund where ordinary investors compete to make the best stock picks. That's the premise of MutualMinds.com. At MutualMinds, the investors themselves pick the stocks. Their track records are posted publicly on the Internet, and updated all the time. The investors are rated for the accuracy and consistency of their picks. Here's the kicker: the better an investor performs, the greater his influence over the investment decisions of the fund. This week, for example, the top investor at MutualMinds was a Dallas woman whose correct calls on Aether Systems Inc. and some other communications stocks landed her at the top of the heap. At the moment, MutualMinds is still conducting dry runs. Its Dallas-based parent's registration is pending before the Securities and Exchange Commission. Under the plan, a professional adviser will still execute the trades and have veto power over stock picks; investors are charged a 1% management fee. But the logical extension of this idea -- not in MutualMinds.com's application -- is to let the amateurs rule and let the best of them take a piece of the fees. Legally it might pose problems. But conceptually it might well be a winner. -- Bernard Wysocki Jr.
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