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The economics of the multitude

The digital revolution is not only a matter of technologies. The players involved can be described as radical innovators, whose work has a direct impact on social exchanges - from friendship to trade. The shock wave is gradually spilling out of our screens and hitting the rest of the economy. The concept of multitude helps us grasp what is at stake.

June 2012
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lire en français
Executive Resume

Paris Innovation Review - In a book recently released (L’Âge de la multitude, “The Age of the Multitude”, ed. Armand Colin, May 2012), you stated that the digital revolution had already taken place, but that the digitizing of the economic and social fabric is still in process, by the dissemination of new economic and industrial models. Platforms, the real infrastructures of the world of tomorrow, are often as powerful as states. However, they heavily rely on their exchanges with the multitude, which is at the center of the game. What do you mean by the “multitude”?

Henri Verdier – This concept originates from a philosophical trend launched by Antonio Negri and Michael Hardt, taken up and developed in France by Yann Moulier-Boutang. According to these authors, the multitude has superseded the proletariat. We are all deeply submerged inside cognitive capitalism, grasped by its needs, involved in increasingly immaterial work. We handle concepts – or even affects. We are asked to defend our “employability”. We all belong to this intelligent, auto-organized and fluctuating ensemble: the multitude.

Nicolas Colin – This concept describes perfectly the new social world but it offers another advantage as well: it translates into other languages what the Americans call “the people” – both understood as the masses but also as the individuals which form part of them.

Indeed, you wrote that “technology is not responsible for global changes” in the opening of a book about the digital revolution. Should we take it as a provocation?

Henri Verdier – This is a crucial statement. Technology is obviously underlying the digital revolution. However, the latter is based above all on deep changes in the relations of production, the exchanges and the social bonds. It has an anthropological dimension.

We could speak of a new industrial paradigm, and even of a change of civilization. In this new rising order, what seemed to us the most significant, above macro-economy and scientific progress, was the role of radical innovators: those who grasp the scientific and technical possibilities opened by technological progress and make a totally new synthesis out of it. Inventors, investors or even the multitude: none of their ideas are necessarily technological. They open a new world of exchanges and interactions that simply did not exist previously.

The digital technology was born far back into the 1950s, with computers and telecoms. The first version of the Internet was released in 1971. As you can see, the real revolution only happened much later: it involves interfaces and ergonomics, the way the general public has access to these technologies. Take for instance Apple or Facebook, two players that have changed the world: innovators are at the heart of these adventures and do not work on technology as such. They are visionaries, capable of imagining and implementing new uses and new forms of exchanges.

Nicolas Colin – We both have managed companies and that’s probably the reason why we emphasize the role of radical innovators at the expense of more technical players. In France, we tend to explain everything by a logical chain of hypothesis and deductions… However, the breakthroughs accomplished by the digital revolution did not respond to any smooth chain of events. It wasn’t anything like a planned development, but much more of an emergency plan, how to foresee the next move without necessarily being able to explain it.

This all-pervading experimentation philosophy implies many losses and eventually, some wins. That’s an important fact. We shouldn’t underestimate the importance of the economic system that supported the digital adventure. Despite many weaknesses in the venture capital model of the Silicon Valley, we can’t deny the fact that it provided funds for the hatching and dazzling growth of many players on which the former economic system would never have placed a bet. The venture capitalist is crucial actor of the digital revolution. Just like Hollywood seeking its next blockbuster, the venture capitalist aims at developing an investment portfolio made of high-potential projects. This naturally leads him to look for the players who claim to change the world.

The radical innovators, supported by an economic model encouraging high-risk adventures, are at the heart of the digital revolution. That’s what sets this revolution aside from the first industrial era, when the players and structures were quite different: capital lockup, key role played by engineers, production of goods as the ultimate goal and scale of value. Fundamentally, it was about taming raw materials and energy to produce goods. That’s why the key player was the engineer: he knew how to tame the forces of nature and organize them into a production chain. It was the golden age of intellectual property. Plans, patents and methods were at the heart of processes that were the key to industrial growth.

The industrial era has had its criticisms which, in turn, have helped us understand it. When you speak of the “consumption era” which eventually followed (mass media, publicity, marketing and on-demand politics) and that came just before the digital era, you wrote that the rebels outside a system are always its best markers. Does the digital world really have any rebels?

Henri Verdier – Yes, there are indeed criticisms and they could help us understand what is at stake, by revealing the fault lines of the system. These criticisms can be grossly divided into three main groups: libertarian, capitalist and neo-Marxist.

The libertarian criticism is voiced by the pirate parties, hackers and the Anonymous. It is led by those who believe in the free contribution aspect and want to protect the non-commercial from any contamination by the commercial world. It can seem naïve and even elitist, in a certain way. At the same time, these criticisms also stress on a potential threat: the API-sation of the Web. In other words, the Web as a global innovation platform, open and interoperable, with an end-to-end architecture is gradually pervaded by proprietary platforms, closed and efficient.

There are also advocates of the former order, who seek to preserve the old world and more specifically, the concept of intellectual property as one of its pillars. Or others who imagine (a little too naively, according to us), that we could tax what’s new to support the economy of the old system. That’s what we call the capitalist criticism.

As for the neo-marxist criticism, it is led by intellectuals such as Toni Negri, who analyzes how “immaterial work” supersedes industrial work – at least from the point of view of symbolic domination. Immaterial work transforms knowledge, information, communication, linguistic and even affective relations, in the exact same way industrial work changed all of these fields a hundred and fifty years ago. Just as the latter, immaterial work spreads its influence over all forms of production, although it concernes only a small part of the global production concentrated in a small part of the world. As Negri explains, in the industrial period, all forms of work as well as the society entered the industrialization process. Today, work and society enter a process of digitizing, become smart, communicative and affective. The new capitalism blends cognitive forces and emotions. Work is entirely in the hands of workers and at the same time, workers are deprived of their own production: that’s the main focus of the neo-Marxist criticism. Taking back control of the situation and fleeing from this alienation is their major issue. But in a hyperfluid and hyperdense world, it’s extremely difficult and this implies a considerable amount of work on the relations between producers and consumers, on the forms and situations that will enable a new harmony between humans and things.

Nicolas Colin – We could imagine a fourth possible type of attack, led by consumers outraged by the violation of their private life and the use of their personal data; or simply wanting to win back part of the surplus value of the intellectual property that they increasingly create.

It makes even more sense if we think that they are confronted to monopolistic giants that could be accountable… In a world both as open and fluctuant as the Web, how can we explain the rise of these new “empires”?

Nicolas Colin – We must first of all recognize the strategic vista of these players: they are often discoverers of new continents where they can set foot before anybody else to grow their empire. But there the effects of concentration can also be quite extreme: an empiric law seems to prevent two players to be active on the same market. It’s a recent phenomenon: the me-too players, as they were called, were very successful during the 1990s, when firms would copy one another. Today, the idea of building a competitor to Google, Amazon, Facebook or LinkedIn is a mere dream. These firms have conquered millions of users in a country like France before even opening a commercial office.

Henri Verdier – One of the keys to this dazzling and crushing growth is the so-called scalability. The ability for a firm to provide the same service to 10 or a 1000 times more people in a matter of weeks or even a few months, without need to change the structure of their offer (design, servers, commercial activity…). That’s possible in the digital world, whereas the rise of a monopoly in the physical world is much less probable. The speed at which the actual monopoles have acquired their position has also drawbacks. Let’s not forget that in a three years’ time, there may no longer be any Facebook around – in others words, maybe nobody will no longer be active on Facebook, because some other player will have discovered a new world where social exchanges will take another form.

Nicolas Colin – By thinking about these monopole effects and the possibility of their dissolution, we come closer to the concept of multitude. You and me, we are the multitude: users who will swarm on a product but who might leave it just as fast. The multitude is powerful and cannot be hold captive. Taking advantage of the multitude is the key to power. But you can’t do it against the multitude.

Dominant positions are often won thanks to the strategic intelligence of firms that have been able to use the power of the multitude by channeling part of the resources they have deployed or acquired thanks to it. Technological knowledge for instance, codes, but also access to the public… These big “monopoles”, as you called them, are in fact platforms. They offer part of their resources to smaller actors, hoping these actors will build their own applications. The design of the platform organizes the flow of value between users and catches as much as possible the creative power of the multitude. As long as this exchange happens, the monopoly can grow. But whenever these firms decide not to play anymore, the multitude detects the temptation of closure and the danger of being hunted and runs away towards another continent, towards the next move.

This leads us to the separation between platforms and applications, which is at the heart of your book.

Nicolas Colin – The link between these two concepts is at this day, a fundamental structure of the Web. Moreover, it is crucial to understand what is at stake because this structure is pervading the rest of the economy.

From a certain point of view, a platform is an application that has succeeded and taken full advantage of its potential. A platform is born when a provider of online services realizes that this service can be offered to other segments of the market in different ways. Therefore, if the provider wants to protect the relevance of his service, he must create different versions of it. He has a choice: to continue to offer the service himself by creating different versions, or offering his resources to a third-party and sharing the benefits.

Henri Verdier – Sometimes, the choice of creating a platform is not necessarily driven by a need to vary the offer. It is more “holistic”: a firm decides to put a resource at the disposal of creators (other firms or the public) because it feels that it is the only way to give full value to that resource, even if it escapes in directions they never would have imagined.

We would like to emphasize the fact that this strategy of platforms is not specific to the digital world. Just the opposite: we tried to analyze to what extent most big institutions of the former economy could convert to platform strategy, based on the multitude.

Today however, the power of the big platforms often comes with selfish attitudes: Facebook keeps to itself the use of Facebook credits, Apple or Amazon take substantial shares in the value that flows through their platforms. Should we fear a petrification of the Web?

Henri Verdier – Indeed, we are today in front of an unprecedented situation. In 1995, nobody was as big as the Web. Today, several big players can make this claim legitimately. There is indeed a movement of petrification and of domination, which is not only about commercial power or the number of users but reaches to the very nature of the big platforms. In the past, infrastructures would depend on states: today, they depend on private giants.

Some firms have reached such a critical size that they could change the face of the Web on their own. Their power has consequences on many other spaces, in the “real world”. Berkeley and Stanford are aching to recruit the best researchers who go and work with Google – and for good reasons: setting aside their salary, they will be able to work with a matchless mass of data, gigantic processing power and their projects will have impact on a global scale. Arguably, these big monopoles are also producers of public welfare – a status which they could be forced to assume. The regulation of these over powerful platforms is a question worth debate.

In these conditions, is the distinction between profit and non-profit still of any relevance?

Henri Verdier – To go further, we need to examine the relevance of the concepts that organize our world. Laurent Gille reminds us that the market economy, relying on monetary equivalency, was developed quite recently, during the 18th century. The digital economy does not totally obey to its rules: parts of the exchanges that take place on the Web remind us of pre-market economy – service for a service, barter, symbolic or non-monetary payments, etc. A great deal of our private life is absorbed by the economic sphere, with the new economic value of social exchanges, of our activities as producers, editors, prescribers. None of this is without problems: should we protect the non-market fields or accept and simply manage this trend? Should we consider ourselves satisfied with a copyright system that provides income, in France, to approximately 12000 persons when at the same time, so many great firms take advantage of the conscious production of Internet users?

The market economy order is brought to its limits by the current evolutions. That can be very clearly seen when we consider the evolution of industries that where built during the last two hundred years on the strong ground of intellectual property. In no more than a few years, Wikipedia destroyed five major encyclopedias: with the optimization of digital resources, many services will go free because it’s much more effective to take advantage of the creative power of contributory economy than grow these services yourself… Is this process liberating incomes or destroying value?

Nicolas Colin – Both, of course… and I would add that it has become necessary to dispel a well expanded illusion. During the last ten years, we believed that the digital field would create jobs. However, it never created many jobs, at least directly. Rather, it helped to destroy bureaucracies and rent situations. The unprecedented optimization (in the field on consumption and services) lowers the amount of labor, but not the volume of activity: upstream of labor, a whole new chain of activity has been created: surveillance, auto-training, e-reputation, connections, exchanges and experiments…

To give ourselves a chance to answer your question, we will have to enlarge the field and more generally, use the concept of externality: value is created elsewhere and cannot be easily measured nor traced. Value will not be spontaneously transformed into jobs but will ask for an efficient and clear strategy that will take advantage of the value to create useful jobs, with good salaries – here and now. Industrial jobs will rise from the ashes of an economy fueled by the multitude. But this rebirth will have to be supported by an adequate industrial policy.

Henri Verdier – If we come back to the platform model that we have mentioned earlier, what’s at stake is to internalize the externalities. In other words: bring back part of the value created outside the industry or the firm. Platforms are organizations able to understand that value is created outside their own boundaries and trying to stimulate this activity to pick up its fruits: whether by retrieving part of the monetary value that has been created (publicity, pay services on the hosted applications) or by increasing their number of users and consequently securing their central position. Basically, a platform is something mid-way between a cathedral and a bazaar. A place for a market (and not a market-place). The authority doesn’t decide for any construction plan or service content; nor does it let the crowd shout messily. It organizes a plan, a structure and leaves the individuals express their opinions. Just think of all the restrictions set by Twitter and of how it gave birth to this unique form of global conversation.

This strategy is not only shared by platforms, but also by applications. They borrow modules from other applications and take advantage of the users to finalize and optimize their services, through a system of trials and interactions that deconstructs the very idea of finished product. Whenever the product is finished, it’s time for a new version.

What must be taken into account is that the digital economy in now spilling out of our screens: the transformations we were speaking of are visible on the Internet but also in the rest of the economy; and beyond, until the definition of public services and states. The latter could be considered as platforms and take inspiration from the strategies chosen by large digital platforms, if they want to protect their relevance, in the eyes on the public, that is: the multitude.

Nicolas Colin – In this new world of continuous innovation, the chain of values is constantly reexamined, reconstructed. The new economic world is dominated by a fundamental instability. The “new empires” are nothing else than those that are capable of reinventing themselves skillfully, by constantly proposing new services and new exchange configurations. Will they hold? They won’t be the only ones to decide. The multitude, from which they hold their power, could turn aside if they it doesn’t feel correctly treated. Other continents could be discovered, to which the multitude could emigrate – without any regrets.

Nicolas Colin
Co-founder and Partner, TheFamily