Back before the bubble-bust of 2000, there was a guy at my university -- let's call him Gordie -- who tried convincing a couple of my business student friends that the future of the web would be less about e-commerce and more about entertainment.
Our business friends didn't buy the argument. They insisted rather that the increasing productivity and diminishing costs provided by e-commerce would something something something something... I don't know, I'm not an economist, and I wasn't in class when their professor taught them to say that.
Gordie didn't really disagree with what the business students said; what he was trying to tell them was that the real importance of e-commerce was behind the scenes (automating processes, managing information and transactions, etc), and the efficiencies created by e-commerce would make it possible for new, previously unimagined activities to emerge and flourish.
Gordie saw that the web possessed a new kind of character -- new strengths, new opportunities -- that would make it possible (or inevitable) to invent and engage in radically new ways of working and living. Combined with the fact that it was becoming much easier and more affordable to do things like make your own music and movies at home, well, who was really to say what kinds of web-driven entertainment people might be enjoying in, say, 2007.
But the business students still didn't get it. In fact, they seemed to think that Gordie was being a bit ridiculous: "You don't understand how it works. Higher productivity and a declining cost of doing business leads to lower prices which leads to higher sales which generates more revenue and a higher stock value which means to more capital to invest in productivity and efficiency which leads to..."
By then everyone was just getting frustrated. It was apparent that they weren't having a real discussion. Gordie didn't possess the sophisticated technical grasp of second-year economics necessary to signal to his business friends that he understood and agreed with them; and his business friends didn't have the creatively pessimistic, 'open conceptual' attitude necessary to see Gordie's dream-like vision -- perhaps their professors hadn't taught them how to "think outside the box" yet.
It wouldn't have made a difference anyways. In a few months the stock market crashed and reassured Gordie that his insights were pretty good (unlike his mutual funds) --
maybe he was better as a philosopher than as a business man.
But that's all in the past now. A new wave of entrepreneurs and investors understands that doing business on the web is about providing new forms of value that wouldn't be possible offline, using information and interactivity to provide a richer user experience.
(I know everybody knows all this, but bear with me; I'm building up to something else.)
The great value of the web is not just that it helps us organize information, activities, and content, but that it organizes those things in a way that becomes a whole new form of entertainment, an end-in-itself -- as in, "the medium is the message."
But now some people talk as if there may now be a 'Bubble 2.0.' I've had some concerns about this myself, but I don't think that these 'bubbles' are merely stock market phenomena: the Web 2.0 bubble has more to do with ambiguous commodities like knowledge and attention. The overvaluations this time are not being made by businesspeople and investors, but consumers and users.
I think that we can observe users making the same general mistake that businesspeople made before 2000: they are going online simply because it's something new, and because they can; and because so many of their peers are going online (in 2000 it was e-commerce, in 2007 it's social networking), people feel compelled to be online -- though they may not understand why.
Of course, skeptics might be surprised to find that once they get over their initial hesitation, most people really do enjoy online social networking, and there really is something to gain (not to mention the opportunity cost they would have had to pay by putting it off); and before they realize it, they're reconnecting with old forgotten friends, meeting new people, and sharing information they would have otherwise not known.
But here's where I'm going to make the same controversial argument that Gordie made in 2000:
The real value of social networking software is that it automates and organizes many of the 'behind the scenes' elements of life. People who use this as a starting place from which to seek and develop new kinds of activity will thrive; users who think it's merely enough to do online what may just as easily be done offline (chatting and gossiping about news and events, sending pictures...) will go bankrupt. Bankrupt?!
I don't mean financially bankrupt; I mean bankrupt in terms of those more ambiguous commodities, like attention and expertise -- social capital and knowledge capital.
That probably seems counterintuitive: "aren't sites like Facebook, MySpace, and LinkedIn all about increasing social capital?" Yes but, like the capital in stock markets, it has a kind of virtual value: you can't just go out and spend it, and it depends on the value other people believe it may have -- based on its potential to grow and give more value in return -- which makes it subject to market forces beyond anyone's control.
To illustrate, say that MySpace's Tom Anderson is worth a million dollars in stock (I'm sure it's quite a bit more than that). If investors lose faith in the potential for his company to grow and add value to their portfolio, if they sell and invest their money elsewhere, then the real value of all of his stock might drop dramatically -- as we saw happen to a few web gazillionaires back in 2000.
Now I see that (as of the time of writing) Tom also has 203,647,567 friends on MySpace: that's a lot of 'social capital' -- on paper. But if users begin to invest their time and attention elsewhere, if they lose faith in MySpace's (or Facebook's, or LinkedIn's, or Twitter's...) ability to add real value to their social lives (they don't have to do it skeptically or intelligently either, something better might just come along), then all of that social capital could be destroyed very quickly, leaving Tom with hundreds of thousands of worthless 'friends,' or rather, a bunch of unupdaded profiles containing out-of-date information -- which, in the information age, could be worse than worthless.
The continued success of these social networking sites depends on a continuing (and preferably, an increasing) stream of attention, which means providing a continuous stream of new experiences, interactions, and information for users. There are roughly two ways for social networking sites to get this: from users themselves, and by providing new ways of interacting and using information.
For this to continue generating growth, I think both users and providers will have to become more knowledgeable and sophisticated. We need to learn to approach our online activities as investments -- towards more effective, creative, generative kinds of activity -- or else the time and attention we spend online (both as users and providers) will simply be lost in the past, with nothing concretely gained to show for it.
The mistake back in 2000 was to conceive the web in limited terms of commerce by consumers. By now we've learned to think in terms of experience by users. But now that isn't enough either. To continue growing we need to conceive the web in terms of education by creators.
It's difficult to say what this will really look like seven years from now. We can hardly begin to imagine what tools and capacities will become available. Almost any guess is pretty good at this point. The only mistake would be to believe we really know.
Like Gordie's business friends from seven years ago, what we know about the web now is what prevents us from seeing the web of the future.
