On Value and Valuation
by Doc Searls
Monday, September 28, 2009 at 09:11 AM EDT
Over in Fast Company, Tim Beyers nicely threads quotable pearls from Cluetrainâ€™s four authors, including yours truly, in Twitterâ€™s Investors Missed the Cluetrain â€“ Hereâ€™s Why. The context of the story is continued investment in Twitter at a reported $1 billion valuation of the company. (Fast indeed.)
Now that the piece is up, I thought Iâ€™d add a few more thoughts of my own.
First, while valuation is unavoidably interesting, value is avoidably important. In other words, it doesnâ€™t get much respect. Not if itâ€™s not being sold.
For example, RSS (currently getting more than 3 billion results on Google). Itâ€™s extremely useful. We would hardly have blogging or online journalism without it. But Dave Winer, to his enormous credit, decided not to make RSS itself a business. Instead he decided to release it into the world so countless uses could be made of it, and countless businesses could be built on top of those uses. He made RSS open infrastructure, just as Linus Torvalds did with Linux, and countless other geeks have done with their own contributions to the virtual lumberyard of free building material we use to make the online world. Open building material is valuable beyond calculation, because it has use value rather than sale value. (Eric Raymond explains the difference here.) The leverage of use value on sale value can be very high indeed. Where would Google and Amazon be without Linux and Apache? Where would any of us be without SMTP, IMAP and other email protocols â€” or, for that matter, the suite of free and open protocols on which the Net itself runs?
Twitterâ€™s creators have chosen to make it a commercial form of infrastructure. This is not a bad thing. In terms of investment valuation (especially at this point in time) itâ€™s a smart thing. But we should not mistake Twitter itself, or even its API, for the kind of true (free and open) infrastructure that comprise the Net and the Web. Nor, for that matter, should we consider Twitter the last word in the category it pioneered and now dominates. At this point in history, Twitter soaks up nearly all the oxygen the microblogging room. Thus there is no widely adopted open infrastructure for microblogging. (Identi.ca and the OpenMicroBlogger folks have worked hard on that, but adoption so far is relatively small.)
But, given time, something will take. Iâ€™d place a bet Daveâ€™s RSS Cloud. Itâ€™s live, or real-time. Itâ€™s open infrastructure. And, as Dave put it here, it has no fail whale. (And now TechCrunch is Cloud-enabled.)
This relates to Cluetrain in respect to what a market is, and what a market does. Markets by nature are open. They are not â€œyour choice of captor.â€ Cluetrain, at least for me, was a brief against captors, a case for open marketplaces. So, while Twitter may provide means for conversation out the wazoo, it still falls short of what are, for me, more important Cluetrain ideals. I await the fulfillment of those with growing patience.
If you had told me in 1999 that the two hottest names on the Web in 2009 â€” Facebook and Twitter â€” would both be silos, Iâ€™d have been disappointed. Iâ€™d have figured that by now most folks would understand the infrastructural nature of open code, open protocols, open formats. (For more on those expectations, see Making a New World, written a few years back but still relevant as ever.)
With time comes perspective. It is helpful to note that the Web as we know it is barely old enough for high school. (The first popular browser appeared in 1995.) As an environment supporting new forms of business life â€” ones thriving in an environment of ubiquitous and cheap worldwide connectivity that each participant is in a position to improve â€” we are at a paleozoic stage in which even the innovative companies continue to follow familiar industrial age models of command and control. Thatâ€™s why they trap users, customers and whole markets in walled gardens that are value-subtracted simulacra of the whole Net. In the best cases (such as Twitterâ€™s, Facebookâ€™s and Appleâ€™s) they create new markets around new inventions and new ways of doing things, but at the expense of isolation for themselves and all their walled-in dependents. So, even when they embrace (though never completely) openness and other forms of goodness at the engineering level, they remain Old Skool at the corporate level where equally Old Skool investors still place their bets. And, while they speed things up in the early stages â€” when they are still new and original â€” they slow things down after their walled markets become large enough to become industrial farms, harvesting income from trapped inhabitants.
The longer that walled farming remains a prevailing business practice, the longer the Industrial Age persists in the midst of the one that succeeds it, and the farther we are from arriving at the Netâ€™s mesozoic: itâ€™s dinoaur age. That age will be characterized, as it was for sentient reptiles, by greater liberty for individuals and greater autonomy for families, tribes and other groups of individuals.
Many of us have long seen that liberation coming â€” and implicit in the nature of the Net itself. The Cluetrain Manifesto announced it in early 1999 with â€œwe are not seats or eyeballs or end users or consumers. we are human beings and our reach exceeds your grasp. deal with it.â€ Chris Locke wrote that, and it galvanized the rest of us by giving voice to the liberating nature of the Net itself. Yes, the Net supports silos, but it is not itself a silo. It provides a base infrastructure for freedom, independence and empowerment. It creates wide open spaces for the social and business constructions we call markets. True, the urge by companies to build walled gardens in these wide open spaces persists undiminished. But in time companies will discover how much more value can be created by contributing to open infrastructure, and by offering original products and services based on that infrastructure, than by trapping customers in closed spaces and operating their own private marketplaces. (As, for example, Apple does with its iTunes store, and other phone makers and companies are now copying. This is very paleozoic stuff.)
We are now caught up in â€œsocialâ€ everything. Cluetrainâ€™s opening thesis, â€œmarkets are conversations,â€ is often credited for predicting, if not inaugurating, the â€œsocial webâ€. Overlooked in the midst, however, is what I think is a far more important thesis, coined by David Weinberger: â€œHyperlinks subvert hierarchyâ€œ. Ask yourself, How well do links work in Twitter? Better question: What happens when bit.ly goes down â€” or out of business? URL shortening needs to be part of the Netâ€™s infrastructure too. Today it isnâ€™t. For more on that, look up Dave Winer and URL shortening: Dave has a history of not being listened to by Google, Twitter and other giants. But heâ€™s right about URL shortening. And about how Twitter can help de-silo it. Single-source commercial URL shorteners are handy and all, but they weaken hyperlinks by making them vulnerable to the failure of one company, or one authority. I am sure Twitter doesnâ€™t mean to weaken hyperlinks (but rather strengthen them, in a way), but thatâ€™s what it does by relying on a commercial silo for shortened links. Weakening hyperlinks, at least to me, makes Twitter less valuable, no matter how much investors think itâ€™s worth on some future stock market.
Dave Winer has long advised, â€œAsk not what the Web can do for you, ask what you can do for the Webâ€. Answering that generously in the long run will result in maximum value â€” and valuations in alignment with a more open and value-producing future.
This article originally appeared on Doc Searls Weblog.