Get the early bird discount when you register now for KMWorld 2017 in Washington DC

Markets and networks

This article appears in the issue February 2015 [Vol 24, Issue 2]


   Bookmark and Share

Airlines have strong incentives to make normal travel hell. That’s the argument Tim Wu makes in a post on The New Yorker site Dec 26 (“Why Airlines Want to Make You Suffer,” newyorker.com/business/currency/airlines-want-you-to-suffer.) He’s right not only about airlines but also about the Internet, and about knowledge.

Wu’s point is that airlines now make billions of dollars from fees for services that exempt passengers from inconveniences that the airlines have chosen to impose. For example, the airlines continue to load passengers in ways known to be inefficient, thus giving customers a reason to pay for early boarding. Likewise, the seats get smaller and the legroom gets shorter at least in part because that increases the incentive to pay for upgraded seats in coach even if you can’t spring for business class.

This is, by the way, part of the argument for Net Neutrality: If access providers are allowed to charge extra for “fast lanes,” they’ll have an incentive to make sure unexpedited traffic travels intolerably slowly. (I wouldn’t have dragged this in except Tim Wu is also the creator of the phrase “Net Neutrality.”)

Both of these are examples of commercial industries that benefit from degrading the system in which they operate. It makes perfect corporate sense. And in a perfect market, competitive forces would correct for this. We’d be able to choose airlines and Internet providers that provide decent service at competitive prices. But for different reasons, these two markets—air travel and Internet access—are not competitive enough in the ways that matter. So we sit with our knees crushed into the seat in front of us and we limp along on overpriced, relatively sluggish Internet connections.

A market is a mechanism for enabling outcomes that satisfy participants whose interests do not align. That makes it a good metaphor for understanding many situations. But networks are another useful metaphor, especially when the interests are different but not necessarily in conflict. Networks provide some systemic benefits that markets do not.

The network metaphor is particularly suited to environments in which the participants can afford to think about the health of the ecosystem and not just of their own wellbeing. That makes it hard to apply to the airlines since they are so set on achieving competitive advantage. Indeed, it happens so rarely in capitalist markets that it’s news when a company like Elon Musk’s Tesla Motors releases the patents on its batteries in order to facilitate the creation of an infrastructure to support an electric car industry.

But the network metaphor is well suited to many other fields of human endeavor, including most of life within a corporation’s boundaries, and to the knowledge ecology more generally.

In many fields of knowledge, producing objects of knowledge is seen as a type of sharing. While many authors depend on copyright, they also want to see their ideas spread. Within an academic or research area, the rules of engagement are designed to enable the development not just of a single hero who rules them all but an ecosystem of engaged disagreement. This is because it’s implicitly understood that knowledge is a networked product, and we need a healthy network to enable it. “Healthy” in this context almost always means that it’s open to new ideas and to civil disagreement, even though that necessarily means that the ecosystem will contain unworthy—unverified or even wrong—ideas.

We are rightfully distressed when market mechanisms are applied to knowledge networks. For example, knowledge hoarding makes sense in a market: You want a fair exchange for saying what you know. In that sense people who supply answers are just like people who supply winter coats or coats of paint. But knowledge hoarding is a treasonous activity in a network, for the network only has value if people share what they know. This is, of course, one of the common complaints about the academic publishing system in the Age of the Network: It turns research and knowledge into a product for sale. That benefits the authors and publishers, but at the cost of enriching the network.

So, we may talk about the marketplace of ideas, but thankfully, we generally work toward a healthy network of ideas.


Search KMWorld

Connect