Technology markets for innovators who are outsiders
Technology markets for innovators who are outsiders
This talk reviews and synthesizes many well-documented episodes of successful outsiders, and how their innovative commercial activity generated responses from established firms in computing markets and the commercial Internet. Analysis reveals that outsiders and insiders face asymmetric economic incentives to innovate in the service of differentiated competitive entry. Importantly, more nurturing market environments at early moments play an important role.
ladies and gentlemen welcome to the meeting with professor shane greenstein i'd like to rapidly introduce him and to tell you what he does as a researcher he's been a researcher for many years and he collaborated with many scholars he has published a lot of articles on many journals he is a martin martial professor of a business administration and he is a co-chair of the harvard business school for the digital initiative he also has a lot of activities in the economy he is the co-director of the program of digitization of the national bureau of economic research he published lots of books and many articles in particular on the commercial development of the internet and all the economic issues connected with the development of i.t market he also publishes commentary on his blog called the digi topoly and his work has been covered by media outlets ranging from the new york times and the wall street journal and so on i'm really impressed by the fact that but beyond the subject of this talk he uh also studied the evolution of wikipedia he published interesting articles on that he elucidated the mechanisms of creation or stop apps the environment where startups can be started companies which were born outside the traditional markets those who innovated and were able to perform better than consolidated companies the companies present in the market were in a way forced to innovate to remain in the market i.e how our outsiders thanks to new technologies could become leading companies in many segments of the market how the internet became commercial a book published a few years ago which was indeed very successful outside the u.s the book analyzes how the internet in less than a decade turned from being used by universities and the army to something which is maybe the most powerful uh commercial engine in the world it was not a decision by the government that was due because of innovations brought by outsiders the companies outside the mainstream governing the internet and those who were outside the traditional markets for that reason internet uh developed and is prospering without that ability to innovate it's not necessarily that internet would have become the powerful economic uh driving engine of today those who could not uh get adjusted to that were doomed to fail and that happened to many companies as it happened also in italy they were cast out of the market so this is very interesting and indeed we hear a lot about startups or new companies which are very innovative who exploit new technologies and knowledge it will be it will be very interesting to hear from you whether you think that the us system which is more dynamic than the italian one is a more fertile ground for the birth and the development of such companies or conversely whether the italian market which is pretty frozen because we have a lot of red tape i mean those who innovate find it much more difficult to emerge i think that what you say is perfectly in line with the title of the festival of this year which relates jobs and technology innovation in the past anytime a revolution happened somebody said well technology will kill jobs that might be the right time for that to happen however until we have as long as we have the ability to innovate there will always be someone inventing something using new technologies to use them to create a new era for the economy most probably that prophecy will continue to be denied now the floor to professor gr very interesting subject please thank you do i um no no no okay well hello it's a great pleasure to be here the talk today is technology markets for innovators who are outsiders i tried to orient it towards the theme of the the festival and it will draw from the book again thank you for the opportunity uh the talk today will have four parts i'm gonna be a professor in the first part i'm gonna take you back to school give you very abstract ten minutes try to try to stay awake then we'll illustrate with stories uh of outsiders several stories and infer what we can from those stories then we'll look at the confrontation with insiders and what that look like and again we will infer from that and then we'll summarize again okay so that's the plan if i have to motivate this talk i would start with the former prime minister of britain david cameron david cameron used to ask many students of innovation why wasn't google invented in britain britain has universities that are world class oxford cambridge many in london britain has finance that is world class britain has a very large labor market highly educated labor force many scientists why didn't it happen in london david cameron wanted to know that's a great question isn't it and i hope at the end of this talk you'll understand how i would answer david cameron i would answer that you should look just beyond one particular firm you should look at the whole system and it should be a system that is friendly to outsiders okay so what's the goal today is to develop an archetype okay a framework of an insider outsider competition what are the main features of entry by outsiders how do established firms respond to them in markets and we're going to be roughly inductive i'm going to show you a lot of stories but before we see the stories i'll show i'm just going to tell you the framework it may not make sense at first and that i'll repeat the framework at the end again and i and i want to say up front this is u.s centric uh i'm going to use stories from my book uh you know i know what i know so i'm going to use uh those examples uh the main point here is the outsiders hold a distinctive point of view when you look at commercialization of technology one of the interesting developments the last 40 years is that there's no longer big differences between startups and established firms in their access to inputs into labor markets into the technical frontier it's what you might call an uncertain commercial opportunity but they all see the same problem how to meet demand how to oper operationalize production and achieve scale and both outsiders and insiders see the same scientific knowledge the same frontier tools the same engineering markets and talent so how are they distinct if they see the same inputs what's the difference and the thesis today is outsiders have a different point of view about how to commercialize technology and the tension between the outsiders point of view and the insider's point of view is the fundamental tension that drives change in innovation markets today let me describe it it may not make sense at first but here it is what happens at the beginning is there's a point of view the outsiders have it it's hidden they behin it takes one of two forms either it's inside of a university so it's outside of the marketplace so you don't see it or it's an immature entrepreneurial effort that's hidden in a broader movement it doesn't look like anything anyone's seen before the next thing that happens is there's learning at these early moments you see the outsider with a different point of view testing their ideas they're looking for inexpensive prototypes they're looking to extend the prototype they're trying to understand what technical and distribution they need for the business they don't know they're trying to solve it sometimes they have help from venture capital sometimes not and then what happens they get a prototype they bring it to the market and here's a key a key observation they experiment in the market there's no way it's too expensive to experiment in a laboratory nobody puts on a white coat goes to the lab sits down a bunch of people and says would you buy this product there's no way to get an honest answer it has to be done in the market there's no way to do in a laboratory set up scale production for ten thousand units in a day you can't do it in a lab you have to do in the market to see how the organization works so these aren't controlled experiments it's not easy to to see you know a treated sample in an untreated sample so it's very risky but the outsiders will try to do try to understand demand and try to understand operations and what you'll observe is the insiders they're no longer hidden once they begin to experiment this way they will get a reaction from outs from the insiders established firms they'll confront them they'll compete and it's what you might call differentiated competition because they have different points of view about how to address the market situation insiders will tend to favor the assets they've already built and the businesses they've already built and the outsiders would tend to favor a different point of view and you have a market competition and you see what happens that's the whole framework and i'm going to say finish when we get to the end that this suggests what uh economists would call asymmetric incentives to innovate it's a shrimpitarian competition which we i'm assuming many people are familiar with yeah it's true tearing competition with asymmetric incentives that's what this will suggest that's what you see over and over again okay so again just to highlight it and then we'll get to the details that the stories are more fun okay if you're still awake we're good okay so here are the details what you tend to see the gradual emergence of a point of view it may not even reflect a commercial motive at first it will not be visible it will be outside the point of view of the insiders it will require time and experimentation it will rarely be a formed business at the beginning insiders will require time to experiment and prototype as well in order to react and it will be very difficult even from the stories i'll show you today to make a generality about how outside how insiders react to insiders you see a wide variety of reactions and what you always end up with at the end is differentiated competition and uh rarely are the the the insiders and outsiders pursuing the same goals or doing going about the goals in the same way okay that's that's where we're going okay if i was an academic i have to do this you know what's novel here first of all is this novel way of talking about the history of commercial internet if you really want to know more by the book okay it's a novel way of talking about creative destruction so that's perhaps the more interesting thing it's it's explaining why creative destruction is typically differentiated it's uh it's talking about industrial economics of innovation and trying to find a very specific role for a different point of view and at the very end we'll talk a bit about innovation policy with this view of the world you have to have specific kinds of innovation policy okay if you're awake you're ready for some stories let's start with internet in a box did any of you ever buy this product anybody buy nobody bought this product okay it's a cute product isn't it it's a box what do you think it does the internet's inside of it this is from 1994. all it was was a cd-rom with a browser you know a phone number that you could call what were they doing well the entrepreneurs who did this they they had a guess they guessed at the time that the internet it was intimidating that there were a lot of users who didn't understand even how to do the basics how to phone it up so what did they do they packaged it in a way that made it look very friendly and familiar i technically no advance here but it was the package it looked like package software it was very easy to buy nobody had to explain it it ran itself what were they doing they were making a guess about how to distribute it how to price it how to operate a business this is a just a fundamental choice about how to commercialize technology and here's the key observation there was no way to learn if this was going to work in a lab you couldn't bring in a hundred thousand people and ask them if they would buy the product there's only one way to learn you put it on the shelf and see if anybody buys it okay so it's a prototype they put it on the shelf notice one other thing that they were doing they're a specialist did they invent the entire network no they invented one thing it's to get access to the network and that's all they did no applications nothing just just access telephone number a little bit of software it worked on your pc they were specialists and they took for granted that everything else was going to be done and they could just take it for granted all right how'd they do well in a year they sold their business for 100 million dollars oh who bought it uh compuserve actually so what you know what do you learn from this hmm this looks so simple and you'll see we'll give you i'll give you another example now another thing that outsiders do is they challenge consensus about value so here i'll give you another 1994 story it's consensus that wasn't perceived that the internet had value that it could be used in clever ways that you could build a browser business around it why didn't anybody see it it's 1994. if you could have seen this in 1994 there's a lot of money to be made well what was the problem the problem was you had to see a working prototype and it had to appeal to somebody other than the chief technology officer it had to appeal to a ceo who wasn't technical you had to be able to show it to a board of directors at a company it had to be recognizable this is jim clark jim clark had built a few businesses he went into this business he founded this company with a few others it's called netscape this is a quote from jim clark i'd say there was a fair amount of skepticism at the time about whether the internet held any promise and of course i felt that it did so he took a risk it's not much different from the firm we just looked at he's a specialist he took for granted that the rest of the network was going to work and he decided to do one thing and he was going to experiment in the market there's no way to know if it was going to work until he tried to put it on the shelf and sell it well how'd they do well they hired a bunch of programmers they built their business in six months they put out a beta version of their software november 1994 and they put out the final version in february of 1995 and they broke all entrepreneurial records for sales 150 million dollars in their first year of sales another thing outsiders can do just to give you is they can experiment outside of a consensus here's a picture of a couple guys who did this this is larry page and sergey brin there were a few graduate students sponsored by the national science foundation inside of a computer science lab at stanford university larry showed up in the spring of 1995 and asked his thesis advisor he was a first-year graduate student maybe uh what about trying this idea the this this ranking algorithm why don't we try it on html nobody had tried it before this advisor have a wonderful interview with his advisor over this his advisor had money from the national science foundation had not promised to this but he knew if it worked he could go back and tell them it worked and they weren't going to complain that the funding was open-ended so he looked at him he said okay go try it so larry went to go try it he couldn't get it to work without a sufficient spider uh technically uh technically somebody that crawled the web this is why he got a partner his partner with sergey brin who had the best spider of any of the graduate students he could find in the neighborhood and together they built this prototype they just sat there i i want to emphasize this the first google experiment ran on a server and they took classes for two years we say in retrospect wait a minute they had this invention now they were students they put it up on a server they let everybody else use it they patented it the university tried to find a buyer maybe they asked too much money nobody would license it this true story and the fact was by 1998 larry and sergey were kind of disappointed they thought they had a good invention and nobody wanted to use it and they had finished classes they had even written two papers they were almost done with their thesis but they were really upset that they made this invention and nobody thought it was useful so what did they do they said we're just going to show people how useful it is so they decided to start a business so they started google in 1980 1998 and um no that's because they couldn't get a license and they ran the search business for three years with very minimal revenue with some venture capital funding some angel funding and the part that most of you know now the auction for ads that wasn't invented until 2002. so four years after they started the firm that's an imitation of all the other auctions and it has a it's a you know again the the book talks a lot about this it's a second price quality weighted position auction it's a mouthful it was basically an imitation of all the other auctions that were being tried at the time but it was done in a way that was consistent with the google model the google model was unique in that it was consumer friendly it didn't sell search to anyone the search was always oriented towards what was most useful to the user none of the other search engines were exactly oriented the same way and moreover they were doing things that were regarded as completely outside of commercial norms they banned ads for tobacco alcohol and sex all they were trying to do was match ads to the users that was their goal okay so it was a very different point of view of how to make a search engine and in fact was not very profitable at the beginning but they stuck to their point of view and continued to develop it okay so those are three examples let me let's back up a little bit a question you might ask now at this point is what enables these kinds of outsiders why do they show up what are they what are they doing there how how come they're they're able to survive and thrive well first things is that they can be supported by venture capital and i love this example it's a wonderful example all right let's see if you're still alive uh how many of you have an e email hands okay now come on how many of you have email come on seriously yeah it's you know it's got to be a hundred percent surely okay now i gotta how many of you have hotmail because it's still gotta be some hotmail out there yeah all right we got some hotmail yeah that's great okay right still the second most popular email system uh email in the world okay so invented in 1995 uh hotmail do you know why it was called hotmail i i'd like to put it always it's just a little factoid let's see if i can get this yeah look at the look at the name it's html oh is that nerdy okay yeah it's a oh yeah they the the guys who did this the two guys who invented hotmail are real nerds that i just you gotta love them they are outsiders they were just a couple programmers one of them is uh indian citizen i mean indian immigrant the other one is um uh yeah u.s citizen they were programmers at another company they they had used an html browser and they were trying to do email but not let their boss see what they were doing and the way to do it was to do it on an html browser and then you know hide it and it occurred to them that none of the email systems at the time were html compatible so they could make one and hotmail was the first one that did that's really it it's a very beautiful little invention they're special notice by the way they're specialists they did one thing well they had a different point of view and there was no way to know if it was going to work till they tried it so they went to vcs to get a little bit of funding because they could see they needed some servers to run the hotmail system that they had in mind on it and it would take a little bit of money and uh and they needed to run it in the market so they invented this this method for trying to make uh it popular and one of the methods they invented was to put in the footer of the hotmail you know get your hotmail from somebody somebody else if you ask a computer scientist at the time whether it was okay to put a hot link at the bottom of an email message you would have been told no not to do that because that violates one of the cardinal rules of programming which is it mixes languages and it violated this this absolute wall between the content of the message and the the language out it's outside the message so actually doing what they were doing having a hot link in the in the in the email this was considered heretical at the time so here's the venture capital tim draper who eventually lent the money it by the way how long did it take tim and his partners to decide to lend the money two days they came to a deal in in 48 hours and tim is the one who suggested that they put the the link in the bottom of the of the email and where did he get this idea he he actually got it from tupperware this is one of the one wonderful things about doing interviews for this book is you know sometimes when someone tells you a story you know they just couldn't make that up because that's just too crazy to you know to be a lie it has to be true and this one this was an example tim he said he was looking at he was looking at the hotmail and he was thinking how can we distribute this and not do it and not be expensive and he thought oh tupperware you tell your friends and you try to sell to your friends and friends sell to your friends so email systems you can sell to your friends and sell to your friends yeah that was the key insight today we call that viral marketing and uh you know it was a small little innovation for one little product that then was imitated by everybody else okay so the point of this example was that you get support from venture capital another thing that enabled the sp the specialists and the outsiders is open governance so open governance uh is uh is actually a sort of a complicated topic uh i'm gonna give you mostly the overview open government governance means uh that you have an architecture that does not limit information to an application provider and there's no limits on how information is used so it's a set of principles for giving discretion to the specialists that's the easiest way to say it the specialists can see anything they want and they can do anything they want with the information a lawyer if we had lawyers a lawyer in the room a lawyer in the room would say there were no reach-through rights so the there's the part in the business partner has no right to limit the other side that's that's the key thing okay now why did we have that well it's a long story and i have to admit it so you got to read the book to find out but we should thank tim berners-lee for this primarily and uh because he developed the world wide web in such a way as to make it open and and have open governance and that enabled a lot of discretion from others a third thing that enables discretion by specialists is the technical meritocracy and again i don't know what other label to give it a technical meritocracy is a situation where good code good technology is always the technical assessment is always prime the primary thing that matters so the age or ethnic or national background of the person who does the code doesn't matter now and all the examples i just gave you a number of them are immigrants a number of them are students some of them are young it didn't matter the point was they did good code now the interesting thing you ask can it how can that happen independent of social setting without a hierarchy it's true there is a social setting often times the university serves as a certification or the or really the venture capitalists just evaluate the code themselves they look themselves so they hire an expert and they look but there's often a signal of the origins you can see good code the other thing that often that pushes this is what i call pragmatic impatience many people just looking for the best thing at the time and they they want it to work right now so the example i give for this is is from the university of illinois uh rob mccool built a web server that used what we still use today cgi the script which just moves code back and forth between the browser and the server so we all of our electronic commerce still uses it today um this is rob and uh you know it was the best code out there and and uh nobody cared who rob was they uh he just put it up on shareware and everybody used it now the funny thing about this story is rob decided to leave the university of illinois and so the code was just there but rob wasn't and so eventually somebody had to take it over and a group of programmers did and started an open source program known as apache and this is the most widely used server on the internet today still okay and again it's just it's good code uh the the point of the story is that technical achievement overcomes all the barriers okay so you you might reasonably be asking at this point what role did policy play that's a reasonable question to ask here there are two kinds of policies one is commercialization policy one is policy for the university uh i'll come back to it but let me do a brief digression and say commercialization policy the key things here are policies that limit concentration through structural limitations on mergers and and divestitures limiting distortions of monopolies on complementary markets in this act in this place it was actually it was primarily the telephone firms who were limited and a series of competitive rules to protect competitive processes for its own sake which nurtures different points of view there's another set of policies having to do with transferring technologies out of universities um that mattered i think it's going to take too long to talk about that today so i'm just going to skip it if you really care this is something that some people really care about but um if you want to you have to sort of read the book so okay so summarizing entry you know what what factors enable the outsiders to play a role remember this so the outsizers have a different points of view of we just said this they have a different view about where demand lies or about how to operationalize things or how to scale an organization they tend to remain it tends to remain hidden it tends to remain outside the consensus it there's experiments in universities to support it maybe a new customer base or operation to support it it tends to use the same knowledge we it's living in a world of dispersed technical knowledge insiders and outsiders aren't any different it tends not to depend on hierarchy it's getting the same financing as everyone else and it lives with experiments in the market okay so they perceive opportunities they have a different point of view they experiment they partner they use open standards and really interesting is things accumulate from the outsiders and they all have this different point of view that's that's the entry part okay that's uh that's most of the framework you might then say well what do insiders do insiders don't you know they're not just going to sit there yeah all right that's it's actually not complicated let me give you a couple so the key question is how do insiders respond and the key point to recognize is what would the insider have done had the outsider not entered and then how do you compare what they did do with what they did would have done so and i'm just going to offer a thesis that i think will be fairly straightforward had that the that the entry of the outsider generates a reaction and a set of actions from the insider that they would not have otherwise done that's the thesis and you i think it'll be very obvious once you uh see how it works might you might say well what would they have done no well basically they're going to continue to do what they did otherwise and just to just to be a professor for a second why is that because an established firm has a tendency to do what it's already doing it will tend to invest in ways that are consistent with its present business it will rarely cannibalize its own business unless someone makes them it will under invest in prototypes that are inconsistent with its business and it can't plan for everything they will have a tendency to use their existing products use their existing workforce and use their existing firmwide assets in ways that get a return on those assets it's just the way business works and then the outsider shows up their catalyst to action because they have either one of three things they have a new product that develops outside the control the insider the prototype reduces revenue possibly at the insider or it demonstrates a demand that the insider had not otherwise appreciated okay so a couple examples and we're done let me use one example microsoft wonderful example the place to start with this example is to recognize that bill gates was the best ceo of his generation let's just start there the best ceo of his generation made a mistake he didn't understand the internet that should tell you everything you need to know no ceo even the best ceo of his generation can anticipate everything it doesn't matter how good he plans so he missed it so what happened well it's actually kind of an interesting thing he ended up writing this famous memo that was alarmed by the lack of control and the potential threat to revenue where did that actually come from actually comes from this guy ben slivka ben slivka was an employee at microsoft he was part of a small team who were convinced that bill was wrong so this is fascinating story of an argument inside of a firm where the 1994 bill gates had said this is not this is not a part of our business we're not going to be in this business and there were a number of people who were convinced their boss was wrong and they were so loyal to him that they took time out of their day to study the alternative point of view ben slivka just to give you illustration wrote four versions of these the study and the fourth version is a 20 page memo single spaced describing the coming commercial internet bill gates cribbed from that for his famous eight-page memo the internet title life that's that's how a ce a great ceo works when his employees show up for him and tell him that he's wrong and they make a 20-page paper to try to argue bill paid attention went surfing and he was convinced and he changed his mind so the short version of this story is why did they change their point of view because somebody paid attention to the outsiders described what they were doing and the ceo listened let me use another example i love this example ibm is a wonderful illustration again we should start here ibm is the single best computing firm for large organizations okay let's just start there the single best computing firm for large organizations missed the internet also so what did they actually miss and what did they get right that's kind of an interesting question what they missed were the inexpensive html software what did they get right they had demand completely right if you went to their lab in 1995 they had built prototypes for everything we now recognize in electronic commerce they had seen it all the researchers they knew what was coming but they had the wrong components they didn't understand that they needed to use open systems and so they had the prototypes but not with web technology so this guy irving vadalski berger had the terrible i think career defining task of trying to do the internet strategy in ibm really wonderful guy you know the fact that he was willing to be he was willing to be interviewed this was very interesting and he had to organize what we now recognize what we now recognize is middleware software and organize that for ibm and you should be clear this is not a glamorous activity it's functionally messy it's it's about logistics uh it's about organizing order fulfillment inside of a large company and it's extremely valuable and this is what ibm did how did they do it just like we've seen before they looked at the outsider's point of view they recognized what they had missed they made new prototypes they showed the prototypes to their buyers the buyers like the prototypes and they changed their investment behavior as a result it's just just as business works i'm making a long story very short by the way the very very painful process for ibm and a very valuable change for them okay last illustration is the last one and this is the last of an of insider's responding wi-fi you all know what wi-fi is you know wireless internet access do you know where it comes from yeah yeah 80211b is the uh the ieee stander that everybody uses okay what was the first product to use it it's the apple airport does anybody have an apple airport it's always fun oh we got a couple oh yeah yeah okay so the apple airport was in uh actually an invention from steve jobs who came back a ceo to apple in 1998 and the firm was on the verge of bankruptcy and his view was as an outsider to bring some innovation into the computer industry so steve wanted a wireless laptop and this you know make a long story short that's how we got the apple airport his actions motivated michael dell you know dell computer and motivated michael dell to try to do the same thing because michael dell hates being beat by steve jobs michael dell then called up microsoft and they got a new release of windows so that was compatible with 802.11b then the other oem started to adopt it too because they hated being beat by michael dell at that point intel hated michael dell telling them what to do so intel then changed what it did and adopted centrino which then supported ubiquitous wi-fi on all laptops across the whole world so what happened here again you get the whole value chain for changing its point of view about what's valuable because one outsider showed up and tried to do something and again it's the insiders all reacting because they see the different point of view and then they recognize the value that's being created there okay so summarizing why do outsiders act as catalysts experiments might not have been done it makes insiders consider demand they might not have considered they might do prototypes they would not have otherwise done it changes the direction of investment it necessarily changes the experiments and here's the last key thing it takes time so it's value is unknown it takes time to reorganize production and you need the competitive situation to sort it out all right i think i'll skip this because we've seen this and a tiny bit of policy and we're done right so that's it that's the framework so what policies nurture this uh here's the central problem the central problem is most outsiders most outsiders are fools and what's the italian for a fool clown so most outsiders as it turns out aren't very insightful few of them are geniuses and so the the basic problem for policy is that you can't forecast a winner but you must keep the situation open for any outsider who shows up who's a genius and i always say if you want an illustration the best illustration i know is from about a dozen years ago who would you have given money to in 2004-2005 but you've given it to a cable company looks pretty profitable or would you have given it to a harvard undergraduate with a new social network right and it's just it's very very difficult to anticipate who the genius is so policy as a result has this very difficult problem it has to remain open to any kind of point of view for its own sake even though there isn't someone there necessarily to be a constituent for that i think in my own experience i found that venture capitalists tend to be the biggest constituents for these kinds of policies because they see it more directly you know historically we can look at the commercial internet and ask whether these things were there and the fact they are you can actually find them there were things to protect and enable outsiders there was a policy to eliminate concentration enable user choice enable openness i mean i'll say you know you can read the book it's a lot of detail and to protect outside and what's really fascinating when you look at it today and you look at the debate today there's still some recognition of this in policy circles i listed a couple things up here but really quite frankly it's absent from a lot of conversation and so um that's that that concerns me and i you know for for the policy world that's a that's a big concern okay thank you very much thanks for your attention thank you thank you very much thank you very much for your overview i'll ask a couple of questions to the professor but then we'll ask the questions to the floor now i have a few questions to ask you now first of all now when it comes to all big revolutions we usually have a lot of stories stories of people stories of fools of visionaries that have intuition insights and they have somehow changed the world if you were to you know name the hero of this revolution who would you mention who would come to mind to you see yeah timber tim berners-lee tim berners-lee could have made a lot of money instead he chose to make his parents proud um he gave away his invention and it enabled many other people to invent things he's a big hero and then i have a curiosity to what extent do outsiders become insiders and when they become insiders and they become large companies and we have a lot of examples do they forget that once upon a time they were outsiders yes they do sometimes bill gates is a particularly good example of that uh he he benefited from the very same policies that he then tried to subvert um when when he was on the uh the other side of it um it's a bigger question today about whether google and facebook are behaving the same way i think a bigger i think the interesting question is whether policy um reminds the uh former outsider that they have an obligation to protect and preserve competitive processes i think one of the lessons of this era was that policy was a little slow to do that and the policy has been much faster i think in this era and reminding google and facebook both early and and frequently about it and uh and i think actually it's we've avoided some things that could have been worse you know we don't get to see the alternative right uh but but uh yeah but uh i think actually we've avoided worse things because they've been reminded quite frequently already it's a great question i have another question then we'll open up to the floor i have a question that's connected to what we have just said now the creativity gave a number of companies the possibility to grow into the market but a number of risks have emerged risk risks for instance to the labor market i'm thinking about amazon here in italy at least they do not respect the workers rights and i think this is a problem that has to be tankled and then another question which i think is a bit more delicate is the defense of the personal data privacy a few days ago here in europe a new european regulation has been forced for the protection of the personal data and for the first time such regulation envisages severe penalties for those who do not comply with the right to privacy now when i speak of a personal data it refers to you know our tastes in terms of you know clothing but also health you know or personal data i guess there should be a limitation to the pervasiveness of such uh tools uh such tools that get into our own private world you know these kinds of rules on are not going to have any are not going to uh make a large difference to the largest firms they're going to be able to deal with them they have the money to do so i think the uh the question policy maker would need to ask it um is whether a young firm it's about the young firm you don't see whether a young firm has to get a half a million dollars of legal help in order to start their business in order to address those regulations that's that's the that's the hard question that should be asked and that would be a um that would be a deterrent to growth and to entrepreneurship um uh you know and if if not i mean if it's possible to comply without a high without a particularly difficult expense for an entrepreneurial firm then that's great if it's expensive legally expensive it's i suggest it's actually potentially not a good policy and maybe needs modification for entrepreneurial firms and such regulation envisages a number of costs for companies as a matter of fact okay let us open up the debate to the floor any question from the floor and please use the microphone otherwise we can't hear the question we can't translate it thank you you introduced the principle of technical meritocracy so how the internet works and nowadays we see all the businesses and with the internet that begin commercial all the businesses were starting their businesses on internet and then moving let's see amazon and then moving excuses okay and so then starting from the internet and then moving in the real world how do you think the collapse of net neutrality and so once imagine when you when you when you study real estate you say three things are important location location locations once you had net neutrality you didn't have this principle of location on the internet and whatever the idea was coming from it was worthy and that's why technical i think maybe what i see is that technical meritocracy was coming also from that once you have the importance of location without net neutrality on the internet how this will affect outsiders yeah it's a great question um i so there's two things there um one in uh you know until now uh we've had a set of policies that uh inc um we're effectively neutral and so i think uh it's not a concern until recently and and so the question about what changes in net neutrality policy will have for new startups going forward um is a question about what net neutrality will look like going forward i think the uncertainty alone has already created some cost and some deterrents uh and and then beyond that and it's hard to measure because we don't see it right we it's the world we it's the entrance who doesn't show up because they're too worried about something a year from now or two years from now the the big concern and this is the concern inside the vc community in the united states now is they get another streaming firm they can't get it to work on all the all the broadband lines they have a problem with one of the large carriers they they need uh legal help to get you know to fight it why you know then why'd you start a firm the the vcs won't once they have an experience like that they aren't going to start firms in those businesses um so at this point we're not there i think that particular nightmare is unlikely for another year or two so what we're observing for the time being is merely the uncertainty created by not knowing where this is going to settle uh and what legal rules exactly goals will be settled on and then um the second step of this uh i just it's just too far off we don't know yet and that's a pretty interesting question i think it actually hangs over the market right now quite a bit as i say it hangs over in a certain set of applications things like streaming things that need to work with a lot of different they need to work on wireless and wireline a lot of different carriers typically across multiple markets and multiple carriers that's that's where the the uncertainty hangs right now itself it's it's not commercial i mean it was it's not a commercial product there is an uh an example on the worldwide web of a big website which is not commercial which is wikipedia you did the research on that can i ask you a few words about that if it's a few words obviously yeah sure wikipedia is a wonderful example of um a non or it's non-commercial um it's it's a crowd-sourced text it's one of the wonderful things you can do with the internet because it allows inexpensive access to a large set of readers and a large set of contributors and uh wikipedia uh the interesting thing for wikipedia for an economist is there's no pricing so there's there's no there's no classic way to measure its productivity if you want to say call it that and there's no classic way to measure its contribution to the economy because it registers nothing in gdp and and so a really hard question um is how do you think about its value in light of next best alternatives so the amount of revenue that's been displaced in the english language reference market is several billion dollars somehow that seems like uh not enough value for something that is accessed uh by eight billion people a month somehow you know a couple billion dollars doesn't seem like the right valuation so displacement value doesn't seem to be the right value and uh and exactly what the right value is we don't have a good feel for it um the topic we looked at was the productivity side of the question so we asked the question how quickly does high quality emerge in from an article um and in particular in its most difficult places and when there are arguments about uh things that are fundamentally difficult to resolve controversial topics um subjective facts political discussions and and i would say wikipedia works really well when you have objective data so the uh it works actually extraordinarily well you know if you look up the science of you know penguins i mean you know in chemistry and mathematics it's it's remarkable it's a little more challenging to look up the entry for a political figure and particularly a living political figure i haven't looked up donald trump's uh recently uh you know i remember barack obama's and george bush's always had a lot of difficulty so what khali feng shu one of my colleagues at hbs and i what we did is we tried to look at how quickly articles would come to represent multiple points of view which is one of the aspirations wikipedia has for itself and and the answer is it performs remarkably well if it has uh a large number of contributors and uh one of the things we walked you know maybe a long story short one of the things we walked away with is um wikipedia has a manpower issue that it works extremely well for the articles that have a lot of contributions and and just the basic problem it's got is it's got a far larger readership uh than it has a you know a set of people to contribute which is another way of saying if you want to do something and be good good for society help wikipedia okay so that's a that's the conclusion and then what we're doing now is we're looking at the um segregated conversation so echo chambers on wikipedia uh you know do red people talk to red people and blue people talk to blue or do they do they cross over and again the answer turns out is that wikipedia is remarkably good um at resolving echo the problems with its echo chambers and and it's for the same reasons that um uh uh the the platform is designed to give a large discretion to its crowd it makes its aspirations very clear the the crowd the contributors will have a debate about whether their particular actions um are consistent with the aspirations uh and it's not algorithmic based it's you know there's no it's all human-based it's uh and and so it it ends up they debate among themselves and again they when there's a large enough base of contributors it works really well and the again for echo chambers on wikipedia the central problem turns out to be just do you have a large enough number of contributors that's that's the short version of it it's by the way right it's wikipedia it's uh you know 15 years old it's absolutely remarkable uh contribution to the to the world the third largest collection of um it's the third not yet it's not the largest it's the third largest collection of uh writing by human beings ever put together into one source the the the first and the second the second one is the library congress and number one is the british library but wikipedia is getting close it's going to bypass them soon thank you very much professor shane greenstein thank you very much to you all i think uh this discussion has been very very interesting about issues that are really topical as we say we journalists very very important topics thank you very much again professor greenstein thank you you