Recently in Sessions Event Category

It has been two months since we hosted a great group of academics, entrepreneurs, educators, and administrators at our Union Square Sessions Event, Hacking Education. Fred posted his initial thoughts immediately after the event and in a great example of peer production, Alex Krupp curated the Twitter stream that captured the thoughts of folks inside and outside of the event.

I finally found some quality time to spend with the transcript that is now online, and thought I would try to expand on Fred's initial thoughts and develop a couple of the key themes that came out of the conversation. Before diving in, however, I'd like to make a pitch for the transcript. It is not perfect (imagine trying to record 40 high powered people all talking at once), but it is readable and full of lots of insights. I would encourage anyone who is interested in the impact of technology on education to plow through it. I have tried to pull some of the highlights here, but there is no way that even this overlong post can do justice an energizing and enlightening afternoon.

There was broad consensus that the internet is enabling substantial changes in the way we learn and teach. It has always been possible to learn outside of a school setting. The ubiquitous connectivity and very low cost of content production and distribution seems to enable the unbundling of key components of education.

Dissagregation - David Wiley broke education into these components, 1) content provisioning, 2) research - conducted, archived, and disseminated, 3) help provided to a student with a question on the content, 4) a social life, and 5) issuing credentials.

Historically all of these components were bundled together in the experience of on-site education in a K-12 or University context. Already today, it is possible for a student to get many of these services outside the walls of a traditional educational institution. One of my favorite illustrations of all of this is a story recounted by Mimi Ito in her report - Living and Learning with New Media (pdf link)

In her study of anime music video (AMV) creators (Anime Fans), Mizuko Ito interviewed Gepetto, an 18-year-old Brazilian fan. He was first introduced to AMVs through a local friend and started messing around creating AMVs on his own. As his skills developed, however, he sought out the online community of AMV creators on animemusicvideos.org to sharpen his skills. Although he managed to interest a few of his local friends in AMV making, none of them took to it to the extent that he did. He relies heavily on the networked community of editors as sources of knowledge and expertise and as models to aspire to. In his local community, he is now known as a video expert by both his peers and adults. After seeing his AMV work, one of his high-school teachers asked him to teach a video workshop to younger students. He jokes that "even though I know nothing," to his local community "I am the Greater God of video edit¬ing." In other words, his engagement with the online interest group helped develop his identity and competence as a video editor well beyond what is typical in his local community.

In theory, Gepetto could have learned video editing in school. In practice his school was not equipped to teach it. He found content, help, a social life, and even credentialing (as others linked to his work) on www.animemusicvideos.org.

Rob Kalin kicked the discussion on the separation of learning and credentialing into high gear with this story.

I graduated high school with a D minus average. ...My guidance counselor said "drop out of high school, you'll have an easier time getting into college if you just get a GED." I [decided] to graduate with this D minus and see what it does for me. I didn't get into any accredited school . I got into a diploma program in an art school in Boston, and it was near MIT. ... I used the art school to make a fake ID to go to MIT. Someone said [college is] expensive. I said no, it's free, you just won't get credit for it.

Today, no one is going to ask Rob for his college transcript. His credentials are the companies he has created. Not every student can be so cavalier about the lack of a diploma, but the web is having an interesting impact on the value of credentials. In an earlier era, it was very difficult to evaluate a student's work directly, so a grade from an accredited institution served as a proxy. Now, if an employer wants to hire a video editor, Geppeto's work is on the web readily accessible. Students in the future will be as likely to be evaluated on their portfolio of work, as they are on their grades. That's lucky for Geppeto because, as his story makes clear, there is no way his school was capable of evaluating his work.

Fred pushed the conversation about disaggregation to another level when he suggested that in the future, he'd like to see students be able to opt in or out of a school on a class by class basis.

When I think about where we are going to be in 50 years, I think we are going to have a marketplace model for education where the student is in control of their education and they determine who is going to educate them, when, where, and how... I'd like my kids to be able to avail themselves of the quality classes and teachers they have in their physical space but then opt out of those [classes] that aren't good and go get that knowledge somewhere else.

A byproduct of the disaggregation of education will be to weaken the authority of schools, but the bigger challenge may be to align their cost structures and business models to remain competitive in a hyper connected world.

Bing Gordon dropped a bombshell just before lunch when he proposed that we should work to drive the marginal cost of education to zero.

From an economic point of view, I would say the goal... is to figure out how to get education down to a marginal cost of zero. Somebody mentioned Oxford. I think the marginal cost for a student at Oxford is probably $250,000; at a U.S. university it's probably $90,000. That's what it costs per student. That's not what they charge. Public school, I think, they are trying to do it for $6-8000 per student. So, what if we had to get it to zero? We've seen technologies that get the marginal cost [of services] to zero, plus bandwidth.

This is not as crazy as it sounds. Knowledge is, as the economists say, a non-rival good. If I eat an apple, you cannot also eat that same apple; but if I learn something, there is no reason you cannot also learn that thing. Information goods lend themselves to being created, distributed and consumed on the web. It is not so different from music, or classified advertising, or news.

For Shai Reshef the idea of reducing the cost of education isn't just theoretical. He described University of the People this way.

It is a non-profit, tuition free, online university...students are not going to pay for courses or tuition. However, they pay admission and they pay for exams that they take after each course... The idea is open admission to everyone.

...We use open source and open courseware... basically everything that is available for free... there are not going to be any teachers in the classroom. Students are going to teach each other...

... [the discussions are] asynchronous... because of the time differences and there is not going to be any video... it's very, very simple [so] that anyone around the world can get it.

... we teach only two courses, business and information technology... these are the most needed degrees to get a job.

It's not for everyone. You need to know English, you need to have a computer... our assumption [is that the students will be from] the upper end of the lower class or the lower end of the middle class... its people who almost made it... who could have been at the university but missed their chance.

So by targeting a very specific audience, delivering only two courses, using open courseware and open source technology, asking students to teach other on a very simple platform, Shai hopes to be able to deliver a limited, but valuable education to an important segment of the global population for free. He will ask them to pay only for testing (accreditation).

Shai is not dropping the marginal cost of education to zero. But he has figured out how to deliver two courses at a marginal cost of pretty close to zero. His costs (and the price to students) is in accreditation. The marginal cost of Gepetto's self directed "course" in video editing was also zero plus bandwidth. He did not pay for accreditation. The only "credit" he got was the approval of his peers on the web site and the recognition of his teachers back at school.

I had a lunch conversation with David Wiley (it's not in the transcript) about whether or not it would ever be possible to reduce the cost of accreditation to zero. I was stuck on the problem of grading papers. I understood how a computer could grade a math exam, but how could you grade an essay on Aristotle. The best I could imagine was that underpaid, but still costly, teaching assistants grade the student's essays. David said, "oh that's easy". You agree with the students on a set of criteria for how the essays are going to be graded and then have each student read a few essays. The readers critique can then also be read by a couple of students and the students final grade is based on how well they wrote and how well they critiqued according to a jury of their peers. By having every essay and every critique reviewed by multiple people, you eliminate the outliers and arrive at a fair grade. So at least in theory, it is possible to peer produce the critique something of as abstract as an essay on Aristotle.

The possibility that education can be unbundled, and that, as an information good, it may be possible to radically reduce the cost of providing at least some types of education could have important social consequences. We spent a good portion of the afternoon talking about some of those issues and some creative ways to use technology to address the issues that technology is creating.

As the web becomes more central to learning, bridging the digital divide becomes more critical. The webs resources are only available to someone with a computer. That sounds simple but as Danielle Allen points out, it's not.

A small anecdote on the issue of technology in schools to underscore the fact that any conversation on education needs to take a whole bunch of other factors into account, which are pretty absent from our conversation. I've served on the board of the University of Chicago Charter School for a number of years. We had to quit handing out laptops because kids were getting attacked. First, we tried school buses so they did not have to walk home, but that wasn't enough, and it's super expensive. So, it wasn't a sustainable program, just because of various social factors.

The difference between those who have computers and those who do not is important but there was also a lot of conversation about those who do not have the cultural background that would lead them to take advantage of the learning opportunities on the web.

dana boyd reminded us that "technology does not determine practice"

Just shoving broadband into a group of kids, just giving them an iPhone, we can think of a gazillion designs that are valuable ... but, if you don't have a culture embedded in it, [it] becomes just another toy you can text your friends with... I've become so infinitely frustrated with... "let's just dump a bunch of laptops into a population and see what they do with it"... That doesn't work... We've watched students rip out the batteries and use them for everything else under the sun.... I don't think we can just think about the technology.... We have to think about it in a broader system.

Even if you solve the real world problems Danielle cites, and embed the technology into a framework that enables meaningful learning, students will still fall into two groups, those that were lucky enough to have been raised in a cultural context that values learning and those that who were not. The story of Gepetto suggests that someone with access to a computer and a desire to learn can learn a lot on the web. What about that portion of the student population that is not self motivated? How can we reach them?

Jon Bischke reminded us of the William Butler Yeats quote "Education is not the filling of a pail, but the lighting of a fire". Several people suggested that this is the role of a great teacher. Steven Johnson described how he learned a passion for baseball and suggested that game mechanics may be one way to light a fire when a great teacher is un available or unaffordable.

When I think about the skills that... I got when I was a young kid that are still valuable, I think back to when I was 10 or 11 when I spent thousands of hours playing baseball games and designing better baseball games. I got a huge amount out of that in terms of the math involved in creating the whole statistical model of how baseball works and stats, and a lot of collateral learning experience... But the most important thing about that was, I learned how to be obsessed with things... I got obsessed with these things and I had a series of stages in my life where I got obsesses with something else. And I just immersed myself to learn as much as I could. And it's that mechanism I used again and again and again in my professional life. So how do you teach kids to be obsessed with things?

I think one of the advantages we have with technology and particularly with games is that they have a built in structure, almost to a fault, as most parents would say. They have an addictive quality where people will just immerse themselves and become obsessed with them...When you look at the games that most of these kids are playing, the amount of information that they have to accumulate and master to perform well in these games is massive compared to the amount of information they are willing to learn at school... there is something in this kind of platform. Without anyone telling them to do it, they are going out, learning all this information, and becoming really skilled at it.

Katie Salen has spent the last two years trying to tackle all of these problems at once. She has created a New York City public school that will open in the fall that is based on the idea of game based learning.

We wanted to open a public school because we are really interested in the equity and access question.

Like Dana, Katie understands the importance of context and culture.

In order to actually have transformative change, you needed to work at a systemic level. So the idea was to design a school from the ground up. All aspects of the school, the curriculum, the professional development program, student recruitment, the kinds of technology and communications platforms in the school, the leadership model - all of that is built around a pedagogy, which is the way we think kids learn best.

And it's based on game dynamics.

In a lot of our work we found that kids that have struggled in traditional schools do really well with some of the work we have been doing around game-based learning.

As encouraging as Katie's story is, there was also some real concern about the future of education. Fred put it this way:

the problem is that the whole economics of that physical space breaks down as [students] opt out [of parts of traditional campus based education]. Maybe this is just what we're going through in other industries... that they get crushed by the organizing efficiencies of the Internet. But I don't know how to get across that chasm

Fred is suggesting that the education industry may soon face the same challenges that currently confront the music industry and the newspaper industry. Like those industries, education can be peer produced, delivered as bits, and curated by a community. Like the music and newspaper industries, the cost structures embedded in the education industry's current business models may be very difficult to support in the face of competition from hyper-efficient, web native businesses.

Unlike the music and newspaper businesses, education plays several roles in current society.

Diana Rhoten pointed out that:

School is a safe place for a lot of kids. It's not only the single parent argument. But, it's also that school represents the eight hours of your day when you are actually warm and have food. Not every kid can opt out of that.

Katie Salen picked up on that:

In the early part of the [last] century there was this configuration between home, church, and school. And it was understood that kids learned in those three different places and it was really clear what was learned in those three places. And over time.... all of it got stuck back in the school.

The day was characterized by this conflict between the technologists and entrepreneurs who were driven by the conviction that we can use what Tim O'Reilly calls the "magic powers" of the web to drive down the cost of learning and increase access to knowledge. This optimistic view was tempered by the concern that education is not music and that the existing structure of education delivers a lot more that knowledge. If the transition from the current high touch, but high cost, learning environment to an efficient peer produced learning network is as abrupt and brutal as the transition we are witnessing in the music and newspaper industry, the social consequences are likely to be a lot more severe.

Early in the day Bob Kerrey's reminded us that education is not like other industries, that it has always, at least in the U.S., always been tied up in our notions of citizenship, and that the collective decisions we make about education have always been politicized.

It is worth remembering that the history of the common school in the United States is a history of people attempting to pass state laws mandating education at an early age, mandating the creation of public schools. And up until the 1920s, when there began to be the a rise of the nativist movement, as a result of the enactment of the openly racist Immigration Act of 1924 and the creation of the American Legion, that resulted in the rapid expansion of public schools in the United States of America for the purpose of teaching citizenship. That's why the Pledge of Allegiance is mandated in all schools. If one of your 11-year-olds is found out on the streets of Atlanta this afternoon, they can be arrested and found in the juvenile justice system for violating their -- as an offender of their status. They're required, for approximately a thousand hours a year in all 50 states, to be in schools. So, that's the context.

Secondly, you've got to sort of imagine yourself -- I have a 7-year-old in the largest public school district in the country, the New York public school system. If you're trying to have an impact on PS41 where he goes to school, to put it mildly, that's a hell of a challenge. Just to try to have an impact upon the arrival of air-conditioners in June, let alone the curriculum and the budget and other sorts of things. So, I think you have to separate the conversation between the effort to improve the public schools and the effort to improve the non-public school environment. These are two completely different things.

And finally, you have to get used to the idea that you have to bring an argument inside the context -- you haven't been in a room full of parents. There are 2 million parents in the New York public school system that might, I should say, have a slightly different attitude about what they want the New York public school system to accomplish than I do. And these board meetings can be raucous, dispiriting and at times counterproductive. You find yourself saying, Gee, I don't want to do that anymore. You can find yourself fighting the battle to get curriculum imposed and brought to the schools and it's exactly what you wanted and, two years later, the board of election occurs and the people you supported get turned out.

So in the end, the technologist's enthusiasm for radically reinventing education was tempered by an increased awareness of the broader social role that our educational institutions play and a greater appreciation for the political will needed to bring the full benefits of the web to public schools. The academics and educators heard about a number of interesting experiments that use peer production, game dynamics, super distribution, and the ubiquitous connectivity of the web to create meaningful demonstrations of what can be done. The challenge for all of us it to find ways to exploit technology to reduce the cost and increase the accessibility of education; build political support for the structural changes needed to make this a reality in public schools and architect a transition from the current industrial model of education to a network based model while minimizing social dislocation.

Here is the transcript for the Hacking Philanthropy Sessions event. It was a tough assignment for the transcriptionist. It was a large room where 40 high powered people were firing ideas back and forth without microphones. So despite a heroic effort, Yochai Benkler's work on peer production came out as "bank lenders work on pure production." Even so, I think the transcript will prove to be useful. Just glancing at it this morning for the first time, I was reminded what a great conversation it was. If you were with us for the event, I think you will find the transcript a great memory jogger. If the transcript is your first exposure to the conversation, I am sure that you will find a lot of great insights.

We had a great lesson in the power of peer production when we put the transcript for our first Sessions event up on the blog and someone (we still don't know who) did all of us a great service by reformatting the transcript into a much more readable form. We'd appreciate any help making this transcript more accurate, and readable. If you were at the event and a key thought of yours came out garbled, please feel free to correct it. Even if you were not there, but it is obvious from the context of the phrase that "medidata" should be "metadata" please fell free to make the change.

We will, of course continue to clean up the transcript as we can but we felt that it was more important to get it up quickly than to make it perfect.

Every so often Union Square Ventures brings together a small group for a day-long conversation about the interplay between technology and society. We call these conversations Union Square Sessions.

Yesterday, we hosted a conversation entitled "Hacking Philanthropy." Hacking is used here as a term of respect as in "The intellectual challenge of creatively overcoming or circumventing limitations." See the Jargon File.

Our idea was to bring together entrepreneurs who have exploited the capabilities of the web to disrupt markets with people working for positive social change in the non-profit sector to see if the same techniques could improve the efficiency and effectiveness of philanthropy and social action.

We would like to thank the great group of energetic and experienced entrepreneurs, technologists, investors, philanthropists, and analysts whose energy and ideas were an inspiration and will, we think, be a useful contribution to the effort to improve the effectiveness of philanthropy and social action.

We hired a stenographer who worked valiantly (desperately) to capture the rapid fire conversation between 40 high energy people. We will know how well Robert did when we get the transcript back in a few days. In any case we will post the transcript here and try to point out some of the ideas we found most compelling. Whether you were with us yesterday, or your first exposure to the conversation is the transcript we encourage you to highlight the points you found useful or important. If you choose to engage elsewhere on the web, you can make sure your contribution becomes part of the conversation by using the tag "usvsessions3".

You'll find more photos here.

It took a little longer than we would have liked but the transcript of our June 15th Sessions event is now up on the Sessions Wiki. Scroll down to the bottom of the page to find it. Or if you'd rather, this is a direct link to the transcript.

Jonathan Taplin took me to task early on for suggesting that ubiquitous connectivity was a given.

" I'd just like to kind of object in a friendly way to your initial supposition, which was that we're living a world of commoditized infrastructure, and ubiquitous connectivity, and I quite frankly think that's not a given. I think we do live in an -- at least in the United States, we live in a telecom duopoly, and clearly the notion that for me a lot of the great business stories in venture capital in the last five years were built on that basis, i.e. obviously Google could never have existed without Linux. If they obtained server licenses on 800,000 processors, their business model would look very different than it does now. And if they hadn't had access to all this dark fiber and all that... ubiquitous connectivity.
But the day when AT & T or Comcast starts changing different levels of prices for different access to a network to a company like Google, their business will change overnight, and that could completely screw the model, and could screw the model of any new start-up that wants to start serving content or any other application into these networks."

Jon's comment launched us into a long and healthy debate on the Net Neutrality proposals before Congress.

Tom Evslin pointed out that this is not just about whether or not Google pays an RBOC more that Yahoo for better service, it changes the very nature of the net.

" if you have to examine every packet on the internet, then you don't have the internet anymore. Not only because you slow the packets down but also, because now the networks become application aware, and we get back to that wasteland that's the telephone network where you can't introduce a new innovation unless the network becomes aware of it".

Tom also shed some light on why the RBOCs and Cable Operators are likely to try to reach up into the applications layer to extract a tax for carraige across their networks. "they've [the RBOCS] made an enormous investment in replicating the cable model as a new revenue source, since VOIP is hollowing out the profits on their voice model. But they converged with an obsolete model. The cable model's about to fall apart. The content providers are bypassing the fixed distribution system and going directly to the web. So if you don't want to face another hundred million dollars in write-offs - if you're those companies, how do you slow that down? You break the internet, that would slow that down".

Larry Lessig brought the conversation home by describing how the duopoly that controls the local loop is likely to dampen innovation.

"there's dynamic here that I think we need to focus on, and that dynamic happens inside a venture capitalist's board room, and the venture capitalists sit there and they say, "Well, we know in five years when this product is done, there's going to be an infrastructure where one or two people call the shots about what runs on the network. And in that world, do we think that our product is going to have a shot?"
"Now some products will because they won't threaten the business model of the one or two entities that control the network, but the whole point is that the extent that you got business models that aren't really in the interest of the network, the venture capitalist I would think would say, "No, the risk is too high, so, therefore, we're not going to be investing in these products," and therefore, when you point at things that will be the competitors of the network, they won't exist because they won't have had the investment to actually make them exist".

Gigi Sohn wondered why, given what was at stake, the tech community was so under represented in the lobbying circles in Washington

"But I think the bigger question is this, you have the incumbent regulated companies, the Bells, Cable, Hollywood, the recording industry investing unbelievable amounts of money in Washington. I think I read somewhere that the Bells are spending like $1,000,000 a day on advertising and lobbyists. They have bought up the Republicans and the Democrats. The tech community, which is our ally I would say on almost 100 percent of everything we do, I don't know if they invest a 10th of that"

We went on to have a spirited debate on the risk to innovation posed by a loss of net neutrality. We talked at length about why entrepreneurs and venture capitalists have not historically invested money or energy to influence the debate in Washington.

Later in the day we tackled other policy issues that impact the pace of innovation including Patents, Copyrights, the Digital Millenium Copyright Act and The Broadcast Flag. There were a lot of great insights. We will try to pull a few out over the next couple of weeks, but if these are areas that interest you, I'd encourage you to read through the transcript yourself.

Yesterday we hosted a group of academics, policy professionals, venture capitalists and entrepreneurs for a conversation about public policy and its impact on innovation. We are very grateful to everyone who took a day out of their busy schedules to help us explore this issue.

The policy professionals in the room argued that the outcome of the current debate on network neutrality, the broadcast flag, and the proposed extension of the anti-circumvention provisions of the Digital Millenium Copyright Act (DCMA) will have a big impact on the opportunity for entrepreneurs to innovate in large and important areas of the economy. The entrepreneurs discounted the threat of innapropriate policy by reminding us of their history of being able to find opportunity in a wide range of regulatory regimes. The venture capitalists pointed out that they were accountable to their investors to deliver a return and that it was easier for them to meet that obligation by shifting their investment focus than it was to fix innapropriate regulation.

By the end of the day, the venture capitalists and entrepreneurs better understood, not only the risks to their current businesses of innapropriate regulation, but also the degree to which enlightened regulation and government sponsorship had created opportunity for innovation in the past in this country and continued to do so in Europe and the Far East. At the same time, the proposals offered by the academics and policy professionals began to reflect a better appreciation of the irrepressible optimisim of the entrepreneur, and the mercenary logic of the venture capital business model.

This diverse group was brought together by a shared interest in innovation. We did not come out of the day with a consensus on any aspect of the debate, but we all came away with a much better sense of what was at stake and some understanding of the range of potential solutions.

You will be able to follow the conversation yourselves when we put up the transcript in a few days. We will also try to highlight a few of the insights here over the next couple of weeks. In the meantime you can get a sense of the participants by looking at the photos taken at the event by our friend Mark Andres.

Our sessions event happened almost a month ago and it is starting to fade into my memory.

But there is at least one phrase that came out of Sessions that we are still using with regularlity at Union Square Ventures. And it came out of this really interesting exchange between Brad and Tim O'Reilly on the subject of "open data architectures":

MR. BURNHAM: I wanted to jump on that one-way aspect, because, for instance, one of the things that if you syndicate a piece of data, you know, do you want to have a string tied to that, at least be able to capture the meta data about how it's being used, and does that make it then two way, because if you -- is it the same to syndicate and just let it go and never have no feedback at all about where it's being used, how it's being used, or is the ultimate architecture going to have something to do with --
MR. O'REILLY: I'm making a guess here, but I'm making a guess that if you try, actually quote Blake, catch the joy as it flies, the wing or something or other destroys. Anyway, basically, you have to let -- I think you have to let whatever you do go. If you try to kind of say, "Oh, I have the instrument so I captured it," you're not going to get it.
MR. BURNHAM: That's a pretty significant departure from just saying, "Okay, I'm not going to let it go at all. You can't crawl me. I'm not going to syndicate my data. It's in a box," to "I'm going to syndicate it, but I'd like to be able to at least capture the value that is associated with how people use it," to saying "I'm just going to let it go and I have no idea what's going to happen."
MR. O'REILLY: I'm going to make a leap here, and I don't know if it's actually true, if I look at the web and what happened, it wasn't until the web got to a certain scale that it was possible to discover how to recapture the aggregation. So I think that something happens when you syndicate outwards. When you let things go, you create network effects. If you try to optimize prematurely so that you capture the value and you build the aggregate system too early, you limit the network growth. And that's why often the actual value is captured by a second party, right, because you cannot build it into the system at the outset. You have to figure out how to, you know, how it's actually implicit somewhere in the system. Somebody discovers later where that implicit way --

This back and forth between Brad and Tim has been rattling around in my brain ever since because Tim is postulating that open data means "let it go with no strings on it" and let others reaggregate it in the future and make the money on it.

That's clearly what happened with web 1.0 where everyone put their content up for the world to see and the search players, led by Google, crawled it and are monetizing it for their benefit.

When we move to syndicated data- via RSS and other technologies - do we have to accept the same deal? Or can we put something into our data (an ad call in a video for example) that allows it to be monetized wherever it goes.

I wrote a post several weeks ago on my personal weblog called The Future of Media where I suggested the following formula for media businesses in the age of syndication:

1 - Microchunk it - Reduce the content to its simplest form.
2 - Free it - Put it out there without walls around it or strings on it.
3 - Syndicate it - Let anyone take it and run with it.
4 - Monetize it - Put the monetization and tracking systems into the microchunk.

It's that last part, monetize it, that is in conflict with Tim's comments at Sessions:

So I think that something happens when you syndicate outwards. When you let things go, you create network effects. If you try to optimize prematurely so that you capture the value and you build the aggregate system too early, you limit the network growth. And that's why often the actual value is captured by a second party, right, because you cannot build it into the system at the outset.

And so we've been talking about strings on data/content in the office a lot lately. And we don't have the answer yet.

Regardless of whether Tim's "guess" is right or wrong, it's important to understand the argument and build your business models so they aren't based entirely on putting strings on content because its hard to catch the joy as it flies.

There was a lot of discussion about the relationship between web service providers and consumers. This relationship is obviously especially important in services where the consumers are also the producers of the service. One thread of this discussion was about control. I hate to lead with Jeff Jarvis again but he is so quotable.

“If you give people control, they'll use it, and if you don't, you'll lose it.”

Jeff’s point here is that consumers increasingly expect control of their web environment, and that most efforts to control or contain them will lower the value of the service to the consumer.

A couple of other threads are less often discussed, but perhaps more useful to someone building a consumer web service. The first of these, which I have not got a great quote for, was that it is only by giving up control that you can learn from your users. It is intuitively obvious that if you allow users only the choice between a red widget or a blue widget, the only thing you can learn is whether they prefer red or blue, but by allowing them greater control over the way they use your service you can learn much more.

The second thread had to do with abuse. Mike Frumin made the observation:

“if you think about the fact that [the business of] Mastercard or American Express…. is having your data, and … if you found ways to make your information available to you and selectively to other people, a lot of that opportunity [for abuse] goes away. I mean, you wouldn't get spam about refinancing your house if there was a way for you to tell everyone who was interested in offering you a mortgage that you wanted a mortgage, but there's not…. So in terms of … abuse, the more you are in control, the more you share, frankly, the less room for abuse there is”.

There was a lot of talk at Sessions about trust. The word appears 33 times in the transcript. Jeff Jarvis mentioned it 11 times himself. Here, Jeff makes the point that value is shifting from content to trust.

“And so the content isn't what's valuable. It's the trust and relationship that's valuable, and that to me, in a post scarcity -- what the internet does is it takes away scarcity in terms of both content and distribution, and it changes the value essentially to trust. So the friction is still there. The friction isn't "I own the content and you don't." The friction is, "You're going to keep good content? Okay, then let's talk." It's a different friction, a different value, but that's essentially what we're going towards…..So relationships and trust becomes a new structure.

This led to a discussion of how trust is created on the web, which in turn led to a discussion about eBay’s rating systems one of the largest and most successful systems created to engender trust on the web. If value is shifting to trust then a generalized reputation system could theoretically become the organizing principle behind a large and diverse set of web services. But, Mary Hodder squelched this thread with an important insight about reputations – they are not portable.

“you can pull data for reputation from Ebay.... but the thing about the difference between what Tim was talking about, maps, and Ebay's reputation information is that the mapping data makes sense when you pull it out of the system, whereas the reputation data, because Ebay is so skewed, it's such a bizarre social environment, everybody is under tremendous pressure to make this sort of, you know, A+++ best sale I've ever had, which, I mean, would only exist if the guy who was selling you the thing drove me the item from Kansas or something, otherwise it's just probably B+. [So]... the reputation information is perfect or it's terrible, and when you pull it out of that system ... it doesn't match up. It doesn't translate with other walled garden reputations”

It turns out that every web service defines trust differently, uses it differently and polices it differently, so it may be difficult if not impossible to create a reputation system that is both general and useful.

One of the insights from our Sessions event was from Yochai Benkler who said the following about peer production:

we do have very good research on how adding money undermines social motivations depending on contents

I am not sure how to intepret that last part - "depending on contents" - but Yochai's point that "adding money undermines social motivations" is something that ought to be watched carefully.

One place we can watch it carefully is Amazon's recently announced Mechanical Turk service, mturk.com.

Mechanical Turk is about peer producing HITs.

According to Amazon, a HIT is a Human Intelligent Task, ie something that humans do better than computers. Like identifying photos or filling out captchas.

If you need a human to do something, you send a HIT request (via the mturk API) to Amazon.

The HIT is displayed to the masses, who then complete them, and get paid for doing so.

This is an attempt to automate peer production and add a payment system on top of it.

So we'll see if this service "undermined" by the money involved.

In the meantime, I've suggested to a couple of our portfolio companies who have mundane operational taks that they'd love to outsource to check mechanical turk out. Let's see what kind of results they get.

Note: You can find the research Fred references on pages 321-328 of Yochai’s paper Sharing Nicely http://benkler.org/SharingNicely.html where he references the extensive work done by Bruno S. Frey among others.

Here are some more of the insights that we gained from our Sessions discussion...

Michael Parekh makes the point that all peers are not created equal…

“Another thing, the term peer to peer, one of the things that's implicit, unfortunately, is that everyone is participating in an equal way, and the reality is in terms of all these others people talk about, from Napster to Wikipedia, the number of people that are actually doing -- contributing content, it's typically a much lower percentage. … If you look at the number of people who read blogs versus write blogs, the number of people who put comments in and who actually have their own blog, I mean, typically you're talking about percentages that are a fraction of the whole system. And one of the things that I'm trying to figure out in a lot of these examples is which of the systems that have lower friction points. Like Del.icio.us, where you would assume that a lot more people, because it's easier to put tags in, are participating and contributing to the system as opposed to just taking things out, and one of the things we need to be mindful about in all the peer to peer conversation is how do you make these systems more efficient? How do you get more people to participate, whether it's trust factors, shyness factors, learning the tools.” .

Tim O’Reilly reminds us that the systems with the least friction are the ones that we participate in unconsciously...

“Everybody participates in Google, because they figured out how to leverage what people do implicitly”

We agree with Michael and Tim that the sponsor of any peer produced service should always be trying to make it easier to participate… to reduce friction, but we would also note that it is not necessarily a bad thing that a small number of producers can create value for a large number of consumers. Leverage in any system is key to the creation of value. It is a good thing that hundreds of thousands of active taggers at del.icio.us have created a utility That helps millions discover things on the web that they could never find with search.

The key insight here is that there are a number of ways to create leverage in a peer produced web service, and that the leverage will be different depending on the service. Services that create value for large numbers of users with a small number of active participants have a lot of natural leverage, but that is only on way to create leverage. Reducing friction to facilitate participation is another. Skype, however, appears to create leverage with a model that assumes that a large number of participants will share their idle bandwidth and CPU with the small number of consumers who are active at the moment.

Umair Haque said something (or actually quoted someone) at our Sessions event that has been rattling around my brain for the past week.

Umair said:

Herbert Simon said it in 1971, which is that "What does an abundance of information create?" A scarcity of attention basically, right?

So I went to Wikipedia and looked up Herbert Simon and found out that he was a cognitive psychologist who made significant contributions to the fields of artificial intelligence, economics, and philosophy.

A more "blown out" version of Umair's quote of Simon is:

"What information consumes is rather obvious: it consumes the attention of its recipients. Hence a wealth of information creates a poverty of attention, and a need to allocate that attention efficiently among the overabundance of information sources that might consume it." (Computers, Communications and the Public Interest, pages 40-41, Martin Greenberger, ed., The Johns Hopkins Press, 1971.)

With that concept rolling around in my mind, I had lunch yesterday with a bunch of smart people at the Shake Shack. We got talking about RSS feeds. Joshua Schachter asked Brad Feld how many feeds someone has before they reach the saturation point. We didn't exactly answer that question, but I am sure someone will do that work shortly and give us the answer.

It will be some meaningless number like 52.3 or something.

But I can tell you this. I am way past the point of saturation and I keep adding feeds. At this point, I have over 100 feeds subscribed to in various readers. And I have frankly stopped paying attention to most of them.

But this issue is not limited to feeds. I have been using a lot of new web services lately. It's part of my job to do that. New companies submit business plans for us to evaluate. The first thing we usually do is use their service. Most of what is getting built today requires a fair amount of user participation and thus a lot of attention. I have stranded so many web services that its not even possible to count them.

I joked recently that I am giving my family "continuous partial attention". They don't like that and demand more. And I give them more. Blogs and web services can't demand more attention very easily. So they get less.

Most of us have day jobs. Many of us have families. So we have a limited amount of attention left. And I suspect we are consuming most of it with what we've got on our plates today.

So where does the attention come for the next wave of blogs and web services? From the old ones, I guess. In my case, its not going to come out of my family's attention allocation or my firm's.

So attention is a zero sum game and if we are creating (at an exponential rate?) more uses of attention, then we are facing a looming attention crisis.

That's all I can offer at this point. I don't know when that crisis will hit and what its effects are going to be. Maybe something will come along that allocates attention more efficiently (delicious or digg?) and the crisis will be averted for now.

I suppose anything is possible, but I feel in my gut that we are facing a "poverty of attention" and something is going to give.

Social production systems seem to deliver a much higher portion of the economic value created to the consumers than traditional production systems do.

As Tim O’Reilly says,

"if you look at … Ebay or Google, even though they're very, very successful companies, they're actually pretty generous in creating value for people outside the company".

This may be because peer producers could get restless if they felt that too much of the value they created was being appropriated by others. It could also be happening simply because the economics of social production make it possible for people to be generous.

But, Tom Evslin pointed out that generousity can be used as a competitive weapon.

"if we think of Craigslist's strategy, it's a brilliant anti-competitive strategy and I don't mean a value judgment by that. How do you compete with them? If you're not in the areas that they charge for, then you can't make any money because you can't charge for those areas either. So you can say, "Okay, well, I'll go compete in San Francisco by giving the ads away," but you don't have the readers in San Francisco. So what they've done is they've said that I've got the network effects from all the places that I give the ads away that I use to make the ads more valuable in the places that I sell them. And so I don't think it's just negligence that they haven't got around to charging for the other places. It's deliberately focusing the value on where they're extracting the money. It's like the Microsoft strategy of always pricing under Lotus, because you just don't want to leave any room for a competitor. And so here's the brilliant I'll price it free in most places so you can't go around me and get in anywhere, and I'll expect value from a few sweet places which you can't beat me there because the value I'm giving away for all the free places"

As we get a chance to go back through the transcript of Sessions, we are finding a number of themes that are worth highlighting. We will try to get these thoughts up on the site over the next week or so. Our first observation is that we may need a finer grained definition of “peer production”

Since Yochai Benkler coined the term peer production in his 2003 paper Coase’s Penguin, it has been used to describe Wikipedia, Linux, peer to peer file sharing, Skype, Google’s page rank algorithm, Craigslist and many other services. As we understand this phenomenon better, it is clear that there are some important distinctions between these examples of peer production.

Tim O’Reilly’s thinking on this was formed by Dan Bricklin’s 2001 paper, the Cornucopia of the Commons:

“[Dan] pointed out [that you can either] get volunteers to [produce a good] or you can architect the system in such a way that it's produced as a byproduct of people's individual selfish activity. And I thought that was a really profound insight, because a lot of peer production examples that we see, like open source software or Wikipedia are ... people coming together [on a] network….to build something [they] consciously contribute to. Whereas Napster was a great example of a system that was built in such a way that people were just pursuing their own activities, but because of the way the system was designed, you created, as a side-effect, this… peer good”.

Yochai Benkler offered a new term, social production to encompass both forms of production.

“I've actually started to use the term social production to cover the two distinct phenomena. [For] individual action…. that gets coordinated [later] by some platform, [I use] "commons based production” (people created web sites and linked to other web sites for their own reasons, Google recognized an opportunity to exploit that effort to improve search with page rank)… “and [I use] peer production [for] the more self-conscious cooperative platforms” (Wikipedia).

Jeff Jarvis added two other examples of commons based production.

“I create my iTunes list, I'm consuming music, but I'm [also] creating a radio station. When I'm consuming peer to peer, I'm helping create the network”

But it is not clear that there are only two forms of social production. Some of the users of Craigslist, for example, are there for their own selfish purposes (to sell something) but their content is contributed to a community that is not exactly a commons. Likewise, users of Skype use the service to communicate less expensively, and do so knowing that they are contributing resources to all of the other Skype users, but Skype is also not a commons. Are these examples of yet another form of social production that we need to define?

These are not idle questions. If you plan to build a business that depends on the output of a peer network (or to invest in one) it is critical to understand how and why they are different.

It took a couple days, but we've uploaded the entire transcript of the first Union Square Sessions, an event focused on the topic of peer production and open data architectures.

The entire transcript (all 227 pages) is available as a Word file here.

Someone has also created a reformatted version of the transcript which is only 52 pages long.

The reformatted version is also available as a PDF file courtesy of the same person who created the reformatted version.

We also have created a page on our public wiki where people should feel free to pull quotes from the transcript to create a summary page. We have already seeded that page with a few quotes we particluarly like.

Please feel free to blog any and all of this and link back to us so we can track the conversation.

Today we hosted the first of what we hope will be many conversations about the impact of information technology on our society, our economy and on the business of venture capital.

The subject of this "session" was peer production. We were blessed by the presence of great group of energetic and experienced, entrepreneurs, investors and analysts who have all been thinking deeply about this stuff for a long time. Our goal, in bringing these folks together was to contribute to and encourage a conversation that is already in full flower in the blogosphere.

We won't be able to replicate the experiece of being in the room today, but we will do our best to share the thinking by posting a complete transcript. In the meantime, we have posted some pictures of the event.