The IFTF’s Marina Gorbis published a post today about the HuffPost v. Bloggers lawsuits discussing growing discontent over what she dubs the “Digital Manor” economy - the crux of the argument is the growing discontent over large companies reaping financial benefit from the freely (or very cheaply) contributed works of their users.

Though I spend an awful lot of time writing code, I’m an economist by training. One of the things I love about economics is that, while you can’t run a controlled experiment, any time you get a few people together long enough you’re basically running an experiment (I suspect the body of modern economic theory owes more to the methods of zoology than physics).

As the internet became popularized in the mid-90’s, its promise was of a vastly democratic medium, an attribute maintained to a large degree today. Where the “Manors” began to form is essentially in marketing - the bloggers who wrote for HuffPost didn’t do so because they Really Liked Arianna Huffington, they did so for a pittance and a lot of publicity. Add some buzzwords about Network Effects and Virtuous Cycles and you wind up with Facebook, Google, and HuffPost being multi-billion dollar companies.

So now we’ve learned something new about people and economics - you can control for production costs (in this case, the cost of producing a blog is close to zero), barriers to entry (again, practically zero), and geography (the internet is “everywhere”) and still wind up with industrial consolidation - potentially moreso than with those factors, since whereas in a pre-digital economy HuffPost might have been a large regional publishing house or magazine, now they’re one of the biggest political commentary sites in the world. Scale economies dominate in a world with no variable costs.

Before they became the powerhouse they are now, though, the bloggers happily worked for next to nothing for the HuffPost. I suspect many felt they were part of a community - and in a real sense, they were. The HuffPost model hasn’t changed - they’ve been content aggregators since they started allowing guest bloggers - but now they’re showing very real revenue, and that’s the seed of this discontent. The issue isn’t necessarily the model, it’s that people are seeing what they see as the full economic benefit of their contribution going primarily to the coordinating group, as opposed to the workers - that old Marxist chestnut.

But that’s the trick of network effects - they’re nonlinear. The value of an individual’s contribution to the network is variable on the size of the network, and in very short order the overall value that the network adds to a users’ content outstrips the value of that content itself. In the case of the HuffPost, the users were happy to contribute for next to nothing to participate in the community and get name recognition - the value they placed on their contribution was relatively low. The overall value of HuffPost, though, grew far faster than just the aggregate values of the blogger’s contributions.

Now we’ve got our second experiment, and we’ve repeated it across many of the popular sites on the internet: When you strip away communication and coordination costs, what’s the value of the individual versus the network, and to what degree do network effects scale? Like all good economic experiments, we can only draw rough analogs here, but in a matter of less than a decade, we’ve seen HuffPost go from a blog to a $300M digital manor, Facebook from a small social network to a $50Bn enterprise touching 10% of the planet, and the Apple App Store to 10Bn downloads.

Manor Lords lived from aggregated taxes on their lands, and Marina’s correct in drawing the parallels to these modern companies - the basic model is the same. I’m not versed in economic history, but I’d wager the early history of the feudal model would look awful similar in terms of tradeoffs.?

As an aside, It’s worth noting that I’ve had the pleasure of attending several events sponsored or hosted by the IFTF - Among their inspirations in their projections and projects, and I don’t think the organization would disagree with this, are the conversations and ideas presented at these events. The IFTF’s role, as I’ve seen it, is both as an original researcher and an aggregator of ideas, and in this fashion they operate a similar ‘digital manor’ model. That’s certainly not to criticize the organization (I rather enjoy the events and conversations), but to say I suspect the true issue is in the scale of aggregated benefits, not necessarily the model itself.