Info Tech for Social Change

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Good Luck Occupiers; Here’s How “Facebook for Protesters” Can Work

Elsewhere on this blog, I’ve written about how the next generation social networking site should be built to help high-risk activists.  If there are any Occupy Wall Street activists who are working on this project, this previous post may be of interest. They should also feel free to contact me or others at Stanford’s Program on Liberation Technology, who would be happy to assist in any way we can.

In the present post, however, I’d like to comment on Josh Constine’s TechCrunch post on how Occupy Wall Street’s recent effort to create a Global Square — a “Facebook for Protesters,” as first reported by Wired — won’t work. The post strikes me as overly dismissive with little or no substance. 

Josh highlights three points, which I address below in turn:

1. The Global Square Will Be An Echo Chamber

How? Why? Josh doesn’t tell us. He just predicts the Global Square will be so. Without even a layman’s theory of how and why this could happen, it’s hard to take Josh’s caution seriously.

If we believe Eli Pariser’s argument, however, Facebook and Google are already echo chambers by means of their filtering policies.

Moreover, research in political science and psychology also suggests that people tend to have a confirmation bias, i.e., they accept information that confirms their worldviews and discounts information that disconfirms them. It’s not like Facebook users are immune to this phenomenon, so it’s hard to see why the Global Square would be any worse.

Additionally, if building your own social network and having an echo chamber is such a bad thing, how come Barack Obama won the 2008 Democratic nomination and presidential election with such a system in place?

If anything, the cognitive and relational benefits that Occupy Wall Street and other protest movements could gain from a Global Square may well outweigh any so-called “echo chamber” costs.

It’s well known in social movement research that, in order to increase the likelihood of success, the movement’s activist core needs readily available communication networks to succeed. But activists also need to count on the support and commitment of others to the cause and a shared set of symbols and cultural understandings by all those who are involved. High-risk activists, in particular, suffer from paranoia about being monitored with reason; if structured correctly, Global Square could help these activists feel safer about their interactions in dangerous environments than existing corporate networks. It doesn’t take a rocket scientist to see how easy it would be for the Global Square brand to accomplish all these things simultaneously.

Josh also views the decision to use Global Square as a dichotomous choice: Either you use Global Square or a mainstream network. Yet this is a false choice. HootSuite allows you to send messages to and receive messages from multiple mainstream social networking sites. (Diaspora* also allows activists to push messages to mainstream networks but not pull them from these networks.) By using the API of existing mainstream social networking sites, Global Square can do the same.  

Then, why not just use the mainstream social networking sites, you may ask? The reason is that you may want to keep your activism private and simply use these mainstream networks to spread the word, which is their primary benefit anyway. In social network analysis terms, you’d use Global Square to cultivate strong ties with fellow activists and use the API of existing mainstream networks to capitalize on weak ties for the diffusion of information. That way, private information would remain secure on the Global Square, while public information would find its way to the dense social networks that form part of mainstream sites.

2. There’s Already Diaspora*

Josh also asked why Occupy Wall Street activists don’t use Diaspora* pods. A better question, in my view, is why not use RiseUp, which was designed with this very purpose in mind: political activism.

As for Diaspora*, one reason is that its code continues to face scrutiny over security and privacy. In this regard, Diaspora*’s code is probably fine for consumer use. But to protect high-risk activists, some security experts would recommend rewriting the code from scratch.

Then, there are questions about whether such a solution is better built on Ruby on Rails (the Diaspora* solution) or some other programming language, as is the case with some of Diaspora*’s competitors (such as Friendika and StatusNet, both of which are farther along than Diaspora*).

Of course, the Diaspora* code is open source, so Occupy Wall Street hackers who were so inclined could always improve the security of the master code or fork it.

My main point is that there are many questions to ask; just because some alternative exists doesn’t mean you should use it. According to Josh’s logic, one could have easily asked Mark Zuckerberg back in 2004 why start a new social networking site when there’s already MySpace?  

3. Still Subject to Subpoena

Josh is right on this point. But it’s not that hard for Occupy Wall Street activists to set up the site out of a privacy/security-friendly location, such as Iceland. Server costs are pretty low these days, so you could set up a site anywhere in the world where there was a decent Internet infrastructure and the right kind of laws you want to protect your users. A privacy-friendly location such as Iceland would frustrate the efforts of law enforcement agencies seeking to obtain information about Occupy Wall Street accounts from mainstream social networking sites.

4. Final Thoughts

Finally, Josh notes that Occupy Wall Street activists may have difficulties recruiting Global Square participants. Again, he provides no explanation as to why this would be the case.

But if the point is to create a global protest network, which by definition would be a niche network, why should Occupy Wall Street activists worry about recruiting participants?  

Even then, it seems a bit silly to argue that the largest US movement we’ve witnessed in the 21st century would have difficulties recruiting adherents to its new network. In fact, an extensive sociological literature suggests that social movements typically are the basis for many of the new industries and markets that drove economic progress in the 20th century. 

About the Author: Yosem Eduardo Companys is a PhD student in engineering at Stanford University and a coordinator for the Program on Liberation Technology at Stanford University.  Yosem also worked as adviser, mentor, and consiglieri to the Diaspora* founders and as President & CEO of Diaspora*. He may be reached at companys[at]stanford[dot]edu.

How the Next Generation Diaspora* Should Be Built to Help High-Risk Activists

An online privacy activist recently asked me: Suppose you were to build the next-generation Diaspora* — i.e., a secure, private, and decentralized social network — how would you go about it? 

The question is an important one, especially considering that many projects preceded Diaspora* but failed to gain traction, along with the skepticism with which Diaspora* has been met in hacker circles. 

Hacker News has been particularly vicious, with attacks on Diaspora*’s security and privacy code implementation from the get go and with criticism of the Diaspora*’s team ability (or lack thereof) to implement its vision

Criticism has also come from the mainstream media, where reporters have wondered “whatever happened to Diaspora*" and "what’s taking so long,” as though building a secure, private, and decentralized social network were as easy as building a centralized alternative like Facebook.  In this context, credit should be given to the Diaspora* founders for trying to advance the vision by learning from the mistakes past projects have made in this space.

II. What is the goal?

One of the first steps to undertake when answering the question posed by my online privacy activist friend is to determine what the goal of such a next-generation Diaspora* would be.  For example, if the goal is to gain traction among mainstream users, as Diso creator Steve Ivy has suggested, then the focus would not be so much on the merits of the technology at ensuring security and privacy, as it would be on its ability to use decentralization to overcome Facebook’s considerable network effects.  As one of Liberationtech's coordinators, I'm much more interested in the former than the latter, for there are many people in the world who care about security, privacy, and decentralization for its own sake, and there is a very compelling reason for giving these people such a solution, i.e., their very lives depend on it.  Before we delve into that topic, however, I'd like to address the question of how one would overcome Facebook's network effects. 

III. How does one overcome Facebook’s network effects?

As you may recall from economics, a network effect is the effect one user of a good or service has on the value of that product to other people.  A network with a lot of people has more value than one that has fewer people.  For example, if you are looking for a job, or searching for people who share your interests, you are more likely to find them in a larger network than in a smaller one.  Since people will choose to join the larger network at the expense of the smaller one, one will ultimately end up with one giant network, as barring some kind of niche offering in smaller networks, one is unlikely to find any value in the smaller networks as the number of users on those networks dwindles. 

This process also illustrates how difficult it is to persuade one person to switch from one network to another.  A person benefits from her participation in a social network because she has ties on that network.  That person’s friends benefit from their participation in that network because of their ties.  As such, to persuade someone to switch from one network to another, you must not only persuade that person to make the switch but also that person’s ties, thereby creating a chicken-and-egg problem: That person will switch only if her friends switch, and the friends will switch only if that person switches.  Thus, overcoming network effects is a group problem, not an individual one: You must create a social movement of sorts to encourage people to switch from one social network to another, or at the very least, create an information cascade or bandwagon effect that encourages people to switch.

For those who may be skeptical about the strength of Facebook’s network effects, consider the following:  Polls regularly find that approximately 70% of users are concerned about their Facebook privacy and security, yet according to a proprietary Forrester study only 4% quit Facebook for this reason.  In fact, nearly half of those who quit Facebook do so because they were bored with Facebook or found a better niche site elsewhere.  These numbers suggest the strength of Facebook’s social network effect.  Given the seriousness of people’s security and privacy concerns, one would expect a much larger number of people to quit.  Yet they don’t do so because quitting would mean losing touch with your friends and other contacts on the Facebook network.

You may immediately notice, however, that this economics story is one-sided: The assumption is that advantages in network size will create an inexorable trend towards consolidation, yet the disadvantages in network size that could create an equally strong or more powerful effect away from consolidation is left unexplored.  We know, however, that such effects exist.  Otherwise, how would MySpace have replaced Friendster in the first place?  Or how would Facebook have replaced MySpace?

The question that arises then is the following: How does one overcome Facebook’s network effect?  There is less research on overcoming network effects than on their inevitability, but some possibilities immediately come to mind. 

A. Deep Pockets

One obvious possibility is that a competitor may come along with pockets sufficiently deep enough to challenge the entrenched network.  Such a competitor could spend considerable resources on marketing and advertising to attract users to switch from the dominant network to the competing one.  Yet, as Google+’s experience has shown, this process may be neither immediate nor successful.  The verdict is still out, but Google+’s recent experience suggests that deep pockets may not be enough to counter a leading network’s network effect.

B. People Discovery

A second promising alternative is people discovery, i.e., a social network that enables you to meet people you don’t know.  Despite an extensive academic literature that suggests that people are distrustful at meeting strangers in real life, proprietary Mintel data suggests the opposite:  Nearly 50% of those surveyed say they would like to meet strangers online, and many admit to “friending” strangers on a regular basis, including women, who are generally assumed to be much more distrustful of strangers.  Web inventor Tim Berners-Lee sees people discovery, or stretching one’s ties to meeting people who are different from us, as the next social networking frontier, and companies have heeded the call, as Altly’s transformation from a private social network to a people-discovery engine named BetaBeat has shown. 

It’s unclear, however, whether people discovery will be sufficient to overcome Facebook’s network effects, especially since Facebook has sufficient resources to copy any social network innovation in this area to its advantage.  Moreover, by virtue of Facebook’s larger pool of users, the company should be in an ideal position to introduce people to others they do not know. 

As Twitter has shown, however, people discovery has the distinct advantage of circumventing Facebook’s network effect.  If a new social network focuses on people who want to meet those they don’t know, then those people are also less likely to care whether their existing ties are on that new network, since by definition they don’t care as much about their existing ties as they do about establishing new ones.  Twitter has capitalized on this insight, and Facebook has recognized it, as the latter’s ongoing transformation from a private, close-tie, college-based campus network to a public, weak tie, international network has shown.  In economics, some have argued that countries pursue protectionism when they are poor and free trade when they are rich.  Similarly, Facebook was for privacy as a small network and is now for openness as a large one. 

C. Technical Superiority

A third possibility is to find a technical feature (or set of features) that are more valuable than those offered by the dominant network.  In other words, one would focus on technical advantages that overcome the social advantages created through network effects.  An example of this can be found in how Google overcame Yahoo at search.  Google had a search algorithm that generated better results, and over time, people gravitated to Google over Yahoo. 

One example that comes to mind in the network space would be the application of natural language processing to enable users to get more benefits out of their social network ties.  Facebook does this through filtering, albeit not as transparently as many would like, leading thinkers like Eli Pariser to complain about the dangers of “filter bubbles.”  In fact, there is a battle brewing between Facebook and Google+ in this area, as natural language processing is seen as the potential driver for a new wave of social network interactions.  Nevertheless, just as Google did to Yahoo, it is entirely conceivable that a new network could come along with a proprietary algorithm in natural language processing that could give it a similar technical advantage over Facebook or Google+ in the social networking marketplace. 

Moreover, there are many unexplored innovations in this space:  While computational researchers have made advancements in the study of syntax and semantics, pragmatics remains a relatively black box, despite media hype to the contrary.  In fact, the most sophisticated research in this area comes not from computer science but from social network analysis in the behavioral sciences.  Surprisingly, however, programmers have yet to mine this extensive literature for behavioral insights with which to construct better social networking sites. 

D. Total Institutions

One final possibility comes from the realm of total institutions.  A total institution can be defined as a place of work and residence where a great number of similarly situated people, cut off from the wider community for a considerable time, together lead an enclosed, formally administered round of life.  Examples of total institutions include monasteries, the army, prisons, and psychiatric institutions, among many others.  Total institutions are dense locations of activity, where ideas can spread quickly, and thus they are ideal locations for fostering the growth of social networking sites.

You’re probably thinking: “That’s crazy. Are you suggesting that we build a social network out of an insane asylum?”  But before you discount the idea, remember that this is exactly one of the reasons why Facebook became a dominant player in social networking.  Facebook, in fact, capitalized on the most influential total institution of Western society, i.e., the college campus.  On college campuses, students work and live together, and they share similar values and engage in similar activities, cut off from the wider community for at least four years.  Facebook’s strategy, as I have explained elsewhere, focused on controlled growth and saturation from one college to the next.  To the extent that female students had privacy fears about joining Facebook, these concerns were assuaged by the fact that Facebook only allowed people who had university email addresses to join, such that the number of potential whack jobs were limited to those that you knew on your college campus, not those that you did not.  This may also help explain why Facebook, unlike other social networking and dating sites, is predominantly female, and why men — as even the Facebook founders themselves acknowledge — were so attracted to joining Facebook in the first place.

This story raises the question:  Can a new social networking site challenge Facebook by taking over college campuses again?  The answer to that is unclear.  Facebook remains strong among college campuses, though the bulk of its growth is now coming from older demographics, such that the proportion of college students in the network has fallen.  You could say that Facebook’s strategy has now shifted from the campus as a total institution to the elderly home as a total institution.  At the same time, college campus-specific social networks have been launched in recent years but have made scarcely a dent on Facebook’s college-age numbers. 

As such, a better question to ask is the following:  Are there other total institutions out there that social networking entrepreneurs can tap into to challenge Facebook’s dominance?  I don’t really have a good answer to this question, so it remains rhetorical.  But to the extent that Diaspora* has gotten more traction than other social networking sites, it is because it has tapped into the free culture movement, hackerspaces and maker spaces, and so on.  Similarly, though Silicon Valley has an aversion to politics, a social networking site that is built out of movements such as Anonymous, WikiLeaks, or the Occupy movement may be able to attain significant traction, if timed properly.  In short, while the number of pure total institutions in our society is limited, it is clear from Diaspora*’s experience that a group-based social networking recruitment approach may work better for social networking entrepreneurs than the traditional individual-based approach they have followed to date.

IV. Getting back to the task at hand

Overcoming Facebook’s network effect, however, only matter to the extent that you want to build traction to supplant Facebook.  But suppose you’re not interested in traction.  Suppose that what you care about is to create a secure, private, and decentralized Facebook alternative that protects high-risk activists fighting for freedom, democracy, and human rights in oppressive, dangerous environments.  Then, many of the mainstream users’ considerations drop out of the equation, and the problem becomes much more focused and manageable — albeit still difficult.  At the same time, however, mainstream users who care about privacy and security can still use the solution, if they are so inclined. 

As a Stanford liberationtech coordinator, you can see why I would be so interested in such a solution.  The goal of our program is to conduct research and design of information and communication technologies to foster freedom, democracy, human rights, development, and effective governance.  In other words, we want to figure out ways in which technology can support the dangerous work that activists conduct every day to create a better world.  A secure, private, and decentralized communication platform would help support activist efforts to this end.  And such a platform only needs traction among activists, not all mainstream users, to succeed.  In other words, it needs to solve the activist problem, not the mainstream user’s problem, to be most effective.

A. Organizing versus broadcasting

But, you may ask, aren’t movements like the Occupy movement, the Arab Spring, or the Indignados more interested in spreading the word?  As such, how can you give up on traction in pursuit of this goal?  To answer these questions, it is important to differentiate between what activists do before a movement and what they do during a movement.  As my doctoral dissertation shows, before a movement, an activist needs a private and secure platform to organize with a small group of people.  These are the people who lay the groundwork for what the movement is to become.  Authoritarian regimes understand this, which is why they seek to stamp out the early-movers, and why they immediately crack down on any signs of free assembly.  When groups of people are able to assemble in such environments, that’s when the regime’s days are numbered. 

If people are able to assemble, then the activist’s task changes from organizing to spreading the word.  It is at this point that traction, or the broadcast capabilities of a social networking site, become important.  But as we have seen, large mainstream social networking sites like Facebook and Twitter are more effective at doing this task.  Once activists get to the broadcasting stage, what becomes more important to them is to protect their identities as they spread the movement’s message.  But the organizing task is never completed.  The organizing task continues.  And it is this organizing task that I care about most.  This critical organizing task is done by a small group of people that need to be able to maintain strong ties to one another in a secure and private fashion if they are to succeed.

This explanation starts to draw the raw schematic of what a next generation Diaspora*-like private, secure, and distributed social network should look like, if it is to achieve Liberationtech ends.  The network should facilitate the communication of a small group of people seeking to organize social change and subsequently enable them to broadcast that message through larger mainstream social networking sites to generate the strength-in-numbers that can help movements grow and ultimately bring about political change.  In other words, it must be a secure and private social networking site with HootSuite-like capabilities that can protect the anonymity of the person broadcasting messages to the larger and more mainstream social networking sites.

B. Decentralization

So far, my emphasis has been on security and privacy alone.  But decentralization is inextricably tied to security and privacy and equally important.  What do we mean by decentralization?  Decentralization means that instead of having to post a message to a central server like Facebook, and then wait for that server to transfer that message (or not, in the case of censorship) to your friend, you send that message to your friend directly.  To achieve this, communication must be machine-to-machine, where the sender controls the first machine and the recipient controls the second, and the message that is transmitted is encrypted to ensure that only the sender and the recipient can read it.  In other words, the sender and recipient must have an easy and fast means to install and manage the software on their machines — whether these machines are servers, computers, or phones, as in the FreedomBox vision.  Furthermore, the sender and the recipient must have the ability to stop using their machines and seamlessly use new ones, should the original machines be compromised for whatever reason by an authoritarian regime.  The software would need to have an easy “self-destruct mechanism” such that the data can be destroyed immediately in an emergency.  At the same time, the “right to forget" would have to be embedded from the get go, such that the data would self destruct after a certain period of time to prevent a trail of communication that would make it easy for an authoritarian regime to track down the activists.  As such, the next generation of secure, private, and decentralized social networking site would create a one-click turnkey solution for activists that could easily be discarded if compromised and whose data could be destroyed automatically as the utility of the data diminishes while organizing unfolds.

C. Mobility

There is one final consideration.  Activists are constantly on the move, such that the social networking site will need to be mobile from the get go and have the capability of synchronizing data on multiple machines simultaneously.  Thus, if the activist needs to coordinate with others elsewhere, she must have the capability to access her data from the alternate location.  Similarly, there will be times when the activist will attend a street protest, and the relevant social networking data will need to be accessible on her phone.  Other times, the activist will need to go to a “safe house" and access her data from there. 

Moreover, connectivity will vary greatly.  At times the activist may have access to broadband Internet, but other times, she may need to connect via a 56K modem, a mobile connection, a mesh network, or perhaps even a satellite link.  The social networking site will need to be accessible regardless of the connectivity, which means significant work on data compression will be required to ensure that the software’s performance remains nimble under such disparate conditions.  This creates difficult challenges for the developers of such an application that developers of mainstream applications would never have to encounter. 

D.  Cooperative

So how does one draw the necessary resources required to overcome the aforementioned challenges of security, privacy, decentralization, and mobility to build such a social networking site?  Western society gives us two main legal-institutional vehicles for tackling the problem:  i) a for-profit firm a la limited liability company or C corporation; or ii) a non-profit firm a la private foundation or 501(c) organization.  (Another possibility is a hybrid for-profit/non-profit model a la WordPress or Mozilla, but let’s set that aside for now.)  In either case, a group of individuals — usually, the founders — become owners of the organization and raise the necessary resources needed to execute the organization’s mission, implement its strategies, and reach its goals.  

A for-profit organization like a C-Corp is ideally suited for the task because the founders can sell an ownership stake in the firm in order to raise the requisite resources.  But as the saying goes, there’s no such thing as a free lunch.  The resources come at a cost in terms of the organization having to perform in a reliable and accountable fashion relative to the expectations of its shareholders.  In the pursuit of profit, principle can easily be abandoned since, at the end of the day, all the shareholders care about is obtaining superior returns relative to what they could receive by investing elsewhere.  If the firm is able to secure superior returns, however, other prospective investors will be attracted to the investment opportunity, thereby providing the organization with the resources to grow over time.  In the end, shareholders matter more than customers — and for our purposes, the activists risking their lives for freedom, democracy, and human rights — for without the shareholders there is no business.     

On the surface, a non-profit organization looks better on principle grounds because the organization is not acting on the basis of profit alone.  Nevertheless, a non-profit organization is still owned by a small group of individuals, and as in the case of a for-profit firm, controlled by its board of directors, which means all decisions with respect to the organization and its customers — or in this case, activists — are made by the board.  This means that, in both the for-profit and non-profit cases, the product at the end of the day is determined by decisions resulting from the good will and discretion of a small group of individuals.  You’ll probably be surprised to hear that it’s often also the case for open-source projects like Diaspora*.  As Karl Fogel’s book “Producing Open Source Software: How to Run a Successful Free Software Project" teaches, most open-source projects are run by "benevolent dictators" in whom "final decision-making authority rests" and "who, by virtue of personality and experience, is expected to use it wisely." Even in the case where the project is Affero General Public License (or AGPL), the benevolent dictator can make decisions that can prevent the right technologies from being implemented over the course of the project.  The project may even create disincentives for open-source involvement by creating restrictive intellectual property (IP) assignment contracts that require developers to give up all rights to the code they produce.  And worse, a non-profit organization cannot sell shares, which means that there are no financial incentives other than the generosity of donors to raise the resources required to develop it.

So to summarize, on the one hand, there’s the for-profit firm that can sell shares to raise the necessary revenues to develop a product but in many cases may sell out principle in pursuit of profit, and on the other hand, there’s the non-profit firm that has to depend on donations but, as in its for-profit counterpart, still makes the activists beholden to the actions of a few individuals.  Given this predicament, what are we to do to ensure that the organization is accountable to the activists it serves and can mobilize developers to contribute in an open-source manner to the project?  One possibility is the cooperative, a business organization owned and controlled democratically by its members for mutual benefit.  The cooperative can range from for-profit to non-profit, depending on the project’s ultimate goals.  Thus, while the cooperative is not a magical solution to all of the aforementioned problems, it can help ameliorate many of them, when correctly designed and executed.

The advantage of the cooperative for purposes of the task at hand is that it can ensure that the organization operates in a democratic and accountable fashion relative to the developers who contribute the code to solve the aforementioned technical challenges and relative to the activists who risk their lives using the technology to do their jobs on the field.  The developers can transfer their IP rights to the cooperative, knowing that such rights will not be exploited for financial gain without them.  Similarly, the activists can know that the organization has their best interest at heart and thus can trust that the solution will be built and subsequently developed with their needs and concerns in mind.  

V. Conclusion

So in response to my online privacy activist friend’s question about how I would build the next-generation Diaspora*, my answer is this:  I would create it first and foremost as a secure, private, distributed, and mobile platform with HootSuite-like (but anonymous) broadcast capabilities and fast and reliable performance under rapidly changing conditions.  But I would make sure to work within a cooperative legal-institutional framework to find the correct design that makes the organization accountable both to its developers and customers, i.e., the activists that the social networking site is meant to serve. 

About the Author:  Yosem Eduardo Companys is a PhD student in engineering at Stanford University and a coordinator for the Program on Liberation Technology at Stanford University.  Yosem also worked as adviser, mentor, and consiglieri to the Diaspora* founders and as President & CEO of Diaspora*. He may be reached at companys[at]stanford[dot]edu.

A Proposal for a New Internet-Driven, Free-Enterprise System…

          Organizations started as a form of spontaneous order.  One had to undertake a task that was too large for one’s self, so one would associate with others who could help achieve that task.  Alternatively, one would perform a task out of enjoyment or necessity that would somehow grow and evolve to the point that it required organization to perform effectively.  The former became larger as the scale and scope of economic and political activity grew.  States were required to create large infrastructural projects or to build armies.  Voluntary associations or organizations were insufficient for the task; mercenaries, for example, could fight wars but lacked the continuity and consistency provided by paid organized soldiers.  Similarly, infrastructure projects required people to perform tasks for indefinite periods of time; such a task was better accomplished through organization.  The latter became the libertarian notion of free enterprise as the driver of the capitalist system.  In this view, individuals — left to their own devices in a competitive marketplace — will provide the services needed by a society and will associate with one another when necessary to achieve this task. 

          What libertarians ignore is that such a system builds inequalities because in the absence of government control some organizations — or the individual interests they represent — grow large and impose their will on others.  Moreover, without a law (whether by public consent or enforced from above) that recognizes free enterprise as a right (or at a minimum, a license), free enterprise cannot even emerge.  The fear is as old as the Federalist Papers, where Madison railed against the dangers of association and majority influence on the nascent American nation.  But the fear is even older than that, harkening back to Adam Smith’s recommendation that governments should ban the printing of industry lists for fear of collusion.  And the fear has been a continuous current in American society through the concerns over the late 1800’s robber barons to the 1920’s concerns of Schumpeter about the ultimate concentration of power that unbridled economic activity produces (and Weber’s and Michels’ similar fear about the emergence of oligarchy from democratic origins), which in his view was the same whether the impulse was socialist or capitalist.  More recently, we see the fear in the behavior of civil libertarians who seek to protect citizens from unbridled corporate power.  The fears were shown to be real in the empire where corporations such as those in South Africa, India and elsewhere were able to build compounds that were labor prisons for all effects and purposes and, in many instances, to build armies that oppressed entire colonial societies.

          There is some truth to these fears.  Foucault spoke about how the state evolved organizations as it needed to tackle more and more functions over time, including the maintenance of a productive society to achieve the state’s needs.  To this end, as organizational scholars have noted, the state established organizational (and later, corporate) charters to engage in war, first and foremost, and to manage economic activities and the requisite infrastructure needed for such activities to thrive.  For without infrastructure, there is no transportation, and for that matter, there would be no communication or power provision for there would be no common standards for providing such services over large populations.  As Olson’s thesis on collective action suggests, individuals living in a libertarian-democratic world would encounter extraordinary difficulties to organize collective action for the provision of such public goods, especially across large numbers of people.  Without systems for transportation, power or communication to occur, it is hard to envision how the benefits of the capitalist system could be achieved. 

          Once the notion of charters was codified into an incorporation code in Victorian Britain, all individuals in principle were given the opportunity to organize.  I say “in principle” for in practice there were a set of moral and legal codes that precluded certain persons — particularly those varied from the norm in terms of their status characteristics — from owning property or establishing enterprise.  Of course, informal organizations have always existed, most notably, sects and secret societies.  What changed was that the state was now recognizing the right — or at a minimum, providing a license — for people to pursue free enterprise.  Libertarians rail against the welfare state that later developed, which was to “oppress” free enterprise through taxation, regulation and elsewhere.

          What exists in our society today is a debate between those who want to restore the freedom of enterprise whether to a degree or to its pure utopian sense and those who believe that the free enterprise creates inequalities that require the state to intervene to correct them.  What has been lost in this debate is the following:  in the case that the state is overly oppressive, how to help individuals in spite of these measures overcome their effects to achieve the full potential of the free enterprise system; and in the other, how to enable the state to correct these inequalities without requiring active state intervention, i.e., by enabling the people themselves to police and intervene to correct these inequalities.  (Some argue that the role lies in civil society, perhaps only implicitly for developed countries but certainly in an explicit manner for developing countries.)  The former requires some form of organization as does the latter.  The question is what form of organization is required.  

          Assuming for a moment, as transaction cost economists do, that state intervention increases the costs of starting business by means of complex filing and taxation requirements, then even in a world where all individuals had equal legal access to incorporation some would incorporate and others would not.  In such a world, not all individuals would have the requisite knowledge of how to incorporate, thereby granting those who by means of superior inheritance (e.g., father teaching a son how to do it), experience, or education an advantage. Such specialization of knowledge creates barriers for the generalist individual, or even for the individual who lacks such specialized skills, and thus serves to increase the transaction costs associated with starting a business.  

          Incorporation, in practice, also works to increase legitimacy, which means simultaneously that those who do not incorporate are de-legitimated.  Examples abound in our society of the pervasive influence of such de-legitimation.  An incorporated organization receives preferential treatment from the state and the media, which view such entities as the only legitimate ones for conducting business.  Informal grassroots organizations experience the pressure to incorporate in the form of a state that will prosecute for regulatory reasons, particularly taxes, as such organizations refusing to incorporate would sap revenues from the state, and in the form of a media apparatus that will provide limited coverage unless the voluntary association of people provides a legitimate corporate name that reflects their actions.  This situation is the same whether we speak of a limited liability partnership such as an LLC, a formally corporate entity such as an INC, or a non profit entity such as a 501c(3) or (4).  While the right to associate is guaranteed by the constitution in theory, the right to form associations — and furthermore, organizations — is not.  One is a right, the other a license.  The former should not be subject to government regulation, the latter by definition is.  Unfortunately, the legitimation the state provides to the corporate status through licensing results in the de-legitimation of free association and organizing as a right.

          One way for libertarians and liberals to find common ground would be for the libertarian to acknowledge that the elimination of state regulations on business is utopian, even when reducing regulations may remain a worthwhile pursuit, and for the liberal to recognize that other forms of non-state intervention could be used to correct inequality, perhaps even more effectively.  Under such circumstances, a consensus could be reached that reducing the costs of business by means of civil society solutions could be a worthwhile goal as well.  Again, it is important to remind ourselves why free enterprise as a right is important:  First, organizational scholars tell us that society as we know it would be impossible in the absence of organization for there would be no economic or political security.  Second, in a neoclassical economics sense, a limited number of organizations translates into limited competition, which leads us into the distopian world of monopoly and oligarchy that so scared Smith, Madison, Schumpeter, Weber, and Michels, among others.  And third, as if the first two reasons were not enough, our constitution warrants such a system, so a state of affairs where free enterprise can only be attained in a legitimate fashion through incorporation should not be tolerable.

          At this point, one may be tempted to suggest that this is a libertarian line of reasoning (the varying political views of the aforementioned cadre of scholars notwithstanding), so it is important to remind ourselves the important function government serves:  helping to direct public attention to those areas where economic or political security can be enhanced through collective action.   It has proven difficult to build large infrastructural systems in the absence of state intervention undoubtedly because state power has often preceded these projects historically but also — as mentioned earlier — because collective action is so difficult in the absence of third-party intervention.  There is no reason to assume, however, that the state is the only third party that can solve the collective action problem.  There have been plenty of instances in our society when in spite of all concerns to the contrary industry has organized for good to create the appropriate standards needed for large-scale collective action.  In such circumstances though, the question is always whose interests are being represented and to what effect.  That is, government can rightly make a claim to the public interest when it is democratically elected and subsequently pursues large-scale collective action in the name of those who elected it.  Industry, on the other hand, cannot make such a claim.  The local provision of electricity in the early 20th century United States worked because neighbors banded together to provide this public good.  Some would say anarchosyndicalist cooperatives in civil war Catalunya and Aragon worked to some extent because of this public consent.  The question then is how to enable such public consent to work at a larger scale without the liberal requisite of government intervention. While difficulties exist in pinpointing the exact cause of the transformation from a primitive to a modern (or some would say, post-modern) society, one can undoubtedly acknowledge that improvements in communication played a role.

          Along with effective transportation, improvements in communication enable larger groups of people to become connected whether in a virtual or real sense (which psychologically speaking, can be the same thing), thereby growing the size of markets and providing more opportunities for free enterprise to make a difference in people’s lives.  As our experience with capitalism over the last couple hundred years suggests, the larger the free enterprise system, the more goods and services exist.  The larger the possibilities for free association and the more goods and services that exist, the greater the likelihood for people to be Simmelian individuals, i.e., differentiated and unique.  To further this point, consider a person in primitive society.  His or her role in society was dictated by place of birth and position of birth.  For example, if you were born in feudal Russia, chances were you were a peasant.  But one could say with all certainty that you were a peasant if your father had been a peasant.  In a democratic social capitalist system, more opportunities for differentiation exist based on free association since you no longer need to associate only by family and class and based on production-consumption patterns since you can now define your individuality based on the larger number of goods and services available, thereby providing a wider array of choices and activities available at your convenience.

          (As an aside, these choices affect you not only as a social individual but as a biological one too because, according to extant research, your particular consumption and activity patterns influence the activation of genes from an overall predetermined gene pool.)

          One of the most fundamental changes in communication in our society has come from the implementation of mathematics via computers to build new systems such as the Internet.  By using logical rules, the routine and ordinary activities of human beings can be codified into programs (hence, the term computer programming) and beckoned to perform complex tasks at the spur of the moment.  It has become a cliche to state that the Internet has changed society in fundamental social, economic and political ways.  But it is true that the Internet in its current embodiment has reduced the transaction costs of business by creating a global communication system where programs can be  collaboratively built and shared, often at the expense of and sometimes leading to the eradication of existing systems of capital and labor.  Yet in the rush to use programming to improve the effectiveness of existing businesses, few have actually explored how programming could reduce the transaction costs of free association.  And it is true that programs have been used to build systems to help individuals connect with others and enrich their social settings, but few have actually explored how programming can be used to enable people to connect with each other for new productive ends outside of specific specialized settings.

          More specifically, programs could be used to build a system that enable individuals to organize by conducting many of the functions of legally incorporated enterprises without having to engage in actual incorporation.  While the financial costs of incorporation would not be eliminated, the system would provide a legitimate way for people to associate, while circumventing the state intervention associated with incorporation.  Systems have been developed for organizations to incorporate, pay taxes, and abide to other government regulations.  But there is currently no system in place for enabling people to connect with others, start an organization (and an industry by extension), manage budgets and track finances, and conduct marketing and advertising, product supply, and the other functions of business, all in one place.  In so doing, the system could overcome the inequalities imposed by specialized knowledge.  The system would have the potential of enabling a single person to become an entire organization, or even for a large group of people to work for the organization without requiring any one of them to be subjected to a strict hierarchy or impervious boundaries.  People could trade places in the everyday management of the organization in the same way that anarcho-syndicalists once attempted, or they could simply discontinue their involvement in the organization should another organized enterprise housed in the system catch their fancy.  The growth of the system could also provide for a ready-made network for collective action, or lobbying, to reduce the costs imposed by state intervention on free enterprise.  In fact, considering that many of our laws have resulted from everyday practices, it is possible that the evolution of such a system with the force of collective action could lead to the changing of laws of incorporation, thereby restoring the right of free association to its rightful place of legitimacy in society, while reducing the need to engage in the financial cost of incorporation. (I admit, however, that there is a complex issue at work here, as it is unclear whether Internet usage today is a right or a license, even though the Internet is a product of government policy.)

          If we look around us, we can already see the desire of people to participate in such a system.  Emergent mobilization is all around us.  People routinely organize spontaneous campaigns in favor or against the issues they care about.  However, it is my experience from conducting research on the subject that people find themselves reinventing the wheel every time.  Once the effort is off the ground, the activists have to figure out how to market and advertise it.  If they begin to receive any form of remuneration for their activities, they need to figure out how to manage their budget and conduct finances.  If they need to begin manufacturing products, they need to figure out the best source of raw materials, and the best place (and way) to sell these products.  If they want to expand their operations, they then need to figure out potential customers to target.  In the process, many activists become frustrated by the scale of the project, and put simply, quit.  These are people who are perfectly capable of managing such projects to fruition but who may lack the experience, connections, and social support to see it through.  In other words, their tolerance to risk is low and the transaction costs are so great that these activists refuse to commit to such an uncertain project.  Thus, specialized knowledge rears its ugly head: In the absence of specialized knowledge, people are less likely to undertake the required risk.  There are many individuals who have a low risk tolerance who still pursue uncertain ventures because their specialized knowledge creates the illusion of low risk.  But people may choose to give up even when their knowledge is quite specialized.  For example, an artist may be remiss to start up a new venture even when her knowledge of art is quite specialized because she may lack the specialized knowledge associated with starting up that venture and not know where to get it.  To put it simply, people are more likely to undertake risk in the presence of a system that reduces the transaction costs related to acquiring the specialized knowledge needed to create a successful organization.  In the context of such a system, people could easily find experienced people willing to help them, either free or for a fee.  They could easily connect with potential stakeholders such as possible employees or customers.  They could also receive the social support needed to undertake the requisite risk.  In other words, they could find the human and material resources needed to see the venture through.  It is often stated by economists who study entrepreneurship that information is more important to success than money; the proposed system implements this vision. Of course, such a system would not be free, except in its basic functionality.  But as we have learned from the growth of capitalism, quite diversified goods and services at competitive prices are obtained as systems of free enterprise grow.

          So while a person may not be able to afford the best specialized knowledge for building their enterprise at first, they will be able to obtain more specialized knowledge for free than they would be able to obtain in the current system of incorporation.  The system would have at its disposal experts that provide basic advice; beyond that, a veritable free market of goods and services would be available, in some cases supplied by the very people who may access the system for their own needs.  Thus, people will enter the system looking for specialized knowledge and find they too have specialized knowledge they can share, thereby fostering the growth of a competitive ecosystem of specialized knowledge.  In this way, the system has the seeds for its own growth and generates the feedback effects needed for it to become self-reinforcing.  Through reputation subsystems, the system can also police itself.  As long as the system is organized as a non profit a la Wikimedia or Mozilla Foundation rather than as at profit-driven commercial system, such a system can remain free and provide a civil society-based alternative to the current state-centered incorporation system.

About the Author:  Yosem Eduardo Companys is a PhD student in engineering at Stanford University and a coordinator for the Program on Liberation Technology at Stanford University.  He may be reached at companys[at]stanford[dot]edu.