Google vs Wikipedia, for-profit vs not-for-profit

post by Schmoo · 2014-04-08T14:42:28.144Z · LW · GW · Legacy · 42 comments

Contents

  Advantages for the for-profit system:
  Advantages for the not-for-profit system:
  Best of two worlds?
None
42 comments

When Wikipedia was new, there was much entusiasm over it's not-for-profit model. Recent years have seen a steady decline in the number of users, though. Meanwhile, companies such as Google and Amazon grow ever larger and are, arguably, besides making huge profits contributing to the growth of human knowledge and prosperity on a massive scale.

An important question in this regard is to what extent information should be generated and controlled by not-for-profits such as Wikipedia (or even the government) or by for-profit entities. What are the advantages and disadvantages of these different systems? To some extent they are the same as for any other economic activity, but producing and organizing information are of course quite different from producing cars in ways that are relevant to this question.

Advantages for the for-profit system:

The main advantage of the for-profit system is that has a tendency to make for more efficiency. The cut-throat competition among IT companies forces them to become more efficient and innovative. Meanwhile Wikipedia does not seem to be either very innovative or efficient, since an oligarchy of old wikipedians block most new ideas (according to the article above).

Advantages for the not-for-profit system:

The idea underpinning market economics is the "invisible hand" which is supposed to aggregate everybody's selfish behaviour into collective good (given a certain institutional set-up). When it works, it often does so brilliantly, but unfortunately companies often don't have an incentive to behave in a way that is beneficial for the community. For instance, many social media make it hard to delete accounts, do but a bare minimum to combat criminal activities on their sites, etc. In short they don't work in their users' interests, and hence fails to maximize the collective good. Another problem is that the massive amount of information they acquire isn't shared properly, as pointed out in an article in Science:

Google is a business, but it also holds in trust data on the desires, thoughts, and the connections of humanity. Making money “without doing evil” (paraphrasing Google's motto) is not enough when it is feasible to do so much good. It is also incumbent upon academia to build institutional models to facilitate collaborations with such big data projects—something that is too often missing now in universities.

Within the open-source movement, people argue that information is fundamentally different from other sorts of goods. Since sharing information essentially involves no costs, we should produce and organize information in a fundamentally different way. Companies shouldn't be able to monopolize information but to some extent be forced to share it, the argument would go.

Best of two worlds?

Could we somehow take the best out of both systems to create an optimal mix? One possibility would be to let for-profit-companies operate on a not-for-profit "platform". For instance, say that Google had been a not-for-profit. It would have allowed different for-profit-companies to make use of data concerning Google users, to construct apps connected to the other Google services, etc. However, the behaviour of these companies would be heavily monitored by the not-for-profit host. Any signs that they didn't serve their members interest would mean they were thrown out. They would be forced to share information deemed useful with scientists (if they requested that).

They would also have to pay hefty fees to the host, of course - possibly higher the greater they became, since low fees for startups would encourage innovation. In effect, such a system would amount to progressive taxation. 

This system would thus make use of the power of greed, but harness it more efficiently than the present system. In order for selfishness to give rise to collectively good outcomes, we need to set up institutions accordingly. The invisible hand is no magic: if the regulations do not incentivize people to behave in a socially optimal way, they won't. 

Edit: One thing I had thought to comment on but which is important is this. Lots of internet markets naturally develop into monopolies. If you want to sell/buy something online, you want to be on the website where most buyers/sellers are. Hence more people flock to the leader of the pack, which thereby becomes even more dominant, etc. The same goes for dating sites, both general (e.g. Facebook) and niched (e.g. LinkedIn) social networks, etc. As a result, they can make enormous profits. For instance, the Swedish site Blocket, which is the market leader consumer-to-consumer site in Sweden, has had a profit margin of more than 50 % in some recent years. Sites like Uber and Taskrabbit charge users 20 % which seems quite a lot for the service they provide (especially in Uber's case). 

Markets for cars, clothes or what have you do not develop into monopolies as easily. Therefore it seems that this factor, too, speaks in favour of being a bit more suspicious of the notion that self-interested actions will give rise to collectively good outcomes within the present system when it comes to internet markets than when it comes to old-fashioned goods markets.

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