In the book Here Comes Everybody, Clay Shirky explores the profound impact that the loosely structured group has on society. The ease at which these groups, free of managerial frameworks, can be formed today is rapidly changing the institutional landscape.
In 2006, a woman named Ivanna left her phone in the back of a New York City cab. She asked her friend, Evan Guttman to offer a reward for its return by e-mailing a message that would show up on the phone. Eventually, Evan set up a website about the missing phone which prompted several significant events:
- viewers found pictures of Sasha (the person who refused to return the phone) on Myspace
- a member found out Sasha’s full name and address, even driving by her house and posting a video
- he received so much traffic that the first 3 bulletin boards he tried to create on the topic crashed
- local and national media picked up the story
While this is not the typical case of a missing phone, Shirky points out that the evolution of group formation has enabled such a powerful response, something that just a few years ago, would not have been impossible. He begins this discussion with a focus on the social group.
Sociability is hardwired into humans as one of our core capabilities and our affinity for relationships is evident in our constituent group society. Almost everyone belongs to multiple groups, perhaps through work, family, or friends, and this gives us the potential to engage in large and complex tasks, from planning birthday parties to building buildings.
“The centrality of group effort to human life means that anything that changes the way groups function will have profound ramifications for everything from commerce and government to media and religion.” (p.16)
So what has changed? The past few years have given us new technologies and tools that have made group formation much simpler. The cost, according to Shirky, has collapsed. The basic economics of the situation tells us that since the costs have dropped, and people have a natural tendency towards forming groups or joining existing ones, group forming and joining will increase.
So if we are naturally inclined to work in groups, why do we have structured institutions like Microsoft or the Army? They exist because they are focused, and because they are managed. These large groups live to take advantage of group effort, but in order to prevent institutional collapse, must use up some resources in the process to manage group members. To exist at such a large size, institutions must take on this management role.
As groups grow, it becomes increasingly difficult for interactions to take place between members within the group until at some point the group becomes unsustainable. To illustrate this idea, he points to the birthday paradox, which shows the rapid increase in the connections that must be made in a growing cluster. In other words, as the size of a group increases, the number of connections between members increases at an even higher rate.
In order to maintain such large groups, institutions undergo the costs of organization. More people equal more connections equal more complications equal higher costs. One way of managing these connections is through a hierarchical organization structure, which limits connections through layers of hierarchies. Institutions, as hierarchical organizations, must also make sure that the potential gains from organization exceed the organization and structural costs. If these institutions grow too large they become inefficient since costs outweigh the benefits, referred to as the Coasean ceiling (named after Ronald Coase, a British economist). The companies that succeed are those that can effectively minimize the costs within the company.
So what happens when transaction costs go to zero?
We know that if these costs within an institution drop moderately, business because more efficient. But when these costs collapse, institutions, as opposed to unorganized groups, will find certain activities inefficient due to the fundamental structural cost of an institution! So what we have begun to see through the collapsing cost of organization is the creation of “action by loosely structured groups, operating without managerial direction and outside the profit motive” (p.47).
To illustrate this he brings into focus the well known picture database, Flickr, and an annual Coney Island event called the Mermaid parade. When people attend the parade and take pictures, they have the option to upload their pictures onto Flickr and share them. While hundreds of the parade goers may have attended separately and taken pictures on their own, Flickr gives these people a platform on which they can share their pictures. By linking these pictures through the tagging function, Flickr users link themselves to each other. Considering the highly inefficient process to organize photographers to share their photos as an alternative, this is a breakthrough since we see that in some cases, uncoordinated groups are more efficient than institutions.
New tools such as Flickr are allowing us to multiply the groups that we create. Communications technologies, from phones, to email, to webpages are key in a societal shift towards connectivity. We are experiencing an increase in our ability to share, cooperate, and take collective action “outside the framework of traditional institutions and organizations” (p.20).
During his explanation of the Flickr linking platform, Shirky makes reference to the 80/20 rule. Showing a graph of the picture submissions by users in an 80/20 distribution, he demonstrates that those bottom 80% of submitters on the long tail would be inefficient in an institutional structure. Since they produce so little content compared to the top 20%, having them work in an institutional structure would never be effective. Shirky restructures this train of thought by linking the cost of the content to its quality.
He then explains the three levels of group commitment: sharing, cooperation, and collective action. Sharing, as the first level, places the fewest demands on individuals, which promotes the most freedom in usage. Flickr, as an example of this, gives users the option to make their photos public. Google, as a more abstract example, has users sharing linking preferences for the betterment of online search. Cooperation is the next level, more difficult because it requires change in behavior from participants, but results stronger in cohesion. Shirky gives “collaborative production” as an example of cooperation. This occurs when no one person takes credit for what is created, and requires the participation of many. Collaborating is more difficult because of the collective decision-making required. Due to this, editing a Wikipedia article is more difficult than sharing pictures on Flickr. Last, and the most difficult but powerful type of group effort, is collective action. This requires members of the group to commit themselves to a particular effort where the decisions of the group are binding to the members. The difference between cooperation and collective action? Think a potluck dinner and a union. For a collective group to take action there must be a force strong enough to bind them through the difficulties of collective decision-making.
The constraints of cost have always acted as a barrier to the formation of groups. With communication networks and tools allowing for much easier group forming, we should be prepared to welcome a massive readjustment of institutions and cooperative frameworks.