Kevin Kelly: Ten Rules for the Networking Economy.

This is a short summary from “New Rules for the New Economy“, originally written in 1998.

Kevin Kelly is one of the co-founders of Wired Magazine, and has been on the forefront of the technology revolution and its consequences for society. The following passages from Kevin Kelly’s “New Rules for the New Economy” may be almost 20 years old, but they are still relevant today. The central focus is on the network and on what happens when a multitude of nodes connect and interact. Kelly explores possibilities already more or less visible around us, and he offers suggestions for operating in a heavily networked environment. How are we preparing ourselves for the changes in the times ahead? Here are his rules:

1) Embrace the Swarm

As power flows away from the center, the competitive advantage belongs to those who learn how to embrace decentralized points of control.

Of all the endeavors we humans are now engaged in, perhaps the grandest of them all is the steady weaving together of our lives, minds, and artefacts into a global scale network.

Any network has two ingredients: nodes and connections. In the grand network we are now assembling, the size of the nodes is collapsing while the quantity and quality of the connections are exploding.

We are connecting everything to everything.

2) Increasing Returns.

As the number of connections between people and things add up, the consequences of those connections multiply out even faster, so that initial successes aren’t self-limiting, but self-feeding.

Mathematics says the sum value of a network increases as the square of the number of members. In other words, as the number of nodes in a network increases arithmetically, the value of the network increases exponentially.

A good definition of a network is organic behavior in a technological matrix.

Everyday we see evidence of biological growth in technological systems. This is one of the marks of the network economy: that biology has taken root in technology. And this is one of the reason why networks change everything.

3) Plentitude, Not Scarcity

As manufacturing techniques perfect the art of making copies plentiful, value is carried by abundance, rather than scarcity, inverting traditional business propositions.

The value of an invention, company, or technology increases exponentially as the number of systems it participates with increase linearity.

The abundance upon which the network economy is built is one of opportunity.

Networks spew fecundity because by connecting everything to everything, they increase the number of potential relationships, and out of relationships come products, services and intangibles.

4) Follow the Free

As resource scarcity gives way to abundance, generosity begets wealth. Following the free rehearses the inevitable fall of prices, and takes advantage of the only true scarcity: human attention.

The more an industry makes, the better it learns how to make them, the more the cost drops.

If goods and services become more valuable as they become more plentiful, and if they become cheaper as they become valuable, then the natural extension of this logic says that the most valuable things of all should be those that are ubiquitous and free.

The only factor becoming scarce in a world of abundance is human attention.

5) Feed the Web First

As networks entangle all commerce, a firm’s primary focus shifts from maximizing the firm’s value to maximizing the network’s value. Unless the net survives, the firm perishes.

Players compete not by locking in a product on their own but by building webs – lose alliances of companies organised around a mini-ecology – that amplify positive feedbacks to the base technology.

The three great currents of the network economy: vast globalization, steady dematerialization into knowledge, and deep, ubiquitous networking – these three tides are washing over all shores.

6) Let Go at the Top

As innovation accelerates, abandoning the highly successful in order to escape from its eventual obsolescence becomes the most difficult and yet most essential task.

An organization can cheer itself silly on its way to becoming the world’s expert on dead-end technology. (The nuclear power industry offers one example).

The problem with the top is not too much perfection, but too little perspective. Legendary, long-lived companies are intensely outward-looking.

The competitive advantage goes to the nimble and malleable, the flexible and quick.

7) From Places to Spaces

As physical proximity (place) is replaced by multiple interactions with anything, anytime, anywhere (space), the opportunities for intermediaries, middlemen, and mid-size niches expand greatly.

Spaces aren’t bound by proximity. The advantage of spaces is rooted less in their non-geographical virtuality and more in their unlimited ability to absorb connections and relationships.

The network economy has set into motion the power of hobby tribes and informed peers.

The only side a network has is outside.

8) No Harmony, All Flux

As turbulence and instability become the norm in business, the most effective survival stance is a constant but highly selective disruption that we call innovation.

In a poetic sense, the prime goal of the new economy is to undo – company by company, industry by industry – the industrial economy.

To achieve sustainable innovation you need to seek persistent disequilibrium. To seek persistent disequilibrium means that one must chase after disruption without succumbing to it, or retreating from it.

9) Relationship Tech

As the soft trumps the hard, the most powerful technologies are those that enhance, amplify, extend, augment, distill, recall, expand, and develop soft relationships of all types.

The net tends to dismantle authority and shift its allegiance to peer groups. The cultural life in a network economy will not emanate from academia, or the cubicle of corporations, or even primetime media. Rather, it will reside in the small communities of interest known as fans, and ‘zines, and subcultures.

The final destiny for the future of the company often seems to be the “virtual corporation” the corporation as a small nexus with essential functions outsourced to subcontractors. But there is an alternative vision of an ultimate destination – the company that is only staffed by customers. No firm will ever reach that extreme, but the trajectory that leads in that direction is the right one.

The network economy is founded on technology but can only be built on relationships. It starts with chips and ends with trust.

10) Opportunities Before Efficiencies

As fortunes are made by training machines to be ever more efficient, there is yet far greater wealth to be had by unleashing the inefficient discovery and creation of new opportunities.

The origin of economic wealth begins in opportunities.

Every opportunity seized launches at least two new opportunities

Technology is no panacea. It will never solve the ills or injustices of society. Technology can do only one thing for us – but it is an astonishing thing: Technology brings us an increase in  opportunities.

In the coming era, doing the exactly right next thing is far more fruitful than doing the same thing better.

For more on the same theme see also the following article in Wired Magazine.

The Rules in Kevin Kelly’s own words: