In The Information Age, It's More Important To Expand The Pie Than Eat The Whole Damn Pie

Economics

from the open-v.-closed dept

Mathew Ingram recently wrote a fantastic post about Twitter’s big mistake a few years back, basically killing off its openness for developers. He builds his argument off of an interesting post from Ben Thompson, arguing that Twitter has lost its strategic focus. Both articles are great, and I recommend them both. In the early days, Twitter was almost completely open. Many of its most useful features and services came from others building on top of it. The very idea of the “@” symbol was the invention of a user. Same with the retweet. Now both are core to Twitter’s identity. And, of course, third-party services were what made Twitter usable in the first place. The service didn’t really ever take off for me until I used Tweetdeck — which was a third party service until Twitter bought it. Thankfully, I can still use Tweetdeck (though not on mobile) because Twitter’s actions killed off most competitors (and, because of this, Tweetdeck still lags in fixing some basic things — like an autoscroll problem I’ve complained about for years). As Ingram notes, Twitter made a big strategic shift, as it started to fear its own openness and worry that it may have resulted in the dreaded “someone else profiting” off of Twitter’s foundation:

Namely, a crucial turning point in Twitter?s evolution that arguably helped put it where it is today, both in a positive sense (it is a publicly-traded $25-billion company) and a negative one (its growth potential is in question and its strategy doesn?t seem to be working). And that turning point happened about five years ago, when Twitter decided to turn its back on the third-party ecosystem that helped make it successful in the first place.

This process began gradually, with the acquisition of Tweetie ? which became Twitter?s official iOS client ? and restrictions on what third parties could do with tweets, including selling advertising related to them. But it escalated quickly, and arguably became an all-out war with Twitter?s moves against Bill Gross, the Idealab founder and inventor of search-related advertising, who was busy acquiring Twitter clients and trying to build an ad model around the public Twitter stream. The idea that someone could monetize Twitter before Twitter itself got around to doing so was what one investor called a ?holy shit moment? for the company.

We see this sort of thing in all sorts of areas — especially around “intellectual property.” People have a very emotional “holy shit moment” pretty frequently when they see “someone else” making money by leveraging something that they feel some sort of ownership attachment to, whether or not there’s any legitimate basis for that attachment. So many of the intellectual property fights we see stem from that general feeling of “Hey, that’s ripping me off!” even if the actions of those third parties may not have any real impact on the originating content, service or idea.

In the internet era, however, this is almost always the wrong decision. The internet thrives based on the flow of information. You want information to flow more broadly, rather than to hoard it. Historical economics is based on worlds of scarcity, and in worlds of scarcity it makes sense to hoard resources, as they are valuable by themselves. Yet, in worlds of abundance you want the opposite. You want abundant or infinite resources to flow freely because they do something special: they increase the value of everything else around them. You want openness, not closed systems. You want sharing, not hoarding. You want copying, not restrictions. Because all of those things increase the overall pie massively, even if some of that pie (or even large portions) are captured by others.

As Ingram notes, at least some at Twitter recognized this at the time. An early influential employee at Twitter, its chief engineer Alex Payne, wrote about how he tried to persuade the company to go in that direction:

Some time ago, I circulated a document internally with a straightforward thesis: Twitter needs to decentralize or it will die. Maybe not tomorrow, maybe not even in a decade, but it was (and, I think, remains) my belief that all communications media will inevitably be decentralized, and that all businesses who build walled gardens will eventually see them torn down. Predating Twitter, there were the wars against the centralized IM providers that ultimately yielded Jabber, the breakup of Ma Bell, etc. etc. This isn?t to say that one can?t make quite a staggeringly lot of money with a walled garden or centralized communications utility, and the investment community?s salivation over the prospect of IPOs from LinkedIn, Facebook, and Twitter itself suggests that those companies will probably do quite well with a closed-but-for-our-API approach.

The call for a decentralized Twitter speaks to deeper motives than profit: good engineering and social justice. Done right, a decentralized one-to-many communications mechanism could boast a resilience and efficiency that the current centralized Twitter does not. Decentralization isn?t just a better architecture, it?s an architecture that resists censorship and the corrupting influences of capital and marketing. At the very least, decentralization would make tweeting as fundamental and irrevocable a part of the Internet as email. Now that would be a triumph of humanity.

But he lost that argument to those who wanted to keep the pie smaller, but to capture more of it for themselves. That may have helped the company go public, but it has put the company in a serious bind today. One in which Wall Street is profoundly disappointed that what Twitter is capturing for itself “isn’t enough” and the innovations that the company needs to keep growing and innovating are much harder to come by. Sure, it does things like Vine and Periscope — both of which it bought out in infancy — but to do so it’s had to hamstring other third-party developers like Meerkat.

Ingram also highlights another Ben Thompson post on what Twitter might have been had it gone down this more open path (he wrote this after the whole Meerkat thing):

I would argue that what makes Twitter the company valuable is not Twitter the app or 140 characters or @names or anything else having to do with the product: rather, it?s the interest graph that is nearly priceless. More specifically, it is Twitter identities and the understanding that can be gleaned from how those identities are used and how they interact that matters.

If one starts with that sort of understanding ? that Twitter the company is about the graph, not the app ? one would make very different decisions. For one, the clear priority would not be increasing ad inventory on the Twitter timeline (which in this understanding is but one manifestation of an interest graph) but rather ensuring as many people as possible have and use a Twitter identity. And what would be the best way to do that? Through 3rd-parties, of course! And by no means should those 3rd-parties be limited to recreating the Twitter timeline: they should build all kinds of apps that have a need to connect people with common interests: publishers would be an obvious candidate, and maybe even an app that streams live video. Heck, why not a social network that requires a minimum of 140 characters, or a killer messaging app? Try it all, anything to get more people using the Twitter identity and the interest graph.

There’s a more fundamental premise at work here. In the information era, spreading more information increases the pie massively and opens up many more opportunities. The challenge is that many others can also take advantage of many of those opportunities, but as the core player in the space, a company like Twitter has a clear and natural advantage, even if it did what Payne had wanted to do many years ago and give up the underlying control altogether.

This is, unfortunately, a profoundly difficult concept for many to grasp — especially when they’re in the midst of it. Hell, even as someone who regularly talks about this very idea, I still get the initial emotional pang of being upset when I see someone else get success with an idea that I had first (whether or not they got it from me). It’s only natural to have that visceral reaction. The real question is what do you do about it. Do you fret? Do you try to control? Or do you realize that in broadening these ideas and sharing them more widely, it creates greater opportunities across the board?

It’s impossible to know what would have happened had Twitter taken a different path. But it seems clear that remaining a more open platform (or even moving to a fully distributed one), would have resulted in a tool that was much more useful today, with a much larger audience and much greater innovation. It’s too bad we didn’t get to live in that world.

Filed Under: closed, developers, distributed, increasing the pie, infrastructure, non-zero sum game, open, ownership, platform
Companies: twitter