Digital Democracy Series: Can ubiquitous connectivity make political parties obsolete?

If I think ahead into what I want the world to look like in 30 years, one of my hopes is that connectivity will be so ubiquitous that we no longer need political parties to act as the primary means through which we practice democracy. I say ‘practice’ democracy because democracy is, like the act of making love, as much an exercise as it is an institution. Though the ends of both the act and the institution are the same, the real joy is extracted through the execution. Now that I’ve distracted you with a sex reference, I should remind you that at first glance these two ideas (connectivity/political parties) might not seem connected; I argue, however, that connectivity allows us to bi-pass the need for others to represent us, thus making political parties obsolete or at least less meaningful. Allow me to explain.

As much as those of us who live in Western democracies like to think of ourselves as having unleashed the power of individualism, we still function almost entirely through collective means of action. As a result, any ‘leader’ we identify in the fields of politics, business, civil society, etc., is often unable to provoke much change on her own; instead, she is judged by her ability to move large groups of people to action. Though we like to think “one person can make a difference,” that statement is often only true in so far as that one person is an extension of a network of a larger multitude. Individualism and collectivism are not necessarily opposites or mutually exclusive in how their applied to provoking change in society.

To provoke change therefore we need to organize ourselves in such a way that collective action or potential for collective action becomes a force and a threat. For this reason we have businesses, trade unions, religions, community groups, interest groups., etc, all designed to organize people around shared principles and demonstrate our power in numbers. Nowhere is the exercise of power through collective will more visible than with political parties.

In stating that we should reduce the influence of political parties, I don’t mean to suggest or acknowledge that political parties haven’t served us well or that they shouldn’t continue to operate in some capacity: indeed, political parties are only as useful/useless as the political climates in which they operate. For example, once we capture power from the hands of dictators, monarchs, etc., political parties often help us diffuse this power and  create rotation in our governing systems. This rotation brings about more transparency, accountability, and generally leads to better governance. In mature democracies party leaders are held accountable by their party members: for example, the fact that neither George Bush in the past nor Barack Obama now can hand-pick his successor without any validation process is a tribute to the sophistication of the often lamented U.S. democratic system.  When political parties are themselves democratic and hold elected representatives accountable they become the pillars of a functioning democracy.

The problem I have with political parties is the impact they have on defining and exaggerating differences within a society. Though in theory political parties aim to ‘represent’ belief systems that already exist, in practice they often serve to impose reductionist belief systems on complex societies desperate to bring about simplicity in order to be able to understand themselves better. The result, if you think about it, is rather absurd. Why, for example, should the fiscal conservatives gravitate towards social conservatism? Why should those who believe in a more prominent role of the state necessarily disagree with those of a strong religious persuasion? To these questions one might respond: “Ah, yes, but these are generalizations!”, which is exactly the point: political parties turn us into generalizations, cliches of ourselves, incapable of diverging from the simple narratives that order and define our society. In other words, political parties perpetuate and fossilize the differences they report merely to represent, thus segregating society in unhealthy ways. More worryingly, they make us stupid by trying to replace the complexity of our society with simplicity, and this is what technology can help us solve.The fact that the U.S. for example, must re-visit the abortion debate each time it holds a presidential election demonstrates how limiting and increasingly irrelevant the political party system is.

Going back to the original benefits of political parties, we see that their greatest contribution has been to break up monopolies of power and replace them with, in many cases, oligopolies. While they distribute power more widely than the preceding governing systems, they still allow for extreme concentration. We acknowledge then that the dispersion of power has been a fundamental component of our societal evolution, yet we seem to be stuck on a system invented more than 200 years ago and designed to meet the needs of highly unconnected and immobile populations. What I argue for then is that we embrace our evolution and take the distribution of power another step further by going straight to the people and allowing them to represent themselves.

With ubiquitous connectivity the need for representation decreases as we are all far more capable of speaking on our own behalf. Furthermore, we can embrace our complexity by allowing ourselves to participate in issue-based discussions as opposed to the world-view battles that occur each time we make a binary contribution to our democratic process.

To give you a real world example, in Mexico’s upcoming Presidential elections it’s hard to find anyone excited about any of the 3.5 candidates running for office: because of the choice-limiting system the Mexican candidates are not only forced to empower a single candidate no-one can get excited about, they also have to live with that choice for 6 years. If we allowed people to represent themselves, however, the person governing would have less correlation with one’s satisfaction with the government’s ability to transform the collective’s will into action, because the representatives have to negotiate with the real-time expression of the will of the people. Mexico’s democracy was designed at a time when it took days to get to the capital. With ubiquitous connectivity, however, we can be there whenever we want.

Some argue that we’re too stupid to handle the responsibility of self-governance, but the truth is that we’re now smarter than ever. Access to information has become democratized and slowly, through organizations such as the Kahn Academy, access to education can also be democratized. In other words the tools I am calling for will be invented in a context in which people are empowered enough to accept the responsibility that comes with no longer out-sourcing the right to speak on their own behalf. While we still have cultural norms to develop, such as healthy patterns of information consumption, beginning a discussion about forcing our societal evolution forward will necessitate that these practices and behaviours come to the surface.

I am admittedly vague in describing what I think digital democracies look like. That’s because I don’t pretend to have the answers. What will ultimately replace political parties must come about as a result of computer scientists, sociologists, political scientists and interested people working together to create systems that increase empowerment while protecting against abuse. We’ll need multiple options, iterations and failures in order to create something that enjoys widespread support and adoption. I am therefore calling for individuals to begin to exercise their collective potential through collaboration. When Winston Churchill said that democracy was the worst system accept for all the others, I don’t think he meant that we should stop iterating and trying to make it better. It’s time to make it better.

Enabling Economies of Sharing Through Social Media

One of the reasons why I get excited about social media and ubiquitous connectivity is because of the potential to develop economies of sharing. Whether you realize it or not you already contribute to economies of sharing: for example, what finances many of the websites you visit is your ability to share information about yourself with advertisers who in turn pay for the content you consume. There are, though, more direct and explicit means by which we can use the internet to enable economies of sharing. Allow me to explain:

Imagine a Facebook app that requires you enter your city neighborhood as well as your skill. Your skill may be the fact that you are an accountant, bricklayer, life coach, masseuse, priest, personal trainer, cake baker, etc. You create supply by offering your services in time units of let’s say an hour. The demand for your services comes from your neighbors, and the way each person accesses free services is by supplying them. For example, if you contribute two hours of services to your neighbors you in turn earn two hours worth of credit you can use to access other services. Need a haircut? Help with your taxes? With a large large enough user base all of these services could be available to you free of charge.

How would such a system be governed? Similar to platforms like EBay and TripAdvisor, once your services are executed the person on the demand side validates the exchange and then provides you with a rating. You then have an incentive to deliver the service well. If you deliver good services to your neighbors over time, demand for your services will go up as will your ability to facilitate your lifestyle through interaction with those who live closest to you.

There are, of course, lots of problems that can result from this system, but like Ebay and TripAdvisor, many of those problems can be resolved by the same system which powers them to begin with: crowd sourcing. Others might suggest that the net impact on the economy could be negative because services people might otherwise pay for would be supplied for free. I disagree with this assumption because it doesn’t take into account that the sudden availability of services would lead to an increase in demand, both free and paid.  Maybe you didn’t realize how much you needed a massage, for example, until you got one for free (music industry take note).

At this point it’s worth remembering that the potential for such economies of sharing were possible in the pre-social media age. What’s different now however is that it’s easier for each one of us to find each other, connect, and to give. As I’ve mentioned in other posts, the benefit of online interactivity is only as powerful as its ability to provoke offline action. We share a lot online now: our challenge, therefore, is to convert our online good will into offline good will and diminish the distance between our intentions and our will. When everyone gives a little we may surprise ourselves with how radically we can change the world for the better.

Taking Steps Towards Digital Democracy

The single most difficult concept for many people to grasp when discussing the possibilities of the future is the idea that as our innovations evolve so too does the context that enables those innovations. For example, when Google made public its self-driving car a lot of people scoffed at the idea that such a machine-driven car could ever be safe. After all, if we can’t depend on AT&T not to drop every call on a 3G network, how the hell are we ever going to depend on a wireless network to organize traffic? The idea of having our car controlled by AT&T rightly scares the hell out of people.

When Google began developing its self-driving car though it wasn’t assuming the infrastructure of today would remain unchanged; instead, Google assumes that by the time the vehicle is ready to be commercialized wireless technology will have improved so much that it will be as reliable as say the electricity in your home (the dependability of your electricity is obviously geographically determined, but if you’re regularly experiencing power-outages it’s not because the technology doesn’t exist but likely because your network is poorly managed).

Last week I published an article on the World Economic Forum blog talking about new concepts of leadership in a digital era. Though I myself am quite passionate about the idea of direct democracy through digital means, one of the difficulties of discussing the topic is the prevalence of cynicism amongst those who believe that governments are needed to protect people from themselves. The concentration of power in the hands of the few, they argue, is needed for the public good.

Such cynicism, I must admit, does not  come without historical precedent: if you look, for example, at the history of plebiscites and  referendums in Canada and the U.S., one finds plenty of instances whereby direct democracy has been deeply divisive, abused, and highly emotionally charged. Those of us who lived through the 2008 campaign for Proposition 8 in California, have seen how the popular will can be mobilized against a minority group in order to surpress their rights. If digital democracy means more Proposition 8 then count me out!

The problem here is that, like the Google car, people assume that whatever version of direct democracy we have would simply be super-imposed on our existing context. There are, however, alternatives: for example, I live in Switzerland and here people vote online regularly on everything from a tax on dogs (Swiss people love taxes) to whether or not the country should have a minimum wage (it doesn’t, yet wages are higher than in France, which does. Go figure). People have even voted to raise their own income tax! If this model works in Switzerland, why can’t it work elsewhere?

You’ll sometimes hear people refer to the Swiss model as if it is the exception that proves the rule while implying that the Swiss are some sort of super-sophisticated uber-race that have pacifism built into their DNA. These arguments, in short, are hog-wash: what they have is a political system which provides the context for this type of political culture to thrive. In addition certain checks and balances are in place (there could always be more) to prevent abuse: For example, when a question is submitted for a referendum there is a team of neutral linguists that look at the proposal and define the question to prevent leading questions and to determine the correct phrasing to best represent the meaning.

In addition, because Swiss people vote so often on the very mundane to the very important, they develop a culture and a context which fit the structure. When I asked a Swiss member of parliament about why the system works in Switzerland and not elsewhere her theory was that the solution for the rest of the world is more democracy, not less. Whenever you have referendums, she noted, they are usually instigated by politicians trying to legitimize tough decisions, or they’re based solely on contentious issues. When you have a say in everything, she argued, you develop an etiquette to carry out the conversation in public. If, on the other hand, you’re only consulted on the most emotive issues you’ll be unlikely to develop that culture; instead you develop battle grounds.

Of course I don’t mean to suggest that the Swiss model is perfect: more recently it has been manipulated by populist abuse, including the Minaret controversy of 2009. Populism, though, is not necessarily the product of democracy but the society that allows it to thrive. Aside from public denouncements of these types of abuses, they can also be prevented  by a strong constitution and legal code that, for example, outlaw the use of referendums to infringe on the rights of minority groups (i.e. Prop 8).

Where I am going with all this is that when people invoke Winston Churchill to say that “democracy is the worst system of government except all the rest,” they give themselves permission to stop dreaming of a democracy that is even better. Despite the fact that the history of our governance in the Western World is a constant de-centralization of powers, we seem to be stuck on the notion that 200 years ago an extra-ordinary group of people developed a system that would serve us forever, when in fact our democracy needs to be continually renovated to serve the needs of our evolving societies.

When representational democracy was created the principle was that someone from your community would travel to the capital to represent you, with your community being limited to those who communicate with, i.e. your neighbours. This notion is flawed in our increasingly interconnected world because we can in fact represent ourselves because in the digital age the distance is erased. Second, the community of people who live around us is only one of the many communities we belong to because we now communicate across traditional borders all the time. A district or constituency, therefore, is an arbitrary grouping not any more or less meaningful than any of my other communities.

In my aforementioned article I quoted Marshall McLuhan as having said that “politics is the process of solving the problems of today with the tools of yesterday.” Though accurate his statement is not meant to be fatalistic: there is no reason why we can’t solve the problems of today with the tools of today. The question now is whether or not we dare to dream of a different context, meaning laws, checks-and-balances, etiquettes, etc., that would enable a different system of governance and a different culture of governance. The only thing that is holding us back is our deep-seated fear of ourselves as well as the impending battle with our current governing lot who will be reluctant to break up the monopoly of power we have bestowed them. If we can allow ourselves to dream we’ll quickly see, as my former Google Colleague and true practitioner of digital democracy, Weal Ghonim has pointed out: “The power of the people is greater than the people in power.”

Re-thinking Public Post-Secondary Education Funding in Quebec and Canada

The recent students’ movement in Quebec formed in response to the provincial government’s plan to raise tuition fees has sparked a much needed debate on how we should fund post-secondary education. Given that my own opinion on the matter has shifted substantially since I graduated almost ten years ago, I’d like to add my voice and suggest we step back from the free/not-free debate and instead consider smart models of funding.

Before I delve into my argument allow me to add a disclaimer: I am the proud product of public and accessible Canadian education and I will defend it vigorously. I attended only public schools from K-12. Afterwards, the quality instruction I received at St. Thomas University in Fredericton, including the small classroom sizes and 1:1 attention, was instrumental in enabling me to be successful when I pursued graduate studies at Oxford. I graduated with about 15k debt after working two or three part-time jobs at a time and it took me roughly 8 years to pay it off. All of this is to say I heart Canadian public education.

Now on to my argument: accessible post-secondary education provides both individual and collective benefits. If an individual invests wisely in post-secondary studies she is likely to find higher paying work upon graduation and will earn more over the course of her career. On a collective level we as a society benefit from having more people graduate from universities because it makes us smarter, innovative, and more competitive. As such, it is to our benefit to have well-funded world class universities which act as engines of economic growth.

It is not a coincidence, for example, that there is a revolving door between Stanford University and the Silicon Valley Business Community: they feed each other and neither would have achieved its potential without the other. Though the valley may owe its birth to Stanford, Stanford owes its current prestige to the Valley. If Canada wants to remain competitive as a mostly service-based economy (outside of minerals) with India, China, Brazil, etc., it should aim to have world class universities that are on the cutting edge in everything from research and development to liberal arts (I’ll come back to that point later).

Given that both the individual and the collective benefit from strong universities, we might agree then that we all have a stake in ensuring they remain well-funded, but why do they need to be accessible? The equation is simple: as Chilean student activist Giorgio Jackson recently noted at the World Economic Forum’s Discussion on Re-Thinking Education, talent and intelligence are equally distributed throughout society, but opportunity is not. Even if you disagree with the inherent right to access of opportunity, you must agree that the best way for us to achieve our collective potential/highest productivity is to exploit our human resources to maximum efficiency. If we limit access to education to a sliver of the population we are not only setting ourselves up for large-scale social upheaval (as has been the case in Chile), but we’re also making ourselves more vulnerable to competitors who can produce more ingenuity by pure volume of graduates.

So the question in my mind is how do we maintain well-funded competitive and state of the art universities while still allowing them to be accessible? I don’t believe the answer is simply making them free or freezing tuition rates. Making universities entirely dependent on government (i.e. tax-payer) funds will put our institutions at a competitive disadvantage since their ability to generate revenue will depend on the fluctuations inherent in the ups and downs of the economy as well as the ideological bend of the government of the day. In addition, there are lots of wealthy people out there who can more than afford public education: why in the end would we want to subsidize everyone equally when some have needs and some don’t? Surely a better strategy is to target those with the most needs with the most subsidy? Doing so then allows for you to elevate more of the have-nots by tipping the scale away from the haves who would otherwise benefit equally as the lesser offs.

Making the post-secondary debate about ‘free’ education misses the point then, because it oversteps the idea that the crux of the matter is that public education needs to be accessible to all, regardless of ability to pay. There are lots of creative ways to achieve accessibility: you can charge tuition fees based on ability to pay; you can offer low-interest loans that sunrise after 10-15 years; you can make re-payment based on post-graduation salary; you can offer financial incentives, as New Brunswick does, to graduates who stay in the province post-graduation. In other words, there are dozens of ideas better than ‘free’ which make education accessible while still creating a level playing field that ensures equality of opportunity and maximum competitiveness. As tax-payers we need to see the collective benefits that come from strong world-class universities while making sure we get the best bang for our buck and demanding that subsidies be targeted to those who most need them, not those who least need them. Let’s not be free, therefore: let’s be smart.

P.S. In yesterday’s Globe and Mail Marget Wente argues that the protests are driven by Liberal Arts Students who are angry because their skill sets wont be applicable in the labour force post-graduation. As a Liberal Arts warrior who ended up working at Google I would like to note that the colleagues who worked alongside me not only studied philosophy like me but also psych., sociology, music, poli sci., etc. Google, like many cutting-edge companies, hires based on talent as opposed to knowledge. In other words, you can know a lot about something but if you aren’t capable of breaking down complex problems then you’re usefulness is limited. You can teach knowledge; you can’t teach talent. Liberal Arts degrees serve to cultivate, develop and extract talent. I would therefore suggest that it is Mrs. Wente, and not the protesters, who is short-sighted.

P.S.

Business schools should be able to charge anything they want for an MBA, since in the end what they monetize is career anxiety more than anything else. If they’re allowed to offer the proletariate version of a knighthood and call it a degree, why not let the free market determine the cost? I apologize if I offend any MBA graduates out there: my point is that people will give you all kinds of compelling reasons for doing an MBA; the content isn’t often one of them.

Defining the next generation of Latin American Leadership

Hi Everyone, I wrote a blog-post for the World Economic Forum Blog discussing new definitions of leadership in the digital age. Please check it out here:

http://forumblog.org/2012/04/defining-the-next-generation-of-latin-american-leadership/

A Letter from Capitalist Me to Socialist Me

Dear Me from Ten Years Ago,

Hey Me, it’s Matthew, from the future. 10 years in fact. Listen: in the event that the space time continuum allows for us to live in parallel, I wanted to drop you a line in the hope that I might be able to help you deal with the anxiety you feel about the state of the world. Specifically, I want to tell you a bit about how your political views are going to evolve. What I’m going to say might seem scary at first, but stay with me and hopefully we’ll agree that while the medium may have changed the message stays the same.

Before I proceed though I have to draw your attention to one thing: please enjoy that chin-length hair you’ve been cultivating for some time now. Once you cut it you’ll never grow it back despite your best intentions after joining the workforce. That lion’s mane will slowly start to retreat, like an awkward guest trying to back out of a party without anyone noticing. Don’t worry though: it’s not yet a war on two fronts, and hopefully by the time I write your next letter in ten more years either new technologies, such as your idea for the Insta-Fabio will exist (future patent pending) or new confidence-boosting drugs will make the problem essentially obsolete (overdose warnings exist for America).

So let’s get to the core of the issue: remember that quote “”If you’re not a Socialist before 30 you have no heart, if your still Socialist after 30 you have no head”. Remember how you thought it was bullshit? I hate to say it, but it turns out that it’s true.

I know: I am as surprised to hear myself say it as you are, and before you label me a sell-out let me explain something: a time is going to come when you ask yourself whether or not your ideology serves you or you serve your ideology. In other words, is your commitment to the means or to the ends? Do you see where I am going with this? If you do you realize that we’re going to have to re-think our relationship with capitalism in order to tackle the issue from which much injustice generates, and that issue is the unequal distribution of opportunity.

Let’s be honest with ourself: capitalism is here to stay. People vote with their feet. You have limited time and energy to spend trying to solve the problem of inequality. I suggest therefore that you focus on figuring out how to use capitalism to achieve your means rather than proposing an alternative no-one is realistically going to buy into. If much of the world has a hard time getting right the hands-off system of capitalism, then you can be sure they will struggle to implement the hands-on system of socialism.

Look: I know what you’re going to say because we are, after all, the same person: hasn’t capitalism failed the world’s poor? Yes: while you can make that argument, a more nuanced argument is that 3^rd world governments have failed capitalism and thus their citizens as well. What you see in much of the so-called third-world is not capitalism but something between feudalism and capitalism. Access to capital, the central tenant of capitalism, is extremely limited. The rules meant to create a fair playing field don’t exist: regulation is either too much, thus stifling creativity, or too little, thus enabling monopolies and oligopolies (that’s still your favourite word, btw). Furthermore, the absence of the rule of law means that citizens have no means to protect themselves when corporate interests work against the common good. In other words, it’s much less about capitalism and much more about complete and utter systematic failure: capitalism is as much as symptom as it is a cause. Put in another way, while a heart attack or liver failure may both kill you, in the end its lack of oxygen to the brain which underlies all death.

Having said all that it still does appear though that uncontrolled consumption is pushing us towards a dystopian future, but again I’d argue that the fault doesn’t necessarily lie with capitalism as a concept but but instead poorly designed global capitalism. In addition governments carry part of the blame in enabling the consumption that is driving global warming: after all, fuel subsidies play a huge part in enabling us to consume the massive amounts of petroleum that are driving global warming. You see, again: the problem isn’t inherent in the system but instead in its use.

So with our newfound appreciation for markets, does that mean we have a disregard for government? Not at all: indeed, while we now agree that the state should retreat from some battles, in others it needs to double-down, especially when it comes to facilitating our quality of life. Not all problems, after all, will be solved by through fluctuations in demand-side economics: instead, in some cases government will have to attack supply for the greater good, even at the cost of additional economic growth.

As an example, the automobile is the primary plague that is affecting the quality of life in our cities. As people become wealthier and the demand for automobiles increases we will need governments to take drastic actions to preserve and protect the benefits that come with population density. Governments need to take a carrot and stick approach by intervening and investing in strong public transportation while limiting the circulation of vehicles to make not driving more convenient than driving.

Similarly on the topic of education governments still have a major role. As someone you’ll meet will point out, talent and intelligence are equally distributed throughout the world, but access to education isn’t. Employing the free market to resolve this problem is highly inefficient, since filtering education in accordance with access to capital limits collective efficiency and productivity. The lack of equal access to opportunity in turn makes capitalism less attractive to those who are born into the losing team. Capitalism’s ability to permanently silence the romantic call to alternatives depends on our ability to get access to education right.

I should also point out that the idea proposed by conservatives that society should solve its own problems without depending on the government will take on a different and less-sinister meaning for you. In 10 years the cost of communicating and thus organizing a society will drop dramatically as a result of the rise of social media brought on by the proliferation of web 2.0 (don’t ask, you’ll see what I mean soon enough). Society will then have the means though which each individual, by making minor contributions to the public good, can indeed contribute to solving many of the social problems we face. In resolving more problems on our own we can allow government to focus on areas where it can have a real and efficient impact (like education).

In addition, the internet is going to democratize the means of production in unforeseen ways by lowering barriers of entry in some cases to almost zero. Many giant corporations in the world will find themselves struggling to compete with small, nimble and highly efficient internet start-ups. This is a sign of a massive disruption on the horizon which will have an equalizing effect that even I, ten years into the future, am only beginning to catch glimpses of.

So to conclude, like a Hollywood movie in which traditional enemies eventually become allies in the battle for their collective survival against a new and highly destructive force (btw, go see Lord of the Rings before it leaves the theatre), you may be able to work with capitalism to achieve your mutually beneficial objectives of self-preservation through sustainability and the realization of justice.

P.S: A few final ideas: putting on a suit and schmoozing with businessmen will not in any way threaten the integrity of your values. After all, no-one is going to see if you’re still wearing your Che Guevara T-Shirt under your suit (note, it’s time to upgrade your Che Guevara T-Shirt). Be careful of people who talk the language of combating injustice but who happen to be incompetent. I’m not going to say who I am referring to, but the name of his country rhymes with Menezuela). Finally, if you can please try to get in on that Google IPO. You’ll thank me later.

Is Instagram worth a billion dollars?

You know what’s cooler than a million dollars?

 What?

 A Billion Dollars.

 ­The Social Network

So, is it? The short answer to the question of whether or not Instagram is worth a billion dollars is yes, it is, because that’s exactly the price Facebook was willing to pay for it. Did they overpay? Like the assumed benefits of the French revolution, it’s too early to tell.

You can’t help but love the story: a few guys get together to work on an idea and within less than two years they have 30 million users and then become multi-millionaires overnight. Indeed, Instagram stumbled upon a disruption strategy which has proven time and again to be extremely effective: mainly: figure out the core of what makes a popular service popular, fixate on the key ingredient and ignore everything else. In Instagram’s case they realized that you could remove all of the other noise from a social network and just focus on photography. Furthermore, their product democratizes the ability to take beautiful pictures: while some will definitely lament that the art of photography may be lost and talented photographers will be overlooked in the sea of amateurs with iphones, I see this as an opportunity for real photographers to step up their game. In addition, if everyone uses Instagram we all spend less time looking at bad photos.

But with 30 million users, was Instragram really a threat to Facebook? After all, there is still a lot that Facebook does that Instragram can’t. This question reminds me of something Eric Schmidt said when Google purchased YouTube for what many considered an over-the-top price: mainly, aside from the cost of purchasing Instagram there is a cost of not purchasing Instagram as well.

For example, what would happen if Google purchased Instragram and then integrated it into Google+? It’s entirely feasible that Instragram becomes the killer app that opens the floodgates to people migrating from Facebook to Google+. Given the fickleness of internet users, it’s entirely possible. Furthermore, Google knows how difficult it is to develop a superstar application from within a massive 30,000 company. As such, you can bet that somewhere within the halls of the Googleplex the company was having its own conversations about whether or not purchasing Instagram would complement their social efforts. Same goes for Twitter.

Another reason why Facebook’s acquisition may make sense is that the combination of the two products may be what allows Instagram to reach its full potential. Allow me to go back to the YouTube example: one of Google’s competitive advantages is its’ capacity to scale products. It’s massive network of datacenters and its ability to share information between them made Google the perfect partner for YouTube: without Google, YouTube would eventually run up against the constraints of not being able to contain all of the content users wanted to add (think about Twitter’s inability to make all of its tweets available in real time). Through Google YouTube was able to avoid the problem of having to put limits on what people could upload to its servers and how long it could live there. Freed from space constraints YouTube could continue unabated in its plan to become the undisputed host of online video, which has now reached one hour of video content uploaded per SECOND. In addition the investment paid off: YouTube has been one of Google’s fastest growing products; its’ homepage alone is represents the most valuable real-estate on the web. In other words, YouTube has definitely paid for itself: the match worked, because Google provided YouTube with the key it its success: scale.

Something similar could happen to Instagram if Facebook is able to manage the balance of maintaining the product’s simplicity while allowing for deeper connections into its social platform. The benefit of buying Instagram in the early stages is that a.) the high price tag may in fact prove itself to be a discount over time and b.) Facebook can incorporate its team before Instragam develops its own firm corporate identity and culture. Incompatible cultures can make for deal-breakers in the success of an acquisition, as culture is the means through which cooperation and collaboration take place. If two companies can’t agree on certain behavioural norms than the Founders of the acquired company may be driven out and thus the motor which created the initial success is removed. What is left is a nice-looking chassis which ultimately isn’t going to get you anywhere.

The last question I’d like to address is what does this acquisition tell us about Facebook. Is the company naïve and spending its money unwisely? Are Mark and Sheryl panicking? Is this a knee jerk reaction to that could distract Facebook from its core mission? While these statements may prove true over time, my feeling is that the Instagram acquisition shows that that Facebook is a maturing company that understands the forces that have given it life and that can thus can take it away.

Facebook owes its success to the fact on the internet, as Eric Schmidt has said, competition is only ever one click away. The ability to succeed in this type of marketplace requires one to be constantly thinking ahead and never content with the status-quo. The same factors that allowed Instagram to become a billion dollar company in less than two years can make it worth nothing in even less time if users find something more interesting and migrate in droves. Interestingly the only public appearance of the founders of Instragram was a technical presentation in which they detailed how they managed to scale their product so fast. By making that information public Instagram is contributing to others’ abilities to replicate their success and thus make scale less of a competitive advantage for the Googles and Facebooks of the world.

Standing still is what leads to seemingly comatose companies like Yahoo! And Microsoft. Like deer in headlights they’re paralyzed, not sure in which direction to move and unable to get out of the way of the trove of cars coming at them. Zuckerberg may be taking a big bet, but he also understands that far worse is not taking any bets. Furthermore, as every techie-delivered commencement address will remind you, failure is not the opposite of success but instead an inherent component of it. If you’re not failing you’re not trying.

So was the one billion dollar price tag worth it? While it’s easy to point to metrics that demonstrate that the cost was too high it’s much more difficult to calculate the cost of inaction given Instagram’s growth trajectory.  There will be some tech journalists who accuse Zuckerberg of being rash, but their ability to decipher the present often comes at the cost of their ability to look deep into the future. There is a reason, after all, why they struggling to meet their 10 article a day quota instead of joining the other tech billionaires on their souped-up yachts in the Caribbean.

A Note on The Google+ Re-Design:

Speaking of tech journalists eager to declare Google+ dead, Google+ this week launched a re-design which in my opinion greatly improves the quality of the product. The re-design comes just as many are declaring the project a failure. Without wanting to get into the non-apparent benefits that comes from Google integrating all of its products, what I do want to point out is that a.) people have very short memories and b.) beta might not mean anything to you because Google has abused the term but it actually does mean something to them. Most celebrate Gmail as the foremost email provider on the web, and indeed having a gmail account is often used as a proxy as to whether or not a person is actually tech-savvy. What people forget is that Gmail took years to become the product that today everyone knows and loves. At the time of it’s launch Google was more obscure and the internet hadn’t the penetration in people’s lives as it does today. Google+ will follow a similar path as Gmail because it’s a multi-purpose platform and, unlike more simple products like Instagram, multi-purpose applications take time to develop, especially as they search for their best use-case and value proposition. Given the strength of Google’s revenue, it can afford for the product to flounder for some time until it develops those killer apps. One example YouTube