CHAPTER 5

Boundaries

Disco Nuns, the Death of the Record Industry, and Our Open-Source Future

Sister Alicia Donohoe moving the crowd in the party room, Christmas 1947.

Not many nuns kick-start revolutions, and almost none have done so by DJing at children’s birthday parties. But Sister Alicia Donohoe was never out to change the world—she was just trying to make sure the kids were having a good time.

Alicia grew up in 1930s Boston, in the suburb of Dorchester, the daughter of Anna and John Donohoe—a child of the Great Depression. “It was a dead town,” she remembers. For the Donohoe family, a family of pianists, music would save the day during these hard times. “My parents played classical and my sister played popular music,” she told me. “My parents would be playing and I’d be singing along and turning the pages, and they’d do duets. All our friends would come over, too. We were surrounded by music.”

John Donohoe liked sharing music with strangers, using his piano to bring many of the unemployed people in the neighborhood together and give them something to smile about. “We had a very nice baby grand piano in the bay window,” Sister Alicia told me. “When my father would sit there at the piano during the day, he’d push the draperies back and open the windows. People who liked music would be standing outside listening and my father would invite them all in. He was not an inhibited man by any means,” she says with a chuckle. “We never knew who was gonna be in the house!”

Music inspired her, but by age six she had already decided she wanted to take care of children, “to see if we can make them as happy as we are at home,” she remembers telling her mother. “I always wanted to be a Daughter of Charity (the order of nuns she was to join). I knew a lot of Sisters, because I had two aunts who were Sisters.” And so it was that at age twenty-one, Alicia became a nun, and soon found herself at St. Joseph’s Home, an interfaith home for orphans and troubled children placed into care from birth to age six. And it’s there the revolution began.

The year was 1944. The world was at war. Scientists involved in the Manhattan Project were hard at work developing the most destructive force known to mankind. But at St. Joseph’s in Utica, New York, Sister Alicia was getting another experiment under way—a social experiment so powerful it is still repeated all around the world every night of the week.

St. Joseph’s embraced children from all cultures, religions, and backgrounds. It was a transient place: kids came and went all the time; some were there for a month or two, others for years. When Sister Alicia arrived, the young rascals at St. Joseph’s were an unruly little mob—she remembers one day having to stop them beating a very over-weight nun with sticks and brooms. “I had no control,” she told me, “I’d be running after them, then they’d be running after me.” But Sister Alicia saw they were a troubled bunch, and she just wanted to make them happy. “At first the children were all so down. I was so sad that they all had to be there. Then I decided I’d be no help if I was crying all the time.” She thought back to her own childhood and the difference she knew music could make to a group of strangers, and suddenly she was inspired.

With the limited resources at her disposal, she created what the children called the “party room”—a space replete with a refrigerator and a record player, which she and the children filled with multicolored balloons and crepe paper decorations. The room also had a piano and a small stage, though the Sister in charge told Sister Alicia that the children were forbidden from using either. Sister Alicia ignored her; she could see the last thing these kids needed here was strict hierarchy. “It was a playroom and they were in there, so I said go ahead and use it.” She decided that this room would be a place where the kids had options instead of rules.

She began to throw parties for the children as often as she could; she wanted them all to feel like stars. “Everybody had a birthday party. If there were three birthdays that month, we had three parties. They’d be all dressed up with party hats and I’d play the records. And the noise was something! But that didn’t bother me at all. It bothered some other people, but y’know, they were having fun.”

Sister Alicia manned the turntable, spinning tunes like a pro to keep the party moving. “We had many, many very nice records,” she says. “We were very blessed. It was all kinds of music, children’s music, party music, and then we had nice, quiet music for when they were getting ready to go to bed. I played whatever records we had. If I heard about any new records, I went to the store and bought ’em.”

She would go digging in the crates at the local record store like this every week, the same way obsessed DJs all over the world still do today, and she soon learned to manipulate her dance floor with expert precision, cutting between party favorites while introducing the crowd to the latest tracks. “If I put a record on and they didn’t like it, they’d let me know. If one didn’t like it, I’d ask the other children. I’d say shall we play this record just once, and then play the records you like? That way everybody had a turn, so it all worked out. And they danced!”

In the party room, these children from disparate and often desperate backgrounds ate, drank, played, and danced together like they never had before, connecting through sound and sharing shiny, happy moments that would have serious effects not just on them, but, some years later, on the rest of us as well.

It was 1949 when a five-year-old named David Mancuso left St. Joseph’s and was reunited with his mother. As he grew up, the memories of the party room became hazy—distant and water-colored, as the song goes. But subconsciously, a seed had been planted. David was a troubled youngster. He didn’t get on well with his folks, the people around him seemed narrow-minded and racist, and even at the impressionable age of six, he was not cool with that. “I didn’t believe in the things Mom believed in,” he told me. “When I was told at a very young age, I don’t even like to use the words, ‘the spics or the niggers or the Jews or this…’ none of this made any sense to me…. Money, a lot of things didn’t make sense.” Time passed, but he refused to fit in. He’d forgotten the party room at St. Joseph’s, but it was clear that David was singing from a different hymn sheet. After nine years, living with his mom wasn’t working out, and he ended up in a reform school.

Mancuso wasn’t much of a student, either. The only thing that held his interest was sound. He was consumed by it. He noticed acoustics everywhere he went, clapping when he walked into rooms. At his mom’s house he sneaked friends in when she went out, and they would dance around the record player. At the reform school he would listen intently to the faraway crackle of R&B stations in his dorm room as he drifted off to sleep at night. “Music reminds us that everything is okay,” he asserts. But everything was not okay. By age sixteen he’d given up trying to fit in with his dysfunctional family. He ditched school and moved into his own place. He realized he needed options instead of rules, which is why two years later he packed his things and headed for New York City.

He started out shining shoes, renting a place, and reveling in his newfound independence. Mancuso seemed to fit in here. He began hanging out in Tompkins Square Park in the East Village by the bandstand, where a group called the Grateful Dead were just getting started, as was a guy named Jimi Hendrix. The sixties were kicking in; everybody was dropping out. He begins experimenting with acid and soon met a young Timothy Leary, the legendary high priest of psychedelia, in a macrobiotic food restaurant. “The man was one of the coolest human beings ever. It wasn’t like he was this high priest…. I mean, well, he was high, and he was kind of a priest,” he explains. “And LSD was good. I mean there was some good shit out there. It certainly made you aware. And when you came down, you wanted to change things.”

The desire to change things stayed with him. During his experiments with LSD, Mancuso experienced reality in wild new ways, soaring to great heights and hitting bottom so hard he briefly ended up in the psychiatric ward of Bellevue Hospital. No doubt the staff saw another burned-out hippie who’d been on one trip too many. But Mancuso had seen something else. A vision, a fleeting memory, a revelation—he wasn’t exactly sure—but an idea was taking shape, one that seemed strangely familiar. There was something he had to do.

He flitted between jobs, disinterested in money, just trying to pay the rent. It was 1965 when Mancuso moved into a disused loft at 647 Broadway. He did so because it was cheap and large. Twenty years later, yuppies all over the world will pay fortunes for any old studio described by overimaginative Realtors as “lofts,” but back then they were cold spaces in deserted and often undesirable parts of town.* Mancuso decided to warm things up with a housewarming party, which, like all good parties, went on a little longer than expected. In fact, this party is still going on today.

“I was having social things there, having all that space, I would let other people from the area come in and throw parties, too. There was a group that threw one that was all-nude…it was the sixties,” he says with a shrug. “It wasn’t until 1970 that money became tight, and then I decided to have rent parties and charge a couple of dollars. I could pay my rent and continue to live there and have parties. None of my friends objected to this.”

Maybe that’s because Mancuso’s loft party wasn’t any old shindig. His obsession with sound had grown, and over the years Mancuso had amassed so much high-end audio equipment, he had designed and installed in his loft what was reputed to be the finest sound system in New York. Mancuso was (and is) so persnickety about sound quality that the only needles good enough for his turntables are Koetsus, which retail for up to $15,000 each, designed and hand-built in Japan by a family who once made samurai swords. The original design and layout of Mancuso’s sound system was so groundbreaking, many of the innovations he pioneered, such as bass reinforcement, sub-woofers, and tweeter rigs are now still used in sound systems all over the world today.

Music was just as important, and he hit the decks concocting aural journeys of R&B, jazz fusion, rock, world music, funk, anything with a groove. On top of this he served up hot food, snacks, and fruit punch. He also installed a huge mirror ball; a huger shrine to Buddha; and for some reason he couldn’t put his finger on, he was moved to fill the entire room with multicolored balloons.

“It was never intended to run as a business,” he explains. “I didn’t want to draw attention to myself, I did not want to get involved with the Mafia—they left me alone, they knew it wasn’t about money—so no liquor. I didn’t want any real hierarchy; even a social club was too much for me.”

Instead of membership, Mancuso sent out invitations to his many friends from all walks of life, inscribed with the words Love Saves the Day (you don’t need to be tripping to spot the hidden acronym here). The “Loft,” as it came to be known, became an institution. Soon more than two hundred people were packing out the forty-foot dance floor every week from midnight Saturday until well into Sunday, paying the $2.50 entrance fee. “It became more and more planned,” Mancuso says. “The sound, the music, every full moon we had ice cream. Everything was organic. It was all home cooking. It was always about being able to be with your friends, you were definitely gonna eat—’cos maybe you didn’t eat that day—who knows. That happened ’cos I had all kinds of people. Yeah, there were celebrities that came there, but the reason they came is they could be themselves. It wasn’t about who’s this, who’s that, it was about people getting together, outcasts mixing with people who were part of the system. We were all stars.”

The Loft became a legend, the original dance floor on which many elements of the emerging disco scene were formed. Word of Mancuso’s parties spread, which is how a childhood friend named Eddy, also from the children’s home, tracked him down. Eddy paid a visit to the Loft, and immediately felt as though he’d been there before. “My friend is really shook up by my space, the balloons and everything,” Mancuso remembers. Eddy looked around the room in disbelief, and the heightened sense of déjà vu gave way to a moment of clarity. He turned to Mancuso and said, “You’re not gonna believe this.”

Eddy had recently reconnected with Sister Alicia, who had given him some pictures of the old party room. When he showed them to Mancuso, it all came flooding back. “In this room was a console record player with records sitting on top, these little tables with kids sitting around, and the kids had little party hats, then there was the balloons. We both just started freaking out. This picture triggered my memory. Suddenly we’re in this living picture. It was so powerful, but it had been totally subconscious. The whole function of the room was socializing, playing, you look at this room and you look at the Loft and you see the same ingredients. I just wept at this picture.”

Mancuso realized he had being trying to recapture these feelings from his childhood at the Loft, feelings he was transmitting through his dance floor that were now appealing to other people. Lots of them.

Disco, which emerged from the psychedelic haze of flower power infused with R&B and social progress that was being cooked up at the Loft, was the most direct descendant, but the Loft’s influence spread into many other areas. Among its patrons were some of the world’s most renowned DJs, who would forge their own new movements. Frankie Knuckles, the infamous resident DJ of Chicago’s Warehouse Club (from where house music stems) was a regular, as was his close friend Larry Levan, the legendary DJ from New York’s Paradise Garage (where “garage music” originated). Influential spinners such as Nicky Siano, David Morales, François K, and Tony Humphries were just some of Mancuso’s other disciples. The history of modern dance music, rave, and club culture as we know it can be traced back to the Loft. Its legacy is difficult to overestimate.

The sentiments of Sister Alicia and Mancuso reflect an ideology bigger than music. “The Loft party was all about going through life and sharing,” says Mancuso—now in his sixties and still partying.* “This whole thing about social progress through parties—the parties were a blueprint for a way for things to work or function without a hierarchy as much as possible. That sense of community was really the wind in my sails. We have to have a system, and if it doesn’t work, it has to come down. Music and artists suffer a lot of the time because the system hits the wrong note.”

The system has always hit bum notes, but ideas of sharing and inclusiveness are striking a chord more than ever. The Loft helped birth dance music, now a multibillion-dollar industry operating across the world, a flashback to the ideals promoted by flower power, a sonic yearning for a system without hierarchy.

Sister Alicia’s social experiments with sharing and sound reverberated around the world. In recent years the music business has been torn to pieces by a new way to share. The open-source movement is revolutionizing many other industries as people collaborate, turning old hierarchies upside down, creating new business models and open resources that can improve the lives of us all.

Disco bit the dust, but ideas based on collaboration are hotter than ever. And it might not have happened in quite the same way if it were not for a nun in the 1940s, throwing children’s birthday parties.

All hail Sister Alicia, the patron saint of sharing.

Talking ’bout Boundaries (Territorial Disputes)

Each story in this book is about boundaries coming down. Punk democratized the means of production. Pirates ignored old restrictions on new ideas. We have seen how useful the remix can be, and how graffiti artists reclaim public spaces from private interests. All of these ideas are about sharing and using information in new ways.

But each story in this book has another side to it. As quickly as society figures out new ways to share ideas that advance the common good, private interests move in to stop this from happening, to maintain the old systems that benefit only the elite. This has happened throughout history. As Machiavelli once said, “It must be remembered that there is nothing more difficult to plan, more doubtful of success, nor more dangerous to management than the creation of a new system. For the initiator has the enmity of all who would profit by the preservation of the old institution and merely lukewarm defenders in those who gain by the new ones.”

This new system being created from the ground up is a new kind of open society. As we have observed, the powers that be are resisting the Pirate’s Dilemma in many cases, but the truth is that new ways of sharing can benefit the old systems, too.

More recently than Machiavelli, a tumultuous renaissance has taken place in the music business, thanks to file-sharing. The story of the record industry’s response to file-sharing is relevant to every other business, because the communities and technologies that changed music could affect every area of the economy. As new economic systems underpinned by sharing begin to outcompete markets, understanding the Pirate’s Dilemma will become a priority for nations, organizations, and individuals alike.

Less Fences = Better Neighbors

The open society disco dreamed about is a space with fewer fences. There will always be a need for gardens with good fences and gated communities, but boundaries can be damaging, and we live in a world where this is becoming increasingly obvious. Our nineteenth-century intellectual property laws suited the past, but they are not quite right for the future, and today they often stifle creativity rather than encouraging it. Sometimes progress happens only when pirates jump fences, going on garden runs over unreasonable licenses and patents to get us to a better place.

Good fences make good neighbors, but take the fence away and you have a bigger lawn. Get a few more neighbors involved and soon you’ve got a park.

The birth of dance music was based on the idea of sharing, channeled through David Mancuso, influenced by Sister Alicia and 1960s youth culture. But electronic dance music was not the only unforeseen side effect of flower power. Another was the birth of the personal computer.

The PC, as we shall now see, also was designed to be a social machine like the Loft—a way of sharing information that offered new freedoms and possibilities while posing a serious threat to some oppressive systems of old. It has since birthed what is known as the open-source movement, which started out as a way to build computer operating systems but is fast becoming a design for life.

There are two underground clubs from the 1970s that will go down in history as major influences on early twenty-first-century ideas about sharing. Both were involved in the death of the twentieth-century music business, and both were inspired by the possibilities of sharing, that we all need to comprehend. One was the Loft. The other was known as the Homebrew Computer Club.

(Disco’s) Revenge of the Nerds

Youth culture built the personal computer. The ideas that shaped it came together at Stanford University’s campus in Palo Alto, California, during the 1950s and 1960s. There a handful of young tech students, who were involved with both the antiwar and the hippie movements, fed their psychedelic social ideas into the development of the computer. Many scientists working on similar projects at nearby R&D facility Xerox PARC also were influenced by flower power. Some were hippies themselves. According to John Markoff, author of What the Dormouse Said: How 60s Counterculture Shaped the Personal Computer, “There was this very interesting parallel between the way they worked with psychedelics—which was about augmenting human potential—and the works of a man named Doug Engelbart [a pioneer of human-computer interaction, who, among other things, invented the mouse], who was attempting to build a machine that he thought would augment the human mind.”

The pioneers of Palo Alto had the same D.I.Y. attitude that energized punk. Their ideas for a new social machine were a reaction to the war machine and the establishment in general. Computers weren’t invented by narrow-minded number crunchers; they were the combined efforts of a group of anarchic radical left-wing activists, who had a desire to expand science, technology, and our collective consciousness, which they began to realize in the research lab. As Markoff tells it, “The great transformative technology of our lifetime was more than just a triumph of engineering and finance. It was, just as compellingly, the result of a concerted effort by a group of visionaries—fueled by progressive values, artistic sensibilities and the occasional mind altering drug—to define the idea of what a computer could be: a liberating tool to expand and enrich human potential.”

Computers became social tools rather than just giant calculators as a direct result of the influence of 1960s youth culture. In 1972 Rolling Stone ran an article about the link between psychedelic drugs and computers returning power to the people. The piece upset Xerox so much, they shut down the Palo Alto research facility. In doing so, they lost out on their early lead developing the PC and word processing—and squandered one of the greatest business opportunities of the twentieth century.

So instead of being controlled by Xerox, the next stage in the personal computer’s development was overseen by a D.I.Y. activist named Fred Moore. Moore was a radical pacifist known for protesting throughout the late fifties and sixties. He saw money as the root of all human problems* but thought computers might offer us some new solutions.

In 1975 a company called Altair released the first home computer kit, which was to whiz kids such as Moore what the turntable was to DJs. Fred Moore and fellow programmer Gordon French founded the Homebrew Computer Club in the same year, the geek equivalent of the Loft. Its membership was a left-leaning mix of hackers and activists who also grew up under flower power’s influence. They met in the garage of French’s home in San Mateo County, California, to ponder the future of computing, using new technology such as the Altair kit. Here the idea that became the personal computer was formulated.

The club’s members included a college dropout who occasionally dropped acid named Steve Jobs, and his future Apple cofounder, Steve Wozniak. They remixed early programs, fixing and debugging them, publishing their findings in a regular newsletter, and recruiting more members along the way. Like disco, computer software was something of a loose-knit, collaborative effort with an open social structure. And like disco, it would change completely once it went commercial.

In 1976, a twenty-one-year-old programmer (another college dropout rumored to have dabbled with LSD) wrote the Homebrew Computer Club an angry letter, saying the club couldn’t use his software anymore, a program called BASIC, without paying for it. “Who can afford to do professional work for nothing?” the letter asked the club, which had formed to do exactly that. “What hobbyist can put three man-years into programming, finding all bugs, documenting his product and distribute for free?” he asked, even though hackers, researchers, and companies such as IBM had been treating software as a public good since the 1950s. This young programmer was brilliant, but he had a different point of view to that of our sharing, inclusive Homebrew Computer Club. He was not doing this for nothing; his software was not a public good; it was intellectual property he had created to make a profit. He had a point: Why shouldn’t he be paid for his time?

It was the early 1980s, and disco was approaching a similar fork in the road. Disco was becoming the kind of social hierarchy David Mancuso and the original pioneers were trying to escape, spearheaded by commercial superclubs such as the infamous Studio 54 and the rise of manufactured, formulaic disco records being churned out by the major labels. Its original ideals were getting lost in a blizzard of sequins, cocaine, and flared polyester.

At the same time, in the world of computer programming, the letter-writing geek managed to turn the tide of opinion, and software was widely considered private property by the early 1980s. He ended up scratching a good living from his software, too. The letter-writer was Bill Gates, founder of the Studio 54 of personal computing, Microsoft Software, which had previously been as free to use as a public park, became a gated community. Gates became the richest man in the world.

Studio 54 and Microsoft monetized the ideals of sharing and networking, but other Homebrew and Loft regulars decided to take the road less traveled. Disco’s revenge was house.

As the commercialized disco scene died a slow death, its original source code was hacked by DJs such as Frankie Knuckles and Larry Levan, who forged it into the new house and garage sound, cleansing the music of crass commercialism and reinvigorating it with disco’s original progressive ideals. House music drifted across the Atlantic in the mid-1980s and found favor with partygoers on the Balearic island of Ibiza, where it was combined with a new drug known as ecstasy.

Music, one of our most precious forms of information, has always wanted to be free, spreading across the globe and mutating into new forms. The music from Ibiza was transmitted to the United Kingdom, where it caught on quickly, devoured the entire country, and evolved into a new sound: acid house. Huge, illegal outdoor parties attracted tens of thousands of people, who gathered in fields and disused structures such as airplane hangars, setting up massive sound and light systems, overwhelming local police forces across Britain. Huge crowds united for the night to thumb their noses at the authorities and imagine a different world. “Rave visionaries revived the utopian hopes of the 1960s,” wrote Ken Goffman in Counterculture Through the Ages, “believing that the vibe coupled with the communications technology and the open information channels…could now effortlessly effect a rapid, global, mass transformation of consciousness.” Rave’s giddy optimism whizzed around the planet, and has since been reimagined as many different youth cultures and strains of dance music, attracting partygoers to venues all over the world, infecting people everywhere, from Texas to Tehran.

Rave became popular because it generated community, even if it was an imaginary one contained in a disused warehouse that only lasted for twelve drug-fueled hours, fading as the sunrise blotted out the ultraviolet lights. Rave was flower power’s wild grandchild; it was the perfect accompaniment to the digital counterculture that began to creep into the early 1990s. It’s no accident that one of the richest veins of rave culture in America, an anything-goes culture also based on the idea of giving people options instead of rules, is in Silicon Valley.

The Homebrew Computer Club’s revenge on Microsoft was the open-source movement. While many agreed with Gates and saw software as intellectual property, others didn’t, and continued to develop their own free software. In 1983, a hacker/activist named Richard Stallman founded the Free Software Foundation, writing a new operating system that was as open as possible, arguing, “Free software is a matter of liberty, not price. To understand the concept, you should think of ‘free’ as in ‘free speech,’ not as in ‘free beer.’”* Hackers who weren’t ready to drink Gates’s pricey Kool-Aid instead started chugging Stallman’s free beer, and a range of new code was created, code that would revolutionize society.

The idea behind open-source software is to let others copy, share, change, and redistribute your software, as long as they agree to do the same with the new software they create in the process. This way, it can spread and progress as quickly as house music. The Internet was founded on free software such as USENET and UNIX, which is why no one can own it but everyone can use it. USENET is a public good free for the rest of us to build on. It was the early 1990s when Tim Berners-Lee, a British researcher working at the Swiss particle physics center CERN, designed the Web on top of such open-source software as a social experiment rather than a technical one. Free software was officially rebranded as open-source software in 1998 by the company Netscape (which then rebranded themselves as Mozilla, and created the hugely popular open-source Internet browser Firefox). As the Web spread its tentacles around the world, it became clear that open source was a way to maintain a wealth of new public goods, as well as a great way to promote private enterprise. In the words of Linus Torvalds, founder of open-source software company Linux, “the future is open-source everything.”

Open for Business

Just as house produced new sounds such as acid house, drum ’n’ bass, and U.K. garage, which became industries in their own right, the open-source movement has created new business models. Open source isn’t just a case of letting others use your work; it’s also about allowing your work to be transformative, so both you and others can benefit. Some businesses use the open-source model as it was intended by the hackers who created it; others just play with the basic idea of options as opposed to rules, enabling a community to build on their brands (but without giving up any copyright to those brands).

The open-source model is also known as a “wiki,” which is defined by Wikipedia as “practices in production and development that promote access to the end product’s source materials—typically, their source code. Some consider it as a philosophy, and others consider it as a pragmatic methodology.”

Wikipedia is a great example of an open-source model. It is an online encyclopedia, the largest encyclopedia in the world, which can be added to, updated, and edited by anyone who wants to. Before Wikipedia, encyclopedias were painstakingly constructed by scholars. Wikipedia is built entirely by amateurs. Instead of authority, Wikipedia embraces a new, decentralized way of working. At the time of going to press, Wikipedia had seventy-five thousand contributors, 5.3 million articles, and was available in more than one hundred languages. Every day thousands of new entries are added, and thousands more are edited and improved on.

Wikipedia’s open-source nature does leave it open to tampering and inaccuracy. In the United States, TV comedian Stephen Colbert has encouraged viewers to change Wikipedia entries during his show on more than one occasion, which they did as he spoke. In the United Kingdom, two BBC Radio 1 DJs defaced each other’s pages live on air. In 2007 both the U.S. government and Microsoft were caught by Wikipedia editors tampering with their own entries (editing your own page is a practice frowned on by Wikipedia users). A 2005 study by the science journal Nature compared forty-two science entries in Wikipedia and the Encyclopaedia Britannica. They found an average of four errors per entry in Wikipedia, three errors per entry in Britannica. But as Chris Anderson noted in The Long Tail, “shortly after the report came out, the Wikipedia entries were corrected, while Britannica will have to wait for its next reprinting.”

Wikipedia is usually pretty reliable, and covers much more ground than a traditional encyclopedia ever has. It may not be perfect, but if you want detailed information on the history of the Jedi, the Pamela Anderson sex tape, or the Homebrew Computer Club, Wikipedia rules Britannica every time. But the site itself makes no guarantees about accuracy. So instead I asked Jimmy Wales,* the founder of Wikipedia, to define the wiki/open-source business model personally. “A wiki is a website that anyone can edit,” he says. “It’s a place where people can edit and share information. It has tools where people can monitor the quality and revert to older versions if anyone has done something bad.”

Jimmy Wales is to encyclopedias what David Mancuso is to DJing. Both Mancuso and Wales changed the game, because they saw new possibilities in the idea of sharing. Jimmy Wales grew up in Huntsville, Alabama, close to where NASA’s team of rocket scientists were headquartered. He attended a small, private school run by his mother and grandmother. “I remember the windows shaking in my house when they were testing the rocket engines. It was a big deal to me that these people were going to the moon. That sent me off in a very scientific frame of mind. We had a really flexible environment. I had a lot of spare time, which allowed me to be very diverse in my interests, and I had a real passion for the encyclopedia. I loved following the links to other knowledge and learning different things.”

Making money was not rocket science to Wales, who made a fortune in the 1990s as an options and futures trader in Chicago, and then decided to pursue his passion. “I’d seen the growth of open-source software coming together online. I recognized that the free-license model gave us a new social paradigm, a way for people to share their work. People are able to use the software for commercial and noncommercial stuff. It’s not about nonprofit versus profit—it’s about proprietary versus closed. If I share my code, I’ll share it under a license that says you can use it for anything you like, but you have to share your changes as well. And that provides a level playing field—we’re all agreeing to share our knowledge. It struck me that this kind of social structure and social agreement could be used much broader than just software. One of the things that came to mind was an encyclopedia.”

Like Linux founder Linus Torvalds, Wales recognized that our future could be open-source everything. “Some of the general principles apply almost anywhere. In many cases, businesses are losing out on opportunities because of their information-hoarding mind-set. They don’t realize that their customers know more than they do.”

Wildly successful Net-based businesses such as eBay, Amazon, and MySpace are based on the strength of their communities and the content their users contribute for free. The technology these businesses are based on—the code that powers the Net—is also free. If there was a huge cost involved with adding pages to the Internet, or using it, none of these businesses would be able to function in the same way.

Many businesses that give content away for free are making money and growing fast. The open-source Linux software set up by Linus Torvalds as a hobby in 1991 is today used by Google, in Motorola cell phones, TiVos, and BMWs. Many companies, including Intel and IBM, have programmers working full-time developing new free software for Linux, as they obey the laws of Linux and put back some of what they take out. By distributing their core software for free, Linux now powers forty-three million personal computers worldwide. By selling customized software that runs on top of the free open-source software, it’s predicted the market for Linux products will be worth $35 billion by 2008. To paraphrase Stewart Brand, author and founder of the Whole Earth Catalog, information wants to be free, but customized information wants to be really expensive. Linux is a great example of a company that follows this dictum.

The value of openness is something most of us are only just getting to grips with. Harvard Business School published a report in 2006 that surveyed a range of businesses and concluded that introducing problems to outsiders was the best way to find effective solutions. A European Union report released in 2007 specifically endorsed open-source software, claiming that in “almost all” cases, long-term costs could be reduced by switching from proprietary software to open-source systems such as Linux. The study also claimed that the number of existing open-source programs already available would have cost firms 12 billion Euros (£8 billion) to build, and estimated that the programs available represent the equivalent of 131,000 programmer years, or “at least 800 million Euros [£525 million] in voluntary contributions from programmers alone each year.”

Systems based on sharing expand the way information is used, and in doing so expand the market for that information. As this dawns on more of us, the question will not be “How do we stop this happening,” but “How do we facilitate it?” The challenge of successful social networks in the twenty-first century will be figuring out how to create a dedicated dance floor like the one at the Loft, and how to keep people contributing to open-source projects and social networks, devoting their time and expertise the way they did at the Homebrew Computer Club. To better understand how this might work, let us look at an example of an industry that decided to fight a new system based on sharing, when it should have been adapting to it.

From Loft Space to MySpace

Today, major record companies claim that they are facing a threat from file-sharing unlike any they have ever known. But this is a case of history repeating itself. The majors have been confronted by the threat of new distribution methods before—in the 1980s the British Phonograpic Industry believed that the cassette tape and home recording would kill music, and campaigned against it. The industry also was confronted by what they saw as a threat from new ways to share music back in the 1970s at the Loft. But just as it was with cassette tapes, in the end, they realized that this threat was an opportunity.

Then the disco DJs were figuring out new ways to share vinyl. Now people are figuring out new ways to share MP3s. As it turns out, David Mancuso is not just the godfather of dance music, he is also the granddaddy of file-sharing.

Back then, the influence of Mancuso and the handful of twenty or thirty club DJs in New York City was so powerful that the obscure independent records they sought out and spun in the clubs could become so well known, they could break into the top forty charts without any support from radio stations. At the Loft and the other discos springing up around the city, records that were hits on the dance floor became so popular that the majors began swooping in, signing and releasing them commercially. Many hit the pop charts, making a lot of money for the major labels in the process.

But according to Mancuso, the record companies didn’t understand these new club DJs. They had no idea who was who, or which of them were breaking these records, so the labels responded by making it very difficult for the disco DJs to get ahold of promotional copies of new records, refusing to share their new records before they were released. They discriminated against disco DJs in favor of radio DJs. Even when they would give records to the disco DJs, “labels would only let DJs go get records between 2:00 P.M. and 4:00 P.M.,” remembers Mancuso. “The record industry was exclusive, it was racist…. I would just go buy my records.” It was becoming harder and harder for the disco DJs to get new music from the labels, even though they were promoting their records better than the radio stations, even though, as Mancuso says, “in those days you didn’t make any money playing records. You were lucky if you got paid.”

Mancuso and the other DJs found the situation incredibly frustrating—so frustrating that, as Mancuso tells it, he stayed up for three days in 1975, taking speed and thinking intensely about the issue until he came up with a solution. Mancuso and fellow DJ Steve D’Acquisto called all New York’s disco DJs to a meeting at the Loft. “DJs and DJs only met to figure this stuff out. And we did,” he told me. “I said why don’t we do something like a car pool, something where we can all get together and pool our energies?”

The club DJs wrote a declaration of intent at the Loft, setting out the blueprint for what would become known as the “record pool.” The disco DJs who were breaking and promoting records presented themselves to the labels and convinced them that what they were doing was legit. “The record companies would give us test presses,* there were no favors, no this, no that. It was eliminating payola—that was the beauty of it. The way to get your record distributed was to give us enough copies; that was it. If they sent us twice as many as we needed, I would send them back. I kept it really clean. Many people felt threatened by it, but we just wanted our records, in exchange for feedback, and that’s what it came down to. It was a great concept, it worked, there was no executive director—we were all DJs.”

The record pool would legitimize the club DJs. For DJs to belong to the pool, they had to pay a small subscription fee to cover postage and costs, and supply a letter on headed paper from the clubs they played at, stating how many nights they worked. In exchange for this supply of free records, the DJs had to supply written feedback to the labels about each new track, letting them know what worked and what didn’t. The DJs got access to new music, the labels got a new kind of R&D department they could use to road test their products. It was brilliant—so brilliant that the record pool system is still used by labels and DJs all over the world today.

“Some people found everything I was doing very intimidating,” Mancuso remembers. “It took a lot of work to form this pool. We used the word ‘discotheque’ and called ourselves ‘disco’ DJs. I only started to realize how significant all this was later.”

This story has never been more significant than it is today, because in the past ten years, this story of the majors responding the wrong way to a Pirate’s Dilemma has manifested again, only this time on a global scale. Just like with the record pool, the majors are being forced to work out a better way to share music, so that the system benefits both them and the people promoting their records and making them money. Only this time it is not disco DJs promoting their records, it is every single one of us.

Farther down the bloodline of geek royalty from Steve Jobs and Bill Gates, is Shawn Fanning, the seventeen-year-old college dropout and convert of rave culture who created Napster, the file-sharing community that turned the music industry on its head. In 1999, Fanning figured out a new way to share music just like the disco DJs did. Napster was born, allowing users to share and exchange vast quantities of music online—illegally. Together with MP3 players, which allowed consumers to carry around the vast amounts of music they had downloaded onto their computers, Napster changed music history. At its height, the Napster file-sharing network had some seventy million users trading 2.7bn files (most of which were music files) every month. Fanning was the consummate pirate, creating a new space and upsetting the status quo. The industry responded with a bloody legal battle, bankrupting Napster by 2002 (it has since relaunched as a legal online music store). The majors continue to rage against download sites and those who use them. But Napster was like the record pool on steroids, and downloading would change the balance of power in the music business for good.

Artists not getting paid for their work is a problem. But the fact remains that file-sharing sites such as Napster make an abundance of music available that we otherwise would not have access to. Most of the recorded music ever made is no longer available for sale on CD (only about a fifth of all recorded music is ever actually on sale; the rest is deleted and no longer in circulation). It is clear that file-sharing can offer us something more than record stores, the same way disco DJs could offer new music in a way radio couldn’t and wouldn’t.

Getting a major label advance has traditionally been the holy grail for aspiring musicians. But many are shelved or dropped before they’ve been given a chance to develop. Those who do sign their rights away and are then subsequently shelved find their careers held up indefinitely. As musician Courtney Love said in a speech in May 2000, “Somewhere along the way, record companies figured out that it’s a lot more profitable to control the distribution system than it is to nurture artists. And since the companies didn’t have any real competition, artists had no other place to go. Record companies controlled the promotion and marketing; only they had the ability to get lots of radio play, and get records into all the big chain stores. That power put them above both the artists and the audience. They own the plantation.”

The same way the record pool made things fairer and better for both the disco DJs and the record labels, file-sharing also could make the business of music much more efficient and equitable for consumers, artists, and labels alike. Artists are learning to make it without the majors, the same way disco DJs made hits without radio. File-sharing and online social networks are giving rise to a new type of infrastructure that allows artists to become self-sufficient and that gives music fans more choice.

Having the backing of a major label with the marketing muscle to put you on every record store shelf and TV channel used to be the only way to the top, but who needs the majors in a world where people watch music videos online and record store chains are going out of business? File-sharing has created a new middle class in music. The musicians in this middle class might not go platinum, but they are making a living.

DJ Jazzy Jeff—who made a name for himself as Will Smith’s DJ and producer (back when Smith was the Fresh Prince), is one such artist who left the majors to do his own thing and who is still making a living as a successful producer and DJ. He explained to me why he decided to go the independent route in 2004:

“The business of music is more influential than the music itself. It sucks, and that’s why now I’m very supportive of downloading. The Internet has given music back to the people; right now the industry has to be doom and gloom to wash out all of the bad. Artists fight over how they split up the dollar they get per record, but nobody is talking to the guy who gets nine.

“One day I really sat down and did the numbers. You get a dollar per record, and after the recording and promotion of the record, it might be $800,000 spent, which comes out of your cut. You sell 500,000 records, which means you wind up owing the record company $300,000. You’ve blown the record up, toured all around the world, how in the hell do you owe them $300,000? If they sold half a million records and got $9 per unit, they made nearly $5 million! And you still owe them!!!

“We have to change the structure. You know what made me realize? I did a mixtape about four or five years ago. I went to a couple of the stores and they were like ‘we sell mixtapes for $10, and we’ll give you $5.’ And I was like ‘Shit! That’s 50 percent! That’s more than the record company gave me! And when you get to the big time, you get 10 percent? If your tape blows up, you might sell 10,000 tapes. And you made $50,000. You can’t make that when you sell 1 million records. That’s why the industry is dead. I know a lot of artists that made records without record companies, but I don’t know any record companies that made records without artists.”

Many artists welcomed the changes file-sharing brought because they felt the same way as Jeff. A study by the Pew Internet & American Life Project asked three thousand musicians and songwriters their views on file-sharing in April 2004. A total of 35 percent of those polled said that file-sharing was not necessarily bad, because it helped market and distribute their work; 35 percent said file-sharing had actually boosted their reputations. Only 23 percent of those asked agreed that file-sharing was harmful; 83 percent said they had deliberately put free samples of their music online.

Until recently, the record industry had made no real attempt to legitimize file-sharing. The majors responded the same way they did to the disco DJs, treating the prospect of a legitimate file-sharing business as a second-class way of doing things. Instead of responding to this Pirate’s Dilemma by competing, the industry fought against file-sharing, imposing unworkable restrictions of digital rights management* on paid-for MP3 files, criminalizing legitimate music fans.

In 2005 Sony-BMG covertly added “rootkit” software in their products, a type of spyware that secretly installed itself on to the computers of their customers, allowing them to make only three copies of their CD and relaying private information about how their customers were using their computers back to Sony-BMG. This was done without customer permission or knowledge, and trying to uninstall the software from your computer could potentially melt down your entire system. Millions of computers worldwide were affected by this corporate-sponsored virus, which did nothing to combat piracy but outraged many customers who had chosen to legitimately purchase their music rather than download it illegally.

As founder of O’Reilly Media, Tim O’Reilly once noted, the thing to fear is not piracy, but obscurity. Instead of figuring out how to embrace digital formats, when the labels decided to turn their customers into the bad guys, many customers turned their backs on them. Ten years ago there were six major labels. Now there are three. Soon there will probably be two. Suing consumers trying to figure out a new distribution system makes about as much sense as only allowing the DJs who promote your records to collect them between 2:00 P.M. and 4:00 P.M.

The hip-hop group Public Enemy was one of the first to understand this new business model, and Chuck D of the group was one of the first to grasp what was happening. When he was invited to address the U.S. Congress Committee on Small Businesses hearing on downloadable music in May 2000, he told them the music business “had to be eradicated for everybody to participate and start from scratch…. A business model will come out of this new century,” he said. “It won’t destroy the old companies, but it will reconfigure their ways.”

Chuck’s prophecy is coming true.

Downloading is blamed for all the majors’ woes, but the reality isn’t so straightforward. It was the majors’ response to downloading that was the real problem. A 2004 Harvard study that matched the hard data on downloading against the actual market performance of the songs and albums being downloaded found that any negative effect downloading has on CD sales was “statistically indistinguishable from zero.” The study concluded that file-sharing was actually boosting CD sales for the top 25 percent of albums that had more than six hundred thousand sales. According to the study, for every 150 songs downloaded, sales jumped by one CD, because the people downloading these songs and albums were not people who would have bought these albums or singles in the first place.

File-sharing created a new market and is attracting a new type of music fan. The problem is the same as the problem with the disco DJs. The music industry hasn’t yet worked out how to legitimize this new way of sharing. When an industry responds to a Pirate’s Dilemma by fighting rather than competing, it runs the risk of missing out on new opportunities.

The Recording Industry Association of America (RIAA) blames file-sharing for the industry’s decline, ignoring many other factors. Radio ratings have plummeted in recent years, as more people tune into MP3 players or talk on their cell phones rather than listening to the top forty on their drive home from work. The RIAA has refused to recognize the potential of file-sharing as a new format. According to their statistics, in the first half of 2005, U.S. music retail sales fell by $266.1 million. But as a paper on the effects of file-sharing by MIT published in late 2005 noted, this figure “does not take into account digital music sales (such as iTunes) which have increased by $124.5 million (169.9 percent) compared to the same period last year. However, when this is taken into account, the loss is almost halved.”

The paper concluded that “allowing the recording industry to proceed with their lawsuits is not the solution. Despite these suits, online piracy is still rampant. The recording industry somehow needs to work with these software companies and come up with a system that is mutually agreeable and effective.” A study commissioned by the Australian attorney general’s office in 2006 similarly argued that the music and software industries were attributing sales losses to piracy, with no solid evidence to back up their allegations.

The truth is that the CD market went into decline because it became an obsolete format, peddled by an out-of-touch industry too stubborn to change. The only reason why the majors had it so good for so long was they could keep selling people back their entire record collection on tape, then CD. Once the majors became multinationals, complacency set in and output suffered. Add to this the consolidation of radio stations into similar conglomerates, and suddenly you have a business with a range of products as diverse as a McDonald’s menu. The death of the record industry was the best thing that could have happened to the business of making music.

It took a company that truly understood sharing to make the first steps to legitimize downloading on a grand scale. It was no coincidence that this company was Apple, a product of the Homebrew Computer Club. iTunes proved that music no longer needed a physical system of distribution to be a legitimate, profitable business. Selling music online independently has been made easy, allowing bands to grow fan bases independently. Suddenly radio playlists, MTV, and A&R guys aren’t the all-powerful gatekeepers anymore. At long last the music industry is becoming a democracy.

This new democracy looks a lot like the model used by the music business in China. A total of 95 percent of all CDs sold there are pirate copies. This is because there are such tight restrictions on the legitimate sale of foreign media, and also because in Chinese society, the idea of paying for downloading music is, by and large, considered ridiculous. Recorded music is effectively a public good, free at the point of consumption. Yet a large middle class of artists make a living there, primarily from live performances. As columnist Kevin Maney wrote for USA Today, “Chinese rock stars aren’t getting as wealthy as, say, Michael Jackson, but…why should they? Only a relatively few American rockers ever sell enough CDs to get fabulously rich. Should society care if rockers can’t afford to build their own backyard amusement parks?”

Celebrity magazines might not have as much to write about, but as far as the business of music is concerned, file-sharing has meant that every aspect of the business (apart from selling the little plastic disks part) appears to be doing better. Since 2005, the legal download market has begun to flourish, with sales worldwide tripling that year, to $1.1 billion. Demand for live music, from barroom acts all the way to stadium-filling rock stars, has grown exponentially since the advent of downloading, as local bands use online social networks such as MySpace to promote themselves beyond their hometowns to worldwide audiences.

Live music has grown because music has become more important to us as it has become more accessible. As MP3 players converge with other products, music is becoming a feature of everything we do. Apple sold thirty-five million iPods in 2005, but Nokia sold forty-five million cell phones that could play music, two years before the iPhone came along. Meanwhile Oakley plumbed an MP3 player into its range of sunglasses and Swiss Army installed one in its latest penknife. The year 2006 saw the first single go to number one on downloads alone. “Crazy” by the group Gnarls Barkley (aka singer Cee-Lo Green and our friend from chapter 3 DJ Danger Mouse) hit the number-one spot in the United Kingdom. “You really think you’re in control?” sang Cee-Lo, maybe not intentionally to the record industry. “Well, I think you’re crazy.” And just to prove it, Koopa became the first unsigned band in history to enter the U.K. top forty, in January 2007, with their aptly named single “Blag, Steal, and Borrow.”

Recently the major labels have begun to see the benefits of this new reality, learning to work with file-sharing the way they learned to work with disco DJs. “Digital is no longer a disruption but the bright future of our industry,” announced Alain Levy, CEO of EMI, in October 2006. “Over 10 percent of music revenue worldwide is now in the digital format and we predict digital will account for around 25 percent of EMI’s revenue by 2010. That’s a hell of a change in a very short time. We are living in a world of beta products/services waiting for consumer traffic…we have to be increasingly flexible and open to the outside world. Closed media companies will quite simply die.”

In the summer of 2006, Peter Jenner, former manager of the Clash and Pink Floyd and now a professor at the London School of Economics, became a modern-day Mancuso, proposing a new way for the artists and the labels to pool their resources and earn money from music shared online. “If there were, for instance, a charge of $10 a month for all the music you can use,” he said, “and there were 300 million subscribers worldwide, the recorded-music industry would have the same retail turnover that it has now. If we also consider that over 800 million mobile phones are sold every year, which will all be able to receive music, and study the growth of new technologies and their application in the last century, the industry should be confident.” The jury is still out on Jenner’s solution, but EMI and Universal became the first major labels to begin selling MP3s without DRM encryption in 2007. That February, Apple’s Steve Jobs made a plea to all the record companies to abolish DRM completely, saying it was “clearly the best alternative for consumers, and Apple would embrace it in a heartbeat.” John Kennedy, the CEO of the IFPI (the International Federation of Phonograph Industries), summed up the music industry’s new position on the Pirate’s Dilemma it faced: “At long last the threat has become the opportunity.”

The sad truth is that it was an opportunity all along. By the end of 2007, some of the world’s most successful musicians, including Madonna, Radiohead, and Oasis, had all stopped working with major record companies.

The music industry’s response to the Pirate’s Dilemma is a lesson all others need to learn from. Movies, video games, magazines, and newspapers have all suffered losses as they make the transition to business models based on electronic distribution. The music industry found out the hard way that resistance is futile. The best way to stop piracy, as Steve Jobs said, is to compete with it.

Instead of fighting change, his computer company saw a way to “embrace it in a heartbeat,” legitimize it, and became one of the most powerful players in the music business in a few short years. Apple beat the majors for the same reason the Homebrew Computer Club beat Xerox back in the 1970s: they were the first to treat the threat as an opportunity. The trick is not to fight, but to be the first to market.

When I say that the Pirate’s Dilemma is something all other industries need to consider, I mean literally all other industries. There are many already using new ways to share electronic information to change things, but sharing isn’t just making waves online. A world full of 3-D printers, where downloading sneakers becomes as easy as downloading music, could be just as scary a place for those in the business of selling physical goods. But a world full of open-source 3-D printers could be terrifying.

3-D.I.Y. Part 2: The New Batch

As we saw in chapter 1, the big machine that punk raged against is being broken into smaller, faster, more efficient ones, albeit ones that can print machines of their own.

Even so, Adrian Bowyer, the 3-D printer developer we met previously, sees even more profound possibilities in the 3-D printer’s future. Bowyer and his team are developing an open-source 3-D printer that can print a 3-D printer called the “Replicating Rapid Prototyper,” or RepRap for short.

“I realized that it ought to be possible to design a 3-D printing machine that could make almost all its own parts,” Bowyer explains. “You’d have to put the machine together yourself. But it would effectively be reproducing, albeit with help from a person…. The best definition of biology is that it’s the study of things that reproduce. My proposed machine would reproduce, and so a lot of biological laws would automatically apply to it, the most obvious one being Darwin’s law of evolution.” Not only will the RepRap reproduce faster than a wet gremlin eating chicken after midnight, it will be able to improve itself and evolve.

“It has the potential to create wealth like nothing that has gone before,” he envisions of the RepRap. “But immediately this leads to a paradox: the RepRap machine itself, and the idea of it, are both worthless. The reason is that nobody can sell a machine that copies itself, because one is all they would ever sell. The machine’s cost has got to drop to the price of its raw materials plus the labor cost of assembling it—it kills the whole idea of added value.”

Bowyer and his team are on a mission to subvert the status quo. Using open-source licenses that do not allow anyone to patent the technology, the RepRap’s design will be free to download, kicking down the last barrier to the world stage once and for all. “We all know that, if it were not for trade restrictions imposed by the rich, the poor would be growing all the world’s food,” he says. “They would thereby cease to be so poor. My primary aim is that RepRap will turn manufacturing into agriculture, and that the poor—who will have the most competitive labor cost of assembly—will thereby be able to use it to elevate themselves.

“3-D printing will completely replace vast swathes of manufacturing industry. Our initial RepRap machine will be quite modest…. Butthen Darwin will take over. Anyone with a RepRap machine can redesign it to improve it, then use their machine to make their redesign. Those improvements will be posted back on the Web, and so I think it will evolve very rapidly in a number of directions. We will also see something akin to speciation as the types of machines diverge. But, of course, any change that makes a machine unable to copy itself becomes a dead end, just as with living organisms.”

Perfect Information

Open-source culture has the potential to turn the 3-D printer, or any other object or idea, into a living organism. And this radical idea based on sharing and D.I.Y. is making some profound changes in the way we live.

A concept exists in economic theory known as perfect information, which describes a state of complete knowledge about the actions of others, instantaneously updated as new information comes to light. It is a purely theoretical, impossible construct, but in a world where Wikipedia is growing exponentially, the Gawker Stalker map gives you George Clooney’s exact coordinates in real time, and you can spend hours Googling the crap out of that girl you met last Thursday, we may be edging a little bit closer to it.

Schools and colleges have always shared the hackers’ sentiment that information wants to be free, and many are freeing theirs. Educational resources are being made available to the public all over the world. Free, open-source educational tools and podcast lectures from some of the world’s finest institutions, such as MIT’s OpenCourseWare, are now available to people who would previously have been denied access to academia. Free education for billions of people would have a profound, positive effect on the planet. Mark Twain once said that he never let schooling interfere with his education; now getting into a school doesn’t have to be a barrier to entry for anyone who wants to learn.

Sharing information in new ways is affecting who is educated, but also how they are educated. Blogging assignments, educational podcasts, and class wikis are becoming increasingly popular as school 2.0 becomes a reality. Education has never been as exciting as other content on offer to kids, such as video games, but it would appear that that is changing. “Never in twenty-five years of teaching have I seen a more powerful motivator for writing than blogs,” teacher Mark Ahlness told the Seattle Times, “and that’s because of the audience. Writing is not just taped on the refrigerator and then put in the recycle bin. It’s out there for the world to see. Kids realize other people are reading what they write.”

Many open-source collaborations are educating even the smartest of us. The Human Genome Project is a great example of this. The project was the result of some of the best and brightest scientists from academia and several huge pharmaceutical companies getting together to collaborate and create a public good: a map of our DNA—the human operating system, a living Linux.

Because so much information is being shared so widely, knowledge and power are being distributed farther than ever before in history. The stock of human knowledge is doubling every five years. “The walls dividing institutions will crumble,” predict Anthony D. Williams and Don Tapscott in their book Wikinomics, “and open scientific networks will emerge in their place…. All of the world’s scientific data and research will at last be available to every single researcher—gratis—without prejudice or burden.”

The open society forming around us is utilizing resources to achieve greater efficiencies than markets alone can. It’s also creating some new killer applications, tackling some of our biggest questions.

A great example of this is community computing. Community computing is a way to create vast amounts of decentralized computer power by connecting home computers together like Voltron, using their spare disk space to do massive calculations and process vast swathes of data that no single supercomputer could handle. By signing up online to services such as SETI@home, which processes radio frequencies from outer space (SETI stands for the search for extra terrestrial intelligence), instead of just going on standby, your laptop joins more than five million other PCs linked together to search for flying saucers whenever you’re not using it.*

Community computing uses distributed networks of PCs, Macs, and laptops to work on potential cures and medicines for cancer and AIDS, render digital animation for movies, predict the weather, and crunch huge numbers so we can better understand global warming. By sharing disk space like it was Loft space, distributed computer networks are faster than our most powerful supercomputers with enough PCs in the chain. Stanford University had signed up fifteen thousand PlayStation 3 users by April 2007, who donated their console’s spare processing power to biological research. This distributed computing network of PlayStation 3s is faster than the fastest supercomputer in the world.

People are figuring out new ways to share knowledge that have serious implications for many industries, most of them positive. Lawunderground.org is attempting to democratize the legal process, using law students and volunteer lawyers to pool their knowledge and provide free access to legal information in the form of a wiki, which generates legal advice based on the questions you ask it. Doctors are using a Google search of more than three billion medical articles to help them diagnose patients (a study carried out in 2006 showed that 58 percent of the time, Google made the right diagnosis). Several projects, such as the Science Commons, are making scientific knowledge and findings more accessible to the general public. Systems creating free substitutes for all kinds of basic processes and services that used to be based on sharing are things you had to pay for, as advice from doctors, lawyers, and teachers becomes as downloadable as music. The customized information that lawyers, doctors, and teachers give will still be expensive; this isn’t about undermining their ability to earn money. What’s actually being undermined is the very idea of why we work.

When Work Stops Working

The success of open-source initiatives proves that money isn’t the only thing making the world go ’round. As Pekka Himanen observes in The Hacker Ethic, capitalism is based on the notion that it is our duty to work. The nature of the work doesn’t matter; it’s just about doing it. This notion, first suggested by St. Benedict, an abbot in the sixth century, evolved into the Western work ethic (where we do work that doesn’t always matter most to us, but it’s for money rather than the monastery). This work ethic has never been perfect (even for Benedict—some of his monks tried to poison him), but is increasingly coming unstuck.

We live in a world that has been governed by competition for several millennia, but increasingly competition has to compete with cooperation.

Work-centeredness was long ago replaced with self-centeredness, but this drive to express ourselves is also forging a new community spirit. As Linus Torvalds writes in The Hacker Ethic, “The reason that Linux hackers do something is that they find it to be very interesting and they like to share this interesting thing with others. Suddenly you both get entertainment from the fact you are doing something interesting, and you get the social part.” Our work ethic is more of a play ethic.

We’ve always harbored desires to create and share, long before the Loft and the Homebrew Computer Club came about. Building community is part of human nature. This previously unseen economy has long been ignored by mainstream economists, but it is now encroaching on the monetary system itself. But rather than eating into the foundations of the free market, it’s bolstering them.

Historically, societies have always been more successful when they boast a wealth of public goods on which free enterprise can be founded. Open-source social networks and other systems based on sharing are about a still unimaginable wealth of new public goods on which even more unimaginable new business ideas will be established. It’s about new industries creating new value. The Internet was built on UNIX; free code, a public good. On top of that, millions of new community-based private enterprises have been built, from the new media giants such as Google and Yahoo to millions of niche and special-interest businesses even weirder than the “weird” section on PornoTube. The music industry is being replaced by a new middle class, but this isn’t just a class of musicians, it’s also a new democracy that offers businesses and citizens more opportunities, which is redefining our economic system.

Based on a $9 million research project into open-source culture, authors Don Tapscott and Anthony D. Williams published their 2007 book Wikinomics, which concluded that “smart firms can harness collective capability and genius to spur innovation, growth and success,” but to fully realize the potential of an open-source future world require “deep changes in the structure and modus operandi of the corporation and our economy.”

The changes that need to be made are largely in our perception. Many think that open-source models are about giving everything away and not making any money. While this is true of some, it’s a choice. They are about sharing information, but it is possible to manage what you share so it’s a win-win situation for you and others.

How to Build an Open-Source Platform: The Four Pillars of Community

We know how to go about creating a great remix, but how do you encourage others to remix your ideas in an open-source system or social network in ways that will benefit you both? Open-source systems work like the youth cultures that dreamed them up, open environments that can infect people with the passion of those who built them and become self-perpetuating, growing sustainably and often substantially.

Pulling a crowd into an open-source project is a lot like pulling a crowd into a nightclub. To build a great open-source platform that people will want to go to, you need to be a great party promoter. Handing out flyers is not enough. What can you offer the potential users who will turn your idea into the hottest ticket in town? There are four ways to motivate people to participate. To create a great platform people will flock to, you need to build it with one or more of the four pillars of community.

Pillar 1: Altruism

Inspire Your Audience to Help You Start Something

Successful clubs and open-source projects are driven by the passions of their audiences. Clubs inspire partygoers with new sounds. Open-source projects inspire people with new ideas. The Loft gained support because there was nothing else like it. It was worth being a part of. The same is true for Wikipedia, the cause of amassing all our knowledge in one place, for free, is a worthy one. The lawyers who contribute to open-source projects such as Lawunderground.org do so for the same reasons disco DJs promoted obscure records in the 1970s for very little pay: they believe in carving out a different way of doing things.

Pillar 2: Reputation

Let Your Audience Create New Identities and Distinguish Themselves

Altruism inspires people, but so does self-interest. A form of self-interest that powers both youth cultures and open-source culture is the desire to create identity. Ravers might wear brightly colored outfits as a form of conspicuous consumption designed to communicate something about themselves to others. Open-source systems flourish when they encourage conspicuous collaboration. Many open-source networks have an inner core of extremely dedicated users. To encourage this, you must empower your most dedicated contributors. Reward users’ efforts by making their hard work visible to others. Users of Internet forums are often graded under a points system, depending on the number of posts they have made on the forum. The most dedicated Webmasters on forums are often volunteers who are motivated by their position of status in the community and the power they have to control the discussion and ban unruly members. Reputation drives many of the hard-core users who make Wikipedia the largest encyclopedia in the world. It has many contributors, but only about 10 percent of them contribute ten or more entries. They are competing with one another. It’s a social activity, a form of conspicuous creation that ups the reputation of users among their peers. Open source is about decentralization, but in many cases an upper echelon of core users, working hard just to get a rep, is vital.

Pillar 3: Experience

Give Your Audience a New Experience and the Chance to Improve Their Skills

Flower power, disco, and house all offered their audiences incredible new experiences on the dance floor. The payoff for being a collaborator in these movements was walking away with a new experience and being part of something that mattered to you. Old hippies talk about being at Woodstock with reverence for the rest of their lives. Old ravers love telling younger generations that they “weren’t there in ’88.” Open-source models also offer users experiences they might not otherwise get the chance to have.

Collaborators are attracted to great open-source projects so they can say they are a part of it, but many are also looking for experience in a more practical sense: they want to hone their skills and gain hands-on experience. Free blogging software gives users the chance to learn to be journalists. Programmers all over the world support Linux not just because they share Linus Torvald’s passion for free software, but also because they want to learn the finer points of the system to boost their own careers. For those interested in getting into the video game industry, creating open-source mods of games is a great way in. The cost of contributing to open-source projects is usually just time. To convince collaborators to spend time on your project, you must make sure their return on this investment is high.

Pillar 4: Pay Them!

At the Loft, David Mancuso paid his partygoers back for coming with homecooked food and fruit punch. Increasingly, paying users back will be an answer for many companies that are attempting to make a profit from open-source and social-networking ventures. If contributors are to share expertise, revenue-sharing models will become more commonplace as more organizations jockey for our spare time, helping to grow a sustainable open-source economy. Already people make full-time jobs out of selling goods on eBay. Online editors will increasingly be paid, too, adding further to the growing number of self-employed people.

Open-source collaborations have to be a win-win situation for the system and its users. Everybody needs to benefit in some way or the model is not sustainable. Creating a great open-source model is about striking a balance between encouraging users to innovate and create without giving away so much that you cannot sustain the model. This might mean you don’t give away all your information, but in other cases giving away all of it may be the best solution.

Weaker Boundaries = Stronger Foundations

Some critics argue that open source will completely destroy free enterprise, but what it is actually threatening to do is facilitate free enterprise on a truly democratic basis. The huge disparities of income that exist in the world could be significantly eroded by the free distribution of all kinds of knowledge and information, and if the 3-D printer succeeds, the free distribution of physical goods, too. Open source isn’t going to end free enterprise on a global scale, it’s going to make it fair.

“I think that we are in for some really radical changes in a lot of social structures, because of the ability to flatten things out and have really open sharing of information,” says Wikipedia founder Jimmy Wales. “How it’s going to play out in a lot of fields I have no idea. But there are huge opportunities for people who come to things with a new perspective.”

Resources are being made available that could decentralize power in unimaginable ways. Giving resources away, exploiting others less, and relinquishing control are defining the most progressive and innovative businesses, movements, and ideas, and have been since the 1970s. The mass market isn’t going out of business, but it’s learning to do business in a new way.

The new democracy in the music industry gave us more choice, but for the old industry machine it means less dominance for marketing-led manufactured music and more opportunity for organically grown niche acts. We find ourselves with a unique opportunity to share anything that can be transmitted electronically the same way we share music, and all industries could face the same changes. The future depends on whether we fight these changes, or see them for the opportunities they are.

We still need boundaries. But our boundaries now need to be porous. In many areas, ideas of collaboration and collective intelligence are met with fear and contempt. But others are proving that if you let your users add their two cents’ worth, soon you have a pile of money.

Some think that open source is digital communism, but it’s exactly the opposite. We are laying the public foundations for new ecosystems of private enterprise that will reinvigorate competition and break inefficient monopolies.

The antiauthoritarian ideals of youth culture are becoming something nobody saw coming: a new more extreme, invigorated, and equitable strain of the free market—the decentralized future of capitalism.

As organizations and systems become more open and transparent, as the balance of power between consumers and producers is leveled as we become more connected, another important idea is gaining traction. As we shall now see, it’s not enough for new systems to just be connected to their audience; the dialogue between systems and their users needs to be genuine above all else. Our new connections need to be authentic.