Arnold Kling  

Failure in an Open-Access Order

Libertarian Principles... Furman on Social Security...

Clay Shirky writes,

Open systems are a profound threat not only because they outsucceed commercial firms but also because they outfail them. They grow not in spite of failure but because of it.

In traditional business, trying anything is expensive, even if only in staff time spent discussing the idea; so some advance attempt to distinguish the successes from the failures is required. Even at firms committed to experimentation, considerable effort has to go into reducing the likelihood of failure. And because green-lighting ideas that turn out to be failures will be noticed more than killing radical but promising ones, many people err on the side of caution.

In open systems, by contrast, the cost of failure is reduced, partly because less coordination is required among the various players and partly because each player is willing to accept some of the risks of failure directly.

Rashi Glazer (scroll up from Shirky) writes,

market economies have been understood to rest on specialization: Individuals are producers of one thing and consumers of everything else. In what is sometimes called the nanocosm, by contrast, consumers could become the sole producers of finished products of all kinds.

Eighteen other pundits also contribute to a list of "breakthrough ideas" compiled by Harvard Business Review. Strongly recommended. Thanks for the pointer to Tyler Cowen, from Ben Casnocha, from Renee Blodgett.

Comments and Sharing

COMMENTS (4 to date)
Matthew Cromer writes:

Item 20 is also a great read.

"20. The Folly of Accountabalism "

mjh writes:

Mr. Shirky writes about how open systems allow for a lot of experimentation and the success of the vast number of failures demonstrates a filtering process to weed out success more efficiently.

How is this fundamentally different when it's done with open systems than with closed products/services produced by firms? For example, 95% of small businesses fail within 5 years. Doesn't this also represent an experimentation and filtering process?

What about open systems makes it's particular form of filtering better than closed products form of filtering? Is it volume? Is it cost of entry? Time to market? I don't understand what's fundamentally new here.

TGGP writes:

Of course public schools don't want to be held accountable. They don't have to compete on any sort of merits and we are just supposed to pretend that they are effective. Spending-per-pupil doubling over the last 30 years and test scores not budging? Well screw tests then. Faculty-per-pupil increasing at the same time as students-per-classroom? Well how do we now those extra faculty members aren't performing an essential role? There's no measurable accountability! Indulge your preference for ignorance!

Marcus writes:

Actually, in open-source, the individual in many cases is only able to 'risk' some of his time because he has a good paying job or some other resources to cover his living expenses which leave him with 'free' time to do as he will (ie., party on the weekend, go see a movie, write open-source software).

If it wasn't for his market economy job (or dependency on someone who has a market economy job) the programmer likely wouldn't have the time and money to 'risk' on an open source project.

On the other hand, the market economy allows the burden of risk to be shouldered by those who can afford it (investors). Their investment then pays for those who couldn't otherwise afford to spend their time developing software.

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