Online Extra: The Changing Work Equation

Author Thomas Malone talks about the decentralizing power of the Internet and how it's changing the way people, and companies, function

When Thomas Malone published The Future of Work: How the New Order of Business Will Shape Your Organization, Your Management Style, and Your Life in 2004, he anticipated the current explosion in people-power in business. eBay (EBAY ), Google (GOOG ), Wikipedia, and more all are examples, says the professor of management at MIT Sloan School of Management, of how companies, managers, and employees face big changes in the way they work and live.

Malone contends that the sweeping communications power of the Internet is pushing business inexorably toward greater decentralization and power for employees and customers in determining the direction of companies. In a recent conversation with BusinessWeek Silicon Valley bureau chief Robert D. Hof, Malone talked about how that trend will evolve. Here is an edited excerpt of the interview:

You've compared the change you see in work and corporate organization to the advent of democracy. Why?

Most people said democracy was a strange aberration and it wouldn't work well as a large-scale solution for governments in most places. We're in a similar place now with respect to the change toward much more human freedom and much more decentralization in business. Most people in most companies think these changes are unusual and will never be widespread.

But I think that it will become much more widespread over time. The transition to more decentralized businesses or businesses with more human freedom probably won't involve bloodshed, but it will certainly involve the business equivalent of that, which is people losing jobs and companies going out of business at the same time new jobs are being created and new companies are forming. We're in the early stages, somewhere around 1790 or the early 1800's in democracy. This is a trend that will play out over decades, not years. We're in the first decade.

When the Internet was first going commercial in the mid-1990s, there were a number of books that predicted that workers would end up with less individual power. Is this still a possibility?

Yes. In some cases, the decreasing cost of communications will lead to more centralization. But in more and more parts of our economy, the critical factors of business success will no longer be just economies of scale. In our increasingly knowledge-based and innovation-driven economy, the critical factors for business success are often precisely the same things as the benefits of decentralized decision-making—things like freedom, flexibility, creativity, motivation. When people are making more decisions for themselves, they're often more highly motivated, more creative, able to be more flexible. Finally, they often just plain like it better.

What specific examples are you thinking of that embody this trend?

eBay is a great example. Selling on eBay is the primary or secondary source of income for more than 700,000 people. If those people were employees of eBay, that alone would make eBay the second-largest private employer in the country, after Wal-Mart (WMT ). The key thing is, those 700,000-plus people are essentially independent store-owners. They have a huge amount of freedom to decide what they do.

But they have a scale through eBay that would have been unimaginable to any small store-owner before in history. They've invented a really new way to do retail, essentially outsourcing almost all the traditional functions of retailing to these independent sellers.

What does all this mean for workers themselves, and their jobs? Carried to its logical extreme, we all become small businesses.

I don't think it will happen for everyone and every job. But I think more jobs will become more like independent businesses. It's more and more useful to think of yourself as a brand or as a business.

The problem is that the distribution of people who want to be autonomous hasn't matched the distribution of jobs. What we need to do, and what the new technology will allow us to do, is to match the amount of autonomy in different jobs with the amount of autonomy different people are capable of and want to have.

Is this something that will happen by itself, or must it be addressed proactively by businesses or people creating the technology to enable it?

In the long run, it will be automatic. But it takes proactive action by individuals and companies. Individual companies need to realize it's now possible and desirable to create jobs and organizational structures that give people more autonomy and freedom.

Customers are becoming key contributors to some companies' success, from eBay to YouTube. If customers, in a sense, become the producers for a lot of these companies, what does the notion of work become?

Little bits of time from thousands of people pursuing their hobbies can produce substantial new things—Wikipedia, YouTube, etc. It used to be people pursued their hobbies in a non-cumulative way. You play basketball, I collect stamps. We're each having fun, doing our thing, but there's no cumulative result.

But when the communications cost falls so dramatically, it becomes not just possible, but pretty easy for each of us pursuing our hobby to do so in a way that has a cumulative result and produces something of value. That's a pretty new thing in the world.

This also results in even more globalization. Will there be a government response to these trends, as we're seeing to some extent with the controversy over offshoring of jobs?

Technology-enabled changes in business have been with us for centuries at least. For at least several of those centuries, people have been worried about the consequences of these changes on individuals—the Luddites in England, for example. Every time people have worried about dislocations and reductions in employment because of new technology, there have always enough new jobs created to more than make up for the jobs that were lost.

What kind of response do you get to these ideas from businesspeople?

A lot of interest, and skepticism from some. People at the top of these big companies will have to give away power. Sometimes the best way to gain power is to give it away.

One example is Lou Gerstner at IBM (IBM ). He took over a company that was perhaps one of the most centralized in the world at the time. Today, IBM is a lot less centralized. But the people who do this will be the exception. New organizations that are organized in a different way from the start will grow, and be imitated by other organizations, and they will collectively take more and more market share.

What's coming next?

Collective intelligence. Suppose you could have any number of people and computers connected in any way you imagine to do some task, like designing cars or caring for patients in a hospital or running a bank, how would you do it? If you could do that, I think you'd end up with organizations very different from the kinds you have today. You may have organizations with thousands of people spending a few minutes each to do some tasks. Or you may have organizations where many of the things that today are done by people can be done by computers on the other side of the world with oversight from a few people in various places.

Where might this have an impact?

This has interesting possibilities in the field of medicine. Instead of all the expertise residing in the mind of one person standing by your bed, you could have a lot of expertise and processing power spread all over the world. Same thing for a lot of the things we do in business.

In some cases, it will be a matter of taking the same people who are in organizations today and connecting them and their computers in better ways. In other cases, like we've seen with eBay and Wikipedia, it will be a matter of assembling new groups of people who never existed as a group before and connecting them in ways that allow us to do the same things in very different ways, or even new things.

When you think about it, even Google is doing this with search.

Exactly. It's not just Google the company, it's the whole system of people creating Web pages, linking those pages to each other, and then the Google algorithms that analyze all that knowledge and give you amazingly intelligent answers. That system is a great example of collective intelligence—in this case, one that's dependent on very high-tech algorithms and vast amounts of computational resources.

Google and Wikipedia are just scratching the surface of whole new kinds of organisms—economic organisms or even information organisms—that will spread around the globe doing the things that we take for granted in radically new ways—and doing things that were never even possible before.

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