TL;DR
– Tradeoffs of informational liberty invite chaotic consequences.
– Collaboration results in exponential advancements.
– Privatize Gains, Socializing Losses
Philosophical at its core, open innovation is a socio-economic movement synonymous with globalization and decentralization that defines a model for sharing information (data, systems, architectures, and designs) without the commercial or legal restrictions that burden traditionally designed systems.
Contrary to what the short-term market movements, toxic headlines, and frantic degens on social media may say, we are alive in the most prosperous time in the history of humanity.
Clean water, resource abundance, extensions in life expectancy, and unlimited access to knowledge.
But it wasn’t always like this.
There was a time when information was reserved exclusively for the elites; when education was made available only to the upper echelons of society, when simply living in a home was considered a privileged opportunity.
Through millennia of exploration and experimentation, through the rise and fall of empires, humans have traversed the world, sharing their knowledge and trading expertise. In the process, they learned each other’s secrets to medicine, construction, and agriculture, which enabled an era of exponential growth.
By removing the illusions of scarcity imposed by geographical borders and mobilizing people through new form factors of vehicular transportation, humanity tapped into the exponential superpowers of collaboration.
Exponentials of Collaboration
Humans tend to think linearly in a multi-dimensional world.
Where 1 + 1 + 1 in the logical realm of mathematics is 3, in biological reality, the answer is almost always anything but 3.
Variations in environments, languages, rituals, and belief systems have given every culture a chance to develop its unique insights into the machinations of the world.
When these insights/perspectives blend together, magical things happen.
Imagine if the ability to construct housing took 95% of the world 24 months, 50 people, and resulted in habitation for up to 10 years. Meanwhile, another nation (5% of the population) was able to configure a method of building via material substitutions and process adjustments that compressed building times to 12 months, reduced labor force to 25, and resulted in habitation for up to 30 years.
By having the advanced nation educate the others, the efficiency output in construction worldwide blossoms by a factor of 5x (50% faster + 50% cheaper + 3x more durable)! Considering that this will affect 19x as many people as it had prior, the multiplier becomes exponential.
But the impact is profoundly beyond measurement in numbers.
In addition to the direct economic improvements, the acceleration in housing availability for larger portions of the population increases the baseline quality of life for society (cleaner streets, less homelessness). Moreover, the qualitative improvements to individuals that come from the psychological security of having more reliable housing frees up cognitive space for them to pursue more difficult problems/make new discoveries/otherwise advance society, instead of worrying about their living situation.
Look at it this way;
If you have a problem that takes 1,000 hours to solve and you have 24 hours in a day of which 12 can be used effectively towards solving your problem, it will take you (1,000 / 12) ~84 days to solve your problem.
But now imagine if you had 100 people working on the same problem with you. Within 10 hours, you will solve the problem, create positive reverberations of success throughout the community of people who participated, and be able to direct your energy to other matters.
That is an efficiency output of >170x versus doing it alone.
In the modern, digitized age of telecommunications, where information travels globally at the speed of light and software enables asynchronous connectedness, the frontier of exponential development exists in the atomic world of IT/telecom.
Going Open Source — Technological Chaos
As computers began to arrive in the public’s consciousness and integrate into society in the ~1970s, expertise on the subject matter was scant.
Beyond the military and scholastic circles, very few people genuinely understood the far-reaching implications of digitization, let alone the magnitude of transformation on human life that something like the internet would have.
In the capitalist spirit of a developing world, insiders began to exploit their information advantage of technology against the public by privatizing and commercializing all code.
Given that software is information factored into the form of digital speech and information by virtue of nature is something that belongs to the public, this was seen as a violation of the moral code (and thus the constitution).
To defend human rights to knowledge, a specialist group of brilliant people, including Linus Torvalds (father of Linux) and Richard Stallman (father of GNU, Copyleft rights, and FSF), stood up against the elitist overreach at the earliest stages of the industry’s establishment.
After years of articulating the dangers to society of private code lacking universal standards, the weakness of data protection against cybercrime, the potential economic exploitations of government contracts by private institutions, and the drag on intellectual development, they won. Forever changing the trajectory of society and business by imposing transparency to enable fair ground for competition.
Granted, the birth of the open source movement did not remove the right of corporations to produce proprietary software, but it did introduce a framework that expanded the breadth of control rights and information sharing across a spectrum from proprietary to copyleft to permissive and public domain; which in turn laid the groundwork for creating interoperable, resilient systems including Linux and data standards such as HTTPS; two essential pieces of software that every device and user, interacts with, every day.
We can immediately picture important technological junctures where this can become a matter of life or death for civilization, namely the development of AI and robotics.
But there is more to this than just computers.
Beyond Software
Open innovation imbues open source philosophies and practices throughout other subject matters/domains/industries. The surface area for compounding prosperity is endless.
Agriculture: (controlling diets)
Harvesting crop and maximizing its yield. Bio-engineering seeds and managing pests. Applying chemicals and removing them. Breeding animals and controlling dysentaria.
Medicine: (controlling health)
Pharmaceuticals processes and chemical composition. Operational procedures and disease control. Sanitization practices and patient rehabilitation.
Manufacturing: (controlling production/consumption)
Assembly line coordination and machine configuration. Material structures and supply chain management. Workspace safety and automation.
Education: (controlling social development)
Course structuring and student retention. Subject matter sequencing and classroom dynamics. Testing methodologies and career path modeling.
Absolutely every industry and domain of human life is subject to the forces of Open Innovation.
Thus, it is quintessential to understand the scope of its implications.
Benefits of Open Innovation
Solutions arrive through the unconscious crevices of the human mind, and creativity compounds through synthesis. By removing the physical borders distancing and separating people, a radical, hyper-dynamic paradigm of collective thought is unlocked.
Be it in the detection of errors, configurations of variable alignment, or the realization of addressable application space, the more eyes there are on the same problem, the higher the likelihood of extrapolating valuable insights and achieving desirable outcomes.
Reducing the threshold for entry by dismissing the stringent, arbitrary demands of certification and authorization invites a broader swath of the population to participate. Hidden talent that was suppressed for either economic or philosophical reasons becomes an asset capable of contributing to society.
Leveling the playing field enables new products, companies, and protocols to be built and compete against legacy corporations, which results in greater optionality for consumers, greater advancements in functionality, and an expansion of economic capacity.
Universal standards that are flexible and compliant across jurisdictions become material. Standards rise globally to match one another, and the balances of power even out. Humanity becomes its own auto-immune system, protecting itself from itself (such as the case with public key cryptography, operating systems, and messaging protocols). If code can exist in the public domain and not a single actor finds a way to subvert it over the course of time, the code is considered safe/reliable.
Even if nothing more than the acceleration in discovery and solution of problems is accounted for, humanity still stands to gain an order of magnitude improvement with open innovation.
Hooray!
What a dream come true!
Now that the world has embraced “OPEN INNOVATION”, humanity can prosper as we unite our knowledge and pursue solutions to complicated problems!
Not so fast.
We cannot blindly anticipate that Open Innovation is a magical pill with no undesirable side effects.
There are tradeoffs in unlocking this Pandora’s box of social liberation.
If you keep your mind too open all the time;
Your brain might fall out.
The Darkside
Just like any other aspect of life, parasitic human nature will find a way to manipulate, abuse, or otherwise take advantage of something beautiful.
The biggest problem of open innovation boils down to two factors: the attraction of questionable operators and the misalignment of incentives.
Yes, there are groups of benign creators looking to build innovative things for the sake of commerce or personal satisfaction, but they are few and far between when compared to the legions of malicious actors. In fact, some of the most motivated people in the world also happen to be some of the least morally obligated.
Without the standardized intellectual property safety barricades, operators unburdened by integrity scavenge for loopholes and potential vectors to subvert systems in the space.
Even though open-sourced material ultimately distills into an anti-fragile version of itself, it can go for unknown amounts of time lacking formal safeguards and operational standards while the discovery process takes place. Standardization implies some degree of control, which is antithetical to the “open” agenda to begin with; but before standards can even be established, it must first be understood exactly where and how to apply them. This is an invitation for bad actors to violate things.
Another, slightly more ephemeral, element is the physical byproduct of bidirectional flow. When a door is open, things can enter as easily as they can leave, and when there is movement sloshing uncontrollably in both directions, things can break.
Hashing algorithms and key management systems can become outdated as technology becomes more sophisticated and computers become more powerful (Hello MD5 and SHA1). Leaving some companies utilizing those systems at risk of a cyber attack, translating to data breaches and violations of consumer data privacy.
In systems of open innovation, 99.9% of efforts are expended towards the privatization of gains and socialization of losses.
This brings us to the pinnacle of open innovation; the purest embodiment of cypherpunk philosophies; an industry built from start to finish on a foundation of open collaboration.
Crypto & Web3
Trustless, transparent, decentralized, auditable, accountable, composable.
Simultaneously regarded as the catalyst of transformative wealth and the harbinger of financial calamity, Crypto is the Petrie dish of experimentation in open innovation taking place internationally between individuals, corporations, and governments of varying skill and economic status.
And as its vibrant history has shown us thus far, it is the premier example of how open innovation can be a double-edged sword.
Born from the hellfire of the 2008 Great Financial Crisis as a solution to the corrupt legacy financial system, cryptocurrency in the form of Bitcoin arrived on the scene.
An amalgamation of decades of research in monetary policy, game theory, computer science, and cryptography, this digitally native infrastructure was intended to supplement and ultimately replace the outdated and elitist predecessor banking/payments systems.
Imbued with the spirit of individual sovereignty and institutional opposition, Bitcoin leveraged the principles of open innovation as the foundation for building its reliability. An engine of trust that brought money to the internet and enabled commercial/economic activity without any intermediaries or censorship.
Quickly transcending its novelty by proving political neutrality and downtime resilience while transforming remittances and ballooning from nothing to Billions in Market Capitalization in just a few short years, Bitcoin became a symbol of hope for a more prosperous future.
Aside from a handful of political refugees, occasional family members sending money back home, and tiny pool of genuine cypherpunks/angel investors, the sliver of society most inspired by it just to happened to be the morally challenged ones.
From attempting to brute force key generation to eclipsing the chain, forking the codebase, ransomware attacks, and beyond, it did not take long for people to start scheming how to exploit the system.
Starting off lightly, free market forces found use in the pseudonymity features and lack of ties to the real world with BTC, turning it into the de facto unit of value exchange on the darknet. Illicit substances and obscene services could be engaged in commercial activity online with greater freedom.
But that was far from enough.
Hinging upon all economics being experimental, a slew of false prophets and technological clones popped up. Cryptocurrencies including Peercoin, Dogecoin, Feathercoin, Litecoin, Bitcoin Cash (Roger Ver), Bitcoin SV (Craig Wright), et al., came to market preaching sovereignty and sensationalizing their “innovations”.
Thousands of assets came and went.
Countless sums of money were made and lost.
Until we stumbled across the first real paradigm shift that accelerated everything.
Hello Ethereum.
Extending the open source principles and guarantees of blockchain beyond a single asset/accounting spreadsheet, Ethereum enabled a new dimension of applications capable of disintermediation not just the banks, but absolutely all financial institutions by bringing their systems on the chain in the form of smart contracts.
Finding the first perfect product to build on Ethereum did not take long. Tools for coordinating capital, automating accountancy, and getting filthy rich with nothing more than a promise…Tokens.
By replacing the technical requirements and overhead of instantiating an entire blockchain, a much larger group of less technically sophisticated people could now create digital assets 100x faster and cheaper. Not to mention, they could do so without violating security laws simply because the technology was so young that legislation hadn’t had the chance to create rules.
ICO, or Initial Coin Offerings, took the world by storm.
Tens of Billions of dollars spread through thousands of projects in hopes of building revolutionary technology (and getting filthy rich as quickly as possible).
This propelled the industry greatly. The influx of attention spread education on the subject matter through the masses. As projects got funded, they recruited capable people, experimented with the technology, and built real products. Some of these are cornerstones of the industry 8 years later (AAVE, Chainlink).
However, the combination of novelty, unsophisticated naive users, absence of accountability to authority, and lack of tooling to conduct evaluations proved toxic. Aside from malintentioned scammers lining their pockets with the money of working-class people, a class of wannabe entrepreneurs ended up burning through insane amounts of capital by simply attempting to build irrelevant things or lacking the intellectual/emotional wherewithal to navigate the space.
Nestled between the technical insanity was the social insanity. Blatant scams, including Onecoin and Bitconnect, preyed on human nature, siphoning billions of dollars away from innocent, uninformed individuals.
One would think that after 12 years of aggressive cycles of extraction, technological advancements, and social cognizance, the space would straighten out. Wishful thinking.
Riding the tailwinds of pandemic psychosis, we saw these cycles of grift come alive again in ~2021 in the form of NFTs. Tens, perhaps hundreds of billions of dollars enamored with promises of great wealth quickly, poured into narratives of online communities and digital monkeys.
NFTs themselves are form factors for assets, frameworks for how an object is defined. Benign in nature, they are a fundamentally important element in the development of a digitally native economy. Be it for gaming, healthcare, or any other area where a hierarchical granularity in rights to data may be necessary.
Perhaps mthe ost notable event of all from this era was the FTX collapse. A regulated institution, compliant with laws on the surface and endorsed by reputable entities, imploded due to the neglect/shenanigans of its operators.
Fast-forward a couple of years, and once again, the industry succumbs to another delusional narrative of financial nihilism to supercharge the “memecoin supercycle”.
This is not to discredit the advancements that have taken place in parallel to these events.
Advancements in technology have given us a better chance to build more scalable, secure, sustainable, and fluid systems.
Populations burdened with collapsing fiat monetary models have been given alternatives. Tremendous wealth can be stored and moved globally with ease. Money can be put to work without having to reveal private information about the owner.
Regulations have been established to solidify the role of the industry on the global stage.
Even tier 1 governments have become active participants in the space.
This leads us to consider whether the costs of reduced transactional friction and disintermediation of governments have been worth the pain.
Would you rather put your money to work in the stock market, buy gold/real estate, or give it to a scammer sitting in a third-world country?
Tick question.
With crypto, nobody can force you to do anything.
Dig deep here.
If governments couldn’t stop transactions and ended up incapable of disregarding the industry, maybe there is something to be said about sovereignty.
Food for Thought
There is one nuance that is rarely addressed but impossible to ignore. Open Innovation provides exponential growth to regions that are substantially lagging behind others, while only providing minimal (and even sometimes negative) effects to leading regions.
If the world came together and resolved how to filter saltwater, the discovery would destabilize existing water company supply chains. Desert regions can experience a 10x boosted improvement by lowering their costs and delivery systems, and mainland regions further from the water would stand to capture maybe a 2x by having cheaper alternatives provided, meanwhile, regions that have built their economy on freshwater sourcing can be negatively impacted by having those freshwater companies lose their market shares.
To Open or Not to Open?
That is the question…
Figuring out which one is better will ultimately boil down to personal preferences and biases.
Closed innovation is elitist.
Open innovation is techno-democracy.
One retains control.
The other leans toward chaos.
One depends on force.
The other cannot be stopped.
There is no escaping the reality that society will be more digital and connected with each passing year. More data will be produced than ever before. That more people will have access to more information and become more intelligent than ever before. Governments will continue abusing their citizens with fiat debt systems and violations of privacy. That people will need credibly neutral, reliable, decentralized systems to prosper.
Obviously, not everything should be open; certain system components must be made proprietary in order to drive competition.
With all said and done, when taking into account the moral implications and weighing the upside against the downside of the absence of open innovation, the answer is crystal clear.
Freedom is priceless.
Information must be open.
