Thank God for the Internet

The amazing thing about the story of Marcus Arnold, the 15-year-old kid who posed as a lawyer on the Internet, was that when his actual age and inexperience were revealed, the adults he'd given legal advice to defended him. Why do you think they did that?

I do think that he had managed to persuade a lot of people that he was good at this. And for these people he'd persuaded, there were only one or two responses that they might have had when they found out he was 15. One was: I'm a fool, and I was conned by a 15-year-old. The other is: He's a genius, and I have the privilege of having seen that, and recognized that in him, and having his services available to me.

They had something invested in his expertise.

But there's a larger point. Right after I met Marcus, I came back to London, and I got into the back of a London taxicab, and the cabbie asked me what I was doing. I told him the story, and he said: "Oh, I use that service." He wasn't using Marcus, but he said, "I'm getting a divorce, and these lawyers here were going to charge me a fortune." He said: "For 60 pounds, I can get divorced on the Web."

People recognize, and they're right to recognize, that legal services are overpriced. They're overpriced because there are trade restrictions -- to be a lawyer you need to be licensed. And the fact is, an awful lot of the service you need can be provided by someone who doesn't have a license. Just like a nurse can treat you for many things just as well as a doctor, at a tenth of the price. So, there's a market inefficiency that I think slowly people are figuring out. And the Internet will facilitate the removal of it.

When you talk about the circulation of information, you say that as it speeds up it becomes commodified. You show that in finance and law with the story about Marcus. Do you think that there is any information that won't become commodified in this way? Are there going to be any true, credentialed experts that are unassailable in their lofty authority?

I don't think this is a process with one direction. I think there's a dialogue that goes on between the higher class and the lower class, the amateurs waging the war and the experts who are being besieged.

Let's take an example: financial expertise. Slowly but surely, the stockbroker has been undermined. People use stockbrokers now with much less reverence than they did 20 years ago.

That process of demystifying the stockbroker accelerated dramatically when the Internet collided with the financial markets. The stockbroker -- the lower-level expertise in the financial markets -- has been largely washed away.

Brokers at Merrill Lynch are being replaced by clerks and electronics. But in the higher reaches -- the more complicated stuff like mergers and acquisitions advice or really complicated financing that is innovative or clever and original -- they have some kind of intellectual property component to them. This work is still very highly compensated. And nobody thinks -- nobody thinks yet -- to subject them to extreme price competition.

I guess what I think is that the ranks of the so-called experts will shrink. There's a little less room at the top. Large chunks of the legal, medical, financial professions will be commodified. But there will still be heart surgeons that get paid zillions of dollars, there will still be extremely able corporate lawyers who get paid zillions of dollars and extremely able mergers and acquisitions advisors who get paid zillions of dollars. But that is much more rarefied than it used to be. It's a shrinking aristocracy.

All these challenges to the established order, like Gnutella and Nullsoft -- you talk about how they get absorbed by companies and co-opted by capitalism. What then is their significance? A lot of people suggest that they are just cheap R&D for big companies.

This is the mechanism of technical change. This is where it comes from. It comes from people who are unhindered by the usual kind of corporate constraints.

Corporations do not dream up the technology that is going to undermine their business. Once that technology is dreamed up they have to assimilate it very quickly, or else they get put out of business by someone else who does. That's the new dialogue.

What's changed, and I think the Internet had a lot to do with changing this, is that the traditional corporate response to a threatening technology was to try to ignore it or suppress it for a long time. The popular perception in the management class has now changed. It's now widely believed that it's futile to do that. Instead, what you need to do is co-opt it. It may hurt you in the short term to take on this technology and undermine parts of your business with it, but if you don't do it, someone else will.

It's really interesting the way capitalism has changed, especially since it ceased to be opposed, and people who really are seditious enjoy a different sort of relationship with the establishment. It's a much tighter embrace.

Like when Justin Frankel wrote that program to take the ads off of AOL's own instant messenger program, and he was working for the company. It seemed impossible that he wouldn't be fired, and then of course he wasn't. It's like keeping your enemies close.

That's right. Because it's understood that if they chucked him out he'd still have the capacity to cause a great deal of trouble. Whereas the early corporate model was if you chucked him out, you could leave him destitute on the streets without any ability to cause trouble.

Insiders and outsiders have been thrust more closely together, and I think that's just going to continue. But it's becoming systematized; insiders and outsiders are coming to almost be self-aware about the process. I don't think that I'm telling you anything that Steve Case wouldn't tell you.

I think he would say the same thing if he was being honest. He completely understands what he's doing. It probably drives him crazy that he can't just fire this guy. Wouldn't you think?

You paid him $70 million and then he goes to try to find a way to undermine your business. It's just one relationship, but it's a nice metaphor for something that's changed.

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