In economics, a “transaction cost” is the cost incurred in making an economic exchange – the price of doing business. In sociology, we could talk about a “coordination cost,” the cost incurred in working effectively in a group. The Internet has altered the cost of coordination, and will also alter the social structures based on that premise.

In the pre-digital era, in order for people to collaborate effectively then needed to be in the same place. So one had to rent office space or purchase a factory or build a university or construct a military base. Second, if you wanted to motivate people to collaborate where intrinsic motivation was absent you had to pay them to collaborate. So one had to buy people – or at least 40 hours of their time each week – through salaries.

These pre-digital rules of geographic synchronicity and wages shaped much of our modern world. In the field of economics, corporations made money because corporate collaboration is expensive according to the two determinants of collaboration cost: geography and labor. Modern corporations have geographically dispersed operations and the labor involved is not intrinsically meaningful (ask an accountant or factory worker). In the field of politics imperial states are also geographically dispersed and requiring labor which lacks intrinsic motivation (ask a legionnaire). Even for those motivated to collaborate, geography made collaboration costly and inefficient.

The Internet has ended the geographic cost of collaboration, at least for short-term actions. Operation Payback – the incredibly successful pro-Wikileaks DDoS attacks on Mastercard, PayPal, and others – has demonstrated that. This is also an evolution from previous international digital coordination, where people carried out geographically siloed yet synchronized activities (think of the Iran solidarity protests in 2009). In Operation Payback hacktivists attacked the servers of corporations. Both the location of the activist and the location of the server were relatively insignificant. As Clay Shirky wrote in Cognitive Surplus, for those who have the willingness to work for free, geography is no longer an obstacle.

In my last post I wrote about the struggle between hierarchies and networks as the organizing structure for human society. In that post I implied that one would eventually win, but I don’t think this is quite true. Complex and expensive hierarchical institutions will find their niche in fields where there is no intrinsic motivation to do the work and wages are still required. This will compose a great deal of human labor.

However, for work that does have intrinsic motivation – writing, music, film, social justice – the network will take over. It is no coincidence that these are the arenas most threatened by the Internet today – print journalism, the entertainment industry, political institutions. This does not mean the end of an old way of doing things as much as the beginning of a new way. Both will continue, but the hierarchy has the most to lose and the network the most to gain. It is social Darwinism, not of the individual but of the way those individuals organize themselves.