How the Social Web is Helping the West Rediscover Its Informal Side

Western cities have spent the last century scrubbing away the informal realm. In a guest blog post, Nick Grossman argues that technology is helping them find it again.

The Informal City Dialogues illustrate how vast portions of the world operate informally, with all of the associated wonder, chaos, risk and humanity. The informal city is unregulated or self-regulated, D.I.Y. and peer-to-peer, and it encompasses everything, from taxis in Chennai to electric power in Nairobi to ambulances in Bangkok.

Here in the developed world, we’ve spent the last several centuries building systems to formalize all of this informality — to clean it up, smooth it out, make it safe, sterile and consistent. This has helped us achieve amazing things like public education, (wildly expensive) professional healthcare, a (safe) microwave in every home and an iPhone in every pocket, mortgage-backed securities (oops…), etc. etc.

In the industrial age, the way to achieve this safety and consistency was to take activities that were formerly person-to-person and unregulated, and convert them to a regulated person-to-company or person-to-state relationship. This created very high cultural standards for the product and service economies, an outcome for which I’m thankful every time I flip on a light switch, flush a toilet, ride a train, or deposit a check.

As a result, for better and for worse, we’ve gotten far, far away from the informal city in the Western world. But the social web is rapidly bringing us back.

Way back in 1995, when eBay launched, most rational people thought it would be crazy to buy something online from a stranger. But we experimented. And as our new online world came to life, we started exploring peer-to-peer models for more and more things: Selling an old appliance, renting out an apartment, borrowing a car, teaching or learning a new skill, bartering for services and lots more. But just like in the “real” developing world, most of these activities remained in the shadows (email lists, discussion forums, Craigslist) far from the daily view of mainstream society.

But then something happened. Hackers, entrepreneurs and community leaders kept building layer upon layer of social architecture on top of this base network, applying eBay’s reputation-based “trust model” to everything. The result has been the lightning fast de-formalization of every sector of the economy and society, from transportation, to wellness and healthcare, to travel, to journalism, to humanitarian aid, and on and on and on.

The new collaborative platforms are now both highly optimized and operating at massive scale, worldwide. In effect, they are applying highly formal structures to these “informal” personal interactions, bridging the gap between the industrial economy and the informal economy. To make that possible, we’ve created new systems that make it possible for us to transact with one another in a safe, secure way — just like we did with industrialization and regulation in centuries prior.

The difference, however, is that this set of innovations has brought us back to the informal city, giving us an opportunity to connect with our neighbors, peers, heroes, critics, patrons and supporters directly. Less formal, more social.

If the industrial era was about stamping out the informal economy, and the network era is about cultivating and supporting it (in new ways), this shift in approach is, by definition, a recipe for conflict. Not surprisingly, we’re seeing this conflict unfold as the new informal economy, operating at web scale, draws the ire of both incumbent industries and establishment regulators whose livelihoods it threatens. Sharing rides is illegal. Sharing apartments is illegal. Making person-to-person loans is illegal. Even free online education is illegal. For now.

Slowly but surely, however, jurisdictions are adapting their regulatory positions to recognize and support the new informal economy, powered by the tools of the social web, and recognizing some of the legal precedents that have allowed the web to thrive. The challenge will be to continue pursuing the goals of safety, accountability and equity, while simultaneously embracing this return to the informal. We’ll need to resist our industrial-age tendencies to solve this problem by simply regulating from the top down. Instead, we should embrace and adapt the kinds of peer-based systems that have made online communities work: Trust based on accumulated reputation as determined by peers, paired with decision-making that’s powered by real-time data.

Even then, tough questions will confront us. For instance, thus far, these peer-regulation systems have been proven internally within specific communities (eBay, Etsy, Airbnb, Sidecar, et. al.). But how can we apply them to the various externalities, both positive and negative, that the new informal economy generates? As web platforms start to look less like companies and more like governments in their own right, how does that impact our view of personal freedom and regulating for the public good? And finally, as the developed world continues its path towards web-enabled, structured informality, what lessons should we be taking from the developing world, where informal is the default?

Answering these questions won’t be easy. But if recent history is any guide, the solutions will likely be imagined and agreed upon based on real-time data, compiled on the web and discussed peer-to-peer.

Nick Grossman is the “Activist in Residence” at Union Square Ventures and a Visiting Scholar at the Center for Civic Media at the MIT Media Lab. You can find him online at The Slow Hunch and @nickgrossman .