Beckström, Rod

beckstrom_rod.jpgRod Beckström received his BA and MBA from Stanford. He was a Fulbright Scholar and later a derivatives trader for Morgan Stanley in London. He co-founded his first company, CATS Software, while in graduate school. He serves on the board of Environmental Defense, and he's a co-founder of the SV2 philanthropy network. He also co-founded Global Peace Networks with Ori Brafman, the coauthor of his current book, and he serves on the board of Jamii Bora Africa Ltd., a micro-lending network with 140,000 members. He and Ori wrote the recent breakthrough book on decentralized networks entitled The Starfish and The Spider: The Unstoppable Power of Leaderless Organizations.



[Bio adapted from his website, www.beckstrom.com.]

The Starfish and the Spider book cover

tompeters.com asks ...

Rod, you coauthored The Starfish and the Spider with Ori Brafman. What prompted the two of you to write this book?

RB: I'm a Stanford MBA alum, and I typically mentor a graduate business student every year. I got to know Ori through one of his friends, Andy Mowat, whom I was mentoring. Soon after, Ori and I began working together on some environmental projects.

Then 9/11 happened. I was in New York and had a very powerful experience; it changed my life to watch those buildings burn with people I knew inside, and I felt a certain calling to go and serve peace. I remembered that Ori had a self-designed major in peace as an undergraduate at U.C. Berkeley. So I recruited him to join me in starting an organization dedicated to addressing peace. We ended up building a behind-the-scenes, decentralized network—working for peace. We decided to model that organization off of al Qaeda. We wanted to understand al Qaeda—what it is and how it's organized—and if we were to counter it, we needed to learn from the principles that had made it so formidable, but apply those principles to peaceful efforts.

That led us on a five-year quest to research and understand: What was this new phenomenon and how had it become so powerful? Over those five years we had a series of different "eureka" experiences where we said, "Oh, my gosh!" The first was learning that al Qaeda was an ideology and not a formal organization. That was a very difficult lesson to learn and understand; it took us awhile to absorb. Then we started seeing parallels in technology and in business—in the decentralized social networks that were taking off—whether it was instant messaging, viral networks, YouTube, or Craigslist. So it all came together.

We focused our work on the peace movement, and helped to kick off various decentralized networks that are quite active around the world. When we finished our investigation, we said, "You know, we could write a book." We worked on it together, and I gave a presentation at the Stanford Graduate School of Business in May 2004 entitled "The Decentralized Revolution."

We proposed a major thesis and framework for the book. The class was comprised of 50 CEOs from around the world, and they loved it. We said, "We're thinking about doing a book on this. What do you guys think?" And they were unanimous in urging us to write a book—so we did.

What's significant about the starfish and the spider?

RB: These two little creatures are highly instructive about human organizations. Superficially, the two creatures look very similar. They both have a lot of legs or arms. But in fact, internally, their architecture is completely dissimilar. If we study how the internal architecture is dissimilar, we have a new model for looking at human organizations. These two creatures define the end points of a new axis of analysis, or a line along which you can map organizations.

Let's look at the spider first, since we're most familiar with them: body in the middle, four legs on each side, a cute little head on top. If we cut off the leg of an adult spider, we usually get a crippled, seven-legged spider.

On the other hand, if we cut off the head of a spider, it dies. The reason it dies is that it has a centralized physiology, and it cannot live without its central nervous system. It has a command-and-control hierarchy within it that's driven by that brain. When I was in business school studying organizations, they had pretty clear organizational structures. There was usually a senior hierarchy: a CEO, chairman, or Board of Directors at the top and layers of hierarchy below. We've been looking at businesses as spiders, having intelligence like spiders, and being organized and coordinated like spiders.

Now let's contrast it with the starfish for a moment. When we see a starfish on the beach, most of them have five legs. Some species actually have up to 50. When we cut a leg off, (or an arm as it's referred to in the starfish), that arm can grow back. What's amazing is that in some species, such as the blue linckia, found on the cover of our book, if you cut off all five legs near the center, each arm can re-grow an entire creature, an entire new starfish. You can actually chop a starfish into five pieces and produce five new starfish.

These remarkable powers of regeneration, durability, and resistance to attack are due to the fundamental architecture of the starfish. The starfish is a decentralized organism. It's actually more like a community of five different arms rather than one centralized creature. It does not have a centralized brain; it has a decentralized neuron-network. It does not have a centralized stomach; the slit under each arm of a starfish is the stomach within each arm. Each arm has the critical organs required for survival.

So each arm is basically its own organism that just happens to be stuck to others like it.

RB: In a way. It's a decentralized organism. A nerve ring connects the arms, and messages get relayed there, but it's not centralized control. The arms are part of the whole, working together. Yet they're so decentralized you can hack them apart and they bounce back and survive.

In order for the starfish to move, one arm has to convince the others to go with it, right?

RB: That's right. Imagine that each of the arms can communicate to the others when it senses food, or when light conditions indicate the presence of food, and it begins pulling in that direction. If one arm pulls harder than the others, then the other ones will concede and go in that direction.

By the way, there's a lot of research going on about starfish intelligence. It's quite fascinating. One of the things they're learning is that although there are five equal arms, there tends to be one alpha arm. If there's a deadlock—all five arms pulling at the same time—one is the tiebreaker, saying, "Hang on, we're all pulling, follow me." Or, "I'm giving in, let's go in your direction." It's very interesting. It's a bit like how group dynamics work. Even when we're in circles, one person tends to be the leader or the tiebreaker when the group can't work in consensus or if the directions aren't clear. The more I study the biology of the starfish, the more I see the applicability to management principles. The same is true for the spider.

These two species also represent the two major physiological structures. There are those that are bilateral. If you put a mirror down the middle of a spider, it looks the same on both sides. The same is true of our bodies. A starfish is not bilateral; it's radial. It has a radial symmetry, as do sand dollars and other echinoderms.

Returning to organizations and our attempt to understand al Qaeda, we started looking at it as a decentralized network, as opposed to a centralized network. What we discovered led us to develop a whole framework for analyzing competitive strategy between traditional organizations—spider-like organizations—and decentralized starfish-like ones. We began to look at the battle between the U.S. government and al Qaeda.

The U.S. government, as with most, is quite centralized. The response to the 9/11 attacks led it to become more centralized. When we studied history, we found that most centralized organizations respond this way when attacked: They pull into their shell. They centralize control even further, even when it's exactly the wrong response.

That's the whole "gather the forces together so we feel stronger" mentality.

RB: Exactly. Let's pull it all together and put all the force behind one arrow. The problem is that the enemy this time isn't centralized; there's no central target.

One of our "eureka" moments happened when we realized, "Oh my gosh, decentralized networks are winning in the technology space too." For example, it was obvious that the Internet itself is decentralized. There's no headquarters, no boss, no central servers; it's just a phenomenon, a protocol that people adhere to. It's this huge, unfolding, decentralized network.

What was less obvious is that the Ethernet, the standard for networking within offices and companies, is also completely decentralized. If you look at the Ethernet protocol, it's a very unsophisticated, shotgun-method for sending messages around. Instead of receiving a message and saying, "This should be routed to Erik in Boston," it says, "I have a message. I'm not sure where it goes. I'll blast it to everything I communicate with." Once the message finally gets to its destination, it will stop flying around.

The power of Ethernet is that you don't have to architect the network within the firm. With the star or token ring network, which were more elegant, less bits had to move around because you had a network controller. It had to be architected. As a result, when things broke, it became more complex to fix.

So Ethernet won. Not because it was the most efficient, elegant, or lowest cost from a hardware standpoint; it won because it was the most decentralized, and it didn't require human intervention. You could just plug the dumb thing in, it blasted messages around like a shotgun, and it worked.

That reminds me of a Chris Anderson speech I saw on the topic of abundance. We're in an age of abundance. One of the qualities of the Long Tail is that there's much more to pick from. It sounds to me as if the Ethernet could work because there was room for all this stuff to fly around—because pairing it down and becoming exact took more energy or sophistication.

RB: That's exactly right. It used a lot of bandwidth, but the bandwidth wasn't that precious compared to the complexity and cost of having human beings manage and manipulate information.

Chaos versus organization, and chaos won.

RB: Exactly. What we're learning now in business is like a new principle of physics. One set of constraints is gone, and we're into a new phase. We've gone through a phase change. In this new phase of abundance and ubiquitous communication, organizations are beginning to organize around the same principles and experience success leveraged by the Ethernet and Internet. Al Qaeda is just an example of a group that did that.

Al Qaeda used to be centralized when they were backed by Saudi supporters and sanctioned or allowed, in some sense by the U.S. government, to go and fight the Russians. But once they became illegal, they had to come up with new methods. They came up with this very clever architecture of decentralized terror cells, where each cell was five people only. They profiled the kind of people to recruit to a cell, how to start a cell, how you stay "below the radar," how to plan a mission, how to spawn off other cells.

They came up with an architecture for a viral, decentralized, human network. I would argue that it only became possible on a global scale because of global communications—global transportation, global Internet communications, global cell phone communications, etc. Otherwise it could have been nipped in the bud within a country or two; instead, it spread dramatically across borders.

In the same way, YouTube is a global phenomenon. Three guys have dinner in San Francisco and decide to put up an Internet site where people can swap video files as easily as they swap photos on Shutterfly. It explodes internationally. Talk about abundance: Look at the abundance of clips on YouTube, MetaCafe, and MySpace. It's so important in business to understand that this is not a fluke, fad, or trend. It's a fundamental change in how humans organize and share their content and activities.

As with post-modern art movements, it seems we've hit post-human organizations. Humans are like spiders: We're bilateral. Our organizations are clearly based on our humanness. We have a head at the top, the CEO. Chop off the head and it's over. Now we've moved beyond relying on our own humanness as a model for how we create interactions among humans.

RB: That's right.

The Internet has begun to enable incredible collaboration. We've always been collaborating, but now humans from everywhere can work with each other. All of humanity can collaborate.

The good and the bad always come together. In the al Qaeda cells, no one knows who the other folks are, so theoretically you can't get any information from exposing one cell that will help take down other cells.

RB: Moving in a similar fashion are the eBay and Craigslist communities. Pierre Omidyar, founder of eBay, is a genius in sculpting these networks, but Pierre doesn't know what the Model A car collectors are doing on eBay right now—how they're organizing, what they're choosing to do, or who is starting to make knock-off Model A parts in China based on the demands of guys in Iowa or Ohio who are restoring these cars.

All this activity is taking place. Each of us is able to do what we want to do in some sense. There's a tremendous liberation, a tremendous freedom. On the other hand, you can look at the whole and either say that's a garbage can, or that's a masterpiece orchestra of self-organizing. It's a fractal orchestra of self-organizing communities and activity.

Two things about eBay. One is that it's actually a hybrid organization, and the second is the trust that keeps the organization going. The founders said we're going to have to rely on people to self-regulate, and then they made a system of reviews that helped encourage that.

RB: What's fascinating is that so many of the big winners in terms of shared, open platforms, even if owned by larger orgs like eBay, were started by people who wanted to serve others. They didn't want to control others. They weren't trying to start businesses per se, they just wanted to serve others.

EBay was free for the first six months. This was not a strategy to grab market share. It was just a free service that Pierre put on his website along with some other services—and it took off. When people started complaining to him that they were getting ripped off, he decided he didn't want to play cop or enforcer. He was a volunteer. So he created a way for people to rate one another, which I think was a reflection of his personality, character, and spirit. That model won dominantly over companies like onSale that appeared at the same time with the backing of top venture capitalists.

We all want freedom.

RB: Yes. There's a profound theory of management here that's new. Bend your left elbow out in front of you, so that your left hand is to the right. Imagine that your hand, with its five fingers is a starfish, and that on your elbow, to the left, is a spider. That line from the spider to the starfish is an axis for analyzing competitive positioning of players and their relative strategy.

EBay is way over toward the right, toward that starfish. OnSale was more toward the middle, trying to have control. Best Buy or your local computer shop is a little bit more to the left. They're centralized and locked into their physical stores.

The ability to look at your own organization, either internally or in a competitive market space versus others, and map where you are on that continuum of spider versus starfish is incredibly helpful for understanding competitive dynamics.

As a case in point, I've just been asked by one of the top five newspapers in the country to come in-house and do a presentation for 30 or 40 of their people representing their future path brain trust. Their advertising revenues are falling and their classifieds are disappearing because you can now put your classifieds for free on Craigslist with photos and as much description as you want. It's hard to compete with that. Advertising revenues are decreasing because advertising is more targeted on the Internet.

The reason they invited me, is that when they interviewed me about the book, I talked to them about their strategy. As a big traditional newspaper, they're a spider because they have to deliver printed paper to every house and building after running it through big printing presses, involving a lot of capital. It is only accessible to those who pick it up and buy it. How can they compete with sites like Craigslist that are spreading, literally like wildfire, around the world?

We're going to look at how, over time, the media business went from small town presses all over America to being concentrated in the hands of mostly large papers. Now those papers are attacked by Craigslist and the online community. What are the strategies that they can use to get back in the middle between advertisers and readers? At the end of the day, that's really what their business is about. That sweet spot has moved.

In most industries, if I put my elbow out there again, the power is not moving toward my elbow, where the spider is sitting, it's moving out toward the starfish on the right.

Maybe paper is just over. Or not. [Laughter] I guess you're going to find some way to keep them in business.

RB: Well, I don't know. Sometimes industries downsize. Plan for it. Do the best you can to be a winner in a downsizing industry. For individuals, that means you'd better begin figuring out where you want to go, because this landscape still has a lot of opportunities. But they're changing. If you're a top-paid journalist at a premier newspaper, you and your colleagues will not all be there in five years. Where do you want to be? Do you want to be in a corporation writing copy and PR? Do you want to have your own blog, build your own community, advertise around that, and do consulting? Do you want to write books? There are a lot of different things you can do; a lot of them are on the Internet.

Yes, the Brand You phenomenon, being your own free agent. That's linked in a way to why these leaderless, decentralized websites like Wikipedia, MySpace, and YouTube are so popular. The popularity is based on the fact that people love to contribute. Although I think Ben McConnell and Jackie Huba would tell you that it's actually only one percent of the people who are circling around any of these sites who are contributing. The power is going to the people who are doing this stuff. But I think "power" is a dead term now, because it's all about the contribution.

As you say, organizations become decentralized, then centralized again depending on threats or the nature of the world. The nature of the world has clearly changed. People are going to float into and out of companies. Look at Andrew Sullivan. He started his own blog and due to his success was pulled into blogging for Time and now the Atlantic Monthly. The big story is that you have to be flexible. We've known for 10 or 15 years that we're not going to be employed by one company our whole lives. Although a lot of people still don't understand that. I think what you're saying is that it's not just true for individuals anymore; it's true for huge organizations. That's scary.

RB: It is scary. It's a lot of change. On the other hand, it provides a lot of freedom.

Absolutely. Freedom is scary.

RB: That's right. Someone once said, "You either have change or comfort; not both." We're going through a lot of change. Power is flattening. The general trend is that wherever there has been concentrated or centralized power, in those spider-like or hierarchical organizations, it is being flattened. For society, it means that people are getting more choice and having an opportunity to express their voice and be heard.

One hierarchy after the other is getting seriously threatened and attacked. Who would have thought that a guy in a cave in Afghanistan could decide that he wanted to have a war between the Muslim world and the West and pull off an attack that successfully provoked the greatest nation on earth to go into the fight he wanted? It has already cost this government $400 billion. I saw an estimate in some publication recently that even if we wrapped it up now, with all the future benefits to veterans, hospital costs, and everything else, we're probably looking at a trillion dollars.

The war in Iraq is so instructive. As I was reading your book, I kept thinking back to an article I saw in the New Yorker by George Packer called "Knowing the Enemy." [12/18/06 issue, not available online] It's all about social networks, which is really what you're talking about in your book. He says, "People don't get pushed into rebellion by their ideology; they get pulled in by their social networks." I think you say a very similar thing in the summation of your book. It's who you know. That's how you get dragged into things—blaming this on ideology or being a Muslim is wrongheaded.

RB: I would say that. I think that the notion of a clash of cultures is a very negative concept and ideology that leads to a perpetuation of the problem. If you step back from terrorism and de-personalize it—forget about which religion is which, or who says what—it becomes a human sociological phenomenon.

There are similarities between what the Irish did to assert their notion of independence, their rights, and their freedom, and what other people who use violence to achieve their political ends do. When a people feel they have been insulted and subjected to foreign powers in their home countries or cities, it builds resentment. From the perspective of a lot of people that we would call terrorists in the Middle East, they feel their society has been suppressed, their countries carved up, and borders have been drawn by others far beyond their control. They feel that dictators and fascists have been supported by those same others in different parts of the world. There's a huge resentment and feeling that they're being insulted.

That radicalizes the people. It can lead to a certain expression. I think if we look at it in a dispassionate sense, we'll be more successful in dealing with it, rather than engaging in the right-versus-wrong, my-religion-versus-your-religion dialogue.

The New Yorker article I mentioned says you have to get to know all these people. You talk about an al Qaeda cell in Kenya and how it's being dealt with by local people who know the people in the cell. No one from the outside would know that these people are in an al Qaeda cell.

RB: Absolutely right.

We think this is just about politics but there is a parallel to business. We have to know the enemy, but any business now has to know its customers down at the level of the individual. That's what companies are still trying to figure out, right?

RB: Exactly. A challenge for a lot of media companies, for example, whether you're in film, news, print, or a broadcast network, is that you must understand that people want to contribute and they're going to contribute.

The question becomes not how do you compete with them, but how do you harness that energy? Say you're a television network that used to ship news out to a town in Iowa, eighty percent of which was national news content and the local news anchors would add their little local pieces. Well, hang on, that town in Iowa with a population of 10,000 probably has 1,000 video cameras right now. Of that 1,000 there are probably 10 or 20 people who are really good at shooting video, who like to film the high school football games or town hall meetings, or who were at that last car accident.

If you're the network, you have to think about how you open up. Instead of fighting with the desire of people to contribute content, how do you grab it, edit it, synthesize it, and combine it with what you've been traditionally doing? Instead of looking at Craigslist as the enemy, say, "Hang on, what can we learn from these guys?"

There are so many lessons to learn from Craigslist. I was fortunate enough to hear Craig Newmark speak at a conference. His title is Founder, Chairman, Customer Service Representative. He doesn't even like to go and do these talks, because he needs to be answering emails from his customers.

RB: And he really does.

That's so not what we get from the big monoliths. That's why I guess they'll disappear eventually.

RB: Let's come back to the biology of a starfish for a second and look at the parallels with Craig's behavior. A starfish, if you look at it in the middle, is really just the intersection of five arms. There's a tiny little nerve ring that connects those five. But that little nerve ring is not telling the arms what to do at all. It's just relaying messages, serving them, helping them hang together, and communicate. Craig is like the center of a starfish. He's not dominant. He's not trying to take control. He's just saying, "Let me serve you, members. What do you need? The messages aren't getting through? There's too much spam? Oh, better go fix that. The servers are down in Asia right now? We've got to go buy more capacity, let's get that fixed." There were only 18 people in the Craigslist company when we interviewed him last year. Maybe there are 25 now—very few. There are tens of millions of users.

The centers of these new organizations are tiny. The power is in the arms, the new members, the users. This is a fundamental power shift in organizations that cannot be denied. If you deny this power shift, you are very vulnerable to having bad strategy with bad business results.

You point out the weaknesses of a decentralized, leaderless organization. For example, you point out how Wikipedia can become vulnerable.

RB: There are limits to this model. You wouldn't want to use it for all purposes. For example, for the next flight I take, I want one person in control of that aircraft with a professional backup. I don't want the high school kid sitting next to me who really wants to fly a plane and has done a lot of video game flying to go into the cockpit and take over the aircraft, saying, "I've got it from here. I'll land it."

With his video game training, he might be able to land it.

RB: He might be very good, okay. My point is not that decentralization is perfect, or that it's superior. What we're seeing is the species, the starfish, is exploding and evolving. In terms of human organizations, both in business and society, in politics, art, and so many areas, these starfish organizations are taking power away from traditional, spider-like organizations.

On the other hand, the spiders that are smart can move their strategy back toward the middle and incorporate the principles of starfish organizations. A case in point is News Corporation's acquisition of MySpace last summer for $580 million. People thought they were crazy and now realize it was a brilliant move. As a result of this acquisition, they now have a huge starfish platform within their traditional media company.

Across the world, the sweet spot of power in most industries is moving toward the decentralized, starfish side of the continuum. Most organizations have considerably spider-like tendencies in business. But the balance of power is moving away from that. The question for managers is: "How can I understand these principles?" They must study them, to begin to look at the world through this new lens. They can then begin to adjust their business strategy and services to leverage the opportunities that are presented in this new starfish world.

That's fabulous. Thank you, Rod.

Email: rod (at) - beckstrom dot com

Twitter: twitter.com/rodbeckstrom

Other books by Rod Beckström:
Brainticklers: Beyond Y2K: Questions for the New Millennium and the Year 3000 with Elizabeth Arnold
Brainticklers II: Questions for CEOs with Elizabeth Arnold and Tom Stauffer
An Introduction to VAR edited by Rod A. Beckstrom and Alyce Campbell

Websites:
www.starfishandspider.com
www.beckstrom.com
SV2 philanthropy network
www.oribrafman.com, the website of coauthor Ori Brafman