Recently I assembled a bridge in between my interest in business models and my interest in the wealth distribution. Business models span some space of actors, coordinating their actions, driving actions with motivations of all kinds. If we rope in other institutions (church, state, professions for example) we need to reframe these as institutional model.

The sum of these models creates the distribution of wealth. That’s the bridge, but the consequence is how this ties to ethics. In the search for interesting business models the holy grail is the business model that once added to the societal sum increases equity rather than decreases it.

Ethics permeates the work of those actors who labor to shape institutions: Entrepreneurs who labor to make new institutions that respond to observed institutional failures, critics who attempt to illuminate institutional failure, guerrillas who labor to undermine institutions they perceive as sufficiently failed as to be deeply illegitimate, professionals who strive to keep institutions vibrant, efficient, and away from the many dead-ends that lead to failure.

How an institutional model effects the income distribution is largely independent of how much activity in enables and coordinates. How much eBay, Microsoft, Google, all create large amounts of economic activity. How they effect the income distribution is another matter.

On my more cranky days I suspect that most internet business models are not on the side of the angels here.

In broad strokes the standard internet business model works by realizing that the internet gives the entrepreneur access to a vast pool of labor. The successful model discovers a means to engage those idle hands. Given them something to do. This works best when their motivation is intrinsic while the motive force for the business is more fungible.

None of this should be taken as dismissing either the magnitude of the effort the entrepreneur goes thru to construct the new institution or the magnitude of the social and economic value generated when one of these institutions come into existence. This is not an argument that Google, eBay, Microsoft, etc did not raise the economic boat overall. It is an argument that they certainly appear to have contributed to the shocking disparity between rich and poor.

Short of deciding to forgo the economic and social benefits of these network businesses we are left with a search problem. Can we find designs that get the benefits without the corrosive social consequences? How your institutional shaping actions effect the skew is part of the metric that guides that search. How much is, of course, up to you.