How virtual organizations are changing the social operating system.

Prosecutions for online thievery and piracy may grab headlines, but there is another side to the civilizing of the cyber-frontier that may be more significant in the long run–the new systems of organization and self-governance that are enabling people to work together on the internet and even across borders in relative safety.

Companies have operated globally for centuries, but until recently few individuals ever had opportunities that extended beyond their hometown, let alone their own country, unless they emigrated. Now that’s changing, thanks to the internet, partly through the facilitation of companies such as LinkedIn, the 250 million-plus member online professional service network, and online banking networks like Paypal, which makes it possible for individuals to do business in 193 markets and 26 currencies without even leaving their desk.

Perhaps even more important are the novel systems of collaboration that have made it possible for individuals to not only organize traditional businesses across borders, but to also work together to create valuable intellectual property, including important computer languages and operating systems (Linux, Apache, Android), the world’s largest encyclopedia (Wikipedia), the world’s biggest travel guide (Tripadvisor), and other kinds of complex, creative projects.

But how is it that although the world’s 196 countries have a hard time getting along, the millions of people involved in these and other projects are able to cooperate with hardly any oversight at all–especially considering the fact that the internet remains the kind of marketplace where people watch their wallet carefully?

One reason, perhaps, is that these new organizations are able to make decisions in a very different way. The traditional corporation was organized to limit the amount of information that flowed to the hierarchy, a concern that matters much less online, according to David Weinberger, author of Too Big to Know, and senior researcher at Harvard University’s Berkman Center for Internet and Society.

“(Today’s) large web enterprises don’t have to strip out information,” Weinberger explains. “Instead, they tend to keep decisions within local sub-webs, with a full flow of information to the rest of the network when necessary. That keeps the decision among those who have the most complete knowledge.”

Another factor is that decision-making structures are often set up in ways that make it possible for disputes to be resolved long before they are taken to a central arbiter, according to Weinberger. At Wikipedia, for instance, editorial disputes are usually resolved long before they get to founder Jimmy Wales.

Over time, the bigger decisions become a precedent that informs the next set of decisions. One Wikipedia article called “What Wikipedia Is Not”, features a long list of things that Wikipedia is not (an anarchy, a democracy, a bureaucracy, etc.), and notes that “We cannot anticipate every bad idea that someone might have. Almost everything on this page made it here because somebody managed to come up with some new bad idea that had not previously been anticipated”.

“If an issue escalates all the way to Jimmy Wales, it’s because the community is closely divided that they can’t resolve it… Wikipedia is a network, with a hierarchy for the few cases when the network can’t resolve an issue,” Weinberger says. “Consider how different this is from, say, GE where the CEO views himself as ‘The Decider’.”

The limited focus of many of these projects also makes it possible to set out a series of clear rules in advance that keep the roles of participants clear. Sometimes, those rules are built right into the group’s rules of operation, as with Wikipedia or open source software development.

Robin Teigland, an Associate Professor at the Center for Strategy and Competitiveness at the Stockholm School of Economics who studies the creation and diffusion of knowledge in social networks, notes that over time, open source developers have worked out three different levels of right for the use of their code: strong “copy left” meaning that it can’t be combined with proprietary code; weak copy left, which allows combination with proprietary code; and no restrictions at all.

The first copy left licenses–a play of course on the word ‘copyright’–were developed in the early 1980s by Richard Stallman, an American programmer who saw proprietary software as a tyrannical development.

The general license he created for an operating system he wrote in the 1980s for his GNU software program, instead of restricting its use as conventional copyright did, required any user who developed a variant of the program to make the program available to others under the same terms provided by his license.

The idea grew out of Stallman’s ideological conviction that software should be free–free as in free speech, he has said, not as in free beer. “Free Software respects the user’s freedom, but proprietary software keeps the users divided and helpless. Divided, because they’re forbidden to share it; and helpless, because they don’t have the source code, so they can’t change it, they can’t even independently check what it’s really doing to them–and, often, it does something rather nasty,” he explained in a 2009 speech.

Other groups have found ways of getting around intellectual property wrangles within a more conventional intellectual property framework. Quirky.com, for example, a crowd-sourced innovation start-up, has worked out a very particular system for enabling amateur inventors and designers to work together. By orchestrating that collaboration in a community of 500,000-plus amateur inventors and designers–and with a little help from a professional staff of about 170-plus people–the New York-based start-up now releases roughly three products a week, which are now being sold on Quirky’s site and carried on the shelves of some major US retailers.

Legally, the key factor that keeps Quirky’s production line moving right along is that the company dodges some of the rights problems many inventors face as they try to get their brainchild developed: the inventor must cede all his intellectual property rights in the beginning of the process, in return for a flat royalty payment if the idea is developed, according to Teigland.

Ultimately, however, the relative lack of difficulty people have in getting along on these sites may have something to do with the nature of the online environment. By reducing the cost of contribution and making it easier for people to find each other easily, the possibilities of collaboration have grown, explains Sheen Levine, a researcher at Columbia University, and co-author with Michael J. Prietula of Emory University of a recent article analyzing the dynamics of open collaboration online. “We don’t believe that the internet created open collaboration, but it certainly facilitated it,” Levine says.

Online collaboration works so well, in fact, that Levine and Prietula argue it is extremely difficult to stop once it gets started. In the article, the two scholars introduce a mathematical model that suggests these kinds of collaborative organizations can flourish even if only a tiny fraction of people involved actually contribute to the project.

The scholars say that a number of studies have found 13% of people will contribute to others at a cost to themselves, uninfluenced by what others do in return, a population they call cooperators. Another 63% will contribute at a low rate, but only as much as others contribute. And a final 20% are free riders who “contribute significantly less than others (but usually more than nothing).”

Online, their model suggests that even in communities that have just 1% cooperators, the collaboration will continue as long as the number of free riders does not exceed 70%. In the end, they say, collaboration “will perform surprisingly well even with a bunch of ordinary people. It can thrive far and wide, we suggest.”

Ultimately, perhaps the biggest emerging problem for online collaboration is less legal than political–the threat crowdsourcing, crowdfunding, and even what might be called ‘crowdspanking’ can pose to conventional institutions.

One case in point: JP Morgan’s difficult introduction to Twitter on the day of the Twitter IPO on 14 November 2013, when its #AskJPM account went live, and was flooded with a variety of harsh questions (“Did you always want to be part of a vast, corrupt criminal enterprise or did you ‘break bad’?”; “What section of the poor & disenfranchised have you yet to exploit for profit, & how are you working to address that?”)

Eleanor Bloxham, a corporate governance consultant based in the US, says that every year, groups such as Change.org are becoming much more powerful. “It is starting to influence the way in which people think about corporations,” she says.

As a result, she says, companies need to be more proactive than ever in how closely they listen to their customers. “You really have to be in dialogue more,” she says.