Don Tapscott is one of the world’s most influential management thinkers, best known for helping business people understand the implications of the evolving digital world. Over the years, he’s authored or co-authored 13 books on the application of technology in business and society, including his 14^th book, Macrowikinomics: Rebooting Business and the World. In this interview with The Analyst, he discusses financial market regulation, intellectual property protection, and the current IPO process.

Q: You cite five principles for this new age of networked intelligence—collaboration, openness, sharing, integrity, and interdependence. Are there examples of FP500 Canadian companies that have profitably embraced these into their business practices? How have they devised meaningful roles for external collaboration and allowed for community members to share in the ownership of their creations?

Let me focus on two of the five principles: interdependence and openness.

Growing interdependence has profound ramifications for the way organizations act and make decisions. The more we become connected and interdependent as societies, the more we want and need to know about the affairs of others and how the actions of a distant third party could potentially impact our individual or aggregate welfare. Similarly, the interdependence of actions and events means we have no option other than to try to encourage and enforce mutual cooperation through a new division of labor among the four key pillars of society: business, government, the civic sector, and a new pillar enabled by the internet—the individual citizen. There is simply no room for unilateralism in a world in which trust, transparency, and collaboration will be essential to ensuring near- and long-term stability.

The longer unsustainable practices continue, the greater the threats to the essential foundations of our economy. Firms are dependent on their employees to work productively, on customers to buy their products, on investors to buy and hold their stock, and on government to provide human, legal, and physical infrastructures for economic development. All of these people and institutions, in turn, are collectively dependent on the shared resources and services provided by the natural environment. If a financial crisis makes the point, a potential global meltdown of our environmental ecosystems does so a thousand times stronger:

On an increasingly interdependent planet, no organization can succeed in a world that is failing.

Major Canadian companies such as RBC are becoming deeply involved in communities, philanthropy, and doing the right thing. RBC embraces a regulatory environment that is not only in the best interests of its customers and citizens but also of the financial industry as a whole.

In terms of openness, a good example is a Celestica. It is multinational electronics manufacturing services company headquartered in Toronto. Its global manufacturing operations comprise more than 40 locations in 11 countries around the world. In terms of its supply chain, Celestica has huge transparency and visibility. It can see down through its primary suppliers to suppliers two levels below.

Q: When Google went public in 2004, it pioneered a modified Dutch online auction format to make it easier for individual investors to buy stock and minimize the usual first-day “price pop.” The New York Times has referred to it as one of Silicon Valley’s most controversial IPOs. And yet, is this the future of underwriting?

I think the Facebook and Groupon debacles are evidence that the traditional IPO process has serious flaws. Facebook’s shares have fallen by roughly 25 percent, and Groupon’s have plunged more than 75 percent from the first day. IPO shares are usually priced low to nurture the belief that there will be a big first-day “pop” that handsomely rewards the underwriters and “friends and family.”

I think the Google modified Dutch online auction was clever and warrants being re-examined in light of Facebook and Groupon. Certainly Google’s shares have rewarded their owners handsomely, having gone from $85 when issued to close to $700 today.

Q: One of the global challenges for regulating financial markets stems from its effectiveness at embracing innovation and networked intelligence. As fast as regulators try to pin down rules, the industry has moved on. What solutions are available to us in Canada, where we have fragmented regulatory structures, and the Supreme Court of Canada has ruled that proposed legislation to create a national regulator is unconstitutional?

I think the Supreme Court made a mistake. We need a national regulator. Regulations matter, which can easily be seen by comparing the U.S. sub-prime mortgage fiasco to the stability of the Canadian financial services industry.

Nevertheless, society’s approach to regulations could be improved as a result of the internet. In the old model, regulatory agencies pored slowly and methodically through a random sample of the products offered by banks. But as financial “innovation” outstrips the ability of regulators to catch up, crowdsourcing could make regulators more responsive.

During the 1980s and ’90s, many governments dismantled large regulatory bodies and asked industries to police themselves. The public was told that self-regulation would be more efficient. Governments were to be the “regulators of last resort,” stepping in only after self-regulation was deemed to have failed.

The problem, in practice, is that most industry self-regulators have lax rules or inadequate enforcement. Also, governments (for the most part) have proven unable or unwilling to take prompt action when market failures become evident. Indeed, after years of underfunding, it’s no surprise that many regulatory agencies are ill-equipped to pick up the slack, let alone confront novel challenges for which they have neither the resources nor the expertise.

Rather than allowing a small group of powerful companies to police their own activities, we should look to the reverse: open up the regulatory process. Make everything transparent on the web and let citizens and other parties contribute their own data and observations. Where possible, let citizens help enforce regulations too, perhaps by changing their buying behaviour or by organizing public campaigns that name and shame offenders.

I’m not saying transparency is a substitute for better regulation by national governments and international institutions. But I am convinced that more disclosure and increased civic participation would add significant muscle to traditional regulatory systems.

Q: In your recent book, Macrowikinomics, you provide an example of how an entrepreneur with a Harvard MBA and $2 million in capital devised a decentralized, mass collaboration business model to successfully capitalize on weaknesses in the auto industry. How does this extensive crowdsourcing help facilitate innovation and outpace existing global companies, many of which are too slow to adapt to customer expectations?

In difficult economic times, companies that are nimble and flexible have a much greater chance of survival and even growth. Traditional companies increasingly face competition from start-ups, since it is much cheaper than ever to create a company. One study found that the availability of resources such as open source software, cloud computing, and the rise of virtual office infrastructure has driven the cost of launching an internet venture down from $5 million in 1997 to less than $50,000 today.

Small start-ups can have many of the same capabilities as large companies without the main liabilities—bureaucracy, legacy cultures, systems, and old ways of working—all of which can impede innovation. Open innovation, where talent doesn’t have to be inside corporate boundaries, benefits all organizations, and the biggest beneficiaries can be small companies.

Q: We’ve seen how protest groups in the Middle East leveraged social media to self-organize and share information to bring about social change during the Arab Spring of 2011. Now we are seeing extreme social unrest and protests across Europe, particularly in Greece and Spain. What countermeasures are there to balance the need for fiscal reform against this backlash?

There are backlashes against the austerity measures being imposed on European countries such as Greece and Spain because they are the wrong policies. I am in the Paul Krugman camp that economic downturns call for stimulus spending and not austerity measures that throw hundreds of thousands of more people out of work. To be sure, evading taxes was a national hobby in Greece, and a crackdown is required so that people who have a taxable income should pay taxes. But many European countries are vivid examples that tax cuts and spending cuts will simply make a bad situation worse.

We have a crisis with youth unemployment around the world. In some countries it is as high as 40 or 50 percent. My generation had a clear pact with youth. If they stayed in school, stayed out of trouble, and were willing to work hard, they would have a good life. Now that is proving to be false.

Q: The Pool for Open Innovation makes thousands of patents and proprietary information available to the public. How does sharing intellectual property like this actually improve how a market economy works?

There is a broad agreement that markets have historically provided the best incentives for innovation and wealth creation. But increasingly, companies understand that traditional industrial age approaches can be radically improved by a more sophisticated approach to patents and proprietary information.

Today, as Linux dominates large computers and mobile devices around the world, smart companies like IBM have embraced the open source operating system, saving themselves hundreds of millions of dollars a year and generating billions of dollars in hardware and services revenue. Biotech companies cooperated to place their intellectual property—the human genome—in a commons.

Nike gave away 400 patents to the GreenXchange on the principle that a rising tide lifts all boats.

And in industries ranging from pharmaceuticals to auto manufacturing, competitors are beginning to share some of their intellectual property as a step towards improving their industry and their own chances of survival.

Companies are learning that all intellectual property is not the same. Some intellectual property should be protected, while it’s wiser to place other intellectual property in a commons. Like IBM, they save money, enhance their capability by sharing and then compete on a higher level, all to the benefit of shareholders. I estimate that if IBM had fought Linux rather than embracing it, the company’s revenues and likely market value today would be a third less than it is.