Probably the most interesting exchange on yesterday’s VC Panel at Google I/O was around how investors think about open versus closed systems.  Dave McClure got the most memorable line of the day with “Open is for losers."  Dave was obviously being provocative on purpose. 

My own thinking here was captured by comments from Chris Dixon and Brad Feld.  Chris pointed out that open is the basis for more overall consumer surplus generation (i.e. more total net benefit to society), while closed is the basis for more concentrated wealth generation.  Brad said that open and closed come in waves and that investors can make successful investments in both cases.  I added that at Union Square Ventures we are not so concerned about attempts by individual companies to create closed systems, as long as the Internet itself stays open, which is why we favor regulation that keeps the layers of the web separate from each other (i.e. no deep packet inspection).

I am particularly intrigued by the idea that innovation on the web gets pioneered in closed or small systems and ultimately superseded by open systems.  I still remember the time when corporations had proprietary and closed email systems, which seems inconceivable now.  In that regard one of the sessions I really enjoyed yesterday was Chris Messina’s ”The open & social web“ in which Chris talked about the potential interplay between Webfinger, OpenID, PubSubHubbub and Activity Streams.