Wednesday, May 03, 2006

Peer Production and Market

After "The Wealth of Networks" the question if peer production is desirable and viable is answered. What remains is how to mix it with the market economy. If peer production is going to play that revolutionary role that Yochai Benkler predicts it will this shall be a crucial question for all kinds of businesses. And it is not trivial - as psychology shows (see for example: "Effort for Payment - a tale of two markets") monetary reward crowds out other incentives. We need to divide the work very carefully so that the market part does not destroy the peer production. And to make this precise division we need to know more about the psychological mechanism of incentives crowding out and also about the economic feasibility of provisioning a particular work by peer production. Even a nonprofit organisation needs pay some bills - and what are for profit business models compatible with peer production? Some first answers were worked out by the Open Source and Free Software movements (for example
Open Source Case for Business), but I have not found any more systematic treatment of that subject - a framework guiding us when evaluating not yet discovered business models.

1 comment:

phil jones said...

I think the really interesting thing is that for a long time paid, exchange economies have driven out gifting ones. And suddenly, on the internet, that's being reversed.

Suddenly, gift-economies are able to compete with, and out-perform, exchange economies. My guess is that this is something to do with scale : there comes a time when you cross a threshold of number of people, and the cheaper, asynchronous co-ordination of gifting is more effective than the more expensive synchronous co-ordination of payment.

Obviously, as Benkler says, the wider distribution of productive capital is a necessary precondition.

I think I have a three-part answer to the "how to make money" question.

1) In the short term, you sell services around the peer-produced information products. That can be anything from customized modification of free-code, renting server-space, through to some higher-level reviewing, indexing, derivitive services.

The problem is, these become commoditised really quickly. That's why everyone from Sourceforge to MySpace to Google is offering you gallons of free hosting for your content in return for an infinitessimal advertising revenue.

I recently got a bit annoyed when I discovered that I couldn't create any more "sets" on my free Flickr account. But I see the point. Flickr give away commodity hosting, but require me to pay for access to a higher value, highly abstract categorisation resource. Ironically I can have free disk-space but not free name-space.

I don't think this will last. Competition will commodify "sets" just as it commodified disc sectors. But I think it's an experiment that shows Flickr are looking in the right direction.

2) To avoid getting commoditised, you have to look more closely into two strategies : what Umair Haque is calling "edge competencies", and what OReilly is calling "data inside". How do you become a non-commodity, essential hub / partner in an ecosystem of peer-production, in such a way that people have to pay you?

EBay, Amazon and Google can all take a cut of transactions you do through them, because the peer-production is inalienable from their service. The challenge is how to get yourself into this position.

3) Ultimately though, we're moving towards full Netocracy, where links (or live attentional connections) start to be valued and "imploitable" in themselves. I'll give away content because the connection with the audience is *more* valuable to me than any money I can make. At first we'll asssume that this is simply a kind of investment, because, ultimately, downstream we *will* be cashing out those links into real money. But money itself is is something we might persue without worrying about how we actually spend it - sure, ultimately it will buy us food, but we may hold on to it and invest it for decades before we end up eating it.

In the same way, we may hold on to, and invest in, and trade links for decades before we finally expect them to be "exploited" (converted back into money).

So as our recognition of netocracy grows, we'll worry less about the ultimate payment and more about how our peer-production is helping with our link portfolio.