Talent and Scarcity

door Arne Keuning op

Talent and Scarcity

Open Source, Wikipedia and others attract lots of people who spent lots of time in adding information and improvements. All for zilch, noppes, nada. At least financial terms…

Some think this is the way of the future. All new paradigms first attract the idealistic people. In the first days of the Internet commerce was simply not done. Flame wars should not be stopped by imposing rules and enforcement but by netiquette. Funny thing is that many of these idealistic first users also happen to be a bit anarchistic. This seems logical because these are the people that venture into the uncharted territories precisely because of the lack of rules there. I feel sympathetic to that. While reading the book of Yochai Bankler you get the feeling that we are on a new era of the altruistic society. I would love to believe this but I don’t buy it.

In 1982 Güth, Werner, Schmittberger, and Schwarze wrote an essay with the title: “An Experimental Analysis of Ultimatum Bargaining,” (Journal of Economic Behavior and Organization, 3:4 (December), page 367). In this they laid down a special version of economic game theory called the ultimatum game. The game goes like this:

There are two players, A and B. B gets 10 euro’s and can decide how to split the money. A can either accept the offer or reject the offer. If he accepts the offer he will get what he is offered and B keeps the rest of the money. If A rejects the offer both get zilch, noppes, nada.

This of course means that whatever A is offered, he will always be better of accepting the offer because when he rejects he gets nothing.

Funny thing is that when people are offered less than 2 euro (20%) they tend to refuse the offer and therefore lower their own earnings. With the help of MRI scans during this decision process it seems that we humans do this because we wish to punish the one that is unfair to us by too low an offer. This is interesting but what has this to do with open source software and altruistic people?

Talent is scarce. Very few people are capable of making a good video, few people are good at writing and even less are good at writing good on interesting topics. But a lot of people love to watch a good movie and read a good story and are willing to pay for it…. Hey, that sounds llike a business model…!

Because some are willing to pay for a good (say, reading a blog) either directly or by being exposed to advertising than there will be people that will start to write for money. But if some schmuck who can’t write can get paid than you as an excellent writer also want to be paid. Otherwise you will feel like a loser. It’s like a virus: once it starts spreading it will develop like an epidemic. And when there is a market there will always be somebody who will act as patient zero.

Now getting back to the ultimatum game. I think that when somebody is going to make money based on the work that you or I deliver, we want a fair share of the pie. And when we do not get it, we will stop contributing (and of course be miserable because we loved contributing. But that is the essence of the ultimatum game). As long as nobody was making any money it was ok. But when somebody is making money the definition of fairness changes. And like I said, when there is a market it will be serviced.

Jeff Howe from Wired recently wrote a blog about this: Digital Sharecropping: Mesh takes on Crowdsourcing. But in his view people are motivated mainly by “respect”. But I, based on the above, think that once the virus spread more and more (talented) people will ask for payment. And once they are getting paid it will be like a normal business.

A nice example of a new business model is Crowdspirit.org. Here users can brainstorm, develop test and recommend new electronic products. Once they are succesfull the creators get paid for the work they did.

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