Calacanis’s wallet and the Web 2.0 dream

“What we are seeing now,” writes Yale law professor Yochai Benkler in his techno-anarcho-utopian magnum opus The Wealth of Networks, “is the emergence of more effective collective action practices that are decentralized but do not rely on either the price system or a managerial structure for coordination … As computers become cheaper and as network connections become faster, cheaper, and ubiquitous, we are seeing the phenomenon of peer production of information scale to much larger sizes, performing more complex tasks than were possible in the past for nonprofessional production.”

What this all amounts to, says Benkler, is “a quite basic transformation in the world around us, and how we act, alone and in concert with others, to shape our own understanding of the world we occupy and that of others with whom we share it.” By changing “the way we create and exchange information, knowledge, and culture,” he concludes, “we can make the twenty-first century one that offers individuals greater autonomy, political communities greater democracy, and societies greater opportunities for cultural self-reflection and human connection.”

Clearly, Benkler is suggesting that we’re undergoing a radical reordering of the means of producing and consuming cultural goods, one that will bring us – as long as the industrialists and lawmakers don’t screw it up – to a supra-earthly paradise of thought and symbol. The moneychangers and their managerial goon squads will be thrown out of the temple, and the people will share their creative gifts freely over a dense network of fiber optic cables, a new and serpentless Tree of Knowledge hung with tasty digital fruit. (Whoa. I’m starting to speak in tongues, like Kevin Kelly’s evil twin.) Benkler’s tome provides arguably the most eloquent and certainly the most exhaustive explanation, and defense, of the idea of what some have called “the gift economy.” As Benkler’s fellow-traveler Lawrence Lessig blurbs, “No work to date has more carefully or convincingly made the case for a fundamental change in how we understand the economy of society.”

But how convincing is Benkler’s case? The string from which it hangs is his contention that we are seeing “the emergence of more effective collective action practices that are decentralized but do not rely on either the price system or a managerial structure for coordination.” Amateurs and volunteers have always been active in producing creative works, of course. Emily Dickinson didn’t write her poems to get rich, and community orchestras and theater troupes rely mainly on volunteers. But in the past such enterprises have been small-scale affairs (in terms of production, not necessarily artistic merit), limited to the work of an individual or a tiny, local group. What Benkler argues is that the Internet will allow the model to “scale to much larger sizes, performing more complex tasks than were possible in the past for nonprofessional production.” Teams of amateurs, working for free and without managerial oversight in technology-mediated collectives, will be able to do what up until now has required formal and usually for-profit organizations manned and managed by professionals who get paid for their work. The amateur collective will thus supplant the professional institution as the engine of common culture.

So how strong is Benkler’s string? Will the decentralized web collectives be able to operate successfully outside “the price system” and without “managerial structure”? The fact is, it’s too soon to know for sure. We should be skeptical, though. For one thing, in the past we’ve seen a pattern of amateur activity springing up in the wake of the invention of a new communication medium, only to be followed by increasing professionalization and commercialization. The invention of the radio – the original “wireless” technology – spurred the creation of a vast network of amateur broadcasters, but that nonprofessional network was soon displaced by a smaller set of commercial radio stations that were better able to fulfill the desires of the listening public.

For another thing, we’re already seeing the (re)emergence of formal managerial structure in new online media. As examples supporting his thesis, Benkler points to (among others) Wikipedia and open-source software. As I have described more than once on this blog – with tedious regularity, in fact – Wikipedia has been steadily wrapping itself in an ever more elaborate and hierarchical management structure as it has pursued its goal of improving its quality. Open-source software, too, has been successful not because it lacks a management structure but because it has a very good one. I won’t rehash these points again – you can look here, here and here – but I think that Benkler’s belief that large-scale efforts to create cultural goods will succeed without management structure is dubious, at best.

But what about the ability of those efforts to exist outside the price system? Here, Benkler’s string seems a bit stronger. But it’s starting to fray. One thing that has become clear is that the success of social production collectives hinges on the intensive contributions of a very small subset of their members. Not only that, but it’s possible to identify who these people are and to measure their contributions with considerable precision. That means, as well, that these people are valuable in old-fashioned monetary terms – that they could charge for what they do. They have, in other words, a price, even if they’re not currently charging it. The question, then, is simple: Will the “amateurs” go pro? If they have a price, will they take it?

We are going to start finding out the answer to that question, thanks in some measure to Jason Calacanis. Calacanis, whose company Weblogs was one of the first to pay bloggers, is an unbeliever in the gift economy, and yesterday he in effect called Benkler’s bluff. He offered to put the elite diggers and taggers that do most of the work at sites like Digg on his payroll – if they’d come and work for him instead of the competition. He offered, in other words, to bring the social mediators into the price system. It’s worth quoting some of what Calacanis wrote, just to emphasize how his model is the antithesis of Benkler’s:

When [my partner] and I started Weblogs, Inc. the idea of paying bloggers – heck, even making money from blogging – was considered offensive to many. Blogging was, as the case was stated, a highly personal activity that should not be trivialized by the forces of commerce and greed. I don’t have a complicated relationship with money or capitalism: I love them both and see them as simply as fuel and the process by which fuel is produced. Money to me means time, time means quality, and quality means success …

Talented people’s time in our society is primarily engaged with money … Talent wins, and talent needs to get paid. I love paying talented people so they can sleep well at night doing what they love. That’s my biggest joy in business: gettin’ people paid … The concept of “free” content producers, which I think WIRED called crowdsourcing, is going to be a short-lived joke. A loophole in the content business that will be closed by savvy startups which identify the top 5% of the audience and buy their time.

I think that what Calacanis is getting at is that the reason “social media” has existed outside the price system up until now is simply that a market hadn’t yet emerged for this new kind of labor. We weren’t yet able to assign a value – in monetary terms – to what these workers were doing; we weren’t even able to draw distinctions between what they were contributing. We couldn’t see the talent for the crowd. Now, though, the amateurs are being sorted according to their individual skills, calculations as to the monetary value of those skills are starting to be made, and a market appears to be taking shape. As buyers and sellers come into this market, we’ll see whether large-scale social media can in fact survive outside the price system, or whether it’s fated to be subsumed into professional media. Which is mightier – Benkler’s dream or Calacanis’s wallet?

15 thoughts on “Calacanis’s wallet and the Web 2.0 dream

  1. Seth Finkelstein

    Note also, in terms of deskilling/outsourcing/freelancing, that the actual amount that is being offered to the “talent” seems to be pretty light money – SIX DOLLARS AN HOUR, as a full-time job. Maybe it’s not a full-time job, but, still, Calacanis sure isn’t working for that chump-change.

  2. SidneyV

    Along the same lines, remember the “Homebrew Computer Club”? Personal computing was led by the same phenomenon of amateur peer production, but now we have Dell. Going back further, weren’t the Wright brothers amateurs too? Certainly they weren’t professionaly trained aeronautics engineers …

    Just as you point out, almost every new field of activity starts out as a hobby and passion, and then matures into a profession.

  3. Craig Danuloff

    And the price that gets set is market driven. You can’t argue this isn’t a great competitive move. As I wrote in my own post on the subject, what if the next wanna-be MySpace offered $500 each to get the Quarterback, Prom Queen, Top Geek, Biggest Pot-head, School Wierdo, Debate Team Captain, Girl-most-likely-to-become-a-porno-star and 10 other influencials at every high-school in America to move to a new service? Wouldn’t that be a great investment? Would MySpace make a counter-offer? Influence has a value, and there is soon to be a market for it.

  4. lawrence

    I don’t think there’s any question that eventually, any site attempting to build a business based on user generated content will have to share revenue with contributors.

    The only thing that doesn’t quite sit right with me about Netscape’s strategy is that they seem to have decided to go external for their super users. The best kind of super users are home grown. Why not offer to pay existing Netscape users based on contributions? In addition to generating some buzz with their existing user base, paying regulars would be more likely to result in dugg news stories that match the site’s existing demographic.

  5. Rob Jones

    You have to admire Calacanis’ ability to act as a disruptor. He shook up commercial blogging, and appears to have made that move stick, at least for now. He’s messing with Digg, the darling of the web 2.0 crowd. Hell, he even (sharp intake of breath) upset Mike Arrington on the Gillmor gang.

    However, not everyone is as mercenary as him. I believe people really do contribute to these sites for reputation rather than financial reward (cf. Maslow). And it’s not just Digg, which is the pinnacle of user-created content. All sites which offer users the opportuntiy to contribute (Amazon et al) call on this facet of our collective personality. For many it really is more about recognition and community than financial reward. I’ve heard stories of Amazon taking their top reviewers away somewhere for a couple of days and treating them well. This might be a more healthy and fitting way to reward the contribution of the core than paying them a little over minimum wage.

    Benkler has a point, although rather idealistic. Calacanis also has a point, although rather materialistic. No doubt the truth lies in the substantial middle ground.

  6. Ian Betteridge

    Rob, you might call it mercenary: others call it “making a living doing something you enjoy”. Recognition and community are not opposites of being rewarded for what you do.

  7. alan

    Right on the nail Rob! I wonder will Calacanis’s move be a splinter in the side of the “technology-mediated collectives” thereby prompting infection, or will it be pushed right out and be just another blip? Feedback so far appears to be mostly negative. “Tree of Knowledge hung with tasty digital fruit.” I for one assume that the serpent will always exist albeit transformed to be as invisible and insidious as ever but always one step ahead! That could be a long conversation though. Alan.

  8. Yochai

    I’m happy to

    accept this wager as a measure of the quality of my predictions about

    the long term sustainability of commons-based peer production. The

    shape of the wager, however, should be clear. We could decide to

    appoint between one and three people who, on some date certain—let’s

    say two years from now, on August 1st 2008—survey the

    web or blogosphere, and seek out the most influential sites in some

    major category: for example, relevance and filtration (like Digg); or

    visual images (like Flickr). And they will then decide whether they

    are peer production processes or whether they are price-incentivized

    systems. While it is possible that there will be a price-based

    player there, I predict that the major systems will be primarily

    peer-based. Look at what happened to Mojo Nation—which tried to

    reward participants in a swarm peer file distribution system with

    “mojo” convertible into goodies as compare to BitTorrent, which

    did not. Compare the level of use and success of pay-per-cycle

    distributed computing sites like Gomez Performance Networks or

    Capacity Calibration Networks, as compared to the socially engaged

    platforms like SETI@Home or

    Folding@Home. It is just too

    simplistic to think that if you add money, the really good

    participants will come and do the work as well as, or better than,

    the parallel social processes.

    The reason

    is that the power of the major sites comes from combining large-scale

    contributions from heterogeneous participants, with heterogeneous

    motivations. Pointing to the 80/20 rule on contributions misses the

    dynamic that comes from being part of a large community and a

    recognized leader or major contributors in it, for those at the top,

    and misses the importance of framing this as a non-priced social

    process. Adding money alters the overall relationship. It makes

    some people “professionals,” and renders other participants,

    “suckers.” It is not impossible to mix paid and unpaid participants, as we see in free and open source software and even to a very limited extent in Wikipedia. It is just hard, and requires a cultural form that is definitely not “now at long last we can tell who’s worth something and pay them, while everyone else is just worthelss.” What Calacanis is doing now with his posts about the

    top contributors to Digg is trying to alter the cultural

    interpretation of what they are doing: from leaders in an engaged

    community, to suckers who are being taken for a ride by Ross. Maybe

    he will succeed in raining on Digg’s parade, though I doubt it, but

    that does not mean that he will succeed in building an alternative

    sustained social process of peer production, or in replacing peer

    production with a purely paid service. Once you frame the people who

    aren’t getting paid as poor sods being taken for a ride, for example,

    the best you can hope for is that some of the “leaders” elsewhere

    will come and become your low-paid employees (after all, what is

    $1,000 a month relative to the millions Calacanis would make if his

    plan in fact succeeds? At that point, the leaders are no longer

    leaders of a community, and they turn out to be suckers after all,

    working for pittance, comparatively speaking.)

    There is an

    abiding skepticism, born of many years in the industrial age, about

    the sustainability and plausibility of nonmarket-based cooperation

    and productive collaboration. We have now, on the other hand, almost

    two decades of literature in experimental economics, game theory,

    anthropology, political science field studies, that shows that

    cooperation in fact does happen much more often than the standard

    economics textbooks predict, and that under certain structural

    conditions non-price-based production is extraordinarily robust. The

    same literature also suggests that there is crowding-out, or

    displacement, between monetary and non-monetary motivations as well

    as between different institutional sytems: social, as opposed to

    market, as opposed to state. It just is not so easy to assume that

    because people behave productively in one framework (the social

    process of peer production that is Wikipedia, free and open source

    software, or Digg), that you can take the same exact behavior, with

    the same exact set of people, and harness them to your goals by

    attaching a price to what previously they were doing in a social

    process. Anyone interested in the basic approach can look at my

    articles Coase’s

    Penguin, or Sharing

    Nicely, which include more of the underlying literature than does

    the book The Wealth of Networks, although some of the materials are

    there in chapter 4. The problem is not, in any event, a simple or

    solved one, and I, among many others, continue to work on it.

    On another,

    less important note, of course it is “too soon to tell for sure.”

    “Knowing for sure” is the sure sign of religion, not analysis.

    I just want to point out that the particular example you use, the

    American Broadcast System, however, is very far from accurate. There

    is a very brief overview of the history of the displacement of

    amateurs by the networks over the course of the 1920s in an oldish

    piece of mine called “Overcoming

    Agoraphobia”. The short of the story is that the

    Department of the Navy more or less forced British Marconi to sell

    its American assets to an American company, thereby creating RCA in

    partial alliance with GE. GE, RCA, AT&T, and Westinghouse then

    created a patent pool which divided the market in radio receivers and

    transmitters in 1920-21, and spent the next five years jockeying

    within this market to try to prevent amateurs and competitive

    producers from competing. Throughout this period they manuvered with

    Herbert Hoover, then Secretary of Commerce, to regulate the airwaves

    so as to shunt the amateurs onto what were thought unusable short

    waves, and to crowd all the nonprofit and almost all the

    non-patent-pool stations into a single narrow channel, while

    reserving separate channel allocations for stations that could afford

    expensive broadcast stations and live performers. Amateurs were

    prohibited from broadcasting news, or recorded music, etc. To say

    that this process represents an instance in which “that

    nonprofessional network was soon displaced by a smaller set of

    commercial radio stations that were better able to fulfill the

    desires of the listening public” is, shall we say, not the only way

    to characterize that story.

  9. Nick Carr


    Thanks very much for the comments. I look forward to reading the papers you linked to.

    As to the wager, two years is much too soon. We won’t even have sorted out which parts of the current “social production” movement are fads and which will actually endure. I would think 10 years would be the real test, but 5 years should be ok – at least the trend should be apparent.

    What about your contention that large-scale social production efforts won’t rely on management structure for coordination? Isn’t that just wishful thinking? Doesn’t Wikipedia have management structure? Don’t Linux and other successful open-source projects have management structure?


    PS Movable Type stinks in handling html tags, as your comment’s formatting shows. Sorry.

  10. Cliff

    Having observed and participated in various roles along the volunteer-paid employee continuum since the early days of the WELL, I must say that this argument never seems to go away. Most people enjoy the gift economy when it fits their interests. The feeling of community membership is sufficient and exciting reward, as is the information gained and shared. And almost inevitably, those who contribute a disproportionate amount to the community eventually look for some meaningful compensation.

    This is not a new phenomenon, and is only so visible because the Net allows us to see it happening in so many situations at once. Clearly, when certain members of the community begin getting paid for their roles, the relationship dynamic may change. They are no longer peers, but they may still provide valued service to the community and be respected for it if they honor the relationship that got them into a paid position.

    We keep fooling ourselves into believing that a new argument means it’s the “beginning” of something and the “end” of something. There will always be gift economies in new environments. There will always be paid experts.

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  13. Touschner

    Okay, 5 years – July 2011 – is coming up. The bet is coming due. Who won? Is it Benkler’s Dream or Calacanis’s Wallet?

    Calacanis’s gambit to pay Digg users did not succeed, and Digg is on its way to the dustbins of Internet history at any rate.

    Slashdot-type peer-to-peer filtering and accreditation has not gone mainstream. Yet Twitter continues to grow and is increasingly playing the peer filtering role. A number of services (Klout, PeerIndex, etc.) have emerged to identify key social media influencers and “pay” them with a reputation score.

    Facebook users do not get paid for the value they create on Facebook (and in fact “pay” for the service with their personal information). But Facebook and others (Apple, Google (Android), etc.) are building “app market” platforms that pay the ecosystem of developers who build on them.

    Wikipedia remains “commons-based peer production,” but with substantial levels of management and coordination at the top level. Quora and StackOverflow also harness the crowd, but do not pay the top producers.

    5 years out, it still seems “too soon to tell for sure.” Do we need another 5 years?

    I’m working on a paper that explores this debate in light of what some are calling the next layer of the Internet, the “personal layer:” Input from the principals to this wager – an update on your views – would be greatly appreciated. Thanks!

  14. Katherine Warman Kern

    Benkler is mistaken. Calacanis is on the right track.

    I empathize with Benkler’s concern with the need to take ridiculous money out of the equation to foster creativity. But the creative gets better when the creators aren’t distracted by wondering how they will pay the mortgage.

    Katherine Warman Kern


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