Love and Money

Yochai Benkler’s classic essay, Coases Penguin, explains peer production as a third classic means of organizing economic activity, parallel to the marketplace and the firm. Peer production has a distinct set of advantages for information products, where costs of communication and distribution are low.
Benkler notes that in the real world, of course, market and firm aren’t mutually exclusive. There are many variants and hybrids between pure market and pure managerial forms. Industry ecosystems typically include a mix of big companies, small suppliers and service providers, and market-based commodity purchasing.
Similarly, we would expect to see hybrid forms combining aspects of peer production and the other classic market and firm-based forms. Following up to Benker’s analysis, here are some thoughts on some emerging combinations.
At Socialtext, we see companies using wikis to generate peer-created internal knowledgebases to share information, replacing centralized, structured collection and publication processes. Companies are finding that removing barriers to contribution by a larger number of contributors improves the speed, quality, and amount of content.
Another hybrid of organization form is for-profit customization and service on an open source base. This isn’t just “rent-seeking” — the economist’s slur for exploitation of freely contributed work. It’s a way to fill a gap in the peer production model.
Benkler describes the traditional method of prioritization in a firm as “managerial.” Resources are allocated by a manager’s dictate. This description ignores a key factor in managerial production — the customer. Managers gather customer needs, and ensure that production is done to customer schedule.
The advantages of peer production are greatest where the developers are the customers. When customers are separated from developers, by skill set or time priorities, there needs to be some way to communicate the customer’s needs to the developers. Customers also bring deadlines, which are foreign to pure peer production. Benkler writes that peer production is more efficient over time because of its ability to marshall vast resources. “Peer production relies on making an unbounded set of resources available to an unbounded set of agents, who can apply themselves toward an unbounded set of projects.” But if a customer needs functionality by a specific moment, it won’t help that a given free software project will probably develop that capability eventually.
Agile development methods — where customers and developers work collaboratively to set priorities against deadlines — take advantage of lowered communication costs to increase customer input and reduce risk. Using these methods on an open source base allows producers and customers to take advantage of peer production low cost and high-quality for things that are generic or non-time-sensitive.
With agile development, money is a measure of practical empathy — you get paid when you understand and meet customers needs and priorities over time.
Another interesting and puzzling question is the mix of incentives in a hybrid world. Where financial and nonfinancial motivations co-exist, how can money be introduced without discouraging people who contribute for free, for fame, satisfaction, personal need, and other nonmonetary incentives.
As noted in the previous post, some activities, like sports and music, where participating for money isn’t seen as mutually exclusive to participating for social rewards and personal satisfaction. There are fields like academia and scientific research, where participants make a living, but choose to earn substantially less than their peers who work in law practice and industry. There are also fuzzy lines in artistic and academic communities between being successful and “selling out” — tilting the balance all the way toward money, and away from values respected by peers, like unbiased research.
Benkler notes that there are some areas where perceptions change over time. In Shakespeare’s time, professional actors and musicians were looked down on; in the 19th century, professional athletes were disrespected. These values have reversed.
Given the substantial economic activity surrounding open source (IBM, anyone?), there are many people negotiating the “love and money” boundary every day. Personally, I like serving customers, and think it is fortunate that it is customer focus that makes money in an open source ecosystem. Much of the innovation in social software is coming from peer production — the way to innovate is to participate in the game. And, like anyone in a business based on “commons” resources, I want those resources to thrive, for reasons of inherent value, and for self-interest.
What do y’all think?

2 thoughts on “Love and Money”

  1. i like your ideas. it’s a lot of what we are doing at microcast communications, my new startup. we talk about keeping buyer and seller in intelligent learning loops.

  2. I agree with the general thrust of this. Though I’m becoming a bit sceptical of some of the over-simplified use of Coase’s Transaction Costs.
    Phil Agre has a good caution about this here :
    OTOH in my time I’ve written things which were definitely on the breathless optimism side 🙂

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