There’s kinda this Grand Theory of Social Economy that exists in terms of the rise of social networking and the internet that has been touched on in books like The Long Tail and Here Come’s Everybody and recent article’s like Doree Shafir’s New York piece this week. No one has really put it out there, in full, yet and it is something that escapes my inexperienced and inadequately prepared comprehension of it. But I’m going to try to wrap my thought process around it anyway. We’ll see how this goes.
At the heart of this social economy is the the web (more accurately, perhaps, digital technology), which redefining long-held economic structures. An example of this is digital (e)books. The economics of the publishing industry developed under conditions such that pricing was based on physical production of a hard (or paper) bound physical object (less writer’s fees, agent fees, editors, advertising, etc., etc) that had to be stored, shipped and either sold in stores or delivered to the home. Digital technology has led to a profligacy of digital book editions which remove the economic costs of the physical product. reproduction is as easy as a click and shipping is as easy as a download button. But the publishing industry cannot seem to grasp how this upends their world. That is, they cannot come to terms with the core principal on which their entire industry rests: How much do we charge for this product?
(Now, that’s not to say that the printed book industry is going to disappear. It isn’t. But one has to concede that the “publishing” industry need to at least recognize that the market is shifting in a new, digitally dominated direction)
And no one within the industries themselves seem prepared to answer these questions. No one really seems invested enough to step back and say, we need to tear this whole thing down and start from scratch. It’s a lazy approach, but the motivation not to change is probably more fear than laziness. As Shirky points out: “Institutions will try to preserve the problem to which they are the solution.”
So what seems to be happening – and I’ll use the tired case of the newspaper – is that these institutions are failing. They cannot (or will not) reassess their situation, will not tear it down to start again, so they are, then, inadvertently tearing themselves down. And in their place step the startups that Shafir aptly profiles.
At the same time, we have a more social atmosphere on the web. The explanation for this is simple diffusion theory. That is, ideas and technology spread through a society through social networks and interpersonal communication. Facebook spread so quickly for this very reason. Your friends are on it, therefore you are on it. The same can be said of Foursquare, Tumblr or Kickstarter. These organizations use existing social networks to propagate their platform and spread it through society. At the same time, the users capitalize on their social networks for economic transactions.
I’ll point to the case of Kickstarter because a) it’s an excellent example and b) I have experience using it. Shafir writes (with my emphasis added):
When I went to Kickstarter, the projects that were seeking funding included everything from a documentary on Asian-elephant conservation and a project that will cover the funding to send journalist Ted Rall to Afghanistan to a pair of Brooklynites who make artisanal soda. People can put up whatever they want, and the people behind the projects agree to give their funders something from the venture. So if you give $10 to the artisanal-soda folks, you get a coupon for two free sodas, but if you give $50, you’ll get a printed tote bag, a mix CD, a coupon for four free sodas, and a handprinted card with one of their soda recipes. Give more than $500 to Rall and you’ll get personally thanked in the acknowledgments section of his book plus signed copies. People set a funding goal for their projects, and funders don’t get charged unless a project reaches its goal. It’s a way of not only encouraging creativity but also making consumers feel more connected to the things they buy. (Kickstarter takes a commission of 5 percent of all projects that get funded.) The biggest project funded so far was for $85,000 for a book of Obama-campaign images, Designing Obama, by Scott Thomas, the campaign’s design director.
“The value is in the exchange,” says 33-year-old Chen, when we go down the block to Schiller’s for a snack. Chen looks like a surfer, with shoulder-length black hair; he wore a navy hooded sweatshirt over a T-shirt. Born and raised in New York, he spent a few years in New Orleans and still owns a house there. “I think that’s how you create an economy, and a commercial market that is sustainable, rather than seeing donor fatigue enter into it.”
Chen sees the power in returning control to the creative producer, the way it could upend much of the way culture is produced. “If you’re in music and you have a record label, if you’re in fashion and you work for a studio, you are giving up the mass bulk of your intellectual property right off the bat,” he says. “And with Kickstarter, you keep 100 percent of your own intellectual property.”
Kickstarter is an economic platform in and of itself. It’s a marketplace for ideas, essentially, where projects are both funded and sold. A successful Kickstarter project is a project that connects with what Kevin Kelly calls the 1,000 true fans.
A creator, such as an artist, musician, photographer, craftsperson, performer, animator, designer, videomaker, or author – in other words, anyone producing works of art – needs to acquire only 1,000 True Fans to make a living.
A True Fan is defined as someone who will purchase anything and everything you produce. They will drive 200 miles to see you sing. They will buy the super deluxe re-issued hi-res box set of your stuff even though they have the low-res version. They have a Google Alert set for your name. They bookmark the eBay page where your out-of-print editions show up. They come to your openings. They have you sign their copies. They buy the t-shirt, and the mug, and the hat. They can’t wait till you issue your next work. They are true fans.
So Kickstarter offers a potential platform to gather your 1,000 True Fans and enter into an economic transaction. You aren’t just asking them to give you money so that they can create your work. You are offering your work to them in return. They key isn’t to say “give me $500 to make my documentary so I can become rich and famous.” The key is to say “give me $25 and I’ll make then give you this documentary that otherwise wouldn’t exist.” And therein lies the social aspect of the economy.
So the Social Economy is less about replacing economic structures as creating a new column. This is something that get’s overlooked in the hype and hubbub over the next great technology. There are always going to be Blockbuster Films (I mean, maybe not forever and ever and ever, but you know what I mean). But what we see is the rise of the niche for people to create products which heretofore wouldn’t have existed and to actually make a living and a profit from those products. And these niche products have more of a chance than ever of jumping into the mainstream, because they rely on social networks. That which built the project will also spread the project.
