| Felix Stalder on Tue, 4 Aug 1998 14:35:22 +0200 (MET DST) |
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| <nettime> Rishab Ayer Ghosh: Cooking pot markets 2/2 |
----- beginning of part 2 -------
Is reputation a convertible currency?
Suppose you live in a world where people trade chicken and
grain and cloth - a very basic economy indeed! Suddenly one day
some strangers appear, and offer to sell you a car; you want it,
but "Sorry," says one of the strangers, "we don't take payment in
chicken; gold, greenbacks or plastic only." What do you do? It's
not hard to figure out that you have to find some way to convert
your chicken into the sort of commodities acceptable to car
dealers. You have to find someone willing to give you gold for
your chicken, or someone who'll give you something you can
trade in yet again for gold, and so on. As long as your chicken is,
directly or indirectly, convertible into gold, you can buy that car.
What holds for chicken in a primitive barter economy holds also
for intangibles such as ideas and reputation in the part of the
economy that operates on the Internet [16]. And some of these
intangibles, in the right circumstances, can certainly be converted
into the sort of money that buys cars, leave alone pizzas to keep
hunger away. This may not apply to your reputation as a cat
enthusiast, though; it may not apply to all software developers all
the time, either.
In the primitive barter economy, trade is limited to basic
commodities with only the occasional car thrown in, Not everyone
will want to buy cars, however rich they may be in grain and
cloth. Much of their earnings will go back into buying more basic
commodities; only some of it will be converted into car-buying
things like gold. Then again, only some people at some times will
be able to find the right sequences of trades to convert chicken
into gold, which may depend on context and the general demand
for such unusual things in the economy.
On the Internet - indeed in any knowledge economy - it is not
necessary for everything to be immediately traded into "real
world" money. If a significant part of your needs are for
information products themselves, you do not need to trade in
your intangible earnings from the products you create for hard
cash, because you can use those intangibles to "buy" the
information you want. So you don't have to worry about
converting the warm feelings you get from visits to your cat Web
page into dollars, because for your information needs, and your
activities on the Net, the "reputation capital" you make will
probably do.
"The cyberspace 'earnings' I get from Linux," says Torvalds,
"come in the format of having a network of people that know me
and trust me, and that I can depend on in return. And that kind of
network of trust comes in very handy not only in cyberspace." As
for converting intangible earnings from the Net, he notes that "the
good thing about reputations ... is that you still have them even
though you traded them in. Have your cake and eat it too!"
In 1990, Colin (Col) Needham was a research engineer for "a
major US computing company which has a large industrial
research facility in the UK." [17] What on earth was he doing
developing the Internet Movies Database, which quickly became
perhaps the most comprehensive source of data on films
anywhere? [18]
"I started the database as a fun activity back in 1990," says
Needham. "There was already a list of actress filmographies
being posted" - by the Net's ubiquitous hobbyists who don't want
to charge for the work they do - "to [the USENET newsgroup]
rec.arts.movies and I added to that by creating a companion
actors list just for a little bit of fun combining movies and
computing."
I never believed that people could do so much work just for "fun".
Yet it's the most common reason I have always seen for
anything of value produced on the Net. Some of these people,
including Needham and Torvalds, spend several hours a day,
forgetting to sleep, writing programs and creating articles and
Web pages. Fun?
For close to three years, I have been publishing frequent articles
on the Internet, analysing the Indian telecom and broadcasting
markets. Unlike the weekly column that inspired this book, my
analyses are published on-line only, and don't even get the fees
Indian newspapers pay. True, I enjoy doing this, as I have
enjoyed my prolific posts to various discussion groups over the
years, but none of this has been just fun. But I have to admit that
it takes a while to get to more substantial reasons for the
Internet's huge productivity. After all, few people think of
economics while developing free resources on the Net, and since
they're not getting paid for it, the first answer that pops up to the
question "why am I doing this?" is Fun.
But there's more. "The original motivation," says Needham later,
"and [the] sustained motivation right through to today was just to
put something back into the Internet community in one small way
... [it's just that] over the years it turned into a bigger way!" Now
that's more like it. Putting something back into the Net seemed
not much clearer than "fun" at first, but it is at least a sign that
there is something Needham, like all of us, took out of the Net in
the first place.
There is, here, the first glimpse of a process of give and take, by
which people do lots of work on their creations which are
distributed not for nothing, but in exchange for things of value.
People "put it" to the Internet because they realise that they
"take out" from it. Although the connection between giving and
taking seems tenuous at best, it is in fact crucial. Because
whatever resources there are on the Net for you to take out,
without payment, were all put in by others without payment; the
Net's resources that you consume were produced by others for
similar reasons - in exchange for what they consumed, and so
on. So the economy of the Net begins to look like a vast tribal
cooking-pot, surging with production to match consumption,
simply because everyone understands - instinctively, perhaps -
that trade need not occur in single transactions of barter, and
that one product can be exchanged for millions at a time. The
cooking-pot keeps boiling because people keep putting in things
as they themselves, and others, take things out.
Torvalds points out, "I get the other informational products for
free regardless of whether I do Linux or not." True. But although
nobody knows all the time whether your contribution is exceeded
by your consumption, everyone knows that if all the contributions
stopped together there'd be nothing for anyone: the fire would go
out. And that wouldn't be fun at all.
Needham was a film buff, and had reason to put back into the
section of the Internet that fed his interest in films. He had no
plans to trade in the reputation capital the IMDb earned him for
money, at first, because he had a job and was using his
"reputation earnings" as brownie points, of sorts, in the on-line
world of film. His intangible wealth was being used as a ticket to
the consumption of intangibles, similar to the chicken-breeder's
spending on grain and cloth, but not cars, in the primitive barter
economy.
In contrast, Rob Hartill, who developed the software for the Web
version of the IMDb, and has maintained the Web version since
its inception, is a self-described "computer junkie". Indeed, he's
better known now one of the core developers of the free Web
server, Apache [19]. As for movies, he says, "I like watching
films when I get the chance, but I don't take it seriously; no video
collection, no LD player, no movie books." [20] He didn't have
much reason to put anything into the Internet - at least, not into
its movie-loving parts. Nor could the reputation of having worked
on the "greatest possible entity" that Needham sees as the IMDb
be much good to Hartill; why should a computer junkie care
about what film buffs think of him?
Of course, the work Hartill was extremely computer-related. "I
loved the idea of database being available to jog my memory and
generally just be there to play with," he says, so "fun" was
important for him too! "For me, the Web was a new media [sic]
that hadn't been exploited for anything interesting," so Hartill
was, naturally enough, willing to develop an interesting
application with a lot of effort, in order to give it away. Someone
had put the new medium of the Web into the Net, Hartill felt
obliged to put in something himself. "I was looking for things to
do with the Web ... and I just happened to have the [movies]
database sitting in my filespace." So his involvement with movies
was coincidental; what Hartill was putting into the Net concerned
his area of work and interest, programming for the Web. Indeed,
"if it hadn't been the IMDb," says Hartill, "I'd have burnt my eyes
out with some other programming project I'm sure."
Hartill, unlike Torvalds, then decided to cash in on the reputation
capital his contribution to the IMDb earned him, perhaps
answering those who asked "ask why on earth I spent so much
time working on [IMDb] for no apparent gain." He went to work
at Los Alamos National Laboratories. "My boss at Los Alamos
hired me on the basis of what he'd seen of the IMDb" - which
was pretty famous, and very popular, by that time. Hartill's
contribution to it was well known, so "I didn't have an interview or
even talk to [Los Alamos] on the phone before meeting him on
my first day [at work]."
But the IMDb, to use Needham's words, "snowballed." It has
now grown so big, that Needham is working on it full-time, as are
Hartill and several others with whom they formed a company.
IMDb is still free, and still relies on inputs from readers - like the
original version, based on the content of rec.movies.reviews. The
motivation to develop it further, according to Needham, is not
very different from what it was originally - "it's seeing what the
database has become and means to hundreds of thousands of
users and the challenges of taking it forward which motivate me."
However, the fact that Needham and Hartill have formed a
company to work on the database full-time means that IMDb has
to be their source of real income. It is not enough for IMDb to
earn intangibles such as reputation to meet their needs for
intangible information products on the Net; Needham and Hartill
now need their work to make some real money, tradable in the
economy outside the Net. As Needham adds parenthetically, "of
course I now have [the] added motivation that if we fail then my
wife and kids starve too." Reputation capital can help earn
tangible monetary returns: IMDb now takes paid advertising.
Cooking-pot markets
One can attempt to estimate the monetary value of the static
resources of the Internet. This could be extended to software
systems such as Linux, even though this not truly a static
resource as much of its value lies in the organisation of its
developer community, rather than any single copy of the
operating system software.
For instance, calculating that since Linux users have, on average,
much fancier hardware than Windows users and could therefore
pay more for the software, the 5 million-odd estimated installed
base of Linux is worth some $500 million in annual revenues.
(This sort of valuation is faulty, as not everyone who uses free
software would buy a full price version; however, the Business
Software Alliance uses the same method to calculate losses
through software piracy, where the same caveat applies.) The
Apache Web server if paid for in cash ought to have revenues
exceeding $500 million, given its commanding technical and
market lead over regular commercial software.
Such valuations may be imprecise and controversial - I could
using similar estimates give a figure of at least $50 billion as the
notional revenues of "free" resources on the Net - but at least
they can be reasonably attempted using statistical valuation
methods not altogether unfamiliar to analysts of brickspace
markets. Using the Net, though, has made it quite clear that the
real worth is in dynamic resources, the communities of people
that make up much of the value of even the "static" software on-
line. The worth of dynamic resources is exceedingly hard to
quantify, particularly since, like communities in the "real world",
they are riven with intangibles. Try calculating the worth in dollars
of, say, your neighbourhood watch community; or your
old-boys'/girls' network; or simply the folk you hang out with to
discuss politics (perhaps even economics!). Not easy, maybe
impossible.
Yet a rough estimate of the importance of dynamic resources is
possible: just figure out how much of your energy on the Net is
spent in interacting with other people - through discussion
groups, interactive Web sites or sites where you give feedback,
on-line chat, e-mail - and compare this with the time spent simply
reading static Web pages. Until recently on the Net it was
universally the case that people spent most of their time
interacting with others; now with the explosion of new content,
and new people who are still finding their way around, the ratio
may not be so high, but I expect that it will always be, in the long
run, the Net's dynamic resources that are most valuable.
If dynamic resources are the most difficult to evaluate, they are
also the most intangible to trade in. Yet whenever you post to
rec.pets.cats this is what you're doing: trading in dynamic
resources, in your post- of-the-moment that is valuable
temporarily, while your value remains. The workings of this
system of trade stem from the same motivation of "fun" present
when Colin Needham developed the Internet Movies Database -
which, built upon newsgroup discussions, is half-dynamic. It is
Needham's need to "put back" into the Net after having "taken
out" so much that drives most trade in dynamic resources. It is
the cooking-pot market of a seemingly altruistic value-in-giving
norm that drives the economy of interacting people.
If it occurred in brickspace, my cooking-pot model would require
fairly altruistic participants. A real tribal communal cooking-pot
works on a pretty different model, of barter and division of labour
(I provide the chicken, you the goat, she the berries, together we
share the spiced stew). In our hypothetical tribe, however,
people give what they have into the pot with no guarantee that
they're getting a fair exchange, which smacks of altruism.
But on the Net, a cooking-pot market is far from altruistic, or it
wouldn't work. This is thanks to the major cause for the erosion
of value on the Internet - the problem of infinity [21]. Because it
takes as much effort to distribute one copy of an original creation
as a million - and because the costs are distributed across
millions of people - you never lose from letting your product free
in the cooking-pot, as long as you are compensated for its
creation. You are not giving away something for nothing. You are
giving away a million copies of something, for at least one copy
of at least one other thing. Since those millions cost you nothing
you lose nothing. Nor need there be a notional loss of potential
earnings, because those million copies are not inherently valuable
- the very fact of them being a million, and theoretically a billion
or more - makes them worthless. Your effort is limited to
creating one - the original - copy of your product. You are happy
to receive something of value in exchange for that one creation.
What a miracle, then, that you receive not one thing of value in
exchange - indeed there is no explicit act of exchange at all - but
millions of unique goods made by others! Of course, you only
receive "worthless" copies; but since you only need have one
copy of each original product, every one of them can have value
for you. It is this asymmetry unique to the infinitely reproducing
Internet that makes the cooking-pot a viable economic model,
which it would not be in the long run in any brickspace tribal
commune.
With a cooking-pot made of iron, what comes out is little more
than what went in - albeit processed by fire - so a limited
quantity must be shared by the entire community. This usually
leads either to systems of private property and explicit barter
exchanges, or to the much analysed "Tragedy of the Commons."
[22]
The Internet cooking-pots (in the plural, as it turns out, an
examination of which is beyond the scope of this paper) are quite
different, naturally. They take in whatever is produced, and give
out their entire contents to whoever wants to consume. The
digital cooking-pot is obviously a vast cloning machine, dishing
out not single morsels but clones of the entire pot. But seen one
at a time, every potful of clones is valuable to the consumer as
the original products that went in.
The key here is the value placed on diversity [23], so that
multiple copies of a single product add little value - marginal
utility is near zero - but single copies of multiple products are, to
a single user, of immense value. If a sufficient number of people
put in free goods, the cooking pot clones them for everyone, so
that everyone gets far more value than was put in.
An explicit monetary transaction - a sale of a software product -
is based on what is increasingly an economic fallacy that each
single copy of a product has marginal value. In contrast, the
cooking-pot market rightly allocates resources on the basis of
where consumers see value to be, in each distinct product.
A calculus of reputation
A crucial component of the cooking-pot market model is
reputation, the counterpoint to ideas. Just as money does not
make an economy without concrete goods and services,
reputation or attention cannot make an economy [24] without
valuable goods and services, which I have called "ideas", being
produced, consumed and traded.
Like money, reputation is a currency, i.e. a proxy, which greases
the wheels of the economy. Monetary currency allows producers
to sell to any consumer, without waiting for the right one to offer
a needed product in barter exchange. Reputation encourages
producers to seed the cooking-pot by providing immediate
gratification to those who aren't prepared to pull things out of the
pot just yet, or find nothing of great interest there, and keeps the
fire lit.
Money also provides an index of value that aids an understanding
not just of individual goods (or their producers), but the entire
economy. Reputation, similarly, is a measure of the value placed
upon certain producer-consumers - and their products - by
others. The flow and interaction of reputation is a measure of the
health of the entire cooking-pot economy.
Unlike money, reputation is not fixed, nor does it come in the
form of single numerical values. It may not even be cardinal.
Moreover, while a monetary value in the form of price is the
result of matching demand and supply over time, reputation is
more hazy. In the common English sense, it is equivalent to
price, having come about through the combination of multiple
personal attestations (the equivalent of single money
transactions).
Money wouldn't be the same without technology to determine
prices. Insufficient flow of information required for evaluation, and
insufficient technology to cope with the information, has always
been responsible for the fact that the same thing often have the
same price across all markets.
The management of reputation is far too inefficient today to be a
useful aspect of a working economy. Its semantics are poorly
understood; moreover, there is nothing remotely akin to the
technology that determines prices based on individual
transactions in the monetary economy.
In a forthcoming paper I examine the calculus of reputation
networks, especially as they would work in a cooking-pot
market, and describe a possible technological solution to the
problem of efficient reputation management.
Conclusion
The common assumption that the Net feels at home with free
goods and vague trade because its population is averse to
money, altruistic or slightly demented is wrong. It is becoming
more obviously so as floods of "normal" people arrive from the
world outside, and initiate themselves into the ways of the Net.
An economic model based on rational self-interest and the
maximisation of utility requires the identification of what is useful -
sources of value - as well as a method of expressing economic
interaction. In the cooking-pot market model, it is seen that while
scarcity creates value, but value is subjective, and may therefore
be found in any information at all distributed on the Net.
The cooking-pot model provides a rational explanation for
people's motivations to produce and trade in goods and services,
where a monetary incentive is lacking. It suggests that people do
not only - or even largely - produce in order to improve their
reputation, but as a more-than-fair payment for other goods -
"ideas" - that they receive from the cooking-pot. The cooking-pot
market is not barter, as it does not require individual
transactions. It is based on the assumption that on the Net, you
don't lose when you duplicate, so every contributor gets much
more than a fair return in the form of combined contributions of
others.
Reputations, unlike ideas, have no inherent value; like money,
they represent things of value, as proxies. Reputations are
crucial to seed the cooking-pot and keep the fire lit, just as
money is required to reduce the inefficiencies of pure barter
markets. However, reputations require a calculus and technology
for efficient working, just as money has its price-setting
mechanisms today.
The cooking-pot model shows the possibility of immense value
being generated through the continuous interaction of people at a
numbing speed, with an unprecedented flexibility and aptitude
towards intangible, ambiguously defined goods and services. The
cooking-pot market already exists, it is an image of what the
Internet has already evolved into, calmly and almost
surreptitiously, over the past couple of decades.
The cooking-pot model is perhaps one way to find a rationale for
the workings of the Internet - and on the Net, it finds expression
everywhere.
About the Author
Rishab Aiyer Ghosh (rishab@dxm.org) is Managing Editor for
First Monday. This paper was written in December 1996 and is
updated from a version published in First Monday, Vol 3, Issue 3,
March 1998. http://www.firstmonday.dk/issues/issue3_3/
Notes
1a http://www.linux.org
1 http://www.amazon.com
2 Rishab Aiyer Ghosh, 1994. "The rise of an information barter
economy", Electric Dreams, #37 (21 November), at
http://dxm.org/dreams/dreams37.html
3 http://www.linux.org
4 http://www.apache.org
5 http://www.genmagic.com/Internet/Trends
6 Rishab Aiyer Ghosh, 1995. "Implicit transactions need money
you can give away", Electric Dreams, #70 (21 August), at
http://dxm.org/dreams/dreams70.html
7 see, e.g. Linux distributed by Red Hat Software, Inc -
http://www.redhat.com
8 This, and other quotes from Torvalds, are from e-mail
dialogues held with the author since October 1996. A
consolidated version is published as an interview in First Monday,
Vol. 3 Issue 3, March 1998,
http://www.firstmonday.dk/issues/issue3_3/
9 Credited to John Perry Barlow.
10 Electric Dreams, http://dxm.org/dreams/
11 Rishab Aiyer Ghosh, 1995. "Paying your readers", Electric
Dreams, #67 (31 July), at http://dxm.org/dreams/dreams67.html
11a Michael Goldhaber, 1997. "The Attention Economy: The
Natural Economy of the Net", First Monday, Volume 2, issue 4,
http://www.firstmonday.dk/issues/issue2_4/goldhaber/index.html;
Richard A. Lanham, "The Economics of Attention,"
http://sunsite.berkeley.edu/ARL/Proceedings/124/ps2econ.html
12 Paul A. Samuelson and William D. Nordhaus, 1995.
Economics. 15th ed. New York: McGraw-Hill.
13 http://www.timesofindia.com
14 Or the similar Blue Ribbon campaign, see
http://www.eff.org/blueribbon.html
15 Tim Clark, 1996. "Gates: Explorer will be huge", C-NET News
(August 1), at http://www.news.com/News/Ite
m/0,4,2009,00.html
16 Rishab Aiyer Ghosh, 1995. "Implicit transactions need money
you can give away", Electric Dreams, #70 (21 August), at
http://dxm.org/dreams/dreams70.html
17 Needham's quotes are from private correspondence on file
with the author.
18 http://www.imdb.com/
19 http://www.apache.org
20 Hartill's quotes are from private correspondence on file with
the author.
21 Rishab Aiyer Ghosh, 1995. "The problem with infinity",
Electric Dreams, #63 (19 June), at
http://dxm.org/dreams/dreams63.html
22 Garrett Hardin, 1968. "The Tragedy of the Commons,"
Science, Volume 162, pp. 1243-1248, and at
http://dieoff.org/page95.htm
23 Rishab Aiyer Ghosh, 1995. "Trade reborn through diversity",
Electric Dreams, #65 (10 July), at
http://dxm.org/dreams/dreams65.html
24 On the importance of attention, see Michael Goldhaber,
1997. "The Attention Economy: The Natural Economy of the
Net", First Monday, Volume 2, issue 4,
http://www.firstmonday.dk/issues/issue2_4/goldhaber/index.html
Copyright © 1998, ƒ ¡ ® s † - m ¤ ñ d @ ¥
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