Two years ago at Pop!Tech Chris Anderson, the author of The Long Tail and the editor of Wired Magazine, gave his very first presentation about “Free! Why $0.00 Is the Future of Business“, which then turned into an oft-cited article for Wired Magazine, and will soon be expanded into a complete book. Over the past two years he has been thinking a lot about the price of free and this presentation shows that he has decided to change the language which expresses the argument.
The concept of non-monetary economics has been around forever. It is bartering, sharing, informal markets. It is when you let me stay at your house for a night and I show you how to make a podcast. It is when my presentation benefits your conference and your conference benefits my reputation. Currency isn’t exchanged here, but value is.
What Chris Anderson wants to know is if you can formalize non-monetary economics.
What does an abundance of information create? A scarcity of attention.
Herbert Simon, 1971
Every abundance creates a new scarcity. As we respond to abundant information we are discovering what the scarcities are. Here are some obvious scarcities:
- Time (Which relates to money)
- Money (Which is money)
- Happiness (Which, so they say, money can’t buy)
- Reputation
- Attention
Reputation Economics
The Google Economy is the first real expression of formalized reputation economics. The so-called atomic unit of reputation is the hyperlink. When you link to someone you are conferring your reputation to them. You are telling your viewers to leave your online real estate and to venture elsewhere. The person you are linking to, in turn, gets more reputation because they receive more readers and you get more reputation because your readers benefit from the information.
Google then tracks these gifts of reputation (that is, hyperlinks) and measures each website’s “reputational assets”. The measurement of those assets is Google’s PageRank. The higher the PageRank of a website the more readers the website will receive from searches on Google. Chris reminds us that 40% of Wired.com’s pageviews come from Google. And those pageviews, in turn, lead to more advertising revenue, which pays the salaries of Chris and the other Wired employees.
Links lead to higher PageRank, which leads to more readers, which leads to more advertising revenue, which leads to real money. That is the process in which reputation has been formalized into currency.
Just as the Central Bank plays with money supply and interest rates as mechanisms which affect traditional currency, Google tweaks its algorithms in ways which affect reputation currency. For example, the nofollow tag was introduced as a way to deflate the reputation currency of spammers.
Attention Economics
Chris brings up slides of Second Life and the popular Korean video game, Maple Story, which has recently entered the US gaming market. These games have virtual currencies which are formally linked to real currencies. In the case of Second Life users can purchase land. Just like Google’s algorithm tweaks reputation economics, Linden Labs, the company behind Second Life, tweak the value of their currency. The economics of Second Life has already been discussed ad-nasueum so Anderson wants to focus on the Korean game Maple Story.
In MapleStory the players want to accumulate gold. There are two ways to gather that gold: you can either invest your time and win gold in the same way that you do with most other video games, or you can just insert your credit card details and purchase the gold straight up.
Young people with lots of time but little money tend to accumulate currency by participating in the attention economy; that is, by using their time. Adult gamers with more money but little time purchase their gold; often times from the young people who have accumulated it in their spare time. In MapleStory the attention economy and the monetary economy co-exist in the same market.
My Thoughts:
Chris Anderson did a good job clearly expressing two concepts that have been around for a long time now. People like Lokman Tsui and James G. Webster have been discussing reputational economics, the value of the hyperlink, and the marketplace of attention for years now.
I was disappointed that he didn’t get into the social impact of the scarcity of reputation and attention. In fact, that’s my criticism of all the heavyweights here at Pop!Tech. They are doing a great job of clearly explaining complex concepts about how our world is changing, but they aren’t daring to explore the social impacts of those concepts or what specific opportunities exist for activists.
If attention is scarce and the greatest example of formalizing attention economics is in playing video games, what does that say about our society? Similarly, while reputation economics of the hyperlink seems to democratize reputation, it in fact contributes to the longtail effect in which just a few popular websites get more and more popular while the vast sea of valuable content gets mostly ignored. What I want to know his how do we formalize attention and reputation economics in a way that clearly improves society.
