Wikinomics Review

I’ve got a review of Wikinomics up over at The American. Here’s the meat of it:

If Wikinomics has one weakness, it’s that the authors fail to fully appreciate the extent to which market mechanisms lose their salience in the context of peer production. For example, they urge Yahoo! to set up a profit-sharing scheme within its Flickr photo-sharing site and its del.icio.us social bookmarking site, in which the creators of the most popular content would get paid for their contributions. This seems entirely unnecessary. The sites must already be offering users sufficient incentives to participate, or they never would have signed up in the first place.

Moreover, introducing payments could create new problems. Paying a handful of the most popular contributors could create feelings of envy and resentment among the vast majority of users who would continue to be unpaid. The lure of cash payments might also induce some users to attempt to game the system. Paying contributors would be highly inefficient, as there would be substantial overhead in locating, authenticating, and mailing (fairly small) checks to thousands of people. The money would be far better spent hiring more programmers to further improve the site, making it more valuable for all users.

This points to a more general principle: peer production succeeds largely because it eliminates the frictions that accompany commercial activities. Proprietary software companies face a variety of costs, including finding and hiring programmers, finding and hiring sales and support personnel, supervising and evaluating employees, negotiating contracts with other software companies, filing patent applications, renting office space, and so forth. Peer production eliminates most of these costs, as contributors self-select the parts of a project that interest them most (which will, more often than not, be the parts to which they’ll have the most to contribute) and contribute their changes directly to the project, without the substantial overhead that would be required to keep track of who contributed what and how much each contributor was owed. Introducing financial payments into the equation can often undermine the very efficiencies that make the system work in the first place.

Also, don’t miss the latest edition of The American’s new podcast, which features yours truly discussing the basics of peer production with managing editor David Robinson.

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