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Socially Created Value

Everyone is utterly familiar with the market narrative for how “value” is created through property rights, contracts and money. But we have far fewer stories, let alone rigorous analyses, about how social communities create value – and how that value can be retained by those communities (GPL and CC licenses are two key tools, but what else can work?) My pet theory is that socially created wealth tends to “disappear” from view because market players are so adept at appropriating and monetizing it, and then pretending that they created it in the first place. The standard IP narrative kicks in, and voila! – the role of the value-creating community is obliterated.

I think about this dynamic a lot these days as I contemplate how online communities are becoming the real engines of value-creation on the Net (think blogging, wikis, P2P, public domain archives, social networking websites, massively multiplayer online games, open source software, etc.). It’s a real mind-bender for traditional content vendors to understand that piracy is not their fiercest long-term competitor; it’s user-created content and online community. Only a relatively few savvy businesses understand that there’s a business bonanza to be made by providing open platforms that leverage people’s social impulses (to share pictures, trade web bookmarks, gossip, make professional connections, rate books, meet like-minded hobbyists, and so on). The troglodytes continue to pursue the pay-per-view, lock-it-all-up model of online information and creativity — but the real money gusher will come from those who convene social communities and unleash their social energies.

Which leads me to a question that I’m grappling with – for which I don’t have the answer. When will a major player in journalism recognize these facts and invent an online business model for reputable journalism that leverages social community and rivals the profits and influence of a CBS News, USA Today or the WSJ?

In some ways, this is already happening with major blogs and alternative news sites; it just hasn’t been publicly recognized.
Jay Rosen’s essay
for a “Journalism, Blogging and Credibility” conference in January 2005 is germane here: social trust is migrating to online venues, but mainstream media haven’t learned how to follow. Why not? I think it’s because the business of journalism, a captive of its mass-media paradigm, can’t recognize the value-creating capacities of readers in the networked environment, and change itself accordingly. Its failure to innovate could be fatal. As social credibility and trust migrate online, the agenda-setting power and influence of mainstream mass media will decline. It already has; think of the betrayals of trust committed by Judith Miller, Bob Woodward, Dan Rather, Jayson Blair and more generally, the Washington press corps – many of which were exposed by bloggers. As Craigslist, Huffington Post, Raw Story and other online venues become more efficient, trusted, versatile and speedy in providing everything from classified ads, news-gathering, punditry and even celebrity gossip, traditional mass media will lose their economic base. Their “voice of God” objectivity and brand franchises are already taking a drubbing.

I’m convinced that distributed user communities will be the foundation of a new genre and generation of journalism. That’s where the real value-creation is occurring. But how will the MSM adapt? Can it adapt without a wholesale change of identity? These are questions I keep returning to.

3 thoughts on “Socially Created Value”

  1. How does a horse monopoly become a car company, before cars have been invented? That a battleship of industry ever adapts, as a rule of thumb, must be due to its head start and deep pockets, so if the guys in their R&D department invent only a moped, the corporation can hang in there and outlast and coopt the guys who invent the car. I guess the liability to worry about is that WaPo won’t have the money to buy out the inventers of the business model we’re waiting for–or they’ll be outbid by Murdoch. But there’s culture and idealism in the blogosphere too. A new kind of business with 10,000 Ben & Jerry’s as partners might be picky about who they allow to buy them or under what terms they’ll accept venture captial.

  2. “Only a relatively few savvy businesses …”

    No big mystery.

    The problem is that data-mining is *hard*, and LOW-MARGIN. Whereas rent-seeking with a monoply is, if not exactly easy, not as hard, and with substantial higher margins.

    Note there are lot of business gurus trying to make money off being advocates of low-margin data-mining, rather than actually going into the business of low-margin data-mining. That should tell you something about the industry.

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