This week I’m discussing how markets are shifting and changing as we enter the digital era.

In his book The Wealth of Networks, Yochai Benkler discusses the fundamental shift we are currently undergoing from the Industrial Age to the Information Age.  One aspect of this is represented by the shift from a market-based economy to a market and non-market based economy.  This emergence and growth of the non-market based economy is extremely interesting and is something I will focus on.

Information is one of America’s largest exports, we are no longer the manufacturing country we once were.  As everything becomes more information oriented and as digital technologies take over their traditional tangible counterparts (think digital audio files from audio CDs), we see this rise of the information age.  Think about the weight of a dollar, what used to buy a vinyl record was soon replaced by the smaller, lighter compact discs; the compact discs now largely replaced by digital audio tracks.  These digital files, information files, weigh virtually nothing, they are intangible items.

If you think about the last 50 to 100 years, most people would never work for free; people expected compensation for their work.  It would be unlikely to find someone willing to work or work overtime without expecting some sort of compensation, primarily financial compensation.  In today’s economy, we find that while this is still/mostly the case, there are many examples of a thriving non-market based economy.  People who work without compensation because they are passionate about a project or a cause.  Many people now have the tools to be able to work on these projects inexpensively, think about the software developer who gets paid for programming at his day-job, then contributes his knowledge and skills to an open-source project later that night.  This application of knowledge is simply something that has never been as feasible or practical before.  For example developing a web service requires only a computer, internet access (which is widely available), and the programming skills, while building a car requires expensive materials, space, and the mechanical knowledge; thereby making it nearly impossible for a factory worker or mechanic to construct their own automobile at home.

Some Examples:

Look at the Linux projects, they are open sourced and contribution based.  Contributors are working, the contributions they make on the project are largely consistent with the type of work they do at their day jobs.  This “overtime” contribution/work is done out of their passion for the project.

Look at Wikipedia.  Wikipedia’s success is based on the contributions of a globe of Web users and Wikipedia moderators. This idea of a universal, free, always up-to-date (and constantly updating), accurate encyclopedia, with the largest collection of articles was unimaginable 10 years ago; and to think the contributors responsible for creating and maintaining the database continue to spend their time and effort without getting paid.

Many companies are starting to take advantage and leverage this idea of crowdsourcing.  While certainly not the first, or only company to achieve this, by far the most popular is Facebook.  Facebook attracts users because they want to update their profiles and information for their friends to see and they want to see what their friends have updated and added.  Facebook therefore relies on its users for the content of the site, the content that brings users back.  Facebook simply redesigns their page occationally and sells advertising.  The users are seemingly working for the profitable company, being responsible for the return visits and pageviews, for free.

I believe we will begin to see more activity in this non-market space and more companies aligning their strategies with this model in the future.  There are companies whose business models don’t seem to make much sense at the moment, companies we don’t fully understand, like Twitter.  It’s interesting to see a company with little to no revenue stream is generating so much buzz and continues to raise venture capital.  This leads me to believe in an idea I will discuss more in a future article, that getting paid with attention is becoming more important and more of a motivating factor than getting paid monetarily (at least on the web anyway).

I would love to continue a discussion on this, please comment below.