Explaining Success of Social Media
No commentsJimmy Wales and “a band of volunteers,” created Wikipedia, the self-organizing, self-correcting, never-finished encyclopedia of the future. In TED conference he explains how the collaborative approach works, and why it succeeds. ‘Wikinomics’ also tries to explain the rise in social media and reason for the success. Altruism, Anti Establishment and Super Ego gratification are the answers they speculate as to what motivates the ‘volunteer’ to work for free.
But Adam Smith – father of economics has concluded that rational self-interest, free market economy can lead to economic well-being and prosperity. His observations and theories is the foundation for Capitalism. But, when people are willing to work for free as in the case of Wikipedia, how can you apply ‘free market economics’ in that case. So, does this mean that social media challenges the Market Economy and Capitalism as explained by Adam Smith?
Well I have been troubled by this very question for some time until I recently read ‘Predictably Irrational’ by Dan Ariely. According to Ariely, our understanding of economics, now based on the assumption of a rational subject, should, in fact, be based on our systematic, unsurprising irrationality. Ariely argues that greater understanding of previously ignored or misunderstood forces (emotions, relativity and social norms) that influence our economic behavior brings a variety of opportunities for reexamining individual motivation.
In the chapter on “Cost of Social Norm”, Ariely argues that we live in 2 worlds, one ruled by ’social norms’ and the other ruled by ‘market norm’. Social Norms are friendly request and wrapped in social nature and need for community (for example asking your neighbor to move your couch). This plays to warm and fuzzy human nature. On the other hand Market Norms are based on sharp edge of monetary exchanges. In this domain you get what you pay for.
He does an interesting computer based exercise to explore the affects of social and market norm. The goal of the experiment is to monitor labor productivity by observing the number of circles on the computer screen that can be pulled on to the square in 5 minutes. First group received $5 to perform the task, second group received 50 cents. Third group got only social request (nothing concrete was offered, but mainly favor). It was found that productivity of first group was higher than second group. This indicates the ethos of market norms. The more money equals more motivation. This is how organization motivates its employees. But the interesting find was the third group was far more productive than the first group. Even though no monetary incentive was provided to the third group. What happened? While the first and the second group worked within market norm, third group worked in the domain of the social norm.
Based on the above experiment, when people work in the domain of market norm, Adam Smith’s Market Economics works fine. But if people can be made to work in the domain of social norm, then Adam Smith’s Economics does not hold true. In the past social norm was constrained by space (your friends were in your neighborhood). But technology has expanded space and you can ‘virtually’ collaborate with people across multiple time zones. Now ’social norm’ can be successfully applied to motivate people to collaborate and create value based on a unique business model.
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Monday, April 14th, 2008 at 5:01 pm and is filed under Web 2.0, Globalization, IT Strategy, Collaboration. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
