This is part of my series of posts thinking about a coming age of abundance.  The main thrust of my arguments will be that abundance will be a feature of the physical world, but I would be the first to admit that we are a long way off from that.  In the meantime though, we can look to the online world for some clues as to what abundance might look like.  Online (at least on the margin), the cost of resources is already sufficiently close to zero so as to not matter.  One of the interesting possibilities that this holds is doing away with money.

Why would you want to do away with money?  As it turns out money is too powerful an incentive.  When you throw money into the equation, it tends to drown out other motivations such altruism, social norms and reputation.  Dan Ariely has a wonderful example of this in his book “Predictably Irrational” where he describes how a nursery school tried to use cash penalties to prevent parents from dropping off their kids late.  With the cash penalty the number of late drop offs went up (!) because now parents felt like they were paying for a service.  The money completely overwhelmed feeling bad for imposing upon the teachers.  Amazingly, money was so powerful that even when the school dropped the cash penalties the late drop offs stayed above their initial level.

At Union Square Ventures earlier this year we invested in StackOverflow which operates a series of sites with a fairly elaborate reputation system for motivating quality answers to questions.  I think it is pretty easy to see that if cash bounties were introduced into the system, those would completely drown out the existing reputation system.  For instance, instead of caring about earning badges and getting emotional value from those, contributors would rapidly gravitate towards earning the most money.  Not only would money change why people participate, but also who participates (namely people who care more about money than about reputation or altruism).

The saying “you get what you pay for” should be amended to include “and nothing else.” This is the reason that it is so notoriously difficult to come up with good sales compensation schemes.  Once you start paying sales commissions you have to now somehow measure and manage everything else, including quality of deals closed, cooperation with other departments, (over) promises to customers, etc.  This also explains in part why video sharing sites that tried to use ad revenue sharing to attract content did not succeed in catching Youtube.  The primary reason people were uploading to Youtube was to get maximum exposure for their videos and so having a large (potential) audience was a much bigger motivator than the potential to make some money.

As a small aside, this will be an interesting challenge for a number of the budding education sites such as Nixty and Udemy.  On one hand it is tempting to introduce money and let instructors charge for their courses.  On the other hand that will override any other motive that teachers might have, such as a genuine love for explaining a subject.

So in an online world without money we see that behavior can be influenced by much more subtle and varied means.  Again, my basic contention is that eventually this will be true for the physical world as well, but to get there will take some time.  More on that in coming posts and I recommend reading Cory Doctorow’s “Down and Out in the Magic Kingdom” for what that might look like (and learn about “whuffie” the reputation currency).

In the meantime though, there is a fascinating startup that is beginning to build a bridge between an online world without money and the physical world.  Listia uses a credit system to let people bid on items.  It is not a barter site, but rather an auction site with a credit system.  Now you might say that the credits are just like money, but because Listia credits are not connected to real money (you can’t buy credits with cash or redeem them into cash), Listia credits are potentially more subtle than traditional money.  I say potentially, because on Listia you still use credits to buy actual physical items and so there may be some implicit conversion going on.  I am watching Listia with great interest to see how much Gee and James (the founders) succeed in building a subtle incentive system around credits that motivates many different behaviors and helps build a community of reuse rather than a transactional auction site.  Listia could well turn out to be a wonderful glimpse of the future.