The Market is Trending Sideways

The trendline has taken a sharp turn off the surface of the chart.

An encyclopedia emerges where all of the writers are volunteers. It’s the biggest encyclopedia on the planet, and it’s as accurate as Britannica. A network pops up where people can download virtually all media at a moment’s notice, and at no cost (except the legal risks). Users clamor for visibility on YouTube, knowing full well that they won’t make money doing so. And the world’s youngest billionaire is living in a five bedroom rental home.

Something is going wrong here. The classical economists say that this is blatantly irrational behavior. The world’s largest encyclopedia, and the largest collection of videos on the planet, can’t be dismissed as small blips in our view of how the economy works. Conventional wisdom says that we need to be incentivized in order to create these kinds of products.

Incentives are great at motivating people to do mindless, repetitive tasks. They aren’t so great at motivating us to do creative work.

But the science says otherwise. Incentives are great at motivating people to do mindless, repetitive tasks. They aren’t so great at motivating us to do creative work. In fact, incentives seem to have the opposite effect. People are much more motivated by purpose and autonomy.

What would lead people to try to perfect a skill when there’s no money in it? In fact, why would they do their job better when they know there’s no extra money in it? The answer could be tied to the fact that financial rewards are linked to the pleasure center of our brain, the same part that is activated by sex or cocaine. This is one of the most primitive parts of our brain. Strangely enough, it is impossible to activate the pleasure center and the altruism center at the same time.

That’s right. When Swiss homeowners were asked whether or not they would support a nuclear dump in their backyard, most said they would out of a sense of duty. When asked if they would support it if they were paid for it, they were actually less likely to support it. They were thinking about money. They were thinking with the pleasure center of the brain.

And this thing, the nucleus accumbens, is old. Old enough that we find it in reptiles.

But if this motivation to edit an encyclopedia for free, or to “go viral” on YouTube, or even to copy a movie and illegally give it away, isn’t being driven by the pleasure center of the brain, what is driving it? If you believe Geoffrey F. Miller, it’s because we’re like bower birds building an extravagantly artistic nest just to impress a mate. The human brain itself might have evolved for the same reason as the peacock’s feathers.

And yet we’re still trying to run a society based on the part of the brain that motivates crocodiles.

So why now? If it’s built into our brains, why hasn’t this kind of economic activity happened before? The simplest answer is to say that it has. We just didn’t see it. Things have changed. Nearly two billion people are using the internet. It’s become a social internet. It’s not the TV or the radio. This is something that you can interact with.

Now all the work that people were doing for free is extremely visible. Now people can collaborate in ways that they simply couldn’t before.

And the market is trending sideways.

Interview With an Astrophysics Professor: Dr. Michael L. Allen

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  • Russell B

    You tube postings probable find a strong line with the Peacock analogy. It is a space where anyone can say . . . Hey look at me. With the invent of technology this becomes even easier. My challenge to this line of thinking is . . . How much is substantive content vs. Time Waisting? Where could we be as a society if that much collective effort was put into math,sciences, medicine?

  • Carter

    @Russell B:

    That is a very good point. At the same time, I have to ask myself what constitutes time wasting? How do we differentiate between something that is a “useful” way to spend our time and something that is “wasteful?” It might seem obvious but the more you analyze it the less obvious it becomes. Much of what is called “productive” work by market experts has no direct bearing on survival or necessity. What interests me about the whole thing is the fact that the content on YouTube and similar media outlets is largely being produced without financial incentives.

  • Russell B

    Good point. How can anyone really be judge of what is wasteful or not? Is the cell phone truly something that society is better off with or without. In the end everyone has their own relative view of what “being productive” is. YouTube is fascinating that TODAY it is being produced without any financial incentives, although I am a cynic in that I don’t believe everything remains free of economical incentives forever because we all need food and shelter sometime.