What is it about Nick Carr’s recent challenge to Yochai Benkler’s views on the peer production model that feels wrong? He says that peer production exists prior to a commercial market and that a commercial market will break down the peer production model.

“One thing that has become clear is that the success of social production collectives hinges on the intensive contributions of a very small subset of their members. Not only that, but it’s possible to identify who these people are and to measure their contributions with considerable precision. That means, as well, that these people are valuable in old-fashioned monetary terms - that they could charge for what they do. They have, in other words, a price, even if they’re not currently charging it. The question, then, is simple: Will the “amateurs” go pro? If they have a price, will they take it?”

Nick’s challenge is accurate, particularly when a peer production model doesn’t have a strong enough purpose to hold it together through adversity.

And Jason Calacanis has done what almost anyone in his shoes would also try by offering to pay Digg users for their “labor” on Netscape instead of on Digg. He wants to win.

“I’m absolutely convinced that the top 20 people on DIGG, Delicious, Flickr, MySpace, and Reddit are worth $1,000 a month and if we’re the first folks to pay them that is fine with me–we will take the risk and the arrows from the folks who think we’re corrupting the community process”

I guess it’s the assumption that people are motivated first and foremost by money that bothers me. No doubt I’ll do something for money if the benefit of doing it for love or because it’s right is less than the benefit of having the cash. I want to give my family all the advantages that I can.

But I think Nick misunderstands a value proposition inherent in the concept of communities.

There are a lot of people who put a lot of energy into building their church community when that time could be spent elsewhere making money. And I doubt most churches would suffer any significant memership losses if a nearby competing church offered to pay people to switch churches. They participate in the church community because the investment returns have personal and social value that have nothing to do with their material wealth.

People who moderate online communities like some of the more active Yahoo! groups invest themselves because of their interest in things like social influence or sometimes even for other selfish gains. The really successful groups have an undeniable and crystal clear purpose.

For example, the San Francisco Golden Gate Mother’s Group is a highly engaged community of women with new babies who help each other with the day-to-day challenges of urban motherhood. The community holds itself together by the shared desire to raise children well. That mission couldn’t be any simpler or more important to a first time mother. Even the least-engaged member understands that answering someone’s question now results in better answers for you when you need help in the future.

Paying people to participate wouldn’t make them better at what they do. I’d argue it might actually make them worse. If Netscape was a brand with a purpose that mattered to me, then Jason wouldn’t have to pay me or even the best bookmarkers to participate.

Nick also challenges the notion that peer production can operate without management overhead. I think he miscalculates the role of management in peer production. Yes, it may be required, but management is a service to the group, a service to the mission. Management in peer production could probably be outsourced.

I do think Benkler may actually underestimate the importance of a clear and cohesive mission for the group. Without a core purpose that the members of the group find important, a competing commercial market could very well break down the community.

But that then begs the question of how valuable the community was in the first place.

Media executives are admitting publicly that the print publishing model doesn’t appear to have a happy ending to the heavy beating it keeps taking. Folio ran a story this week titled “The Revenue Tipping Point“. It refers to the point at which online revenue gains outpace the print revenue losses at a magazine publishing company.

Photo: therese flanagan

“While online revenue is still dwarfed by print revenue for most publishers, many are starting to see real revenue growth online exceed the real revenue loss in print on a quarterly basis. That’s a huge justification for publishers investing online; a final warning shot for publishers resisting (and yes, there are still plenty of them out there) online investment.”

The business magazine master himself, Pat McGovern, confirmed the trend:

“At the American Business Media Spring Meeting in May, IDG Communications chairman Pat McGovern, head of a company that has been criticized for not committing sooner to the Web, spoke of how the company is now making more money online than it is losing in print.”

Agencies and marketers have been telling publishers that they were shifting budgets away from print to online media for several years. Circulation has been flat or falling across the print world. Readerhsip time spent figures have all been pointing online.

Colin Crawford also of IDG added his thoughts (and warnings) on the trend:

“Every year our print ad market contracts in terms of total advertisers and total pages and revenue and our print circulations fall. There is nothing on the horizon that indicates any sort of reversal of this trend…Transformation involves a deep cultural shift in attitude to put online first and stop over protecting print.”

The signals are everywhere, crystalized for the shortsighted in big red figures on the balance sheets.

But until only recently the investment and tradition behind print publishing and the print brands have made it very difficult for executives to tell their own staff not to mention the press that print magazine models are failing.

Why is it ok to open the kimono now? Because there’s now a story to match the strategic direction. As online revenue builds, investment will shift away from print at a reasonable pace. “We won’t have to close shop afterall,” Mr. Publisher says. “We’ll make up the losses with online revenues. Everyone just calm down and get back to what you were doing before.”

It’s a step in the right direction, but I find this story a little bit dangerous. This strategy implies that the print model has enough life left in it to make the transition only a matter of shifting money from one pocket to the other. I think many publishers will interpret this strategy as a way to hold onto their jobs while they wait for the combined print and online revenues to match pre dotcom bust earnings. It’s then that they plan to release a big sigh and head back to the golf course.

But the competition for online ad budgets is heating up, too. Unfortunately for the old school print sales guys out there, the online ad model doesn’t look the same as the print model. Banners are not the same as print pages, and, it turns out, there are several other effective and often more profitable methods for marketing online than standard banners. Many of them don’t require the overhead of a sales team. And many of them are based on totally new content production models, in case the editorial staff bought the rhetoric, too.

I guess what I’m suggesting is that spending time thinking about this tipping point is merely the first step in admitting you have a problem. But the race is on, and no doubt a bunch of publishers are going to get crushed both in print and online if they don’t actually really make the investment to turn their online businesses into valuable media vehicles.

UPDATE (10/17/2007) — Things have changed a lot since this was originally written in July 2006. A few have found this post through a search and made the mistake of thinking it’s relevant still, but this snapshot in time looks like historical record to me more and more every day. Many of the problems have been addressed or even resolved, and I really couldn’t be more optimistic about the future of Yahoo! now.

Next week is my one year anniversary at Yahoo!, so I thought I’d do a couple of retrospective lists. Looking back on the year, overall, I have enjoyed going to work, learned a ton, met some incredibly bright people and expanded a lot of my thinking about media. It really is a pleasure to work here, and I feel lucky to be part of the team. But, as with any company, there are things I wish were different, too.

Photo: Dawn Endico

Favorite things about Yahoo!:

1. Open minds. In most cases, people are open to “not invented here” technology and products. In all cases, people are very open to new ideas. This culture makes it possible for everyone to feel comfortable speaking up in every meeting or blogging both internally and externally.
2. Smartness. I’ve never been in a meeting where I felt an individual couldn’t contribute intelligently. You witness bursts of phenomenal brainpower both individually and collectively all the time.
3. Never complacent. The constant stream of advances rolling out across almost all Yahoo! products is the public evidence that nobody inside the company is ever asleep at the wheel. They could be driving into a tree, in some cases, but they’re not asleep.
4. Passion. Well, maybe not everyone is passionate about their specific job, but people are very motivated and feel like they are doing or contributing to something that matters.
5. Diversification. Mature companies are able to spread both risk and opportunity across multiple channels. Yahoo! knows this well. That can create distractions, but Yahoo! never takes its eye off the ball, either. The user comes first. Always.
6. Globalness. My experience at IDG gave me a taste for the benefits of globalizing a vision and then sharing knowledge and experience across cultures. I love seeing that same ethos here. People are always thinking about how ideas apply in different countries.
7. Great work environment. The espresso bar; the gym; the great speakers who come talk to us; cubes up and down the hierarchy. Nothing will top the little building my team had across the street from the headquarters of The Industry Standard in San Francisco which was somewhat of a madhouse, but Yahoo! does a very good job of making life at work a nice place to be.

Things Yahoo! needs to change:

1. Control. There are way too many people “owning” things and not enough people contributing their expertise in the places where it’s needed most. The Product Managers’ scripted 1 year roadmaps become the magic wand of power used to reinforce the status quo.
2. Innovation constipation. Few people are willing to take a loss on one product or strategy on the chance that another one might yield a brighter future. The result is a wait-and-see approach. That’s a shame given the incredible potential here.
3. Isolation. The campus keeps us all from interacting with the rest of the world. External face-to-face meetings only happen amongst people whose jobs are dependent on interacting with external companies. It has an impact on the types of products the company creates…often oblivious to what’s happening on the Internet outside of yahoo.com.
4. Product duplication. The company’s decentralized approach breeds an environment where different people are solving the same problem in different ways. This is expensive, but it does have the benefit of forcing people to stay on their toes (see #3 above).
5. Analysis paralysis. There are way too many people involved in very small decisions. You get the benefit of uncovering all the potential pitfalls in any given problem, but people spend way too much time looking for problems and not nearly enough time creating solutions.
6. Where are all the women at? I’m in a presentation with about 150 people right now, yet I see no more than 30 women in the audience. At a company with so much invested in the social aspects of the Internet, it suprises me that the more socially sophisticated sex doesn’t have better representation.

I’m very interested in what leadership lessons we can learn from the people who drive the successful peer production models on the Internet. What is it about Craig Newmark, Jimmy Wales, Rob Malda, Stewart Butterfield and the other pioneers of participatory media that make the brands that they’ve created so powerful?

Photo: heather

Yochai Benkler breaks down the incentives for participation in peer production models in a very sensible and fascinating paper called Coases’ Penguin and discusses the economics of collaboration in his PopTech talk now available on ITConversations. But there’s a missing thread in his analysis that I think is crucially important.

The creators of the platforms on which peer production unfolds must have some common characteristics that enable these reputation models to reflect back on the people who invest in the platform instead of the company, brand or leader of that vehicle.

No doubt the participants are what make the products sing. But there’s something in common about the way these shepherds have approached their products and their customers that create an environment of trust, utility, gratification, expression, community, etc.

I don’t think any of them one day woke up and said I want to build a massive community of people posting content. Rather they probably stumbled onto ideas that started in one direction and ended up a little different than what they intended. I wonder what it is about the way they approach problems and lead teams that made them capable of identifying where the sweet spot would be for their idea.

I suspect that all of them share a handful of key qualities that make them unusual leaders including things like…

• Total dedication, focus and passion for the service the community is providing to itself
• A laissez faire attitude toward conflict but quick to identify resolutions
• Motivated by a desire to do something important, not by money. They want to be part of something bigger than themselves.
• A very creative mind that thrives on solving problems though not necessarily skilled in traditional artistic disciplines
• Collaborative leadership styles, the extreme opposite of authoritarian, mandate-driven leadership

I don’t think they are attention seekers. I don’t think they are self righteous. They probably were mischief makers as kids and grew up to be anti-authoritarian. I’m guessing they were heavy video game users at one point if not still and love to compete.

I’m sure all of them also understand the decentralized and collaborative mentality, not as a translation from another model but rather baked into the way they think about what they are building.

I don’t know any of these guys personally, so this is perhaps wasteful conjecture. But I’m very curious about how the mainstream media business is going to approach the idea of participatory and social media given the cultural chasm and even conflicting styles of the leaders in the two categories. So far, it seems, people like Rupert Murdoch (and Terry Semel) have been smart enough to let these companies run and let these leaders lead.

It won’t be long before mainstream media companies start rolling out their own concepts for participatory media models, and I suspect those ideas will often fall flat…and it won’t be because the idea is bad but rather a lack of the key qualities required to shepherd a community.

Product roadmaps can often become innovation roadblocks. If the roadmap gets translated into a timeline, then the team is forced into an the awkward position of having expectations against which they can only fail.

Photo: Baron von Flickrhoffen

The time required to meet most project deadlines is usually underestimated. There are ways to fight that like padding estimates and shifting resources, but deadlines are meant to be missed. And there are always new challenges and opportunities that popup midstream that you’ll never be able to predict.

As a result, the team gets rewarded for cutting out work and reducing the scope of a project in order to meet the goal. Hold on. That doesn’t make any sense. People get rewarded for delivering less?

In a discussion about Yahoo!’s tendency to focus on time-driven roadmaps with some colleagues yesterday, one person suggested that Product Managers should be rewarded for the number and quality of the features that make it into production. The roadmap then becomes more like a strategy or possibly just an approach to driving toward a vision.

I really like the idea that innovation is the goal rather than beating the clock. I can imagine the lively discussions happening up and down the management hierarchy, too. How much more interesting would it be watching a weekly report that showed all the cool stuff in development rather than a big timetable of all the projects that are running late?

No doubt it would be a lot more fun to congratulate your staff for the bright ideas that they’ve come up with and delivered rather than for the all-nighter they pulled to push out the same old s*#!t.