Social Strategies: Choreography
Here's a nice NYT article discussing how one of my favorite recent startups - Kickstarter - is changing how, um, stuff is financed.
Kickstarter's a killer example of social strategy in action. It's an example of one of the most complex - but almost most disruptive - social strategies: choreography. In the choreography strategy, a new architecture for interaction between buyers and sellers is crafted from the ground up. Literally, the steps of the dance of economic exchange are newly choreographed.
Examples of choreography are tough to find. Most industries and markets have had largely the same choreography for decades, some for centuries. LinkedIn didn't change the choregraphy of recruitment, for example - it just made the steps in an existing dance slightly easier to perform.
So consider Kickstarter's new choreography for a new sec. A total amount to be raised is explicitly stated, and pledges are made conditional on everyone else's pledges exceeding the desired amount. From a technical perspective, Kickstarter is letting one party (like a band) buy a psuedo-binary call option from N others, where the strike price is the fundraising amount, and the option either pays off in full, or not at all. The steps of the dance are altered.
That's a new choreography for stuff like books, music, and film: one that promises to unlock significant efficiency gains. More information is aggregated at less effort, risk is transferred, atomized, and spread, and, perhaps most interestingly, Kickstarter users are themselves beginning to align risk with reward (by offering funders limited edition stuff, etc).
So will Kickstarter take off? Anywhere outside a prop trading desk, these economcis are pretty radical. To really ignite a financial disruption, Kickstarter might wanna think about the other half of the equation. Kickstarter pledges are still illiquid investments. But what if they were tradeable instruments?
Now that would be a radical new choreography. It would move beyond the simple risk-spreading economics of a binary call option - to the self-organizing network effects of a market.
It's just one idea. The bigger idea is choreography itself, and it's power as a path to advantage. So the question is this. Most organizations are choreographed. Are you choreographing?
The Contingency Market is a more sophisticated mechanism for such trades.
The future business model for digital work relies upon contracts between the large, interested audience and the small producer.
In the same way that this new business model is facilitated by the Internet, so the Internet renders the old business model (copyright) obsolete.
// Crosbie Fitch // 2:49 PM
I like the choreography metaphor, but you're confusing the lambada with a foxtrot.
The right metaphor isn't purchasing an option, it's creating a public good. Spreading good music, good art, and good ideas benefits everyone- not just the people who pay for them. So how do we solve the incentive issues around creating public goods? The answer is textbook 21st century advantage-- you've got to be strategyproof.
(Did my best to channel my inner Umair on that one.)