An economic argument for sharing knowledge with those around you.
Recently I had a talk with an acquaintance who is working on creating a network in a very specialized technical niche. The challenge is to create a network where the participants can meet, interact, share their knowledge and not just exchange pleasantries and drink coffee. Personally I was fascinated by the challenges and efforts involved in this endeavor.
Hypothetically if we both posses an apple each and give them to each other then we will still have one apple each. However, if we both have an idea and give them to each other the overall value increases with the increase in the number of ideas shared. How does this happen? Well, ideas as such are non rival goods, we consider any item as a non rival when its consumption by any one person does not make it any less available for consumption by another, and hence the overall increase in value.
The freemium model emerged after the appearance of digital non scarcity e.g. products that have no or marginal cost of duplication like mp3 files or computer programs. This has created a situation where such products can be widely shared at not extra cost. Freemium is model where the producer benefits from free sharing. The more a free product is shared the larger will be the demand for premium products.
In a similar way the non rival nature of ideas creates the possibility for an economic model wherein you get more as you share more. This has been amply demonstrated in a larger perspective.
Society
On a societal level things that inhibit the exchange of ideas are seen as inhibiting societal innovation and thereby stifling growth. A great argument on this can be seen in the economic brief for Eldred Vs Ashcroft. Here 17 eminent economists argue that an extension of copyright is not a good idea.
Industry
On the industry level one can closely look at the industrial revolution in England. The free exchange of ideas at the lunar society is widely regarded as one of the main reasons for the success of the industrial revolution in England. In the post modern era a good example is the open source software industry where freemium was leveraged to create a vibrant ecosystem of businesses around freely shared content.
Business
For the stand alone businesses the recent wave of crowd sourcing is a good example of using knowledge sharing for personal benefit. For example the Netflix prize, where $1 million was promised to the one that could better their movie comparison algorithm by 10%. In order to do this they had to publicly share what they had so far.
While there are both sound reasons and practical cases arguing the economic benefits of sharing ideas, it is hard to create concrete demonstration of this model. Like the case of my acquaintance trying to set up a network.
From a structural point of view I think that there are mainly two reasons we find it hard to share.
First, it is hard to convince people that there is an inherent personal advantage for them in doing this. Working with freemium my experience says that most people intuitively don’t believe that freemium can be a good business model. The same holds true with sharing knowledge in networks. The only plausible reason for this is that because we are so conditioned to working with rival and scarce goods that this intuitively becomes the basis for us rejecting this idea.
Second, it is difficult to create a structure that will allow true sharing. This is a classic case of the ‘prisoners’ dilemma’ wherein both parties can potentially benefit from cooperating, it becomes difficult to coordinate the cooperation so that both parties see the advantage. All parties in a network will objectively benefit from sharing knowledge. Yet it is difficult to create a structure that lets the participants believe that this can truly happen.
In the case of my acquaintance and others like him setting up networks for knowledge sharing I believe that it is important to address the twin challenges in order to create a truely successful knowledge sharing platform.
1. The participants should have a better understanding of the fact that there is individual benefit in sharing knowledge. This can be done by gathering a group of cases that positively demonstrate this or by creating a game where the advantages become apparent with the help of gameplay.
2. The structure should be such that allows ‘fair’ sharing for all the parties and avoids “Narrow self interest” as seen in the prisoners’ dilemma.
Inspiration can be borrowed from networks like The Value Investors Club.
This can be done by framing clear rules for taking part in the network.
What do you think? Are there any other factors that are important for creating networks where true sharing happens based on selfish motives? Is it possible to create a network where different companies start to regard each other as “the companies formerly known as competitors”?
Image: somaya
Related posts:
