Friday, November 28, 2014

The Rise of the Attention Economy

MOSCOW – I was recently posed the following question: “The most important way in which the Internet and online social media are changing our world is [fill in the blank].” My standard answer is that it changes the balance of power between individuals and institutions. But this was a sophisticated audience of economists and students, gathered for the 20th anniversary of Moscow’s New Economic School. I needed new material.

So I challenged the audience to consider the following: For much of human history, there was no economy based on trade and fungible goods. People operated in small groups and fended for themselves. Scarcity was self-limiting: If you could not grow or catch your own food, you died (or moved). Specialization, trade, and pricing – not to mention religions and (economically) unproductive religious institutions, mass production, mass media, and big government – are all recent developments.

Our current world is a mix of people still subsisting with almost no external income, people generating (and consuming) surpluses, and other people consuming surpluses generated by others. Commodity prices spread worldwide, though influenced by local conditions and constraints (including tariffs and other protectionist measures in China, Russia, America, and elsewhere).

Many activities that were previously performed “for free” (often within a household), such as sex, home maintenance, and care for the sick and elderly, are now frequently outsourced and counted as economic output. In general, it is fair to say that these activities are performed more efficiently as a result: People whose skills are worth, say, $50 per hour spend more of their time earning $50, rather than performing chores “worth” $10 or $20 per hour.

But the Internet is changing that as well, in a way that may befuddle the many companies who view it primarily as an economic platform, where they can market or sell things, or even charge for content. Those companies go online to earn money. Google is perhaps the purest example of a company that transforms purchase intentions into income; most other “Internet” companies offer something of independent value on the other side of those searches.

But many individuals, most of the time, go online without any interest in buying something. They are there to find out about the world, catch up with friends, play games, listen to music, chat, or just hang out – and, increasingly, to get the attention of other people. Thanks to highly productive surplus economies, they can spend a lot more time being economically inactive.

This is not the familiar question of whether our machines will put us all out of work. In fact, the question is whether we will start doing more and more intellectual work for free or for barter, becoming more like our ancestors. Instead of producing food or housing for ourselves or for barter, we will be producing content and amusement for one another, without engaging in explicit (taxable) financial exchange. Yes, there is a so-called gift economy, but there is also an attention market that may not be fungible or priced – a distributed, many-to-many economy that harks back to the old days.

The economic and psychological implications of this are profound. It seems pretty clear that most people gain self-esteem and mental health from doing something useful, whether raising children or earning a salary. I am not predicting a utopian world in which everyone is equally valued. But it may be a world in which people use their Klout Score (a measure of one’s online influence), their Twitter following, or a similar measure to justify their existence, assign value to their activities, and measure their self-worth.

The trouble (for economists and traditional businesses, at least) is that this future disturbs traditional notions of economic growth. Companies that provide content will increasingly find themselves competing with individuals who offer entertainment for free. This phenomenon is not visible yet, because analysts focus on popular bloggers and online media sites competing with traditional media.

But the real change is the rise of the “long tail” – millions of additional units of content (email, Facebook posts, text messages) being read by only a few people each. That is possible only on the Internet, with its vanishingly small distribution costs. This will not be the unmeasured economy of yesteryear, but rather one where we quantify our efforts in other ways.

How do we tell if this is happening, economically? If we generate our own economic surplus without accounting for it – what the American writer Clay Shirky calls “cognitive surplus” – how does that influence reported economic statistics and, ultimately, shape incentives and activities? Do we spend more on “communications,” meaning the hardware and infrastructure, even as the real value is unaccounted for? Can we apply that surplus to something “useful”?

Right now, fashion (let alone clothing) is becoming cheaper and cheaper. But you can “do” fashion for free by designing an avatar for yourself. Will the world of cognitive surplus make it easier for us to be environmentally responsible, guided also by the inclusion of externalities in the prices of physical goods, so that we end up “consuming” fewer physical things and spend more on virtual value?

This attention economy is not the intention economy beloved of vendors, who grab consumers’ attention in order to sell them something. Rather, attention here has its own intrinsic, non-monetizable value. The attention economy is one in which people spend their personal time attracting others’ attention, whether by designing creative avatars, posting pithy comments, or accumulating “likes” for their cat photos.

Just as we are driven to spread our physical DNA, so apparently do we have an urge to spread our virtual identities, so that we cannot be erased. Instead of physical descendants, we are offering our own virtual selves to posterity.

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    1. CommentedMarina Lismacfinnan

      It is enough to remember the emergence of the time of "reason" and Enlightenment, where people came to realize that life is not predominantly about "consuming more" , but about acquire more knowledge about ourselves and the world around, creating a better ( quality vs quantity) society we live in. From this point of view we are still in a "play room" just playing with the tools we have just discovered and real discovery is in the future that slowly getting uncovered today.

    2. CommentedJ St. Clair

      "earning $50, rather than performing chores “worth” $10 or $20 per hour."....i don't know what planet all you people are living on but when it comes to paying for living on this planet, which is what we are all stuck takes more than these measly per hour dollars....

    3. CommentedJay Singh

      I loved this part of the article as I strongly vouch for it.
      In my opinion, the money or currency as we know it, would cease to exist a few years from now. The need for a knowledge-based currency is visible in the horizon. A knowledge based currency and economy would ensure that Governments allots a higher budget to research and development and encouraging more and more children to take up education to ensure 100% literacy rate.



    4. CommentedNathan Coppedge

      Dyson's last comment, as usual, has a certain kind of brilliance. Hypothetically, at this historical stage of mental development, this is exactly what we would be doing, even on the popular media level: spreading the reproducibles of our virtual identities and meta-datums. Work by the physicist Brian Greene does not disconfirm this: he says that what exists outside of a black hole is essentially information. The real world, according to prior assumptions, has already met its end. At this point the astute philosophers will say something like "but isn't that a metaphysical theory?" And while I believe they're right, they do not always offer better theories themselves.

      The razor of the article, the standard of analysis, seems to be a way of playing devil's advocate. Sure, economics doesn't literally depend on virtual consumerism (to say nothing of failed virtual consumerism), but consumerism is what it is. Although the points are mutually affirming, all of the points are deniable. Again, there is brilliance in this.

      What it seems to suggest to me is more often than not an idea of the meaningful consumer. What seems like a gamble originally on a slightly more expensive product, eventually looks like an indefinite amount of money going into any profit at all. I can see in the use of certain botanical products an urge for the meaningful consumer. But this is just textualism and physics. It's not the stage of so-called (originally) post-consumerist networking and evaluativism.

      What I originally thought to be an original principle, the idea that the structure of information could effect meaningful consumerism---meaningful consumerism, a concept that still seems new---is now looking conservative.

      For me, that is the virtual meaning of cognitive surplus, a meaning that socially, globally, is looking to be ever-more concrete and materialized. But the 'evil' caveat is that that concreteness has a pricetag of ever-increasing complexity. Yet also, complexity is now consumable.

      Consumers now want:

      *Applications that give life meaning
      *Applications for applications
      *Consumer items that substify intangible information

      As a corollary, consumers also want:

      *Acceptance of human frailty
      *A way to feel dynamic, qua immortal
      *A way to be immortal, qua healthy

      While we / consumers are now prone to a lot of exaggerations, some of the requirements of consumerism should be immediately realizable.

      Consumers, more than ever, are now willing to abandon the label of consumerism in order to achieve what was intended originally.

    5. Commentedjames durante

      The one good thing about this article is Brinton's illustration. Since the only way to determine value in this current post-capitlaist, virtual world is by money (digital, of course), someone will have to balance out the economic gains of our virtual genetics with the zombie effect, dissociation, and alienation that the virtual world exacerbates. Oh, and then there is ll the lost productivity from checking e-mail, going on facebook and playing solitaire.

      Yes, we will become more like our ancestors except that it will all happen within screens and a vast cosmos of zeros and ones. Ahhhh, the nostalgia!

    6. CommentedShane Beck

      Whether the digital imprint of an individual has an economic value depends upon the content and the type of organization the content is directed towards, non profit organizations like project syndicate, wikipedia etc or pofit organizations like facebook, instagram etc. There is no doubt that like memes, there is a desire to replicate one's digital self but whether that this can be captured in true economic value depends upon the digital/physical interface and whether economic models can accurately capture this: server farms are energy intensive beasts with high environmental costs; the ecological imprint of the computers alone is high

    7. CommentedProcyon Mukherjee

      Esther Dyson has struck a chord on attention economies and I am particularly attracted to Christopher A Sims’ work in this regard. The internet had expanded the scope and breadth of the plethora of stimuli and information assays that attract us and our responses to these have changed over time. There are two strong possibilities; one that Sims had raised which is rational inattention, and the second that I call irrational attention. These two are constantly drawing us to conclusions before we make a choice.

      No matter what we choose and sometimes we refrain from choosing as well, the economic value of our choice must be governed by far more information access that we have, but this excess is not a sufficient condition for making an optimum choice as we could be actually ignoring the fundamental while sifting through the trivia that internet and the related constituencies offer and if this is cognitive surplus, then we have a problem.

      Procyon Mukherjee

    8. Commentedjim bridgeman

      It seems pretty clear that things like the Newtown massacre are events in this attention economy.