The quote below is from the AssetMap blog (highly recommended if you are not currently reading it).
One of the fibers in the current cultural milieu is a fascination with the science of happiness. After a century of belief in the power of stuff to make us happy, many Americans are, reasonably, feeling a little sold down the river. Much of the most quoted research suggests that when it comes to “buying happiness,” purchasing experiences (restaurants, vacations, etc) is a better bet than buying items. Fascinatingly, part of the additional benefit of experiences seems to be that we’re less likely to compare ourselves to others than if we’re buying things.
While the internet has enabled an incredible array of new purchasing options, one of the more interesting models that has emerged is crowdsourced funding for initiatives that would not otherwise not have a clear source of revenue. In the nonprofit space, Kiva has been the greatest success, facilitating more than $150 million in microcredit loans from average citizens to entrepreneurs in the developing world. In the last year, Kickstarter and IndieGoGo have applied the model to creative pursuits, giving artists, musicians and filmmakers a new way to engage their fan communities.
Yet for each of these successful platforms, there are a dozen that have flopped. What the successful companies share is an obsession with making their user experience addictive.
I think that there are 4 key elements of the addictive experience:
- Embracing the emotional reward of giving. The core reward for participation in these systems is the sheer joy of giving and enabling creation – whether its someones debut album or a new peanut shelling business that’s being created. The interface and features of these platforms are designed to amplify these rewards.
- Building social reciprocity into the system. Interestingly, these systems each have an element of reciprocity. When you make a Kiva loan, you actually get your money back when the entrepreneur returns the money to the lending institution. Kickstarter allows creators to offer rewards and prizes for different funding levels. The important thing to note is that this is not a transaction economy. People aren’t “buying” the gifts they get back. Instead, it is a system of social reciprocity that serves to reinforce the bond between the two actors.
Insightful thoughts on how mechanisms to encourage reciprocity can be built into funding platforms. A frequent question in alternative currency discussions is, “How will people be able to convert between financial capital and social capital?” Crowdfunding and Micropatronage appear to provide one piece of this puzzle. What will be interesting to see now is whether any given platform can put all the pieces together by:
- Providing a social platform that allows users to demonstrate “potential capital” (human+social) to other users.
- Funding mechanisms that allow users to attract financial capital in exchange for value creation
- Reputation and reward mechanisms that allow users to accrue social capital in return for both funding/patronage and value created and gifted to the community.