Utilizing Scarcity in the Four Quadrant Value Universe

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Creative ProfessionalWhat insight can be drawn from the four quadrant value universe?  Can it help creative professionals understand how to earn a living while pursuing their passions?

A couple weeks ago I attempted to explore modes of navigating the four economies.  That post was largely unsuccessful and a few exchanges with Stefan King in the comments demonstrated the confusion inherent in any analysis of transitions between quadrants.  It turned out that asking, “How do I convert?” was the wrong approach.

I eventually realized I was not discussing conversion strategies but instead the social signals that indicate quadrant boundaries.  For example, you know you have moved from the attention economy into transactional economy when information begins arriving in the form of a physical product.  The transfer of physical product is nearly always an indication that monetary payment will be required.

Does it follow then that refining your attention economy work into a physical product will facilitate monetization?

Not necessarily.  The physical product serves as an indicator of refinement and refined goods are generally transacted.

But, what if the people you engage in the attention economy do not want a refined product?

What if you have begun to form relationships with some of them?

Writing a book will not help you push them back towards the unrelated side of the plane.  Some may accept the purchase as a form of gift exchange, but that will not provide a sustainable source of income.

How then are we to move from one quadrant to another?

Value Universe1

The four quadrant framework does not offer much practical value if we remain trapped in a given quadrant.  Counter-intuitively, as the boundaries between quadrants blur and as the gaps between are bridged,  it becomes more important to manage these subtle transitions carefully.  Options abound but many won’t leave you feeling very good about yourself…

The Old Way

The old answer was to organize certain activities into companies.

What is a company?

The terms ‘company(corporation) or ‘business’ are arbitrary distinctions.  Recall the famous quote by Peter Drucker:

A business exists to create customers.

In the industrial economy this statement became tautological.  A business was something that created customers, therefore if something created customers it was a business.  Tax laws and regulatory policy reinforced the tautology.  A corporation was a particular legal construct designed for money making ventures.  Any venture that produced revenue was strongly nudged into the corporate silo.

The result was a bifurcated society.  Productive activity became synonymous with commercial activity, and a distinct set of institutions existed to encapsulate nearly all forms of commercial activity.  Activity that was not intended to be monetized existed exclusively outside the corporate institutions.  The two mixed only fleetingly.  The mainstream goal was to achieve work/life balance…not work/life synergy, or even more simply, a productive life.

The Institutional Machine

Businesses, being institutions organized around a single goal, became bureaucratized machines.  The larger the business the more refined the machine.  Machines need fuel, the more refined the machine the more refined the fuel.  That fuel is money.

Individuals within a business are obviously capable of appreciating diverse streams of value, but diverse streams are unreliable and often inconsistent.  A highly refined machine cannot run on bits of attention here, a few relationships there, and a dash of intrinsic motivation.  You wouldn’t expect a Ferrari to run on one gallon of diesel, one gallon of jet fuel, and a few quarts of canola oil.  The need for consistent and reliable fuel necessitated conversion into a single refined medium (money) wherever possible.

While critics contend that this mode of organization it dehumanizing, advocates counter that the capitalist model was most effective at motivating the productive activity necessary to alleviate scarcity of material goods.  [I agree with both perspectives.]

Breaking Down Barriers

As technology has broken down work/life divisions, productive activity has leaked out of the corporate silos.  It has become clear that extrinsic reward is not always the best way to motivate productive activity.  Web platforms have empowered intrinsically motivated individuals to produce and share massive volumes of unmonetized cognitive surplus.

In some cases this activity is purely motivated by intrinsic interest.  In other cases it may be motivated by exchanges of non-monetary values.  Either case provides clear evidence that monetary compensation no longer has a monopoly on motivating productive activity.

This returns us to the original question:

How can creative professionals earn a living if they are simultaneously rewarded in other quadrants?

How do you earn money if, for example, your audience is already compensating you via attention and relationship?

The Wrong Way – Reinforcing Boundaries

The wrong strategy can be seen most clearly in the attention economy.  It is in the attention quadrant that attempted monetary conversion is most obvious.  For example, I recently came across the following on a popular blog:

An Unfortunate Lie: This lie states that if you help enough people, and give away enough value, sooner or later you’ll make money.

If you don’t get your offer right from the very beginning, any amount of value you give away will amount to naught. You simply must get this right, from the start.

Though I often find the author of this passage to be intelligent and thoughtful, on this issue he is thoroughly misguided.  He is falling into the same tautology used to define the industrial corporation, paraphrased:

If a blog generates income then it is a business, and the purpose of a business is to earn income.  Therefore the primary focus of your blog should be income generation.

The difference between a blog and the highly refined corporate machine is that the industrial corporation must organize around money or descend into chaos.  The individual creative professional is not a refined machine.  He is capable of accepting and appreciating value in multiple forms.  The implication that creative professionals should focus on money first and foremost is purely arbitrary.

A blog that earns income exists partially in the monetary economy and partially in the attention economy.  That is the reality.  The conclusion – if you don’t set the stage properly for monetization “any amount of value you give away will amount to naught” – is both factually incorrect and ungrateful.

Artificial boundaries do not spring into existence via assertion.  The reality is that not everyone is a buyer.  Forcing a transactional relationship onto people who prefer operating in other quadrants is a fool’s errand.  It might lead to some sales in the short run but  in the long run it will cannibalize your base.

As Seb Paquet likes to say: “Friends don’t monetize friends.”

Your closest collaborators are generally not your biggest promoters.  Likewise, your biggest promoters often are not buyers.  Each has found his or her individual comfort zone.  They do not want to be converted.  A rational strategy must acknowledge this reality and accept that each form of exchange conveys value.

The Right Way – Utilizing Scarcity

Scarcity is the one condition that allows you to move anywhere in the value universe you want.

Why?

Because scarcity isn’t trickery.  It is reality.  When you have something that someone else wants all the leverage is in your hands.  That person might prefer a collaboration or an attention exchange.  The services in question might even be unsuitable for transactional exchange (unrefined).  It doesn’t matter.  When you control something scarce you can direct activity wherever you want.

Suppose you email me asking for my unrefined opinion on some abstract and impractical topic.  Normally this would be a difficult interaction to negotiate in transactional terms.  What is the monetary value of my off-the-cuff response to some random impractical question?  We might even have a pre-existing relationship, making a monetary transaction even more inappropriate.

Now suppose I am occupied with several other projects.  I am working twelve hour days and my free time is extremely limited.  I try referring you to someone else but you insist that you want my opinion.  Eventually I am forced to reply:

I would love to help but I am currently committed to several other projects and simply can’t spare the time right now.  The best I can offer you is an appointment at my current hourly rate…that is, only if you desperately need to get in my calendar.

Am I (hypothetically) being sleazy?  Assuming I am being honest…of course not!  The statement above is not an active attempt at conversion.  It is a passive statement of reality.  There is no manipulation occurring.  I am not creating artificial scarcity.  My time is, as a fact of reality, limited…and therefore valuable.

Honest Supply & Demand

At the most basic level, scarcity is a relationship between supply and demand.  When supply exceeds demand your leverage in an exchange decreases.  When demand exceeds supply your leverage in an exchange increases.  The ability to monetize unrefined values or related-party exchanges exists when demand for either exceeds the supply.

There are countless strategies promulgated to create this confluence of circumstances.  Many are ethically questionable because they rely on either artificially increasing demand or artificially decreasing supply.  The degree to which each can be questioned ethically is a direct function of the degree to which a given market adjustment is created artificially.  Using false advertising to generate demand can be easily condemned.  Restricting access to a digital product in order to recover the fixed costs of production…more justifiable.

However, there are a few strategies that capitalize on scarcity without any ethical compromise.  You should not be surprised that they directly contradict the “business = money = business” tautology.

Work Your Ideal Zone

Are you an executor or a dreamer?
Do you prefer starting projects or finishing them?
Do you operate best within close relationships or in the anonymous marketplace?

We will all find ourselves more comfortable operating in some quadrants than others.  I tend to value unrefined ideas over refined products and therefore am most comfortable in the lower half of the plane.  Wherever your ideal zone is, that is where you will create the most value.  That is where you will generate the most honest demand.

Acknowledge Multiple Value Streams

Don’t neglect non-monetary value streams…promote them.  The most obvious reason – they have value!  Relationships have value.  Attention has value.  A “business” that provides money, relationships, and attention is better than one that provides only money.

Two less obvious benefits:

  1. Multiple value streams provide social proof.  A sterling reputation in the attention economy signals potential ability to create refined value.
  2. Multiple value streams make you legitimately scarce.  Investing in relationships leaves the remaining time available to transactional endeavors more scarce.

Do Not Attempt Conversion

This shouldn’t require any further explanation.  If you recognize that individuals converge towards certain comfort zones then you must accept that conversion is not a simple matter of changing habits.  It requires pushing people out of their preferred quadrant.  Most people will eventually resent that.

Allow People Opportunities to Orient Themselves to You

Make yourself available to be pulled by the right opportunities.  If you succeed in creating value in your preferred zone then you will produce spillover demand in adjacent zones.  Success in the attention economy generates demand for transactions and relationships.  Success in the relationship economy will attract attention and gifts.

Instead of pushing people out of their preferred quadrant (conversion), pull in the people who have a preference for adjacent quadrants.

Wrapping Up

None of the above strategies is a sure thing.  You still might require some artificial scarcity in order to pay the bills.  Nonetheless, experimenting with the strategies above is surely preferable to self-sabotage.  Most importantly, understand the scarcity you are utilizing.

photo courtesy of Gandalf’s gallery

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  • http://www.recordedviews.com Stefan King

    Ah, so “conversion,” with all its connotations, describes transitions. Now I can make more confident use metaphors. For example, compare a job interview to dating or something. If I get some interesting results, I’ll share.

    I have a worry about your (honorable) attempt to remove sleaziness from transitions: when you rely on the fundamental scarcity of your time to set the price of an exchange, you forgo negotiation leverage that might arise from other sources. You base the price on how much time you have, while in some cases you could get a better price based on the counterparty’s (lack of) alternatives. Likely this would again be decided by other value exchanges you might have with them. You are more likely to play hardball with strangers than with friends and acquaintances, so the scarcity of your time is your last line of defense against negotiators who are already moving around on your Rader Plane.

    • http://OnTheSpiral.com/ GregoryJRader

      Yes, you nailed my intention with you last line.  Time scarcity is your last line of defense.  If you can justify a more favorable arrangement in some other manner then you don’t have much of a problem.  But if you find yourself stuck in one specific quadrant with no obvious hope of monetization, then scarcity is the tool that allows you to move around, and ultimately anyone can leverage time scarcity regardless of specific circumstances.  

  • Gene Linetsky

    I have to second Stefan… To your question, “Am I (hypothetically) being sleazy?”, I would answer, “Yes you are, you conniving jerk! And I thought you were my friend! F*ck you!”

     

    • http://OnTheSpiral.com/ GregoryJRader

      After reading your comment along with several others I realize I framed the situation improperly in that the conversion suggestion was still explicit, even if it was very low pressure.  As James Bach suggest below, people in the relationship category already know they can become clients if urgency demands.  So I agree there is a difference between explicitly mentioning the possibility in any way and simply having a paypal button allowing people to convert themselves if the situation demands.  That is fairly similar to what you are accomplishing with allthis…allowing others to express their own conversion preference in a way already agreed to be mutually acceptable.  

      I will have to cogitate further on your second point.  The corporate machine is using money in part to mediate supply and demand so I’m not sure they can be separated into distinct functions.  Though again, as evidenced by allthis, you can use a similar medium with function specific rules to change the perception.

  • http://twitter.com/sebpaquet Seb Paquet

    Money is just one of several forms of value, and bilateral transactions are just one form of value exchange.

    The general objective, once an interpersonal connection is made, is to answer the question “what is the best exchange of value the two of us could be engaged in at this point?” This depends on a slew of personal characteristics. The more that is known about each party and what kinds of value they are open to offering and receiving, the easier it is to identify a profitable or promising interaction. Premature pigeonholing leads to awkwardness and raises the probability of a “no deal”. Surely the technological infrastructure could help us describe our respective openings and identify interaction possibilities efficiently.

    • http://OnTheSpiral.com/ GregoryJRader

      I like this way of describing it.  The formal transaction often leads to an adversarial positioning but there are also certain people and certain situations that favor transaction.  Not everyone wants to accrue the social debt associated with an asymmetric exchange.  Some people want a simple transaction that allows them to go along their merry way.  

      I also agree that a big part of the equation is simply making our various offers visible, thereby allowing people choose their comfort zone.  

  • Eric Harris-Braun

    Gregory, I really like your 4 quadrant value universe, and the thinking this framing engenders.  A while back a created this diagram: http://openmoney.info/images/wealth_acknowledgement.png as part of a description of the levels of wealth and the the transaction media/methods that build those different levels of wealth (http://openmoney.info/sophia).    The axes on that diagram are trust & consciousness and risk & complexity.  These are of course related to your axes as trust & consciousness may be affected (though don’t need to be) by relatedness, and risk & complexity affect refinement of value.  So I don’t have anything definitive to say about this, but thought you might be interested. 

    • http://OnTheSpiral.com/ GregoryJRader

      Hey Eric,
      Thanks for pointing this out, though the second link appears to be broken…With regard to first link, it looks like your groupings describe the top two quadrants pretty well.  Relationship economy would then be high risk + high trust while attention economy would be high risk + low trust.  I will have to ponder on it a bit more to compare and contrast the subtleties of the two sets of axes…

  • James Bach

    This is very much how I’ve run my consulting business for the last 12 years. But I would suggest a little adjustment… I don’t suggest to my close friends, colleagues and collaborators that they pay me. (If they need my time in a big way, then they already know I can’t afford to give that to them instead of selling that time to a client, and if they want to become a client, that’s fine)

    However, in the course of conferences and forum participation, I invite anyone to seek my help on an “as available” basis. I enjoy offering my time, in bits and pieces, because that’s how I do marketing. In this way, many strangers approach me and ask if I might be available for consulting/training and if so what is my availability and price. When they approach ME with a request for my price, I’m in a much more powerful position than if I were to approach them with the suggestion that they pay. In other words, I don’t move to the transactional quadrant– I am invited into it by each client. And that happens because of my scarcity as a resource.

    • http://OnTheSpiral.com/ GregoryJRader

      Thanks James, you and Gene are thinking along the same lines, and I agree that I didn’t quite frame that scenario correctly.  The argument definitely works better when considering the initiation of new engagements rather than transitioning existing relationships.  

      You also make a nice point that the rare transition of an existing relationship into the transactional quadrant is much less awkward if it is initiated by the prospective “client”.  A thoroughly passive option such as an online booking form would seem to accomplish this better than the conversation I proposed.  

      • James Bach

        Another thing that makes this dynamic work may be the size of the transactions… I don’t need a lot of them to make a living. Recently I asked a client why he had come to me. It turns out I was recommended by a student who had been taking advantage of my free coaching service. So, I provided a few hours of a free service on a relationship basis, that person engaged in a relationship-based exchange with his boss, and then THAT guy entered into a $20,000 transaction with me.

        I don’t need many of these to fund my business. I get a handful per year. It has been become rare for me to get gigs based on any generic factor. Almost all come through relationships. Building up this marketing takes several years, though.

        • http://OnTheSpiral.com/ GregoryJRader

          Another way of saying this perhaps…by starting in the relationship quadrant you keep your overhead to a minimum.  You keep the size of your operation small and minimize your need to colonize the other quadrants.  As long as that remains true, the handful of opportunities you describe will remain sufficient.  The more you move into the “heavier” quadrants the more time you need devote to those activities to sustain yourself.

          By the way, I am cogitating on a revision to this post which should clarify further.  Thanks for the food for thought…  

  • David Chudzicki

    I’ve started looking at lots of things in terms of these four quadrants now. Listening to the 37signals podcast (episode 13) I came across an interesting example of interplay between the four quadrants (and people’s discomfort with it):

    37signals has a site for designers to find work (http://sortfolio.com/) and hosted a “competition” there to find a new designer for 37signals themselves. But to enter the competition, one had to tweet about it — which bothered a lot of people, who didn’t want to have to help out 37signals with “word of mouth” (attention economy) to participate in this transaction.

    • http://OnTheSpiral.com/ GregoryJRader

      That is a great example demonstrating that it is equally awkward to attempt forced conversion in the opposite direction – using a monetary opportunity as a tool to generate attention.  

      Each quadrant seems to appeal to a fundamental motivation that appropriate exchanges need to balance.  In the transactional quadrant fair exchanges are expected to appeal to the intrinsic qualities of the goods or services traded.  We feel it is unfair when someone with an inferior offer but superior connections wins a deal.  

      Likewise, in the attention quadrant we expect that “memes” should be amplified based on their intrinsic merits without reference to their source.  The person who constantly promotes his friends or his sponsors is seen as disingenuous.  

      On the right side of the plane the situation is reversed.  We expect certain behaviors to be motivated by the relationship rather than by the specific values exchanged.  The person who chooses relationships based on the extrinsic value exchange is perceived as a “user” or “Machiavellian”.

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15 Responses to Utilizing Scarcity in the Four Quadrant Value Universe

  1. Stefan King says:

    Ah, so “conversion,” with all its connotations, describes transitions. Now I can make more confident use metaphors. For example, compare a job interview to dating or something. If I get some interesting results, I’ll share.

    I have a worry about your (honorable) attempt to remove sleaziness from transitions: when you rely on the fundamental scarcity of your time to set the price of an exchange, you forgo negotiation leverage that might arise from other sources. You base the price on how much time you have, while in some cases you could get a better price based on the counterparty’s (lack of) alternatives. Likely this would again be decided by other value exchanges you might have with them. You are more likely to play hardball with strangers than with friends and acquaintances, so the scarcity of your time is your last line of defense against negotiators who are already moving around on your Rader Plane.

    • Yes, you nailed my intention with you last line.  Time scarcity is your last line of defense.  If you can justify a more favorable arrangement in some other manner then you don’t have much of a problem.  But if you find yourself stuck in one specific quadrant with no obvious hope of monetization, then scarcity is the tool that allows you to move around, and ultimately anyone can leverage time scarcity regardless of specific circumstances.  

  2. Gene Linetsky says:

    I have to second Stefan… To your question, “Am I (hypothetically) being sleazy?”, I would answer, “Yes you are, you conniving jerk! And I thought you were my friend! F*ck you!”

     

    • After reading your comment along with several others I realize I framed the situation improperly in that the conversion suggestion was still explicit, even if it was very low pressure.  As James Bach suggest below, people in the relationship category already know they can become clients if urgency demands.  So I agree there is a difference between explicitly mentioning the possibility in any way and simply having a paypal button allowing people to convert themselves if the situation demands.  That is fairly similar to what you are accomplishing with allthis…allowing others to express their own conversion preference in a way already agreed to be mutually acceptable.  

      I will have to cogitate further on your second point.  The corporate machine is using money in part to mediate supply and demand so I’m not sure they can be separated into distinct functions.  Though again, as evidenced by allthis, you can use a similar medium with function specific rules to change the perception.

  3. Seb Paquet says:

    Money is just one of several forms of value, and bilateral transactions are just one form of value exchange.

    The general objective, once an interpersonal connection is made, is to answer the question “what is the best exchange of value the two of us could be engaged in at this point?” This depends on a slew of personal characteristics. The more that is known about each party and what kinds of value they are open to offering and receiving, the easier it is to identify a profitable or promising interaction. Premature pigeonholing leads to awkwardness and raises the probability of a “no deal”. Surely the technological infrastructure could help us describe our respective openings and identify interaction possibilities efficiently.

    • I like this way of describing it.  The formal transaction often leads to an adversarial positioning but there are also certain people and certain situations that favor transaction.  Not everyone wants to accrue the social debt associated with an asymmetric exchange.  Some people want a simple transaction that allows them to go along their merry way.  

      I also agree that a big part of the equation is simply making our various offers visible, thereby allowing people choose their comfort zone.  

  4. Eric Harris-Braun says:

    Gregory, I really like your 4 quadrant value universe, and the thinking this framing engenders.  A while back a created this diagram: http://openmoney.info/images/wealth_acknowledgement.png as part of a description of the levels of wealth and the the transaction media/methods that build those different levels of wealth (http://openmoney.info/sophia).    The axes on that diagram are trust & consciousness and risk & complexity.  These are of course related to your axes as trust & consciousness may be affected (though don’t need to be) by relatedness, and risk & complexity affect refinement of value.  So I don’t have anything definitive to say about this, but thought you might be interested. 

    • Hey Eric,
      Thanks for pointing this out, though the second link appears to be broken…With regard to first link, it looks like your groupings describe the top two quadrants pretty well.  Relationship economy would then be high risk + high trust while attention economy would be high risk + low trust.  I will have to ponder on it a bit more to compare and contrast the subtleties of the two sets of axes…

  5. James Bach says:

    This is very much how I’ve run my consulting business for the last 12 years. But I would suggest a little adjustment… I don’t suggest to my close friends, colleagues and collaborators that they pay me. (If they need my time in a big way, then they already know I can’t afford to give that to them instead of selling that time to a client, and if they want to become a client, that’s fine)

    However, in the course of conferences and forum participation, I invite anyone to seek my help on an “as available” basis. I enjoy offering my time, in bits and pieces, because that’s how I do marketing. In this way, many strangers approach me and ask if I might be available for consulting/training and if so what is my availability and price. When they approach ME with a request for my price, I’m in a much more powerful position than if I were to approach them with the suggestion that they pay. In other words, I don’t move to the transactional quadrant– I am invited into it by each client. And that happens because of my scarcity as a resource.

    • Thanks James, you and Gene are thinking along the same lines, and I agree that I didn’t quite frame that scenario correctly.  The argument definitely works better when considering the initiation of new engagements rather than transitioning existing relationships.  

      You also make a nice point that the rare transition of an existing relationship into the transactional quadrant is much less awkward if it is initiated by the prospective “client”.  A thoroughly passive option such as an online booking form would seem to accomplish this better than the conversation I proposed.  

      • James Bach says:

        Another thing that makes this dynamic work may be the size of the transactions… I don’t need a lot of them to make a living. Recently I asked a client why he had come to me. It turns out I was recommended by a student who had been taking advantage of my free coaching service. So, I provided a few hours of a free service on a relationship basis, that person engaged in a relationship-based exchange with his boss, and then THAT guy entered into a $20,000 transaction with me.

        I don’t need many of these to fund my business. I get a handful per year. It has been become rare for me to get gigs based on any generic factor. Almost all come through relationships. Building up this marketing takes several years, though.

        • Another way of saying this perhaps…by starting in the relationship quadrant you keep your overhead to a minimum.  You keep the size of your operation small and minimize your need to colonize the other quadrants.  As long as that remains true, the handful of opportunities you describe will remain sufficient.  The more you move into the “heavier” quadrants the more time you need devote to those activities to sustain yourself.

          By the way, I am cogitating on a revision to this post which should clarify further.  Thanks for the food for thought…  

  6. David Chudzicki says:

    I’ve started looking at lots of things in terms of these four quadrants now. Listening to the 37signals podcast (episode 13) I came across an interesting example of interplay between the four quadrants (and people’s discomfort with it):

    37signals has a site for designers to find work (http://sortfolio.com/) and hosted a “competition” there to find a new designer for 37signals themselves. But to enter the competition, one had to tweet about it — which bothered a lot of people, who didn’t want to have to help out 37signals with “word of mouth” (attention economy) to participate in this transaction.

    • That is a great example demonstrating that it is equally awkward to attempt forced conversion in the opposite direction – using a monetary opportunity as a tool to generate attention.  

      Each quadrant seems to appeal to a fundamental motivation that appropriate exchanges need to balance.  In the transactional quadrant fair exchanges are expected to appeal to the intrinsic qualities of the goods or services traded.  We feel it is unfair when someone with an inferior offer but superior connections wins a deal.  

      Likewise, in the attention quadrant we expect that “memes” should be amplified based on their intrinsic merits without reference to their source.  The person who constantly promotes his friends or his sponsors is seen as disingenuous.  

      On the right side of the plane the situation is reversed.  We expect certain behaviors to be motivated by the relationship rather than by the specific values exchanged.  The person who chooses relationships based on the extrinsic value exchange is perceived as a “user” or “Machiavellian”.

  7. [...] series of previous posts I developed (with your feedback) a framework outlining four modes of economic exchange (read: value [...]

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