Does Peer Production Turn Capitalists Against Entrepreneurs?

There’s an absolutely fascinating post by Tim Lee examining whether or not the rise of peer production has misaligned capitalists and entrepreneurs. It’s based on a blog post by Jed Harris trying to explain the same concept. The two posts suggest that traditionally the view of capitalists (those with money to invest, basically) and entrepreneurs is aligned. An entrepreneur needs capital to get a business started. The capitalist supplies the capital in exchange for a piece of the resulting business. The question, though, is who is more key to the equation here. The capitalist? Or the entrepreneur? In the past, it might not have mattered, since the two functioned together so well. However, lately, there’s been a lot of concern that the venture capital model is broken. There was story after story of brand spanking new web 2.0 companies springing up with little to no need to raise venture money (other than, perhaps, the connections it brings).

Harris and Lee suggest that the reason for this is the rise of peer production (which certainly is a big part of the whole 2.0 thing), in which money is not necessarily the main ingredient. People aren’t paid to post their videos to YouTube. They do so for other reasons — whether it’s expression, fame or that it’s just an easier way to upload and host video. Harris and Lee suggest that those who believe that the capital part of the equation is more important than the entrepreneur will naturally be averse to such a situation. They tend to judge everything solely on the dollar amounts involved. Throwing in incentives that have nothing to do with dollars seems wrong. It’s either a glitch, or more likely (they’ll often claim) based on some Utopian standard that can’t last (or they’ll just call it "communism"). And, when it keeps going, they’ll claim that it’s just exploitation when nothing is further from the truth.



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Posted: March 29th, 2007
at 10:58pm by Koookiecrumbles

Categories: business

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