Mitch Kapor turned me on the other day to a well known essay by R.H. Coase (there is a link to it here), which was written in 1937 about why companies should exist at all. If market forces (free people setting their own prices for goods and services) generally produce almost perfectly efficient results, why do we see these unusual collections of people (Linden Lab for example) all agreeing to work together without any of the usual haggling, agreeing instead to a fixed wage and percentage of the company. It is a fascinating question to re-examine in our age of hyper-communication, and one that is put in a particular spotlight by things like the feature voting page for Second Life that we put up today (if you are a SL resident, you can find it here)

The answer Coase gives is that for many types of group efforts, the ‘coordination costs’ of markets (haggling over price, etc) exceed the value that can be produced by the group – making it more sensible to agree to fixed terms of employment to create a product. This certainly makes sense if you imagine an early 20th century company with a complex product like an automobile manufacturer – a collective market effort would have had a hard time competing with Henry Ford! But the striking advances in communication offered by digital systems like the internet, combined with better education (most people can now do many different things) and globalization (there are very large available labor pools for a given skill) has made things different. Open source projects (in which there is no formal company) can now rival products created by large coordinated firms, and if you look at the way projects work in Second Life you can easily imagine ever more fluid environments in which coordination costs drop to almost zero.

Extending this idea of ‘coordination costs’ to examining the boundary between company and customer is what leads me to the discussion of feature voting. Historically, the information one could get from one’s customers was very weak. You could mail out surveys or canvas or maybe (in a really sexy modern view) even make phone calls! But if you were talking about a clothing line or a new car, you were really unlikely to get very much useful information. You couldn’t really ‘see’ what was going on – the cost of getting a lot of data across that boundary between you and your consumers was too high. You had to rely instead on the ‘experts’ you had hired to guess about what people thought about your product. But in Second Life, you can just GO THERE. It takes only seconds to be discussing the impact of a change or asking people what is going on. The cost of very deeply involving people in SL in designing SL is very small – so small that I think it will change things in a profound way.

By putting up a page where thousands of people can cast a fixed number of votes to prioritize (or modify) a fairly specific work list of features and changes for upcoming versions of Second Life, we are further blurring the boundaries between the ‘company’ of Linden Lab and the residents of Second Life. We are asking for help (and I suspect comitting ourselves substantially to what we hear) in what is generally a very private and hallowed process – the setting of development priorities.

A really common behavior of companies is to believe internally that they can better estimate the priorities of their customers than their customers can. I doubt that in most cases this is true, if information systems are used wisely to help organize the process. There is an interesting body of knowledge suggesting that for many many cases, the aggregated opinion of a diverse audience can outperform any single human decision maker. A great book summarizing these studies is ‘The Wisdom of Crowds‘, by James Surowiecki.

It is certainly the case that innovation is discontinuous and often the brainchild of a single person, but valuing the potential impact of even something fairly hard to imagine will be (I bet) better predicted by a group of diverse users. Let’s wait and see – as of this writing, the two “must-do” features that we had internally identified as top priorities in our next large feature set are also receiving the highest votes. We are still early in the process (a few hours) with only a hundred or so voters, but still it is interesting to see convergence between our gut and the larger community. Where I think the voting will be really helpful to us is assigning relative priority among smaller, less obviously valuable work items.

Very exciting to wait and watch the numbers come in!

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8 Responses to Vote!

  1. blaze says:

    What I think will be fascinating to watch is when Lindens release comments or further information on top feature requests and then how the community reacts by retracting their votes and re-votes for other features.

  2. blaze says:

    Remove the author of the features. Otherwise it becomes a popularity game.

  3. Prokofy Neva says:

    Philip, 1937 wasn’t such a good year. And I hate to break it to you, but that 100 votes contains quite a few of my alts, a guy whose votes I plan to purchase (as an experiment), some workers I told how to vote…3 people who didn’t understand the concept in the proposition being voted on and just took my word for it…well, you get the idea. But even if you iron out these kinks, you have to look at real/virtual issues. Recently “2/3 of the community spoke out against telehubs in the new continent” — according to a poll put on the forums and “just 2 landlords spoke to me and said they wanted the telehubs” said Robin Linden, but I quickly organized a group of 7 land owners who all want at least one telehub, and among them, they probably paid more tier to LL and hold more land than the “2/3 of the community” or even the “2 landlords”. So…why would their votes get to count when they didn’t pay anything and don’t stand to lose or win by a telehub? These are simple concepts. Most societies go through some stage of “smallholders” or “landowners” as having the vote because those are people who work land, or pay for it. But given the heavy allergy against commerce in this game, and the anti-land-baron sentiment, LL would be hard put to set up a system like that! Yet, wouldn’t it be reasonable to ask whether an issue like telehub placement should be decided by *stakeholders* that is, those who live or have businesses on land they’ve paid for near those telehubs?

    I’d like to ask you, if you have an “equitable system” whereby every person within LL working in that giant one-room stable gets *the same* salary and *the same percentage of the company* whether you could publish that information, so we could see whether in fact that figure is such a high salary, that nobody could possibly be complaining if everybody else got it in that company LOL. Also, it would be an interesting experiment to see if their productivity increased or decreased if they had more private offices or at least cubicles.

  4. Personally, I’m a defender of “grey” approaches. I don’t think that companies/organisations/groups should be run forgetting or ignoring that their customers/user base exists – but neither should they be wholly run by the customer/user base.

    This is also the same issue for having governments, and elections – but very few successful cases of direct, base democracies (except for Switzerland, which is a case study by itself…).

    The reason for that is basic human nature. People usually know what is best for themselves, but rarely what is best for the group as a whole – when they even have a bit of altruistic thought to think about the group and not only about themselves. Group-oriented thinking is a rare gift which is *not* exhibited by *most* human beings. Sometimes “leadership” is defined by the ability of being able to think for the group’s best interest first, and only personal benefit next. Some monarchies tend to view their head of state as the servant of all – and not the “leader” of all (of course, human nature tends to distort this view as well over the centuries 🙂 ).

    In corporate terms, this translates that a company should get as much feedback as they can from their customer base, letting them voice their opinions – and not being afraid to get an overall feedback of selfish interests, and just a tiny proportion of community interests. Then, taking that feedback, it should apply the mechanisms that allow for the best customer experience – even if that means discarding 99% of the opinions. The point is, among those opinions, 1% are worthy, and it’s better to get those and act upon them, than to forfeit customer’s opinions entirely.

    There is a slight risk here – which is the inability to separate the wheat from the chaff. Which opinions are important? Which are not? This is the hardest and most difficult decision to make. Failing to gather the “right” opinions and simply “go with the flow” – ie. just picking up what “the majority wants” – is dangerous. Unfortunately, the majority is seldom right.

    The trick is to give what the majority wants, while at the same time giving them what they need as well – even if they don’t want it. 🙂 Keeping a balance among those two things is a challenge.

    For myself – as a supporter and promoter of the new voting feature system – I think this is a tremendous tool to get all opinions about SL’s features and bugs that the majority “wants”. Taking decisions based on that opinion is something which is the wonderful challenge for LL. Picking from the 230 or so proposals the 2 or 3 that are *really* worth considering – which will really benefit the whole of the community, and not just a group of individuals – is the very difficult task for LL.

    However, how much easier it is when all these opinions are clearly presented and public for all to read 🙂 I applaud the decision of making them public and having the system very transparent, instead of “trying to figure out” what people want.

  5. Morgaine Dinova says:

    The rule of the majority is also called the rule of mediocrity — it just depends on which side of a decision one’s own requirements happen to fall. 🙂

    SL and other virtual worlds are in a unique position to make the rule of mediocrity a thing of the past, because if one is dissatisfied with local group-think and the results of popular voting then one can get up and go elsewhere. If the current community is inadequate, join another, or form your own from like-minded individuals.

    And that’s where I think current debates fall down, in trying to deliver universal policy instead of pure mechanism. The teleports issue is a classic one. Why is anyone even bothering to discuss a universal policy when it’s obvious that there are diametrically opposing views on this? The “avoid mediocrity” solution is simple and obvious in this case: provide teleports as a purchaseable item, and let people place them as they require. A community that doesn’t want teleports in its midst will have a community by-law that says its members will not run teleports, and anyone not liking that diktat would not join the community, or get disowned from it if they transgress — simple.

    The Lindens have stated quite categorically that community schemes will be voluntary, so the attempts to implement universal solutions based on majority vote are totally misguided, quite apart from being unworkable. It wouldn’t work on Planet Earth because all space is already taken, but on SL, support choice for the individual (plot transfer, anyone?) and the communities will become empowered automatically.

  6. Forseti Svarog says:

    I would argue that historical economic theory does not take into account the inefficiencies inherant in human interaction, i.e emotion and irrationality.

    I think when finances come into the picture, things get complicated and coordination costs are heightened because of trust issues. It will be interesting to watch companies like JBOSS as they try to find their way financially and technically.

    If you want to enable looser and more common ties between market participants (with their various skills), you have to work to lower the trust barriers somehow. There needs to be some sort of recourse system.

    I think about the infrastructure in place in silicon valley that fosters entrepreneurship. Not the least is the legal foundation that allows you to agree set corporate rules, negotiate a term sheet with your VC, sign non-compete or IP-protection contracts with employees, sign financial contracts with customers.

  7. Daz Honey says:

    …when the guy who’s job it is to maximise profits and minimise expenses doesn’t know, on a personal level, the guy (female, furry etc) who is in charge of the folks who make the product it can be hazardous to the company I’d guess, not that my comment is taken from what was posted, just musing..

  8. Prokofy Neva says:

    I would appreciate an answer from Philip as to why he did not include the option to vote “no” on the voting page.

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