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We live in a golden age now. The volume of creative work in the next decade will dwarf the volume of the last 50 years. More artists, authors, and musicians are working than ever before, and they are creating significantly more books, songs, films, documentaries, photographs, artworks, operas, and albums every year. Books have never been cheaper, and more available, than today. Ditto for music, movies, games, and every kind of creative content that can be digitally copied. The volume and variety of creative works available have skyrocketed. More and more of civilization’s past works—in all languages—are no longer hidden in rare-book rooms or locked up in archives, but are available a click away no matter where you live. The technologies of recommendation and search have made it super easy to locate the most obscure work. If you want 6,000-year-old Babylonian chants accompanied by the lyre, there they are.
At the same time, digital creation tools have become so ubiquitous that it requires very few resources, or special skills, to produce a book, or a song, or a game, or even a video. Just to prove a point, recently an ad agency shot a very slick TV commercial using smartphones. Legendary painter David Hockney created a popular set of paintings using an iPad. Famous musicians use off-the-shelf hundred-dollar keyboards to record hit songs. More than a dozen unknown authors together have sold millions of self-published ebooks, using nothing more than a dirt-cheap laptop. Speedy global interconnection has produced the largest mass audience yet. On the internet the biggest hits keep getting bigger. The Korean pop dance video “Gangnam Style” has been watched 2.4 billion times and is still going. This size audience has never been seen on the planet before.
While the self-made bestsellers get all the headlines, the real news lies in the other direction. The digital age is the age of non-bestsellers—the underappreciated, the forgotten. Because of sharing technologies, the most obscure interest is no longer obscure; it is one click away. The fast-flowing penetration of the internet into all households, and recently into all pockets via a phone, has put an end to the domination of the mass audience. Most of the time, for most creations, it’s a world of niche fulfillment. Left-handed tattoo artists can find each other and share stories and esoteric techniques. People who find whispering sexy (and it turns out many do) can watch whispering videos produced and shared by like-minded whispering folks.
Each of these tiny niches is micro-small, but there are tens of millions of niches. And even though each of those myriad niche interests might attract only a couple of hundred fans, a potential new fan merely has to google to find them. In other words, it becomes as easy to find a particular niche interest as to find a bestseller. Today we are not surprised by a microcommunity sharing an unlikely passion; we are surprised if there is not one. We can head out in the wilds of Amazon, Netflix, Spotify, or Google with pretty good confidence that we will uncover someone who has anticipated our most remote interests with a finished work or forum. Each niche is just one step away from a bestselling niche.
Today the audience is king. But what about the creators? Who will pay them in this sharing economy? How will their creative acts be financed if the middle is gone? The surprising answer is: another new sharing technology. No method has been as beneficial to creators as crowdfunding. In crowdfunding the audience funds the work. The fans collectively finance their favorites. The technology of sharing enables the power of one fan who is willing to prepay an artist or author to be aggregated (with little effort) together with hundreds of other fans into a significant pool of money.
The most renowned crowdfunder is Kickstarter, which in the seven years since it was launched has enabled 9 million fans to fund 88,000 projects. Kickstarter is one of about 450 crowdfunding platforms worldwide; others, such as Indiegogo, are almost as prolific. Altogether, crowdfunding platforms raise more than $34 billion each year for projects that would not have been funded in any other way.
In 2013, I was one of about 20,000 people who raised money from fans on Kickstarter. A few friends and I created a full-color graphic novel—or what used to be called a comic book for grown-ups. We calculated we needed $40,000 to pay writers and artists to create and print the second volume of our story, called The Silver Cord. So we went onto Kickstarter and made a short video pitch for what we wanted the money for.
Kickstarter runs an ingenious escrow service so that the full grant (in our case $40,000) is not handed over to the creators until and unless the total amount is raised. If the drive is even a dollar short at the end of 30 days, the money is returned immediately to the funders and the fund-raisers (us) get nothing. This protects the fans, since an insufficiently funded project is doomed to fail; it also employs the classic network economics of turning your fans into your chief marketers, since once they contribute they become motivated to make sure you reach your goal by recruiting their friends to your campaign.
Occasionally, unexpectedly popular fan-financed Kickstarter projects may pile on an additional $1 million above the goal. The highest grossing Kickstarter campaign raised $20 million for a digital watch from its future fans. Approximately 40 percent of all projects succeed in reaching their funding goal.
Each of the 450 or so fan-funding platforms tweak their rules to cater to different groups of creatives or to emphasize different results. Crowdfunding sites can optimize for musicians (PledgeMusic, SellaBand), nonprofits (Fundly, FundRazr), medical emergencies (GoFundMe, Rally), and even science (Petridish, Experiment). A few sites (Patreon, Subbable) are engineered to supply continuous support to an ongoing project like a magazine or video channel. A couple platforms (Flattr, Unglue) use fans to fund work that has already been released.
But by far the most potent future role for crowdsharing is in fan base equity. Rather than invest into a product, supporters invest into a company. The idea is to allow fans of a company to purchase shares in the company. This is exactly what you do when you buy shares of stock on the stock market. You are part of a crowdsourced ownership. Each of your shares is some tiny fraction of the whole enterprise, and the collected money raised by public shares is used to grow the business. Ideally, the company is raising money from its own customers, although in reality big pension and hedge funds are the bulk buyers. Heavy regulation and intense government oversight of public companies offer some guarantee to the average stock buyer, making it so anyone with a bank account can buy stock. But risky startups, solo creators, crazy artists, or a duo in their garage would not withstand the kind of paperwork and layers of financial bureaucracy ordinarily applied to public companies. Every year a precious few well-funded companies will attempt an initial public offering (IPO), but only after highly paid lawyers and accountants scour the business in an expensive due diligence scrub. An open peer-to-peer scheme that enabled anyone to offer to the public ownership shares in their company (with some regulation) would revolutionize business. Just as we have seen tens of thousands of new products that would not have existed except by crowdfunding techniques, the new methods of equity sharing would unleash tens of thousands of innovative businesses that could not be born otherwise. The sharing economy would now include ownership sharing.
The advantages are obvious. If you have an idea, you can seek investment from anyone else who sees the same potential as you do. You don’t need the permission of bankers, or the rich. If you work hard and succeed, your backers will prosper with you. An artist might use fans’ investments to build a company that sold her works over the long term. Or two guys in a garage with an amazing gizmo might be able to leverage that into an ongoing enterprise process that makes more gizmos instead of having to Kickstart each one. The disadvantages are obvious as well. Without some kind of vetting, policing, and enforcement, peer-to-peer investing would be a magnet for huskers and scams. The con artists would offer some kind of glorious returns, take your money, and plead failure. Grannies might lose their life savings. But just as eBay used new innovative technology to solve the old problem of fraud between invisible strangers selling to invisible strangers, the dangers of equity crowdsharing can be minimized with technical innovations such as insurance pools, escrow accounts, and other types of technologically induced trust. Two early attempts at equity crowdfunding in the U.S., SeedInvest and FundersClub, still rely on rich “qualified investors” and are awaiting a change in U.S. law that would legalize equity crowdfunding for ordinary citizens in early 2016.