A case for "jobs stimulus" in the U.S. that subsidizes American consumers and producers of customized education, and American providers of associated online markets
The business plan adapted on this site makes a case that establishing a popular CE market starts with:
launching an online market for advertisement spaces
providing a virtual currency [1] for use in this market (cash can be used
(To close this section, click again on ‘[1]‘.)
SecondLife is a popular virtual world that features a virtual currency.
From secondlife.com:
Second Life has a fully integrated economy built on the residents’ ability to buy and sell their virtual creations. With nearly USD$35 million traded between residents each month, the Second Life economy has grown to become one of the world’s largest user-generated virtual economies.
…The economy is based on the Linden™ dollar (L$), Second Life’s virtual micro-currency. Residents can buy and sell L$ on the LindeX™ the official virtual currency exchange of Second Life. In 2008 more than USD $100 million worth of L$ were bought and sold on the LindeX.
also)
Understanding how the plan connects these markets starts with recognizing that bloggers whose content centers on their (non-blogging) work can sell their ad space at the latter market.
(Throughout the below text, the word ‘will’ is employed as shorthand for ‘can be expected to.’)
For these ad spaces, prices in the virtual currency will equate to peer ratings of work samples (i.e., the higher the price, the higher the peer rating) [2].
(To close this section, click again on ‘[2]‘.)
Understanding why starts with knowing that:
70% of jobs are gotten via professional contacts (source: U.S. Bureau of Labor Statistics)
The best predictor of job performance — work sample tests — has a .54 correlation (source: The Validity and Utility of Selection Methods in Personnel Psychology — Practical and Theoretical Implications of 85 Years of Research Findings, by Schmidt and Hunter (1998))
Talented people are likely to receive (more) offers of good jobs, then, by:
maintaining a blog that centers on work samples (in development)
making it easy for people with complementary skills (i.e., complementors) to find the blog
Two steps that comprise an ideal way for a talented person to increase her blog’s “findability”:
identify the most credible mechanism for ranking work samples
secure a high ranking for her blog
The most credible such mechanism is complementor ratings embedded in a cash(-equivalent) price, because:
these ratings have a .49 correlation with the recipient’s future job performance (source: The Validity and Utility of Selection Methods in Personnel Psychology — Practical and Theoretical Implications of 85 Years of Research Findings, by Schmidt and Hunter (1998). An important clarification: Schmidt and Hunter identify a .49 correlation between peer ratings and job performance. In the context of these ratings, a peer equates (largely) to a complementor. From Human Resource Management (11th ed., 2009), by John Ivancevich: “In the peer evaluation system…it is preferable for the evaluating peers to trust one another and not be in competition for raises and promotions.”)
such a price mechanism is prohibitively expensive to “game” (e.g., by overpaying to inflate valuations)
For a one-good online economy like that of said ad-space market, a virtual currency can be substituted for cash.
A price for ad space in the market’s virtual currency will equate to complementors’ ratings of work samples associated with the ad space.
Understanding why starts with recognizing that once said talented person launches her blog/site, she wants to alert complementors.
So she will want to:
spend virtual currency to buy ad spaces on blogs frequented by her complementors
use these purchased spaces to advertise her blog
(Providers of these ad-space markets can be expected to provide would-be buyers with ways to earn a limited amount of virtual currency independent of selling ad spaces, so our would-be ad-space buyer will not be thwarted by a chicken-or-egg dilemma. In my business plan, would-be buyers can earn virtual currency in return for helping other buyers value ad spaces. Two ways my plan rewards this help: (1) When bloggers exchange ad spaces — trade “over the counter,” in other words, rather than sell in the auction-based market — if the bloggers have not yet earned a certain amount of virtual currency, the two can divide an amount of virtual currency as part of the exchange. How the two bloggers split that amount (e.g., 70%/30%) will help other buyers value those ad spaces; (2) A blogger who has not yet earned a certain amount of virtual currency can earn currency by predicting future prices of ad spaces. Of course, the more accurate (i.e., helpful) a prediction is, the more currency the predictor earns.)
Our blogger’s complementors will frequent blogs maintained by our blogger’s competitors and complementors, because:
our blogger’s competitors will be her complementors’ complementors (i.e., folks with whom our blogger’s complementors will want to network)
some of our blogger’s complementors will be her complementors’ competitors (i.e., folks with whom our blogger’s complementors will want to compare themselves)
some of our blogger’s complementors will be her complementors’ complementors
Not least because ad-space sellers are likely to be particularly happy to network with ad-space buyers (i.e., (potential) repeat buyers) who are complementors, our blogger almost certainly will restrict her ad-space buys to the blogs of her complementors.
The price she will be willing to pay will reflect ratings of the ad-space sellers’ work samples (in development) by the sellers’ complementors, not least because the price will be a function of:
the quality and quantity of her complementors who comprise the blog’s audience
the ad space’s CPM (cost-per-thousand ad views), which will reflect the quality of the audience
a CPM-like metric that reflects the frequency of visits by members of the blog’s audience, which can be expected to correlate strongly with how favorably the audience regards the blogger’s work samples
Peer ratings and work samples are top predictors of future job performance (see [2]).
Embedding peer ratings in said prices will make it prohibitively time-consuming for buyers to try to “game” the rating process [3].
(To close this section, click again on ‘[3]‘.)
From [2]:
Providers of these ad-space markets can be expected to provide would-be buyers with ways to earn a limited amount of virtual currency independent of selling ad spaces, so our would-be ad-space buyer will not be thwarted by a chicken-or-egg dilemma. In my business plan, would-be buyers can earn virtual currency in return for helping other buyers value ad spaces. Two ways my plan rewards this help: (1) When bloggers exchange ad spaces — trade “over the counter,” in other words, rather than sell in the auction-based market — if the bloggers have not yet earned a certain amount of virtual currency, the two can divide an amount of virtual currency as part of the exchange. How the two bloggers split that amount (e.g., 70%/30%) will help other buyers value those ad spaces; (2) A blogger who has not yet earned a certain amount of virtual currency can earn currency by predicting future prices of ad spaces. Of course, the more accurate (i.e., helpful) a prediction is, the more currency the predictor earns.
In theory, then, virtual currency can be used to deliberately overpay for ad spaces, as a means of inflating valuations. But the time required to earn currency makes it prohibitively time-consuming to undertake this kind of price-fixing.
Sellers will precluded from distorting prices because:
each seller will be a price-taker
there are no meaningful economies of scale associated with maintaining a personal blog
the above two facts ensure that pricing will be competitive [4a]
(To close this section, click again on ‘[4a]‘.)
From 2009 book How Markets Fail:
As long as each industry contains many competing suppliers, and firms aren’t able to lower their unit costs merely by raising output, it can be mathematically demonstrated that a market-clearing set of prices exists.
…A shorthand way to summarize these findings is to say that competitive markets are efficient. They ensure that businesses supply the products people want, in the right amounts, at the least cost.
…The branch of economics that generated these findings is known as general equilibrium theory.
…General equilibrium theory, [textbook co-authors] Pindyck and Rubinfeld write, “is the most direct way of illustrating the working of Adam Smith’s famous invisible hand.”
This kind of ad-space market will improve, then, on professional-networking websites like LinkedIn.com, which lack a peer-rating mechanism that is not easily gamed.
LinkedIn has 50M users, and is adding 500K each week (source: an October 14, 2009 entry at blog.linkedin.com).
70% of jobs are gotten via professional contacts (source: U.S. Bureau of Labor Statistics).
(Some) ad-space markets of said kind, then, can be expected to attract many users.
Another reason this can be expected: earning a high and/or fast-rising ad rate in virtual currency should make it easier to attract buyers who pay cash (i.e., to turn blogging into a job) [5].
(To close this section, click again on ‘[5]‘.)
An expert whose media earns a high and/or fast-rising ad rate in virtual currency is likely to attract ad-space buyers who pay with cash, because:
Advertising agencies are eager to identify and hire people who know how to spend wisely on online ad spaces [5a].
(To close this section, click again on ‘[5a]‘.)
From the September 4, 2006 issue of Advertising Age:
The good news is that there are people in the world who can analyze and optimize a mix of media. The bad news, experts say? The total number in the world qualified and able to do so is in the hundreds – at the most. Not only are analytics new to general marketing, but some of the most alluring uses are also the most difficult to achieve, marrying statistical analysis, econometrics, strategic planning and a heavy dose of technology. Nothing less than real expertise will do. Attempted without proper understanding, the practice becomes “monkeys with razor blades,” as Mr. Merrihue puts it.
“The one even more [painful fact] to swallow is that there are only 5,000 ‘business mathematicians’ for all industries,” says Pedro Laboy, chief operating officer of Austin, Texas-based marketing consultancy Tocquigny.
“They’re in higher demand than Harvard M.B.A.s.” Even trying to develop a larger pool of analytic superheroes is difficult because the talent is spread thin and needed in all the other parts of a company. Companies determined to succeed in analytic marketing and without a Wal-Mart’s money to tempt entire departments have to start by getting a single expert in-house. Yet even less esoteric talent can be difficult to find. It took Tocquigny almost a year to hire its director of analytics, and just to find a marketing person with the right skill set to do analytics can take nine months.
…So where do you find them? “I wish I had an easy answer, because I wouldn’t have to struggle,” says Tony Weisman, CMO of Draft, Chicago. “They’re not coming from other agencies because we’re just passing around the same people who don’t know [the subject],” he says. Instead, they’re looking to people coming from online strategists, consultancies and customer-loyalty companies. Other companies are looking for people with the necessary skills, whether from the same industry or not. In other words, no one’s figured out a good way to target the potential marketers.
“I don’t know that we’ve figured it out, so we’re trying to throw the net broad,” Harrah’s Mr. Norton says. Some come from consultancies, others from such schools as Carnegie Mellon and Duke. The process is inefficient and is likely to remain so for now, but Mr. Norton isn’t planning to give up, because that would be rolling a pair of dice where the house wouldn’t win.
From the June 28, 2004 issue of Fortune:
The ascension of the media buyer completely disrupted Madison Avenue’s old assembly line. “We’re getting to the point where the media plan is done first, and the creative is developed behind it,” says Verklin. “That is a radical vision for the advertising business that would have been unheard of five years ago.” He adds: “We used to be the dorks. Now we’re driving the whole advertising process.”
People can demonstrate this aptitude via the ad-space market by using the currency to buy undervalued ad space and sell it for a profit (these market participants are hereafter referred to as traders).
It can be expected that many people will become traders [5b].
(To close this section, click again on ‘5b’.)
From a September 28, 2006 article on searchenginewatch.com:
Jake Baillie, President of TrueLocal, said that arbitrageurs make the PPC [i.e., pay-per-click] space more competitive. According to Baillie, business marketers are bitter because arbitrageurs make easy money, plus they inflate their click fees or their clients’ fees. He also showed how second-tier search engines, shopping engines, directories and Internet Yellow Pages are engaging in arbitrage. “Everybody’s doing it,” Baillie said.
From a May 20, 2007 article on publishing2.com:
So much of Google’s success has been driven by individuals, i.e. individuals who make money — in some instances a lot of money — by “working” the online ad marketplace. Individuals like ShoeMoney…ShoeMoney has a video up telling his fellow arbitragers not to worry…He also makes the point that many other search players, like Shopping.com, Ask, and Google itself, engage in forms of arbitrage.
From the May 19, 2007 issue of the New York Times:
Internet marketing and advertising is a social market made for the use of heavy-duty computing and sophisticated mathematics. Investment and start-up money is pouring into the market, and so are many high-powered computing brains.
Basem Nayfeh has a Ph.D. from Stanford, where he did his graduate research down the hall from one of Google’s founders, Sergey Brin. Mr. Nayfeh’s thesis was on multiprocessor chips, and he has worked in corporate labs in Silicon Valley on things as diverse as climate and computer design. Today Mr. Nayfeh, 37, is the chief technology officer of Revenue Science, which tracks, analyzes and predicts online behavior to help advertisers find people most likely to buy their products. Many of his fellow computer wizards are in online marketing.
“If you asked any of us 5 or 10 years ago if we would be in advertising,” he says, “none of us would have said yes.”
Traders who parlay their success into media-planning/-buying jobs will bring their clients’ money to your ad-space market, because advertisers are buying ad space on blogs [5c].
(To close this section, click again on ‘[5c]‘.)
From a 2009 article on technorati.com:
The 2008 [State of the Blogosphere] report, Jalichandra noted, found the striking statistic that 46% of responding bloggers self-described as professional bloggers. That led to more detailed questions in the 2009 report, where 28% fell into the general designation of professional blogger, and 72% as blogging hobbyists. Of all respondents, 9% were found to be self-employed bloggers in which blogging is the primary objective of the business. Overall, 17% reported that blogging is a primary source of income.
From the October 21, 2007 issue of the San Francisco Chronicle:
With audiences growing at double- or triple-digit rates, ad prices are soaring for top blogs.
From the April 21, 2009 edition of the Wall Street Journal:
In America today, there are almost as many people making their living as bloggers as there are lawyers. Already more Americans are making their primary income from posting their opinions than Americans working as computer programmers, firefighters or even bartenders.
Paid bloggers fit just about every definition of a microtrend: Their ranks have grown dramatically over the years, blogging is an important social and cultural movement that people care passionately about, and the number of people doing it for at least some income is approaching 1% of American adults.
The best studies we can find say we are a nation of over 20 million bloggers, with 1.7 million profiting from the work ,and 452,000 of those using blogging as their primary source of income. That’s almost 2 million Americans getting paid by the word, the post, or the click — whether on their site or someone else’s.
…Demographically, bloggers are extremely well educated: three out of every four are college graduates. Most are white males reporting above-average incomes. One out of three young people reports blogging, but bloggers who do it for a living successfully are 2% of bloggers overall. It takes about 100,000 unique visitors a month to generate an income of $75,000 a year. Bloggers can get $75 to $200 for a good post, and some even serve as “spokesbloggers” — paid by advertisers to blog about products. As a job with zero commuting, blogging could be one of the most environmentally friendly jobs around — but it can also be quite profitable. For sites at the top, the returns can be substantial. At some point the value of the Huffington Post will no doubt pass the value of the Washington Post.
The barriers to entry couldn’t be lower. Most bloggers for hire pay $80 to get started, do it for about 35 months, and make a few hundred dollars. But a subgroup of these bloggers are the true professionals who work at corporations, serve as highly paid blogging consultants or write for sites with substantial traffic.
Pros who work for companies are typically paid $45,000 to $90,000 a year for their blogging. One percent make over $200,000. And they report long hours — 50 to 60 hours a week.
These media planners/buyers will seek out bargains in the barter market (i.e., seek out desirable ad spaces that haven’t yet attracted cash buyers).
As seen above, traders have a lot to gain from amassing a track record of profitable trades.
In particular, traders will gain by buying ad spaces in virtual currency that they subsequently sell to media buyers for cash.
As such, traders will bid up the rates in virtual currency of ad spaces that they believe are worthy of attracting cash bids.
High and/or fast-rising ad rates in virtual currency, then, will provide media planners/buyers with good indicators of how they can spend their cash wisely. (Of course, complementors’ ratings will also be reflected in these ad rates, but complementors’ ratings are entirely – wait for it – complementary to traders’ ratings for the purpose of identifying quality ad spaces).
Experts will recognize the benefit of maintaining a blog that earns a high ad rate in virtual currency, and will seek out more ways to demonstrate their comparative expertise.
To facilitate these demonstrations, companies will introduce new online markets for making predictions [6].
(To close this section, click again on ‘[6]‘.)
Many prediction markets are active at intrade.com.
From the May 11, 2007 issue of the Wall Street Journal:
A consensus plan, endorsed by more than 20 leading researchers, including Nobel economics laureates Kenneth Arrow, Daniel Kahneman, Thomas Schelling, and Vernon Smith, and published by the AEI-Brookings Joint Center (http://ssrn.com/abstract=984584), suggests the creation of a safe harbor for small-stakes, not-for-profit prediction markets to encourage experimentation.
(For-profit prediction markets are legal outside of the U.S. (e.g., in England, where intrade.com is based), but are not yet legal in America.)
From a November 29, 2006 article on confab.yahoo.com:
Bo Cowgill from Google, Leslie Fine from HP, Todd Proebsting from Microsoft, and Dave Pennock from Yahoo! will describe how they are using prediction markets to aid corporate forecasting and decision making.
Rankings in these markets will make it easy for audiences to find blogs maintained by comparative experts — particularly audiences who also utilize ad-rate rankings.
Activity in the prediction and ad-space markets will catalyze demand for CE, not least because information created in these markets (e.g., prices, rankings) will enable consumers to identify quality suppliers of CE (e.g., instructors, course designers, curriculum advisors).
Importantly, CE consumers may be unlikely to forgo opportunities to work with quality CE suppliers merely because the suppliers lack extensive teaching credentials and/or experience.
From an article by Malcolm Gladwell in the December 15, 2008 issue of The New Yorker:
A group of researchers — Thomas J. Kane, an economist at Harvard’s school of education; Douglas Staiger, an economist at Dartmouth; and Robert Gordon, a policy analyst at the Center for American Progress — have investigated whether it helps to have a teacher who has earned a teaching certification or a master’s degree. Both are expensive, time-consuming credentials that almost every district expects teachers to acquire; neither makes a difference in the classroom.
From the website of Teach For America:
Research over time has conclusively shown that Teach For America corps members’ impact on their students’ achievement is equal to or greater than that of other new teachers. Moreover, the most rigorous studies have shown that corps members’ impact exceeds that of experienced and certified teachers in the same schools.
All told, the advent of popular CE markets is likely to create opportunities for many experts.
What’s more, it is likely that at least some of the opportunities will be lucrative.
From the December 11, 2006 issue of Business Week:
Megastudy has built a booming business by tapping into the anxieties of parents such as Kim. The [South Korean] cram school company burst onto the scene in 2000, offering videotaped lectures online. Today its Web site lists 2,000 courses.
…Megastudy’s meteoric rise owes much to its popular lecturers. Son has signed up top talent by offering a 23% cut of online sales of videos — a deal that earned one English teacher $2 million last year.
Of course, the faster a lot of money is expended to introduce said markets, along with complements (e.g., software, media), the faster a lot of jobs will be created.
Happily, American media conglomerates can be expected to spend a lot to become owners of popular variants of the markets.
Understanding why starts with recognizing that advertisements on the websites of said markets, and on associated media (e.g., search results), will be viewed by the young and/or upwardly mobile (these advertisements are distinct from the ad spaces that will bought and sold at the ad-space markets).
Advertisers pay a premium to reach this audience demographic.
Once these conglomerates identify this markets-making opportunity, then, they can be expected to launch and/or acquire markets and complements.
From Clayton Christensen’s second book, The Innovator’s Solution:
The Innovator’s Dilemma [Christensen's first book] identified two distinct categories — sustaining and disruptive — based on the circumstances of innovation. In sustaining circumstances — when the race entails making better products that can be sold for more money to attractive customers — we found that incumbents almost always prevail [over start-ups].
…Once they have developed and established the viability of their superior product, entrepreneurs who have entered on a sustaining trajectory should turn around and sell out to one of the industry leaders behind them…A sustaining-technology strategy is not a viable way to grow new-growth businesses.
Media conglomerates are the leaders among incumbents whose:
primary customers are advertisers
business model will not be disrupted by said markets (imho, search companies like Google will be disrupted, as price-based indexes to Web content incrementally subsume/obsolesce link-based indexes like Google’s PageRank)
Needless to say, said conglomerates can be expected to move faster if the U.S. government subsidizes American consumers and producers of CE, and American providers of associated online markets.
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Jobs Quickly
The business plan adapted on this site makes a case that establishing a popular CE market starts with:
also)
Understanding how the plan connects these markets starts with recognizing that bloggers whose content centers on their (non-blogging) work can sell their ad space at the latter market.
(Throughout the below text, the word ‘will’ is employed as shorthand for ‘can be expected to.’)
For these ad spaces, prices in the virtual currency will equate to peer ratings of work samples (i.e., the higher the price, the higher the peer rating) [2].
Peer ratings and work samples are top predictors of future job performance (see [2]).
Embedding peer ratings in said prices will make it prohibitively time-consuming for buyers to try to “game” the rating process [3].
Nor will sellers be able to distort prices [4].
This kind of ad-space market will improve, then, on professional-networking websites like LinkedIn.com, which lack a peer-rating mechanism that is not easily gamed.
LinkedIn has 50M users, and is adding 500K each week (source: an October 14, 2009 entry at blog.linkedin.com).
70% of jobs are gotten via professional contacts (source: U.S. Bureau of Labor Statistics).
(Some) ad-space markets of said kind, then, can be expected to attract many users.
Another reason this can be expected: earning a high and/or fast-rising ad rate in virtual currency should make it easier to attract buyers who pay cash (i.e., to turn blogging into a job) [5].
Experts will recognize the benefit of maintaining a blog that earns a high ad rate in virtual currency, and will seek out more ways to demonstrate their comparative expertise.
To facilitate these demonstrations, companies will introduce new online markets for making predictions [6].
Rankings in these markets will make it easy for audiences to find blogs maintained by comparative experts — particularly audiences who also utilize ad-rate rankings.
Activity in the prediction and ad-space markets will catalyze demand for CE, not least because information created in these markets (e.g., prices, rankings) will enable consumers to identify quality suppliers of CE (e.g., instructors, course designers, curriculum advisors).
Importantly, CE consumers may be unlikely to forgo opportunities to work with quality CE suppliers merely because the suppliers lack extensive teaching credentials and/or experience.
From an article by Malcolm Gladwell in the December 15, 2008 issue of The New Yorker:
From the website of Teach For America:
All told, the advent of popular CE markets is likely to create opportunities for many experts.
What’s more, it is likely that at least some of the opportunities will be lucrative.
From the December 11, 2006 issue of Business Week:
Of course, the faster a lot of money is expended to introduce said markets, along with complements (e.g., software, media), the faster a lot of jobs will be created.
Happily, American media conglomerates can be expected to spend a lot to become owners of popular variants of the markets.
Understanding why starts with recognizing that advertisements on the websites of said markets, and on associated media (e.g., search results), will be viewed by the young and/or upwardly mobile (these advertisements are distinct from the ad spaces that will bought and sold at the ad-space markets).
Advertisers pay a premium to reach this audience demographic.
Once these conglomerates identify this markets-making opportunity, then, they can be expected to launch and/or acquire markets and complements.
From Clayton Christensen’s second book, The Innovator’s Solution:
Media conglomerates are the leaders among incumbents whose:
Needless to say, said conglomerates can be expected to move faster if the U.S. government subsidizes American consumers and producers of CE, and American providers of associated online markets.