An Empirical Puzzle

For a research paper that we recently published, we surveyed founders of new wikis on wikia.com. One of the surprising findings from that paper was that most founders were starting niche communities and had modest expectations about growth.

This came as a surprise to me, and has been surprising to other online community researchers that I have talked to about the findings. My assumption before doing this research was that most people were trying to start large communities, and simply failing.

There are a number of different possible explanations for this surprising finding. One is that the utility of founding a small community is actually larger than we assumed - perhaps even greater than founding a large community. A second is that perhaps people see the likelihood of success of small communities as larger than that of large communities. It’s this idea that I’d like to explore more. Why might people assume that they would have more success in starting a niche community? One possible reason is based on an idea from the economics literature called the Efficient Market Hypothesis.

An Economics Joke (Sorry!)

The efficient market hypothesis basically says that prices will adjust based on all of the available information, and so investors can’t expect to beat the market unless they have insider information. In other words, you shouldn’t expect to excel at buying stocks. If that stock tip you heard really was a great bargain, then someone else with more money and more skill would have already bought it at that price, and would have pushed the price up to what it should be.

There’s an old economics joke that illustrates a particularly strong form of this theory:

Two economists were walking down the street together when one looks down and says, “Look, a $20 bill!”. The second economist says, “It can’t be - someone would have picked it up already.”

The Efficient Community Hypothesis

I’ve been thinking about whether there might be a similar Efficient Online Community hypothesis. The punchline of the theory is that all online community founders should expect to have limited success, whether they attempt to start general or niche communities.

The initial assumptions are that:

1. People get benefits (social, reputation, etc.) from founding communities, and these benefits increase the larger the communities grow (think Linus Torvalds or Jimmy Wales).
2. People are roughly rational - when the benefits they expect from something outweigh the costs, they do it.

The corollary is that the costs of starting new communities should roughly equal the benefits from starting them. When costs are high – and costs might include not only money but also resources like time, skill, or social capital – then rational founders would only invest those resources into a community that they thought would be quite large and successful.

As many costs have lowered (e.g., with lower hosting costs, lower technical skills required, etc.), we should expect that founders have more modest expectations. The basic intuition is that if founding a particular community is such a good idea, then someone would have already done it. When the barriers to entry are so low, then all of the good ideas get taken.

Accidental Success

This has an interesting consequence - all new founders should have modest expectations, even those whose communities eventually grow large. If my hypothesis is correct, then this will typically not be because founders poured resources into them. Rather, their growth and success will be something of a surprise to the founders.

There is some anecdotal evidence that this is true. We know, for example, that Wikipedia was started as a side project, designed to supplement the work of more professional encyclopedia editors. Larry Sanger introduced the idea to the community of editors like this:

No, this is not an indecent proposal. It's an idea to add a little feature to Nupedia. Jimmy Wales thinks that many people might find the idea objectionable, but I think not... As to Nupedia's use of a wiki, this is the ULTIMATE "open" and simple format for developing content. We have occasionally bandied about ideas for simpler, more open projects to either replace or supplement Nupedia. It seems to me wikis can be implemented practically instantly, need very little maintenance, and in general are very low-risk. They're also a potentially great source for content. So there's little downside, as far as I can determine.

Linus Torvalds announced the start of the Linux project with similarly modest expectations:

Hello everybody out there using minix - I'm doing a (free) operating system (just a hobby, won't be big and professional like gnu) for 386(486) AT clones. [...] Linus ([email protected]) PS. Yes - it's free of any minix code, and it has a multi-threaded fs. It is NOT protable (uses 386 task switching etc), and it probably never will support anything other than AT-harddisks, as that's all I have :-(.

I also looked at the first posts of some of the most popular subreddits on Reddit. We can assume that these were written by the founders of the communities. Looking at the text of the posts we certainly don’t get the sense that they knew that they were about to start huge, influential communities. Some look like spam posts, others are jokes.

What’s next?

I think of online communities, and particularly peer production communities, as public goods, and I think that this idea has broader implications. There is a great literature on collective action and public goods production, and I’d like to think more formally about how and when it makes sense to create or contribute to small-scale versus large-scale public goods projects.