A recent book by Matt Ridley called The Rational Optimist has captured my attention and imagination. For years, Ridley, a British microbiologist, has been looking at the economic history of the planet, and he now contends that all human progress starts, deepens, and expands as the result of a single daily activity: trading goods and services with strangers. In other words, all the extraordinary progress we see continually increasing in the world around us comes from the activity of trading in the marketplace. In terms of multipliers, nothing that human beings have ever created matches the multiplying power of trade.
I was thinking of Matt Ridley recently when I read about an online service called Daily Grommet, which introduces new products to tens of thousands of visitors every day. Two women, Jules Pieri and Joanne Domeniconi, from Lexington, Massachusetts, introduce innovative and new products to a marketplace that otherwise might never have known about them.
Daily Grommet not only alerts potential customers to new products, but also takes a cut of any resulting online sales — which pays for the market platform they’ve created. There are two multipliers at work here: first, the growing marketplace that brings buyers and sellers together in an entirely new way, and second, the growing economic value of Daily Grommet as an online marketplace.
Robert Metcalfe, who co-invented Ethernet, talked about how these new online businesses and marketplaces continually create increasing value. Metcalfe’s law states that “the value of a telecommunications network is proportional to the square of the number of connected users of the system.”
What Mses. Pieri and Domeniconi have done is create an increasingly more valuable telecommunications marketing network that has built-in multipliers. Now that inventors of new products know about Daily Grommet, they will send their products to the site, hoping to be featured on each day’s “Daily Grommet.”
The multiplier here is that all of the research to keep the site going is provided by the potential sellers. As word spreads about the site – mainly through social networks such as Facebook and Twitter — the number of customers will continually grow. Day after day, week after week, the usefulness and value of Daily Grommet will grow almost automatically. This is a marvelously simple example of how, in the world of the microchip economy, things continually multiply in a way that was never possible before in human history. And Daily Grommet is just one of countless examples of new kinds of marketplace multipliers that are being created all over the world.
Virginia Postrel, in her book The Future and Its Enemies, writes about how innovations like these contribute to human progress: “As people create and sell products or services … these actions shape a future no one can see, a future that is dynamic and inherently unstable.”
Essentially, what I draw from Ms. Postrel’s description is that the world around us is not created by politicians and bureaucrats, but by entrepreneurs like Jules Pieri and Joanne Domeniconi, who are taking Matt Ridley’s key factor of human progress — trading goods and services with strangers — and multiplying the possibilities of this crucial activity in new and unpredictable ways.
Tags: Marketplace Multipliers, Multiplying Power of Trade, Online Marketing, Social Network Marketing, The Rational Optimist
Hey Dan,
This is one of the most thoughtful pieces I’ve seen written about our company. In fact, it was eerie to see you talk about Matt Ridley at the top, as his thinking is something that informs my approach to business. I always quote him when I am doing a public talk!
The name we’ve given to what we, and other businesses like etsy and Quirky do, is Citizen Commerce. We’re reshaping the trading of goods and services with the power and insight of regular people and all their creativity.
Anyway, we had a great piece a few days ago in The New York Times (I suspect that is how you found us) and I felt your post rounded out the business rationale of what we are doing really well, as a complement to that fine article. At the risk of over promotion…here is that NYT piece. http://www.nytimes.com/2010/08/08/business/08proto.html
You will also enjoy this piece, by the HBS professor and business historian, Nancy Koehn. She eloquently addresses some of your same themes. http://blogs.hbr.org/cs/2009/12/the_new_normal_of_american_con.html
Kudos to all the staff at Daily Grommet….keep it up and it will fly out your hands.Judy
Having written a similar one myself. I have been following the reviews and blog commentaries on Ridley’s book. Most have been quite positive. The nastiest was by George Monbiot in Britain’s left-wing Guardian newspaper. One can of course quibble with details of Ridley’s analysis. But to dismiss his basic story, to actually condemn it as villainy, takes a really diseased cynicism, and blinding oneself to what is, well, blindingly obvious. It’s painful to observe. And it’s harmful, standing in the way of a better world (especially for the downtrodden, about whose plight such pundits constantly whine).
Monbiot et al are intolerant guardians of a narrow orthodoxy. They portray Ridley’s book as fanatically pro-capitalist and anti-government. It is not, and only a fanatic would see it so. Their critiques reveal more about the critics than about the book.
Bravo to Ridley for his breath of fresh air and clear thinking. That his message is widely labeled “radical” is ironic — the reaction really should be, “Duh! Tell us something we don’t know.” Yet Ridley is indeed telling us something that, sadly, most people don’t know.
My own book, The Case for Rational Optimism (Transaction, Rutgers University, 2009), does make many points and arguments similar to Ridley’s, but is far broader in scope, covering not only such topics as the economy, war and peace, technology, democracy, etc., but also the evolutionary background and the philosophical and psychological issues involved with optimism versus pessimism. See http://www.fsrcoin.com/k.htm