Introducing Incentives Into Communities
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April 5th, 2022

Incentives are powerful. They help us build systems that shape human behavior, leading the right people to do the right things at the right time.

Most incentives that we see rely on extrinsic motivations like reputation or money— things that come from outside of ourselves. This contrasts with intrinsic motivation, which appears from within us as an enjoyment of something purely for its own sake, with no expectation of additional outcomes.

When we look at social communities on the web, recognize that a majority of them rely on collective intrinsic motivation. Everyone is there because they want to be there, not because they’re being rewarded to do so.

Many of these communities are better off never introducing incentives, and remaining purely intrinsic in their nature. These are the groups which aren’t meant to scale, and should instead remain as they are. There are some experiences which can only exist in the absence of games or optimizations, and these are often the spaces where our deepest connections are formed.

However, if a community is interested in growing in size and scaling themselves, we begin to see a problem emerge around fair incentives. By the time a social network is fully grown, it requires constant tending to by community managers, which begins to feel like work instead of play. If incentives aren’t introduced, core contributors will churn as they look for new opportunities that will pay them fairly for their time.

What Breaks When We Introduce Incentives

Over the last 30 years we’ve seen a number of attempts at introducing incentives into communities on the web, with improvements being made iteratively with each new experiment.

Before we go through some of these examples, it’s important to understand that whenever an incentive is introduced into an environment, we lose the natural filtration that we get by only drawing people in who are intrinsically motivated to be there. Without this self-filtering effect, the values and the experience of the group will inevitably be diluted over time by new members who are only there for the incentives. To overcome this, any community which introduces incentives should find some other mechanism to continuously pull values-aligned individuals from the edges into its core.

Some of the earliest examples that we have of incentives being introduced into communities were points systems, which were usually used to signal reputation, or in rare cases could be redeemed on the platform itself. While these mechanisms did tend to entice people in the short term, over time people tended to eventually realized that the points weren’t worth very much, and so community builders continued to churn. Any incentive that we reward to contributors must be durable and valuable over extended periods of time if we want it to have a lasting impact.

More recently, we’ve seen experiments in the web3 space trying to fix this problem of invaluable community incentives, by launching tokens which can be freely transacted or sold on open markets at any time. These experiments have been used to bootstrap entirely new ecosystems out of thin air, connecting tens of thousands of people to coordinate and create value together. The only issue, as we’ve begun to witness first hand, is that it isn’t always ideal for a community to be at the mercy of speculators and thin liquidity.

Many of the most interesting token experiments in existence were launched during the last 2 years, which coincided with a massive crypto/everything bubble. We saw an influx of money and attention all looking for the hottest new thing to speculate on, which provided creators with a fertile space within which to build new communities.

Unfortunately, we know that building a sustainable community takes a long time — much longer than the period of attention that speculators are willing to grant the people who do this hard work. As traders cash out and move on, sunny days can begin to feel quite dark for community members, especially when token markets lack ample liquidity to support the economy. Psychologically, it can feel extremely difficult to continue building a community whose token looks like it might go down forever.

Having any community’s value determined by the whims of the free market is stressful, but it’s especially so for smaller social groups who are still in the early stages of gathering their loyal members. This is why traditionally we see that many early-stage projects don’t survive crypto bear markets— many of them get washed out by the falling tide of attention.

Did We Get Ahead of Ourselves?

When we look at the history of incentives in online communities, we see a natural progression first from no incentives, then to reputation incentives, and finally to monetary incentives. It seems that along the way, we may skipped an important and obvious middle step— sweat equity.

Sweat equity is what people traditionally call ownership in a company that hasn’t gotten any money yet. Shares are measured in % instead of $, they can’t be traded or sold, and they’re usually paid to contributors in lieu of monetary incentives. This kind of ownership reward carries a number of important qualities which make it an ideal incentive for social communities who want to begin rewarding contributors without ruining their vibe.

When we think about equity in a project, we can imagine a spectrum which exists across time — at the earliest stage, when the project first getting launched and the equity is effectively worthless, all the way to the latest stage, where measurable amounts of money are flowing back to holders (either via them selling via dividend payouts).

In that early stage, anyone who earns the equity has to be highly aligned with the mission and vision for the group, or else it will simply appear worthless to them. If they don’t align with the values or believe in the goal that’s being worked on, they’ll expect that the project is doomed to fail and seek out others which match their world view. This means that at its earliest stages, equity enforces a degree of intrinsic alignment around the values and activities that are being co-owned.

Over time as cashflows increase, equity becomes easier for members to value, and the need for intrinsic alignment fades. This is when it probably starts to make sense to let the shares be traded among members of the group, before eventually opening it up to the rest of the world. Importantly, this process can be gradual and measured, rather than sudden and unpredictable.

Going back to our original sequence of community growth, we can see that there exists a healthy middle step which comes after a community begins to need incentives, but before any real money has been introduced into the system. By giving out equity ownership, communities can reward people with an asset that’s durable and meaningful in the long run, but only to those who possess an intrinsic interest to participate and grow the community, continuing the self-filtering mechanism that’s so critical for communities in their earliest stages.

This creates an ideal bridge for communities who want to transition from intrinsic motivations to extrinsic rewards.

Ownership Incentives on Myco

If this model sounds interesting to you — you should come join us on Myco!

We care deeply about helping intrinsically motivated communities grow into extrinsic networks, with a focus on long term sustainability. We’ve been publishing our values for a while now, in the hopes that we can find the others who are already doing this great work.

If you’re interested in this vision for community building, then please join the Myco Beta and introduce yourself. We’re always looking for more people to help us build a new generation of collaboration networks, and we love to reward our members with fair ownership.

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