So all this time, Gawker Media founder and evil genius Nick Denton has been pretending to be a mild-mannered blog network CEO, when in reality he is a behavioural economist doing ground-breaking research into the mechanisms of human motivation and productivity. Of course, it could be that even Nick D. doesn’t realize the extent to which he is experimenting with such things — but Felix Salmon’s piece in Portfolio makes it pretty clear that’s exactly what he is doing.
In a nutshell, Valleywag bloggers are paid a low base salary and then have to “earn” that salary through page views generated on their blog posts (instead of being paid a flat rate per post, as they used to be). Once they have done so, they get paid for any additional page views on a per-thousand basis. The number used to be $9.75 per thousand, and now it is $6.50, As Felix points out, that means bloggers at the Silicon Valley scandal rag will have to produce 50 per cent more page views just to keep their income the same. Needless to say, no one is impressed.
As Salmon notes, one reason for the change could be that Denton underestimated the page view growth at Valleywag, and wound up paying his writers more than he budgeted for, so decided to cut back. In a similar vein, the rates paid to writers at the Wonkette political blog were recently cut — likely because Denton knows that page views will skyrocket with the approaching U.S. election, and therefore writers would stand to benefit without having to do any more work.
There’s an even more in-depth discussion of the behavioural economics of this kind of move at the Crooked Timber blog, where Henry Farrell talks about the somewhat perverse Catch-22 that such incentive schemes can run into when they make contact with the real world: for example, if people know that working hard will mean that their salary gets permanently pegged at that higher level and it takes them even more page views to make a bonus, then they won’t work as hard — in a sense, the incentive reverses itself and becomes a disincentive.
If you still can’t get enough of all this kind of talk, I recommend that you set aside half an hour or so and go read Part One of the latest Marc Andreessen series on entrepreneurship, in which he writes about Berkshire Hathaway executive and Warren Buffett sidekick Charlie Munger’s theories on incentives.