Seth Godin explains that the Internet not only allows us to do things faster/better/cheaper, but enables new forms of interaction that were once too tedious to manage:

How about a simple system that lets you run a new kind of auction for an event with limited seating? Say you want 200 people to come to a networking event, the sort of thing that’s no fun if only a dozen or two show up… Instead of charging $50 a ticket, why not charge $1 for the first five tickets, $2 for the next five, and on to $500 for the last ten? You’ll earn just as much (if not more) but reward the brave who sign up early. (The folks who like to wait until the last minute ‘to be sure’ end up paying for the privilege). It’s easy to imagine a simple interface to set up whatever graduated pricing model you’d like.

Over the last few decades, expensive physical goods have been replaced by with software counterparts that, while expensive to initially develop, cost next to nothing to disperse to the masses. With marginal production costs out of the way, we can take a more honest look at what determines value. Ideally, shouldn’t a product’s price be at least somewhat dependent on its worth to each individual? Photoshop, for example, is probably worth tens of thousands to a professional photographer. But a teenager who wants to see what he looks like with a mustache might pay $10.

The question is now, as it’s always been, is their a system that credibly determines individual worth? Guess what? There is, and conveniently, it’s The Point!

Say I’m a software developer who is considering building Widget X. It will take $50,000 to make the project worth my time. So I start a campaign on The Point, agreeing to produce the software, but only if people commit a total of $50,000. People see the campaign, and some of them say, “Widget X is the answer to all my problems — I’ll pay $1,000!” Others say, “I’d kind of like to see that happen… I’ll pitch in a dollar.” People pay what it’s worth to them, because if they don’t, it won’t get built. There’s no chance to free ride.

To Seth’s example, the same model could be applied to an event. The fixed values are the seating and the desired profit. The variable is the ticket price. You need X dollars to put on a show, and people pay whatever the show is worth to them. The show only happens if enough money is raised. Rewarding punctuality, as Seth proposes, is just another imperfect pricing model. Price should be a function of cost to the manufacturer and benefit to the consumer.¹

Back to the software example. A big reason that people pirate software and music is that it’s priced higher than what it’s worth to them. This model would eliminate that problem and a primary incentive for piracy.

This is a bit different from how our economy normally works, i.e. you risk failure for the potential of great reward. But what if you aren’t interested in taking the risk, and you just want to be sure you’re going to end up OK? The Point provides such a model.

-Filed in The Point