Daniel Roth’s 2009 Wired article on Demand Media is utterly fascinating. And Byrne Hobart has an interesting take on the wider implications of Demand’s business model:

Demand Media’s content business has solved a huge labor market inefficiency: there are millions of people who can write reasonably well, but who can’t efficiently get a full-time job. Think of students, housewives, retirees—and ignore anyone below the 90th percentile. It’s a gigantic population of people who are unlikely to get full-time jobs, but who can’t effectively spend their time doing piecework or freelance writing.Thanks to Demand Media, they can do incremental writing work. If they can’t work full-time and it’s hard to judge them part-time, their labor is massively undervalued; in fact, if you look at the rise of blogging, tweeting, Wiki-ing, Q&A sites, etc., you could assume that the median price of their time is zero. By paying more than zero, at a huge scale, Demand Media may be able to buy and judge more hours of decent writing than any other company.

Byrne’s description reflects what you might call a broader disaggregation of work. Declining transaction costs have encouraged the outsourcing of non-core functions in business enterprises, and we see something similar happen in households. But for individuals, there is a countertrend: microjobs are giving at least some workers more independence and variety than they’d have otherwise. One wonders if the Demand Media model is a good way to capitalize on the talents of those of us with attention deficits.

Byrne continues with his celebration of Demand:

Now, compare that to the value of the potential labor everyone in the 90th percentile of writing or movie-making skill, who doesn’t have or doesn’t want a full-time job, but would like some extra income. Figure $30/hr times two hours per week times population times (1 – labor force participation rate) times 10%, and you get a total value of $29 billion per year. That’s the amount of money left on the table if the top 10% of the 30% of people in the US who are not members of the labor force could have each written four articles for eHow.
But that’s just the price. If Demand Media earns even a small positive return on those otherwise unused hours of labor, the value could go up even more.
It gets better. Demand can afford to target the top 10%, but what about the top 1% or the top .1%? Once they have a system for ranking everyone’s quality, they can also start selling off premium talent at a premium price.

Suffice it to say, this step will encourage wage dispersion. Developing a finer-grained sense of who attracts eyeballs and who does not will raise the stakes of the tournament. This reinforces my belief that the explosion in upper-tail inequality is here to stay.

Byrne could be totally wrong about Demand. But I think he’s right that there’s a massive opportunity here to monetize the cognitive surplus. And one important issue is that the value the Demand business model creates is hard to capture through conventional statistics. The consumer surplus generated by search engines is vast, yet all we see is the advertising revenue. In a similar vein, micropayments might enable people to lead lives that facilitate breakthrough creativity. Granted, it might also help people laze around. But consider that some people who need flexible work schedules are highly educated and highly engaged parents, the kind who, according to the logic of superstar kindergarten teachers, are worth vast sums in present value terms. That is one of the reasons why firms like LiveOps are so exciting and so important.

Of course, there are many people who are trying to make our labor market regulations more rigid, in part because they see the Demand model and the LiveOps model as exploitative, not recognizing that many people are embracing flexibility rather than fearfully succumbing to it. And when we make our labor markets more rigid, these opportunities start to dry up.