Crowdfunding is doomed – there are too many fingers in too many apple pies

Will Self’s Madness of Crowds column.

All-American dish: a plate of apple pie. Photo: Koflers Hutte/Flickr
All-American dish: a plate of apple pie. Photo: Koflers Hutte/Flickr

Some guy in some 0.1-horse town in the ass-end of America’s great nowhere put up a crowdfunding appeal on the web: “I want to bake an apple pie for my mom but I don’t have the money to do it.” A couple of days later there was $49,000 in his bank account. I like to think he’ll now bake many, many apple pies and deliver them widely throughout the States to the needy – like some Johnny Apple-Pie-Seed, but in all probability he’ll just trouser the cash.

At least part of the appeal of crowdfunding (or so the boosters proclaim) is that it enables ideas to get off the ground, whether for businesses or creative endeavours, that would otherwise lie down and die in the mud. The web seems to make possible the conditions necessary for the cultivation of what James Surowiecki characterised – in his 2004 book of the same name – as the wisdom of crowds.

Surowiecki was initially inspired by Francis Galton’s revealing anecdote about how the aggregated guesses of a crowd at a country fair more accurately identified the weight of a slaughtered ox than the prediction of any one expert. Surowiecki built on this to identify optimal factors for crowd wisdom: 1. Diversity of opinion – it doesn’t matter what information this is based on, the important thing is that it should be private to the individual. 2. Independence – individuals’ opinions should be free from the taint of groupthink. 3. Decentralisation – in forming their opinion, individuals should draw on specific, local knowledge. 4. Aggre­gation – a mechanism exists that can take all these individual judgements and turn them into a collective decision.

The web, at least in theory, enshrines these optimal factors in its very constitution, which is presumably why crowdfunding has become such a Big Thing. You can now crowdfund films or music albums; venture capitalists have organised crowd equity funding for company start-ups, and wanker-bankers have adapted the model to make it possible for both individuals and corporate entities with a bad credit profile to raise loans nonetheless. It has been calculated by a UK-based wonk tank that during one month this year, $60,000 was raised worldwide every single hour through crowdfunding. By anyone’s estimation that’s a lot of apple pie. In the heady realm of US electoral finance, crowdfunding has been entrenched since Barack Obama used it in his campaign to wrest the White House from the would-be successor to the pixie-eared reader of The Little Goat.

My suspicion is that the efficacy of crowdfunding will in fact decline in inverse correlation to its success. Put differently: the more money that’s raised, the less wise will be the crowd that raises it. I call this theory – contra Surowiecki – “The Idiocy of the $49,000 Apple Pie”. Here’s how the web works to produce such dumb collective judgements: 1. Homogeneity of opinion – the apple-pie funders’ opinions are based securely on information common to them all: apple pies are yummy, moms are great and it’s nice to make apple pies for moms. 2. Conformity – simply by spending enough time on the web to become aware that some schmuck has posted such a crowdfunding appeal, these people are exhibiting a worrisome conformism. 3. Centralisation – also termed “googlisation”, this is a function of the way commercially oriented search engines act as positive feedback mechanisms to pump-prime consumer (or donor) demand. 4. Aggregation – this is the only proposition my theory shares with Surowiecki’s; I agree with him that the web can take all these individual judgements and turn them into a collective decision.

The problem is that the myriad individual decisions are resolutely crap ones. Why? Because there is a suppressed premise in all of this. True, apple pie is yummy; most moms are great; moms do indeed deserve to have apple pies made for them by penurious offspring. However, the offspring do not deserve to have their donor pie in effect made for them many times over simply because they have access to the web. To begin with, such $49,000 apple pies will be the outliers of crowdfunding appeals, but in time – due to the underlying dynamics – they will increase in number, until the total crowdfunding pie will be divided up between a few such specious enterprises; then the whole thing will collapse in a puff of pixels.

The confirmation of the beginning of the end of crowdfunding was presented to me just a few days after I read about the $49,000 apple pie in USA Today. I was strolling along the promenade at Venice Beach admiring the weathered skins of the sun-and-marijuana-baked hobos, when a leaflet was thrust into my hand. “Donate one dollar so we can raise a million dollars to make a movie!” the thruster cried – and when I read the leaflet it cried the same thing. This was crowdfunding taken back to the streets, trying to re-create the conditions demanded by Surowiecki’s theory by decoupling it from the web altogether. Naturally, the crowd was far too wise to engage with such arrant bullshitting, and there were many discarded leaflets papering the asphalt. After all, while the wannabe film producers thought they were engaging in a novel and democratised form of financing, the crowd saw their efforts for the timeless phenomenon they were: begging. 

Next week: On Location

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