Crowd-Funding Turns Amateurs Into Inventors and Entrepreneur to industry leaders

posted Jul 5, 2012, 11:53 AM by David Khorram   [ updated Sep 7, 2012, 1:14 PM by Unknown user ]
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Image: Bartholomew Cooke

I have a lovely artifact of dead media in my house: a radio jukebox from 1946, invented by a friend’s grandfather in his spare time. Radios were expensive, and this handsome metal receiver could be placed in a booth of a diner so that, for a dime, patrons could enjoy a few minutes of AM entertainment. My friend’s grandfather paid to have them built, but—as this story so often goes—by the time they reached the mass market, advances in electronics had rendered them passé.

Was my friend’s grandfather an “entrepreneur”? Today we’re obsessed with that word, and we see the Internet as enabling a future where everybody can hope to become one. In the wake of Facebook’s massive IPO, it’s easy to think that young people with big ideas should all aspire to become the next Mark Zuckerberg. And thanks to the passage of the JOBS Act, which loosens restrictions on stock sales by nonpublic companies, ordinary Americans will be able to crowd-fund startups the same way they fund Kickstarter projects. Undoubtedly, over the next few years dozens of companies will be racing to become the crowd-VC king, many of them promising to underwrite not just one-off products but whole businesses.

It’s great that we’re opening up a path to early-stage investing so that everyone can dabble in some VC action. But we shouldn’t forget about the contemporary incarnations of my friend’s grandfather: people who want to bring a dream to life without quitting their day jobs. He was an amateur, not an entrepreneur. And crowd-funding’s greatest achievement, as well as its most radical implication for our future, still lies in its ability to help amateurs like him innovate.

The Internet has enabled and boosted the amateur impulse worldwide. But American amateurism has its own color and feel, partly because the country’s identity was born out of the constant European insult that Americans were amateurs in every respect—socially, politically, even physically. It only made sense that early America would nurture a culture where innovation, like self-governance, could be accomplished by everyday people in their spare time. Both ideas converged in the figure of Ben Franklin, who helped to found the nation even as he labored over a series of inventions (the bifocal, the lightning rod, the lending library) and scientific inquiries carried out not for profit but for pure love of knowledge. Of course, the story of the brilliant tycoon, from Carnegie to Iacocca to Jobs, has always captivated Americans. But it’s actually the radio jukebox guys—the tinkerers, the amateurs—who are truer to the spirit of Ben Franklin.

As Kickstarter has shown, crowd-funding is ideally suited to helping just these sorts of hobbyist-inventors. Twenty years ago, if the guy down the street had emerged from his garage with a plan for “stackable soaps”—each bar designed with a small cavity in which to set that irritating sliver of soap from the last bar, such that it “meld[s] into a single bar” and creates an “Infinite Cycle of Soap”—you’d have been charmed, perhaps, but deeply skeptical as to whether you’d ever see it happen. Today you can go to the Kickstarter project called Stack and see 1,113 people who altogether have kicked in $17,921, or double what the inventor asked for, to get manufacturing started.

What do the funders get out of it? A few bars of soap. Maybe a tingle up the leg. That’s what makes this type of funding different from VC money. Since Kickstarter doesn’t offer equity, it attracts a different kind of funder, a person who’s more like the inventor—compelled by enthusiasm and curiosity. These funders don’t expect anything financial in return—the way Kickstarter is currently set up, they can’t. Rather, they’re looking only for the satisfaction of being associated with an idea in its infancy and watching it come to fruition.

Researchers who study human motivation have spent decades attempting to decode what they call “intrinsic motivation”—that is, the drive to do something out of enthusiasm or love, the very essence of amateurism. Numerous studies show that while direct reward (a paycheck, for instance) motivates us somewhat, it can also bridle creativity. By connecting enthusiast makers with enthusiast investors, crowd-funding has the power to keep people motivated—right through what, in a 9-to-5 job, might be career-ending missteps or failures—so that they can stay focused on realizing their vision.

As we venture off into our crowd-funded future, we must remember that not everyone is dreaming about becoming the next hot CEO. The best movie about crowd-funding won’t star somebody like Jesse Eisenberg with a new idea for a website; it’ll be more like Fred MacMurray with a handful of flubber, or Christopher Lloyd rewiring a flux capacitor. The backyard crank is back—but this time, with backing.

Jack Hitt (@jackhitt) is the author of, most recently, Bunch of Amateurs: A Search for the American