ONE OF THE few bright spots on the blighted economic landscape of the past few years has been the emergence of a new, efficient method for the procurement of capital. Crowdfunding, as it’s called, allows would-be artists or entrepreneurs to put out a plea for seed money; only if their goal amount is raised do they actually get the cash in hand. The pinup girl for the movement—adored by the tech community, starving artists in Bushwick, and cubicle-dwellers with spare cash who want to be part of something more interesting than pushing endless Excel files—is Kickstarter, the three-year-old website that has done crowdfunding better than anyone else.
Kickstarter is now on track to funnel out nearly twice as much money as the National Endowment for the Arts; almost $1 million is pledged on the site each day, according to a spokesman. Its successes include the $10 million raised for the Pebble watch, which connects owners’ smartphones with a wristwatch; $8.5 million raised for Ouya, a video-game console; and nearly $300,000 raised for Flint and Tinder, American-made men’s underwear. This year, the filmmaker Charlie Kaufman and TV auteur Dan Harmon, frustrated with the creative constrictions inherent to working with studios, turned to Kickstarter to fund their latest project. It felt like a cultural arrival of sorts. For the site’s fans, it was a moment to crow: That was the old, bureaucratic system of patronage. This is the new, populist one.
Those Kickstarter fans are legion. This year, Fast Company named the site on its list of the 50 Most Innovative Companies. It has succeeded, wrote Rob Walker in The New York Times, because “[t]hey champion the underdog—but in particular the underdog who self-markets with aplomb.” Chris Anderson, outgoing editor of Wired, told me, “Kickstarter is the financial engine for the entrepreneurship that’s driving the maker movement”—the term he uses for innovative DIY culture. “It builds community around the project that turns people from [just] customers into evangelists for the project.” And into evangelists for the new economy, as embodied by the site. Take a closer look at Kickstarter, though, and the showcase for the new economy turns out to be a pretty good argument for the old economy.
ONE OF THE great promises of crowdfunding has been the democratization of innovation: People who don’t ordinarily have a say in how resources are spent now have more power. But as James Surowiecki put it in The Wisdom of Crowds, the conditions necessary for a crowd to be “wise” include “diversity, independence, and decentralization”—all of which are more or less the opposite of the conditions necessary for a successful Kickstarter campaign.
The Kickstarter process relies on funding pleas being passed around the Web. It naturally favors groups with strong social-media followings and the capability to make a captivating video pitch, offering quirky perks for those who chip in. These pleas have become ubiquitous: Not long ago, Gawker published an anti-Kickstarter screed calling for an end to “online panhandling.”
The outstretched hands often aren’t appealing to a diverse market, either. The most successful projects on Kickstarter take off because they appeal to groups for whom online ties are particularly strong. Geek-culture offerings, for instance, tend to be disproportionately successful. A “zombie-based” school curriculum hauled in more than $11,000. Or take the “ostrich pillow,” a sort of Slanket for the head, which provides “a micro environment in which to take a comfortable power nap in the office.” The ostrich pillow brought in more than double its hoped-for funding. Then there’s the case of the RoboCop statue: via Kickstarter, $67,436 was raised to erect a giant metal ode to the 1980s sci-fi film. The statue is set to go up in blighted Detroit, whose residents can probably think of more urgent uses for $70,000. Sometimes crowds aren’t wise; crowds are wiseasses.
These absurd examples are cherry-picked, but hardly anomalous. I could have chosen any number of equally ripe alternatives. (And the proprietor of the frequently updated Tumblr Your Kickstarter Sucks has.) A plurality of the best-endowed projects fall under the “design” category, and, as of press time, seven of the top ten design endeavors are accessories for Apple products. In other words, Kickstarter has positioned itself as the world’s No. 1 solver of First World problems.
Or would-be solver, anyway. As many as 75 percent of Kickstarter projects don’t deliver on time, according to a recent University of Pennsylvania study, and some never deliver at all. One of the great ironies of the service is that many of the most popular campaigns, the ones that draw in far more support than they need, have been unable to produce their project on deadline due to demand that far overwhelmed their preparedness. A group of programmers who had sought to build Diaspora, a Facebook replacement, had “become so consumed with things like answering e-mails and making t-shirts for their contributors that they had little time to build the software,” reported The New York Times. Other projects simply prove more complicated to manufacture at large-scale than the (often small) team behind them had anticipated. Kickstarter is supposedly an experiment in letting supply meet demand, unencumbered by cultural gatekeepers and corporate middlemen—and yet the evidence seems to be mounting that middlemen can occasionally make things more efficient.
But the problem isn’t only on the supply side. How much of the demand is real, and how much is peer pressure or idle boredom, can be tough to sort out. For the vast majority of Kickstarter campaigns, much of the money comes from friends and friends of friends of friends. There is an enormous amount of social pressure applied: Entreaties are often made via personal e-mails. “Every time someone I know backs a Kickstarter, I find out about it on Facebook,” says Joshua Gans, an economist at the University of Toronto. “It’s conspicuous consumption.” For many if not most recipients of Kickstarter appeals, I’d wager a RoboCop-statue’s worth of money that the thought process is less Do I think this is a valuable project that will improve the world? and more Sure, I can spare $20 to support my pal’s noise-rock band, especially since he’s going to see a list of people who kicked in to fund his CD and know if I’m not on it.
Backing a small-scale Kickstarter campaign triggers the same emotional response that giving does: You have opened your pocket with little expectation of personal benefit. You have imagined yourself as a two-bit modern Medici, furthering the cause of Art or Innovation in society. And yet, those of us who have less artistic after-work pursuits would never dream of asking acquaintances to chip in to, say, pay our cable bill. (Although, if any of you feel moved to do so ...)
As Kickstarter co-founder Yancey Strickler told Reuters, this market ambivalence is woven into the very fabric of the service. “Of all the products launched on Kickstarter, very, very few would be a good investment. ... However, if the bar is lower—to simply, do I want this to exist?—suddenly over half the things have a life.” The problem with posing the question that way—do I want this to exist?—is that it creates a relationship between consumer and merchant that is more like that of the one between donor and nonprofit.
It’s not hard to imagine someone like Anderson calling concerns about the model overblown. After all, ostrich pillows aren’t hurting anyone. And what’s wrong with a platform that allows innovations that might otherwise remain in a tinkerer’s basement to see the light of day? But where crowdfunding for gadgets and films is one thing, Kickstarter has spawned a number of copycats in arenas where the model becomes a whole lot more ethically complicated. There are now Kickstarter-esque platforms for equity investing, scientific research, and even local municipal improvements. Take, for instance, Citizinvestor, a new service that allows municipalities (big ones, like Philadelphia, Chicago, Tampa) to put forth public works languishing at the back of the queue so interested parties can donate a few dollars that might get them over the financial hump.
These are spheres in which a certain amount of oversight and accountability—and attention to equitable distribution of resources—are rather important. And so it’s worth considering that the spare $20 you donate to a sculpture of the world’s largest jockstrap is part of a much bigger project than the one you’re interested in supporting.
Although perhaps we shouldn’t worry too much just yet. Earlier this year, someone submitted a Kickstarter to produce a how-to for this new economy, titled Crowdfunding: A Guide to What Works and Why. The project fell far short of its goal.
Noreen Malone is a staff writer at The New Republic. This article appeared in the December 6, 2012 issue of the magazine under the headline “Fund Me, I'm Useless.”