September 22, 2020

The Economic Power of Real-time Chat Spaces

Notes on an economic model for independents

I’ve done more collaborations in 2020 than any other year in my indie consulting career. So far this year:

Gig #1 - Worked alongside Erica Heinz on a product R&D sprint. This was the first time working together but we had exposure to each other in a shared Slack group, and had met for a coffee meeting end of last year to share notes and get to know each other.

Gig #2 - I pulled in a social media influencer I knew IRL to run some campaigns for a client and potentially also broker a series of influencer deals.

Gig #3 - Working for a large company I helped bring in a VP SEO - someone I’d worked with previously. LinkedIn DMs was the medium to broker the deal.

Gig #4 - Toby Shorin and I collaborated on a product vision and roadmap project for a client.

Two more potential leads are on the table this year that both include collaborations.

And I’ve joined the Yak Collective and set up my own !& discord space for indie consultants.

Setting up a discord space has been super interesting - there’s a handful of folks active in there who I would now consider “on the bench” if the right project came up - i.e. I have an established communication stream with them and enough of an understanding of the kind of work they do to feel like I can pull them in quickly.

Some quick thoughts:

  1. High availability chat channels are key - whether it’s Twitter DMs, Slack groups, discord DMs - the ability to ping someone and engage in real time dialogue is crucial to the kind of “just in time” work that indies do
  2. Familiarity with work is important - what kind of work do they do? How do they work typically? Without some insight here you’re flying blind on labels like “UX Designer” and attempting to guess if they’ll be relevant for this project.
  3. Transparent pricing that goes both ways. Ballpark what do you think they charge for their work? Once you’ve been indie for a while you can typically eyeball this - based on how senior and experienced they appear and what kind of posture they have. Only occasionally am I off here. Every engagement I’m in I’m always open to letting the other party know my rates and fees to create a mutual transparency.
  4. Trust that the person you’re working with isn’t going to ghost you or disappear. This is gained through exposure - either reading someone’s blog, engaging on social or chatting with them in a discord space.

These map pretty well to the three kinds of transaction costs that firms reduce:

  • Search and information costs are costs such as in determining that the required good is available on the market, which has the lowest price, etc.
  • Bargaining and decision costs are the costs required to come to an acceptable agreement with the other party to the transaction, drawing up an appropriate contract and so on. In game theory this is analyzed for instance in the game of chicken. On asset markets and in market microstructure, the transaction cost is some function of the distance between the bid and ask.
  • Policing and enforcement costs are the costs of making sure the other party sticks to the terms of the contract, and taking appropriate action (often through the legal system) if this turns out not to be the case.
  • Search and information costs = high availability DMs

    Bargaining and decision costs = transparent pricing & understanding of what the actual work looks like

    Policing and enforcement costs = trust gained through exposure


    Here’s some links and further riffing around indie consulting collectives, partnerships and collaborations:

    Theory of Firm

    Firstly - I think often about this great piece from Matt Webb where he muses on the modern state of Coase’s theory of the firm:

    Why do companies exist? In The Nature of the Firm (1937), Ronald Coase put it down to transaction costs. In short, companies exist because it’s cheaper to have an organisation that does the necessary activity internally than to use the free market outside it. Why? Because using the market - the price mechanism - itself has costs.

    Here’s a summary of Coase’s paper:

    There are costs to using the price mechanism for coordinating economic activity. ‘transaction costs’ or ‘marketing costs’

    For example, if you want someone to carry your goods from the warehouse to your shop, first you have to find someone. That’s tough. It’s easier when lots of people who need carriage and lots of people who provide carriage come together – on a website or in the Yellow Pages. That’s a marketplace. But at a certain threshold, it’s easier still to just employ those people.

    Firms exist to economize on the cost of coordinating economic activity.

    Firms are characterized by the absence of the price mechanism.

    These last two points feel key - when coordinating indie collaborations you need coordination (i.e. open communication channels and ways of working) and the absence of price mechanism. In this instance - the absence of price mechanism is implied as “I can bring indie consultant in on project X and understand how much you will charge (roughly) and share costs transparently so neither of us is gouging the other”.

    How does this core economic theory change when it comes to indie consultants?

    Fourth Wave Consulting

    Venkatesh Rao writes a very provocative post about “fourth wave consulting” through the framework of “fourth wave coffee”

    In the fourth wave, which is just over two years old, the indie world is transitioning from individual business nerdery and personal brands/networks to more of a science, and creating a landscape dominated by shared networks rather than individual indie consultants. The Yak Collective is one such network that I’ve helped instigate, one with a focus on pragmatism and delivery, and devoted to consulting as something of an empirical science you can study and get better at through trial and error.

    This idea is provocative and potentially very early as a trend but not necessarily true per se. The post asks the question - is fourth wave consulting the next wave?

    Certainly the Yak Collective is interesting - and I’ve seen a lot of benefit from my own discord group. It expands the surface area of indie consultants to open up to each other, show work and broker collaborations (client work or otherwise).

    A more mature example of this - I’m very impressed by the output from the ResearchOps group: Research Skills Framework.

    Are these groups actually values based as Venkat describes? Or are loose affiliations and collectives more valuable simply by virtue of creating domestic cozy spaces for indie consultants? The jury is still out on that one.

    Collaboration & Coordination Environments

    Every project as an independent consultant is a form of collaboration - and I’m still yearning for a good “shared space” computing environment that isn’t Google Docs folders or… email??

    I’m definitely intrigued therefore by platforms like Wethos:

    Wethos builds tools for independent creatives & strategists to team up and make more.

    Designed for a new wave of entrepreneurs who swap and share projects in real-time, our platform makes it easy to price work, co-pitch services, and transparently pay your partners. 

    Certainly whether it’s 1:1 indie:client or a small group loosely joined we need better shared computing environments that enable the kind of collaboration beyond the document level. I need google docs collaboration across spaces not documents. Wethos seems to be attacking this from the billing pain point.

    Is there enough of a pain point around shared billing and coordination here for this product? Not sure but I’m paying attention.

    Teams & Camaraderie

    Reading The Uncertainty Mindset (highly recommended) it was the first time in a long time that I actually missed working in a team. The tight knit working environment, high performance and dance of collaboration. Through the lens of cooking and R&D kitchens Vaughn paints a picture of small, agile, high performing teams able to work together intimately. It’s almost 10 years since I felt like I was working as part of a small highly functioning team (I never got this experience at Google).

    Certainly 2020 has created the right environment squads as Toby and crew point out:

    How big is BIG SQUAD ENERGY? Yes, squads are friends empowered by digital tools, but this is much more than new chat apps and online "community platforms." This is the movement. Squaddom is about new ways of being together, learning, and making meaning in an increasingly complex world. Squads are groups fueled by vibes, memes, and values, but they are not mindless swarms. Rather squads are proto-institutions that engage the world on their own terms.

    Squads are a collective redefinition of value.

    Squads clearly create emotional value beyond economic value - to what extent could or should an indie consulting network create squad energy? What emerging forms of camaraderie exist beyond formal teams? Is collaborating with other indies good for the soul as well as good economics?

    Good bundling and bad bundling

    At the same time I see a lot of newer indie consultants attempting to form brands and mini agency like structures - in particular a key mistake here is grouping together with other indies who do the same work as you. This agency-like structure feels good and enables the creation of shared identity and brand - but doesn’t actually solve the key problem: sourcing good work.

    Banding together with others who do the same kind of work as you only works when there is an abundance of leads for a certain kind of work. But by far and away the #1 problem indies face is finding good clients. Bundling together with other indies where the work is fungible only creates more overhead. Instead - you should aim to bundle together with folks who can generate adjacent leads and collaborations - the situation where 1 + 1 = 3 as it were.

    All of my collaborations are with people who do adjacent things I can’t do: UX researchers, product designers, brand strategists.


    In summary - I’m increasingly realizing the power of the “group DM space” to organize, coordinate and trust other indies.

    Maybe the key idea is that engaging in collaborations as an indie makes your work more sustainable (both emotionally and economically) and more resilient (by enabling a wider range of work).


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    This post was written by Tom Critchlow - blogger and independent consultant. Subscribe to join my occassional newsletter: