Wednesday, 21 October 2009

Predictably Irrational and Stack Overflow Careers

After finishing "Without Fear" I have picked up Dan Ariely's "Predictably Irrational". The book is on behavioral economics and, broadly speaking, tries to determine what influences human decisions which, if looked objectively, sometimes seem irrational. I'm not even through chapter 2 and find it an interesting read.

Jeff Atwood, the author of Coding Horror and one of the programmers behind Stack Overflow, had written a blog post describing the gist of the book. It was that post that prompted me to buy it.

In the post, while summarizing the 1st chapter of the book, Jeff wrote:
Realize that some premium options exist as decoys -- that is, they are there only to make the less expensive options look more appealing, because they're easy to compare. Don't make binding decisions solely based on how easy it is to compare two side-by-side options from the same vendor.

While reading another of his newer posts, I came to know that the Stack Overflow bunch have started a new site -- Stack Overflow Careers. The idea is to let active Stack Overflow members, who are looking for a job, post their resume on Stack Overflow Careers. The catch here is that in Stack Overflow Careers, the job-seekers will actually have to pay to make their resume available to the hiring-managers! Their reason:

When hiring managers search through CVs, they want to know that they’re looking at active, serious job applicants. If it were free to post a CV, a lot of applicants that weren’t looking for jobs, or who knew that they had no reasonable chance of getting a job, would post them, making it harder for the employers to find serious applicants.

Of course the other and maybe the real reason is so that Stack Overflow Careers can make money. Also, I'm sure that the other side, which looks at the CVs, also gets charged. Win, win, win!

But wait, how much does it cost? Well here are their rates:
  • If you’re a student, a 1 year membership is free
  • Until November 9th, 2009, a 3 year membership is $29
  • After November 10th, 2009, a 1 year membership is $99

See what they did there? The $99 option is a decoy (go and read Jeff's excerpt above), albeit a temporary one.

But I think the biggest trick which they are playing is making the service paid. That combined with their brand name is actually going to make people rush to it. Hell, I might try it out of curiosity!

To make a man or a boy covet a thing, it is only necessary to make the thing difficult to obtain.
-- Mark Twain

2 comments: said...

Spolsky talks a good game when he attacks free and open source software for its negative effects on the programming profession, and when he attacks craigslist's mostly-no-fee model for its negative effects on journalism, but the bottom line is Stack Overflow will make both Spolsky and Atwood enormously wealthy, based upon the volunteer efforts of others. Who will get nothing.

Peter Christensen said...

Paying to post your CV is a fantastic filtering service to provide to companies looking to hire. Resume spam is even worse than email spam. See also Local Bacon for more evidence on this approach.

While they will make money from the people that post CVs, much, much more money will come from the companies that pay to search those resumes. I'm sure they set the price at wherever they expect the best filtering to be. If you value your time at $50 and SO careers saves you 4 hours of job searching every 2 years, it's worth it. If it finds you a job that pays you $.05 more an hour, it's worth it. It's underpriced because CV owners aren't the primary customers.

About the decoys, the $99 regular price isn't a decoy. They're offering the $29 plan because they need a critical mass of CVs to make it useful to companies looking for talent. They're sharing $268 of their value to early adopters as recognition that the first people in make the service more valuable. Once they have lots of CVs they're in a stronger position and don't need to discount anymore. Simple business economics.