Spec Work is a Ponzi Scheme

Last month in San Francisco I asked Stowe Boyd if I should keep writing about this spec work thing, and his advice was fairly candid:

“If it matters to you, it matters to you, and you can’t hide that.”

I love design.  I was a fulltime freelancer for 3 years.  I have my college degree in Computer Graphics and New Media.  My daily routine is revolves around respecting, critiquing, using and creating design.  Because of this, and a few other interests, I watch trends over quite a few industries, watching them ebb and flow.

A graphic design industry evil has recently been in my feed reader.  To me it cheats the client, the designer, and most importantly to me, it cheats the design.  There is a beautiful process of design, where the client and designer create something amazing through many phases, sketches, meetings and downright skill.  Equal pressure is put on the client and designer, and what comes out can be magical.  I love design, and while it has been quite some time since I have done a paid graphic design job, I find this very important.

So here we are.  Spec work has reared its ugly head, and some prominent web folks have been tricked into it.  Bigger clients like Dictionary.com have been using it too.

What is funny about this is the heavy PR outreach by the spec companies.  They know they have a PR nightmare here, and the ugliness of spec work, once out, will kill their chance at a quick buck.

Those new to the spec work debate, simply the argument is if a client should be able to ask for custom work to be done (such as a logo) with the promise that they might get paid once completed.  Think of making a tshirt for someone with their name on it, if they don’t buy yours, the product you just worked to produce is worthless.

To me, asking a group of people to do something with the motivation of payment, knowing you are not going to pay 99% of them is evil enough to write off the practice. But for others, the rational of “If they choose to do it, it is fine!”  Yes there is a gray area, but you need to look at the ecosystem to make a decision of best practices.

This really bothers me, the parade of fallacies.  Here is a short list of fallacies I see being used to defend spec work:

  • Appeal to Pity “but how do designers in poor nations get portfolios?”
  • Appeal to Authority “we talked to thousands of designers from around the world.”
  • Appeal to Belief “it has been done for thousands of years”
  • Appeal to Common Practice “look at all the projects!”
  • Appeal to Popularity “thousands of designers are doing it”
  • Bandwagon “If it ok for shirts, it is ok for other things.”
  • Circumstantial Ad Hominem “He is just against it because he is a designer”
  • Questionable Cause “clients are looking for a fresh way to act with clients”

My Thoughts on Spec I’ve said this before, but for me, seeing spec work is like seeing someone dump oil down a river drain, and then tell all their friends “I found a new way of recycling that works really well!”  It doesn’t solve the problem (finding quality designers at my price point), it gets a group together with the promise of compensation, and leave the majority of them with a bad taste in their mouths.

It hurts quite a few others in the process and has shown a history to not work out long term (and I am not talking ‘they took our jobs‘ sensationalism).   One can look ad the ad agencies of the 90’s to see the massive collapse of the practice.

So with all of this in mind, I can’t help but compare it to a Ponzi scheme to me (no, not that lovable Ponzi. 🙂  Not really a pyramid scheme, but short sighted, quick results stunt and a long term poisoning of the community.

In my earlier post on a specific spec company, I said:

Design, unlike other industries, is unique in that the intellectual property is put into your deliverable, and when the client asks for you everything you have to put into the project to think about purchasing.  …

It is a major ethical flaw of both parties.

Yes, I am naming both the designers and the clients at fault here.  The designers should value their work while the clients should see that design can do so much more.

I find it very dangerous.

Spec work and a nice Ponzi scheme:

  • Works well short term but destructive the more people that get involved.
  • People advocating it swear it has worked for hundreds of years
  • People advocating it try to get you to not google the term
  • People running them swear they aren’t bad
  • People at the top make the money and the people putting in money/work are left with nothing
  • Encourages lack of quality in workmanship
  • There is a large network that will tell you it is dangerous to get involved

Every time I hear “come rate my contest” I think “get in toward the top of the scheme!”

So let’s get back to that logo done for Charlene Li (who I have enormous respect for).  If her company is successful, she has over a hundred designers with a bad taste in their mouth that might just pop up.  “She got rich and I did free work for her?”  She did, knowingly, use a monetary motivation to have work done for her with the intent not to pay the people doing the work.

The dark and evil side of spec is starting to surface.  Over the last five months I have met five ‘designers’ (yes, evil hand quotes and all) that are doing spec work with the intent of suing down the road.  I would assume these guys are licking their chops when money guys like Paul Kedrosky get into the game.

So What?

Design, as an industry, will go down in quality, appreciation and pay.  Charlene Li found a great designer via spec work.  His stuff is great, and produced a pretty good logo for her for $400 (I would argue that you can’t create a great logo for a company that you have only read a paragraph about).  Say Charlene wants to do another project with him, what do you think the rate will be?   $400, or less.

What happens after about 5 years of this being common place?  If 100 people spend 2 hours to ‘compete’ for a $250 logo, that means the average hourly is $1.25.  How many logos do you have to produce to buy a font? Buy PhotoShop?  Buy a MacBook?  Pay rent?  To make it buy, a designer would have to have a template that each client gets to see their name by.  What happens when a designer starts winning with the same design?  What happens if it is similar to another one submitted?  What happens when the company tries to do a redesign down the road?

Yes there is a gray area.  Yes both parties choose to do it, but just like dumping oil down the drain, it is the responsibility of everyone in the process to make sure we adopt sustainable practices.

Spec is similar in practice to hiring a employee on commission (work for free, and get paid a generous % of revenue you create).  If commission was done on spec work, the employee would hand in their sales, and the company would decide if it is good enough to pay them.  See the difference?

A casual observer will wonder why this is such a big deal.  Simply, it is a big deal because recently, with the rise of the authentic community (think twitter), a few opportunists have popped up to try to profit off of spec work.  It has been seen as preying on the designers, having their business be built up on the unpaid work (while bringing them in with the thought of getting paid).

Before publishing this, I shared it with a friend, who responded, “Good, but hasn’t the whole Ponzi thing gone away?  People know it is bad, right?”

Last months Business Week

Wall Street trader Bernard Madoff allegedly defrauds the rich and famous out of tens of billions of dollars. Minnesota businessman Tom Petters allegedly fleeces hedge funds out of $3.5 billion. And socialite New York lawyer Marc Dreier may have duped some hedge funds into giving him hundreds of millions of dollars for an apparently bogus real estate scheme.

Oh, we have years to watch spec work blow up.  There of those of use who care about design, and are speaking up and warning off the practice.  I see a house of cards being built up, a developer cashing out on it and nobody warned them of the upcoming wind storm.  The warnings are now, whether the community comes to respect the ecosystem, respect their neighbors and friends (I’m not talking about just design here) is yet to be known.  Part of me wants to continue writing about this, part of me wants to say ‘I did my part’ and get some popcorn.

So what now?  See someone using spec (with the community sites like 99 designs or CrowdSpring)?  Forward them this post.  Or write your own.  We all deserve better.

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  • andrewhyde

    Perhaps you see the common thread of people looking for big results only to find the wage being around $1.

    I hope so.

  • andrewhyde

    I would think this too, but have seen quite a few spec work disasters where the most talented person didn't win, the person that copied the design awards book won.

    And when that happens, everyone loses.

  • andrewhyde

    2 things:

    1) The sales cycle is very similar, but you were able to make a demo out of a base project (usually) so work could be overlapped

    and

    2) Quite a few industries have found this to be not sustainable, and now are paid for their work on custom demos and some RFP's.

    Something sustainable needs to step up.

  • andrewhyde

    I'm a strong believer in many parts of a society have to thrive to make a strong community.

    Perhaps you don't see design, or creatives, as people that should make any sort of salary. Seeing $1 / hour payoffs become the norm is very much like the dumping oil down the drain.

    Damage is happening. Perhaps it is just damage not in your backyard, yet.

  • Steve

    Is the fact that Chinese manufacturing workers are creating competition for American manufacturing workers (and driving their wages down) like dumping oil down the drain?

  • andrewhyde

    I don't know how I missed your comment but thank you, I've viewed your work from afar over the years.

  • andrewhyde

    Sustainability.

    “It doesn’t solve the problem (finding quality designers at my price point), it gets a group together with the promise of compensation, and leave the majority of them with a bad taste in their mouths.”

    Competition is 1:1. Where there is problems is in the promise of 1:1 only to find out it isn't even close, for all sides.

  • Steve

    That didn't really answer my question. You're saying above that “low wages for creatives” = “oil down drain”. But historically, low wages only meant that there was an oversupply of workers. After some of those workers changed to other fields, wages went back up. So I think you are assigning moral overtones to something that is simply economic evolution. Study economic history for the last century, and you will see that this has happened over and over again to different groups, and each group gets upset and says it is a moral issue. But after the passage of time, it becomes apparent that it was just economic change.

  • andrewhyde

    lotto based economics never work, especially when masked with competition.

    Disruptive markets that you talk about are very real and true, but are sustainable in themselves, which spec is not. Spec, as you are seeing, implodes.

    It is oil down the drain.

    And you think that it is cool.

  • Steve

    At this point, all I think you are saying is “Spec work is bad, and oil down a drain is bad, so spec work must = oil down a drain.” When you make an analogy, there really needs to be a stronger link between the two. Likewise you said that “Spec work is a Ponzi Scheme” when there is only a very, very weak link between the two. All I'm saying is that you really need to work on you analogy skills. Saying “<my cause> is <some hot-button topic>” with very little link is unprofessional regardless of what your cause is.

  • Steve

    That is a very, very weak link. Ponzi schemes are so much more than that. That is like saying, “Deer hunters are bank robbers. They both have guns.” Keep working on those analogies!

  • andrewhyde

    Keep working on that thinking thing.

  • tromtrom

    What I don't understand is this: Musicians, architects, writers, freelancers of all kinds – everyone do “spec work”. Why shouldn't web designers? It's not that I don't see your points, but I guess there are perhaps 200.000 thousand times more strugling musicians than designers out there, pushing demos, getting nowhere. I feel pity for them, but it's not the mucis business' fault. They can't sign all of them.

  • andrewhyde

    Musicians make the album they want to make to try to sell to an audience. Spec is if they had to record an album at the direction of each fan for the chance that each fan would buy their version.

    Big difference.

  • Tromtrom

    I disagree with your comparison.

    In what way is a spec really different from a music demo? All bands that are not signed make loads of demos, sending them to record companies – how is that different from an architect firm competing for jobs – or graphic designers competing with specs?

    What it is all about is that creative people have to compete fiercely to get potential employer's attention – that might be hard and UNPAID work, but is there any other way to handle this?

    Is your main point with this, Andrew, that companies should hire graphic designers instead? Like record companies employ bands and publishers employ writers…? (Which they never do, in fact you misunderstood the ironi.)

  • andrewhyde

    A band makes a personal work of art to sell. They don't make a
    finished song with direction and lyrics built in. They are making a
    good that can be sold 100,000+ times. Spec work would be if the
    finished album could only be sold once. There is a lose money point,
    a break even point and a get rich point. This is why they do it. Spec
    only has a possibility of break even.

    I think companies should hire one team to do one job. Contract it and
    price it competitively.

    Nobody wins design contests.

  • andrewhyde

    A band makes a personal work of art to sell. They don't make a
    finished song with direction and lyrics built in. They are making a
    good that can be sold 100,000+ times. Spec work would be if the
    finished album could only be sold once. There is a lose money point,
    a break even point and a get rich point. This is why they do it. Spec
    only has a possibility of break even.

    I think companies should hire one team to do one job. Contract it and
    price it competitively.

    Nobody wins design contests.

  • Tromtrom

    I disagree with your comparison.

    In what way is a spec really different from a music demo? All bands that are not signed make loads of demos, sending them to record companies – how is that different from an architect firm competing for jobs – or graphic designers competing with specs?

    What it is all about is that creative people have to compete fiercely to get potential employer's attention – that might be hard and UNPAID work, but is there any other way to handle this?

    Is your main point with this, Andrew, that companies should hire graphic designers instead? Like record companies employ bands and publishers employ writers…? (Which they never do, in fact you misunderstood the ironi.)

  • andrewhyde

    A band makes a personal work of art to sell. They don't make a
    finished song with direction and lyrics built in. They are making a
    good that can be sold 100,000+ times. Spec work would be if the
    finished album could only be sold once. There is a lose money point,
    a break even point and a get rich point. This is why they do it. Spec
    only has a possibility of break even.

    I think companies should hire one team to do one job. Contract it and
    price it competitively.

    Nobody wins design contests.

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