Saturday, October 20, 2012

Why oDesk has no scammers

So, in my last blog post, I described a brief outline on how to use oDesk to execute automatically a set of tasks, in a "Mechanical Turk" style (i.e., no interviews for hiring and completely computer-mediated process for posting a job, hiring, and ending a contract).

A legitimate question by appeared in the comments:
"Well, the concept is certainly interesting. But is there a compelling reason to do microstasks on oDesk? Is it because oDesk has a rating system?"
So, here is my answer: If you hire contractors on oDesk you will not run into any scammers, even without any quality control. Why is that? Is there a magic ingredient at oDesk? Short answer: Yes, there is an ingredient: Lack of anonymity!

It is a very well-known fact that if a marketplace allows anonymous participants and cheap generation of new identities, the marketplace is going to fall victim to malicious participants. There are many examples of markets that allowed anonymity and each generation of pseudonyms, that ultimately became "market for lemons". Unfortunately, when you have cheap identity generation, the reputation system of the marketplace becomes extremely easy to manipulate.

So, what is different with oDesk? oDesk has contractors that are not anonymous and their userids are tied (strongly) to a real world identity (onymous?). For example, to withdraw money from oDesk into a bank account, the name in the bank account needs to match the name that listed on oDesk. There are other mechanisms as well for verifying the identify of the contractors (e.g., when I listed myself as a contractor, I had to upload copies of my driving license, copies of my bank statements, etc), but the details of the implementation do not matter. The key element is to make it difficult or costly to create new or false identities.

A strong identify verification pretty much eliminates any type of scam. Why? Because the scammers cannot simply shut down their account after being caught scamming and create a new one. Therefore, all the oDesk contractors with 99.9% probability will not try to scam you. Now, do not get me wrong: you are going to run into incompetent contractors. But there is a difference between an incompetent contractor and one that deliberately tries to scam you.

As my colleague John Horton says: "An incompetent worker who puts some effort in the task is like a bad bus driver: Very slow to take you to your destination but at least you are going towards the correct place, albeit slowly. The scammers are like the unlicensed cab drivers that take you to a random place in order to demand arbitrary fare amounts afterwards to take you to your correct destination".