Category: Economies

Categories
Economies

3 Drawbacks of Reputation as Currency

Three facesPhoto: Ygor Oliveira

We talked about how reputation as currency on the web has the potential to be quite powerful. But there are drawbacks to using reputation so fluently. Here are three:

1. You Can’t Have a Bad Day.
Our current economy uses money as a currency, which is great because you don’t need to know or trust me to exchange value. With money as a currency, it doesn’t matter if you’re in a good mood all the time or if you snap at the Home Depot cashier or not. It’s an impersonal exchange.

Reputation, on the other hand, doesn’t allow such flexibility. In fact, your reputation’s value is based solely on so-called “good” actions which are defined by a larger system’s expectations rather than what benefits your individual values or goals.

Reputation as the web’s currency (currently in use as the reviews you left on Amazon, your eBay seller ranking, your Klout score, etc.) sounds great until we realize it is a universal truth that you can’t have pleasure without pain.

People do have bad days (even on the Internet). More than that, people make mistakes and fail often. A system that ignores the very basis of how we learn and solely focuses on the positive is a difficult system to keep up with.

2. You Can Be Someone Different Entirely.
Which leads us to the next issue… reputation as currency forces everyone online to fit into a certain mold and exhibit certain behaviors until we have a web dripping in happiness. And a bunch of trolls. People can create a web presence that has nothing to do with their true selves. And on the flip side, they’re also forced to create anonymous profiles to express their real ideas.

Either way, people can create and manipulate who they are and their reputation easier than ever. That’s important because reputation is based on trust, and the more that we force people to be different than who they are, the more difficult it will be to rely on reputation as reasonable indicator of credibility.

3. You Have To Be Large and In Charge.
Trust development is being outstripped by technology. Whereas trust used to occur over a period of time as a result of working closely with another, now we feel like we can “trust” someone with a quick glance at their Google trail. And that’s a problem for the un-plugged.

“The people who have the highest reputation scores are usually the people who are the most public,” argues Paul Adams. Those who are willing to live their life more freely on the Internet are the reputation winners. No one is re-tweeting your stellar shoe recommendation to the stranger on the Metro. If you’re building relationships in real life or want to maintain some semblance of privacy, too bad.

Online reputation is inherently unbalanced toward the happy, fake and loud. It’s good enough for now, but if we want our social architecture to scale in any sort of useful or meaningful way, we need to re-program how reputation works on the web.

Categories
Economies

Browsing Toward a New Currency

Air on MacBookPhoto: kayakleader

This is a continuation of How the iPad is (Thankfully) Destroying Our Economy.

Historically, money wasn’t necessary. Within a community, barn raisings, shared child care, and borrowing tools all occured as part of the gift economy. You used trust, reputation, and identity as your currency and money was only used between communities that didn’t know each other.

(Money is a type of currency; it isn’t synonymous.)

This is essentially the same today.  My neighbor will give me his lawnmower or I can go buy one at Home Depot. In the transaction with my neighbor, we might say I got the lawnmower for free, but really I used our relationship as currency. In the transaction with Home Depot, I used money.

Money only exists because traditionally – and this is important – you haven’t been able to scale the gift economy. The bigger your neighborhood gets, the more difficult it is to know everyone. The more difficult it is to know, the more difficult it is to trust. As strangers, and without trust, we need a way to exchange value.

Whereas the gift economy might leave loose ends (relationships are messy, after all), an economy based on the exchange of money leaves no loose ends; it is something for something. Our current economy is built on that idea of quid pro quo, but the Internet came along and turned that on it’s head for a few reasons, some of which we’ve talked about:

1.  The Internet allows us to live by our screens, not among objects, decreasing materialism and increasing the value we put on knowledge and experiences.
2.  The decentralized web increases the viability of the peer-to-peer economy that doesn’t rely on or include large companies.
3.  The networked web is ruled by plentitude, not scarcity, which changes what we value, how we exchange value, and how we measure and acknowledge it.

In essence, the web allows our social architecture to scale. What that means is that for the first time ever, there is the potential for an economy that isn’t based on money. It means that currencies other than money – reputation, identity, data – can be used to exchange value on a peer-to-peer level and on a larger scale than ever before. And it means that we’re relying less and less on money as a currency (i.e., why we’re seeing our current economy collapse).

Take a moment to wrap your head around that; it’s exciting. Or possibly scary, depending on how you look at it.

“Trust networks are able to be tapped for recommendations and referrals, while predictive analysis algorhithms can suggest the kinds of people, products, services, or events that would resonate with our personalities or value set,” argues digital theorist Vanessa Miemis. “A new set of filtering tools are emerging that are shaping where we direct our attention and resources, namely intentions and actions… These contextual clues around data become currencies in themselves, as they give us more information in order to make a choice or decide who to trust.”

Soon, it won’t matter that I don’t know you. We will still be able to transact with each other – I’ll borrow a dress from you, or you’ll take a spin in my car – because our reputation, identity and data currency will travel with us. The goodwill you build on Twitter, or at your job as an insurance salesman, will inherently influence the transactions in your life.

Early efforts at the peer-to-peer web, eBay rankings or reviews on Etsy for instance, show a small piece of that reputation currency. You can also see some attempts at personalization on today’s web. But that’s really all only the beginning. Facebook, for instance, has the power to be the ultimate bank, building a new economy based on the identity information we feed into our profiles and the mass amount of data they’re collecting. Even better, if this type of data were open across the web and we could own it, these currencies could inform the foundational underpinning of our interactions. And then, well, I can’t even wrap my mind around those possibilities…

You can see why who has the most data, and who controls the data, is increasingly important then. Every byte is almost like a dime in this new economy we’re building on the web.

I’ll continue to dive deeper in this series on digital economies and currencies in future posts, including the drawbacks of reputation as currency, why these new currencies aren’t the same as Free, and the rocky transition time we have ahead of us in this half-changed world.

Categories
Economies

How the iPad is (Thankfully) Destroying Our Economy

iPad 2 - HomescreenPhoto: connorsmac

There are a cohort of people who are still buying McMansions in the suburbs; I see the photos on Facebook, “Our New Home!” revealing beige wall-to-wall carpeting (still mysteriously associated with upward mobility), reminiscent of the early 90s, chosen to soften the echoes of monstrously high ceilings usually reserved for public spaces. The outside of the home is similarly beige with french windows framed by a brick veneer and a peaked roof that inevitably evokes some strange sense of American pride and envy… for it does look nice if you’re just glancing by in a car.

But despite the constant commercial endorsement of this wearisome American Dream, such idyllic photos no longer sway the hearts or pocketbooks of the majority of young people who have made it clear they will not be the ones to save the housing market. Even the young billionaire Mark Zuckerburg rents, and in the city, not the suburbs.

It wasn’t too long ago that people flaunted materialism. “Goods [were] exclusive or status related rather than universal, private rather than public” reports economist Tyler Cowen. But whereas the automobile enabled freedom for previous generations, today’s generation use digital devices as a means for self expression. That has made possible an economy focused on knowledge and experiences, not consumer goods.

E-book author Ev Bogue took a photo of every single item he owns and encourages visitors to his site to “count, there aren’t many.” His belongings total a fundamental 32 things. Bogue is a proponent of augmented humanity, and encourages his readers to “cultivate presence at the intersection of life and Instagr.am,” a popular iPhone photo app.

“The incentive with these apps is to live a more extraordinary and present life,” Bogue argues. “If you aren’t living, there’s nothing much to Instagr.am, and thus people will forget about you. No one necessarily wants to see an Instagr.am of a desk. We know this, so I don’t often see photos of desks on Instagr.am.”

While Bogue may fall on the side of extreme in the experience economy for his privileged stylings, his penchant for walks in the forest over a new dining set is shared by his peers. We prefer to live by our screens, not among objects, and so the knowledge economy is just that – in our minds (and on our iPads) and not in the revenue-generating sector of the economy.“The funny thing is,” Cowen argues, “getting away from materialism on such a large scale – whatever the virtues of the switch – really, really hurts. It is the hurt that we in America are living right now.”

We assumed innovation would arrive the way it always has, but technology gave innovation new forms, and insistence on the-way-it-always-was kind of economy subsequently delivered the situation we’re in today: a growing income inequality, stagnant median income, and the financial crisis.

Cowen admits “you can be an optimist when it comes to our happiness and personal growth yet still be a pessimist when it comes to generating economic revenue or paying back our financial debts,” and “even if we can, at the personal level, manage to feel fulfilled under slower economic growth, it is not compatible with how modern politics [and economics] is structured, namely as a ravenous beast.”

Obviously Cowen knows something screwy is happening. But for all of Cowen’s awareness of trying to fit a square peg into a round hole, he never goes as far to eschew the current economic framework, a system simply not suited for a knowledge and experience-based economy.

That system is legacy-based, and its “operating system for money is obsolete,” argues media theorist Douglas Rushkoff. “It is optimized for a different era than the one we are living in today. It is incompatible with Web 2.0 and the Interneted world.”

The Internet has allowed an economy where money, the dependency and abstraction of which has caused the financial crisis, is not the singular centralized currency. On the decentralized web, reputation is a currency. Authority is another. Data, influence, badges, credits and identity are also currencies. There are several currencies on the free and open web in fact – none of which are widely recognized at J. Crew. Increasingly that’s because the point is not to exchange value for consumer goods, but for the stuff inside our screens.

I’ll take a deeper dive into the economy and currencies our digital lives are creating in part two of this post later this week.