Photo: 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.
11 replies on “Browsing Toward a New Currency”
The future of social capital is interesting, certainly, especially in terms of the scalability potential. I do not think that it will replace the economic model of financial capital, or money as currency. It is a supplemental economic model, most likely. Most people trying to figure out the currency angle of social capital are, after all, trying to turn social capital into financial capital.
The monetization structure of this blog is a great example. Social capital translated into financial capital via subscription model. Would I get free access if I wrote a guest post? Perhaps that would be negotiable within this concept of the new currency. I exchange my writing for access to your ideas. Outside of the structure of ideas and services (and the social and economic value of those ideas and services), there are emerging models like Keepio where I can exchange my goods for yours (of course, here we have to deal with the fact that these items have been created and I have acquired them, all facilitated by a financial model which underpins the core thesis).
There’s another important element to all of this that underpins the idea that this is a supplemental economy, not a substitutionary one.
We have to think of this in terms of access. People with enough financial capital to purchase a position within the society of the web (via computers, smart phones, and the money we pay to access the internet, whether through taxation or direct fees) can have access to this social economy.
Awesome comment. I too agree that it won’t take over a monetary economic model for several reasons, including some you listed here, but I do think we’ll see more of a hybrid than you might guess. A great many companies are already doing this (search Mesh or Collaborative Consumption and look at the lists on their sites). And while now we are using a lot of goods that we already own because we consumed too much, in the future, goods will be designed for this type of economy. Imagine a car that was designed for sharing instead of what is really just one driver now. Or taking that a step further, we’ll see our entire systems change – transportation is ripe for this as it’s one of the most obvious that has relied on the industrial economy that is now dead.
This blog is an interesting example because it is using monetary, but it is also based on a peer-to-peer economy and eliminating large companies from the transaction. Before the web, I had buy my clothes from Banana Republic. Now on the web, I can buy directly from a designer on Etsy. So you see there are a bunch of layers to this. Right now we’re half-changed, maybe only quarter-changed. We still have to exchange with money because we’re all in debt, and so money is the preferred currency to get out of debt. If we can do that, money becomes less important because it isn’t the money you ultimately want, but the goods, experiences, etc. that money gives you. And that’s when we’ll see social/data currency come much more into play and have the potential to take over as a serious economy.
Where do you see the issue of access in this economic model?
I think we often overlook the economic, demographic, and rural elements in these high concepts. How does this break down for other parts of society? ?Other cultures? What structures will support and facilitate equal access to the tech and tools required for this to truly and fully scale?
I don’t really see access as an issue, but am open to learning more about that side of it. I think access is somewhat of an issue now, but increasingly access will be ubiquitous. Mobile has made that possible.
And this social/data economy is already scaling so it’s not a matter of how (in my opinion), but when. Which makes me sound like one of those tech-lover wanks, so let me assure you I don’t think it’s all going to go off swimmingly in this new grand economy of the web. I really do believe there is a place for money. But I’m smitten with the possibilities of what might happen if we weren’t so obsessed with money. The Internet allows that to be a reality.
I’m thinking more about this. I do think access is an issue, because every economic model is affected by access. This is why rights are important. And why we fight for them.
First, for any system to scale, everyone has to be able to play. So we cannot just hope that everyone gets access and that will all work itself out. The civil rights movement is a good example here. We had to fight to get everyone equal access, it did not just happen naturally. We can’t just assume that access will figure itself out. Especially when it comes to important societal institutions.
Brilliant.
The new Fast Company has a great article about sharing (You should interview Rachel Botsman) – http://www.fastcompany.com/magazine/155/the-sharing-economy.html
Ha, I had already tweeted that article. I read Rachel’s book Collaborative Consumption over Thanksgiving last year. She’d be great.
Recently I heard an interesting fact, (I wish I could remember where from!) that an overwhelming percentage of today’s children will end up having to change their names legally in their twenties so that their reputation on the web would essentially no longer be linked to them and hurt them as they go on to mature and find a job. It is very interesting to think about because my cousins are really and truly growing up on Facebook. What they say on the web doesn’t go away. For me, it wasn’t until about college that Facebook was even available. At a young age it’s hard to really comprehend the ramifications (both good and bad) that your electronic stamp can make on your life. I think it’s really imperative that the school system have a mandatory class each year on internet, social networks, safety etc. in order to help the next generation use the internet to their advantage.
Perhaps my rant was slightly off topic but I think it really ties in with the exchange of currency based on your reputation and those you’re connected with online. This was such an insightful post and it really opened up a whole different thought process for me. Essentially it’s all about relationships. Facebook or no Facebook, relationships and trust will forever be an important aspect of human life.
Thanks for another great morning read!
That’s ridiculous! I strongly believe that we shouldn’t have to hide who we are and companies will just have to get over the fact that employees have a life. I have never regretted anything I put online, and while I do agree with you that we need classes on safety and privacy, you can’t really change who you are at the end of the day. That will show up online whether you like it or not. Thanks for the comment!
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[…] graph is not social. My reputation is not social. My identity is not social. These are important as currencies on the web, but only as currencies of social relationships. They are not the social relationships themselves. […]