Archives for January 2010

Just like declaring any technology dead has become a bad joke, talking about alternative economic models seems to be popping up more and more. What we’re seeing is exploration into concepts like Whuffie, or a Relevance-based economy, the kinds of systems that look so good and tempting on paper that we’re willing to buy into them, support them – but they haven’t taken off yet. Like the ideal of Communism, non-capital economies are not fully formed enough yet to be worth adopting on a broad scale.

There are more aspects to the current economic model than most people suspect. This is one of the reasons why systems like Whuffie can’t take off until they become inclusive, rather than replacement systems. We need to explore not just alternatives, but additives to our current money-for-property system, because as society expands and changes, physical property is being diminished in its importance.

The obvious system is linear. It exists on a continuum of “Money <> Product” where the exchange is similarly obvious; the more complex, or impressive the product, the more money it’s going to cost. This means you basically have one choice to make. Do you want to keep your money and have nothing, or do you want to get the physical item, the souvenir of the transaction that you want to enact, and forgo the agile utility of liquid asset?

Money economy is simple. It’s not, however, complex enough. Not in today’s society.

We’re not going to get rid of money any time soon. The playing field is not level enough between the have’s and the have-nots to allow such a ubiquitous, obvious capital to die. So what about adding another layer? We’re doing this already, with social capitals like Whuffie. Whuffie is a social proofing system (there’s a full explanation on Wikipedia, as well as the Whuffie Bank) by which a new continuum is proposed: that of “Action <> Respect” where respect becomes a universal capital, and the time and effort your actions entail becomes the trade for this capital. It’s a brilliant system, because respect is virtually  impossible to fake.

Replacing the monetary system with another linear system is a failing concept because of complexity issues. However, when we add to the one-dimensional monetary system another, totally offset system like the Whuffie-based Action <> Respect economy, what we see is a more accurate representation of how people make decisions. Like in a pure relevance economy we can’t expect people to make decisions solely based on money, here is an example  of what this two-dimensional system may come to look like:

I want a television. I look at the brands and models available. Five sets all cost the same in my size range, and all of them fit my budget. How do I decide? I choose based on the company’s image. I’ll pick on Samsung because I know there are good people working there. When all the prices are the same, price alone cannot aid my decision.

This feels like a much more human decision making process. I’ve now removed money from the process, because it’s irrelevant in this transaction, and replaced it with a differentiator involving reputation. Far more thorough. But what happens when the reputation metric falls over? After enough time, with all of the major corporations eventually getting involved in the social space, democratizing their brands and building personalities, the idea of Whuffie will fall apart in the corporate sense, because someone will eventually come up with a new system where no publicly visible missteps are made. While I admit this is a reduction of rationality, let’s say the scenerio is proven, and reputation does become a reliable commodity. What then?

Real depth.

What will that look like? How will we make decisions? I suspect it will look a lot like it does now. Let’s take a fairly complex scenario about purchasing and break it down:

I need to replace a laptop. I do the research, figure out what my real needs are, and find that both an Apple MacBook Pro, and a very high end PC, such as a Toshiba or even an Alienware would suit my tasks. Budget is no object. How do I decide? I take the question to my peers, who return with a resounding support of Apple from the set who likes Apple, and some mixed reviews of Toshiba, a couple of Alienware droolers, and someone offhand giving me a very intense explanation of why I need to consider an HP. What do I buy? The Apple fans always say Apple, so they failed to differentiate. The Toshibas always give mixed reviews. The Alienware droolers are doing my shopping for themselves, but that one dude who suggested the HP had damned good reasons for doing so. We’ll assume it also helps that I did my research following the tip, and found the information to be accurate. So I’ll go buy the HP.

We took care of money by presupposing it’s not an object. We took care of reputation by adjusting for our reactions from our friends. Relevance does not apply because my needs are straight forward enough that any machine on the market of a certain calibre will accomplish my goals. How did I make my decision? An outside force, not the company I was purchasing from, grabbed my attention with a real, human plea about quality, experience, reliability, or something else that actually, legitimately makes the brand stand out over the competition.

We ask our friends for approval of purchases all the time. We budget with our families. We save. We do research. Are any of these things recognized as part of the measurable economic process? Sure they are. There are multinational corporations banking on being the most innocuous, convenient option. Wal-Mart choices. This, I’d say, amounts to the third dimension of a real three-dimensional economy. The “Convenience <> Information” continuum, and it’s the most difficult one to master.

We say all the time in the shop that there’s nothing so dangerous to profit margin than an informed consumer. It’s true, even if it’s an oversimplification. At the moment, consumers who qualify as informed, do minimal research on Google or Bing or Yahoo and come away mostly with answers backing up their assumptions, because no one’s taught them how to use search effectively, and our culture is not exactly encouraging of reliable dynamic thinking like changing your mind based on Wikipedia. There are good reasons for this – for now. But those reasons are shrinking.

Any economic model not sufficiently complex to cover the agile way in which humans make decisions is a failing, imperfect system. This process is simpler than we think; all we have to be able to do is plot the options in a space, and relate that space to our own needs, expectations, and resources. This kind of relational thinking is exactly why we are what we are, and where we ourselves fit on this grid is what makes us as individuals who we are.

Rational thinking is linear. Placing money on the opposite side as physical goods is obvious, and rational. It worked for a long time as the easiest to communicate system, when there were so many barriers to acquisition. Now, however, with all of the barriers crumbling and every wall to commerce falling as quickly as society can allow it to – and with so much diversity in product and method and resource now available – a linear system, any purely linear system, must be called obsolete.

And now I’ve fallen into my own trap.

Where do you see opportunities for more relational thinking? Economics isn’t just for transactions of goods. Economy of effort, of time, these things have the same implications, and require the same skills and know-how to navigate effectively. But we have to do so in a manner that allows us to be conscious of where the effort we’re putting in goes. Where is your effort going?