Tag Archives: economics

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First Bank of Whuffie – reputation economics gets real

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Cory Doctorow is the latest to join the hallowed ranks of science fiction authors whose ideas have become reality, though not for some cool gadget or super-weapon. The Whuffie Bank is a non-profit start-up that has taken its name and concept from Doctorow’s Down And Out in the Magic Kingdom novel – a currency based entirely on reputation. [via pretty much everyone, though I saw it first from Chairman Bruce]

The startup is hoping to promote change in the web by rewarding users with a positive impact on the web with this karma-like digital currency. The service will monitor your activity across various websites, including things like comments, posts, and more. When you complete positive actions, you gain Whuffies, and you lose them when you do something that the organization deems to be detrimental. The company hopes that as we use the web more and more in our day-to-day life this positivity will extend beyond the web.

[…]

The algorithm takes into account ‘public endorsements’, or the number of times a user’s tweets are retweeted, or a Facebook post is Liked. It also takes into account who is making the endorsement, and the content in the messages that are being posted. You can make offers to other users using Whuffies as payment (for example, I could ask someone to help me draw a logo, offering 100 Whuffies as payment).

It’s a fascinating idea, and running it as a side-supplement to regular currency is far more likely to succeed than a pure reputation economy… indeed, the way The Whuffie Bank are pitching it, it’s more like an attempt to formalise the invisible transactions of kudos that already occur in the web’s interlinking clades and cultures.

But it’s still pretty deeply flawed, I think, because the metrics it’s using are too easily gamed, and have hugely diffferent values from group to group. Think of how the web PR shills on Twitter constantly retweet each other like some acoustically-perfect echo chamber, or how some people in your Facebook network will blithely click the “Like” button on every Mafia Wars announcement they see. I think the problem is one of scale: a reputation currency can only work across a group that’s small enough to have a real idea of who and what every participant is and does. Trying to make it global – or even national – is probably a doomed enterprise; it might work for small city-states or large towns, though, alongside a time-based currency like LETS.

That said, I still believe there’s a useful idea at the core of the Whuffie concept – it’s something I’ve been kicking around ever since reading Down And Out…, and when I finally start squeezing some fiction writing time back into my schedule, a modified version be appearing in my own stories. What do you think – is reputation quantifiable? And how could we measure it accurately enough to trade on it?

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The replicator analogy: why infinite ebooks make more jobs

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The common wisdom of record labels and publishing houses alike is that the redistribution of infinite goods – digital music files, say, or ebooks – will be the doom of the industry: if no one needs to pay for the end product, the end product will eventually disappear, as will the jobs that currently create said product.

Now, that seems logical enough, doesn’t it? But that’s because we’re used to thinking in terms of artificial scarcity. Jon Renaut has sat down and written out an analogy to explain why he thinks the conventional wisdom about infinite goods is wrong… and it’s based on the replicators from Star Trek.

A better analogy [for the music or publishing industry] would be if the replicator only made tomatoes. You could have as many tomatoes as you wanted, they’d always be perfect and delicious, and they’d always be free. This would put tomato farmers out of business. But these tomato farmers could likely start growing something else instead. And what happens to the rest of the economy? Pizza and pasta restaurants suddenly find that a major ingredient in many of their dishes just became free. Now, for the same dish, they can charge less, or buy higher quality ingredients, or make more profit. And if you’re a really talented cook specializing in tomatoes? Your skills are now in very high demand.

And there is still a demand for the people who bring the tomatoes from the replicator to your table. There is still a demand for the person who stews and cans the tomatoes, or dices and seasons them. And all the other food items, the ones that aren’t in infitnite supply, still need people to produce, process, and distribute them.

This is what’s happening in the music industry, and starting to happen in the publishing industry. Some parts of the industries are finding their functions obsolete. Instead of looking at the money they could save with electronic distribution, and what good use they could put that money to, the industry is seeking new laws and regulations to limit the infinite supply so business can continue as usual.

Even if every single song, book, and movie was distributed digitally for free, there would still be a need for the music, publishing, and movie industries. There would still be demand for editors, producers, marketers, and all sorts of other services that these industries have always provided.

As is discussed in the comments, the analogy doesn’t hold for other non-infinite goods – medicines, for example. But for goods that can be duplicated endlessly without degrading, there’s plenty of opportunity to build value-adding business models around the free stuff. [via TechDirt]

Your thoughts?

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Three speculative economies: which would you pick?

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bank notesJamais Cascio is stirring things up at Fast Company again, this time with a multi-part article on speculative future economies. In this second part thereof, he lays out three possible economic scenarios, one each for the United States, Japan and the European Union – the other major powers have been left blank deliberately.

The three scenarios are:

  • Resilience Economics (US)
  • Just-in-Time Socialism (Japan)
  • Robonomics (EU)

They’re all optimistic – in that surviving the current downturn and the inevitable next one is a given – but they each have their downsides, also. Here’s a snippet from Robonomics:

The U.S. slowed down, Japan took control, and Europe… well, Europe got wired. Or got weird, depending on your perspective.

On the surface, you still have the same kinds of big companies, same kinds of consumption patterns, same kinds of advertising that you did a few decades earlier. But the twist is that almost nobody works–maybe about 25% of the population engages in income-generating employment, and at least half of that consists of educators, bureaucrats, and the self-employed. Manufacturing, transportation, and most basic services are done with robots, semi-autonomous systems that nobody even pretends have real intelligence, but work well enough to keep the economy humming. Personal service jobs remain in human hands, but those are often performed by recent immigrants, trying to earn the right to a BIG Card.

Go read all three, then pop back and leave a comment saying which one you’d choose. Personally, I’m kinda torn between Just-in-Time Socialism and Robonomics, though I rather expect the UK would end up with Resilience thanks to the fear of European amalgamation – a politcial bugbear almost as entirely predicated on disinformation and lies as the current healthcare debate in the US. [image by Unhindered by Talent]

Oh, and if you’re wondering which of them is dependent on sustainability…

… they all are–that is, environmental sustainability is intrinsic to all three of these models, as it will be intrinsic to whatever economic structures function successfully this century. As the next few decades unfold, any economic behavior that doesn’t take sustainability into account will fail.

So, where do you want to live?

Today's Tomorrows

3D Printing: a world of design

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This topic started brewing in my head at Worldcon in Montreal, as I sat in on a panel on 3D printing by Tom Easton. 3D printing isn’t new to me, and the speed at which it’s advancing shouldn’t have been a surprise. However, it did shock me a bit. I found myself dreaming of 3D printers for a few days. After all, I could already buy one. Continue reading 3D Printing: a world of design →

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Globalisation is still going just fine for the big boys, thanks

Everyone’s suffering from the economic downturn, right? Well, not quite everyone; the really big corporations – the ones like IBM who are truly globalized – are doing just fine… and they’re managing it largely through detaching themselves from their parent nation-states, such as the US.

IBM’s world view has meant that hardware is an increasingly small portion of its revenue. It no longer makes personal computers, having sold its ThinkPad division to China’s Lenovo; higher-end servers now constitute only a quarter of its business. The rest is in software and consulting, which are increasingly based outside the U.S., making IBM less sensitive to the U.S. economy even as it remains—technically—an American company. IBM remains highly profitable. In the first six months of 2009, it earned nearly $6 billion in profits, even as the U.S. economy contracted sharply. This past quarter, about two thirds of its revenue came from outside the U.S., and that percentage is growing.

Some of the effects are undoubtedly negative for the U.S. Thousands of IBM employees have recently been offered a choice between losing their jobs in America or moving abroad to stay employed. Companies that once were icons of American power—like IBM and General Motors—will thrive only if they become more wedded to the world and less to the U.S. GM itself is a perfect example of what works and what doesn’t, with a U.S. division that failed and a Chinese division that is wildly successful. A world with more strong foreign markets means less money spent on labor and operations in the U.S., and more spent elsewhere. Companies like Intel and Microsoft are investing billions in R&D facilities in China because they believe that is where their future is.

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IBM is hardly the only example of global business detaching from the U.S. Other technology and consulting companies such as HP and Accenture are charting similar paths. Firms in other industries have moved away from the U.S. altogether, most notably oil-services company Halliburton. Having been reviled in the U.S. for allegedly overcharging the U.S. military in Iraq, it decamped to Dubai, where no one cares. In fact, there is hardly an industry other than utilities that is not seeing its most significant growth outside the U.S. That was true before the crisis, but it is even more clear in financial results this year. In 2006 about 43 percent of the profits of the S&P 500 came from outside the U.S. In 2009 that percentage is poised to surpass 50 percent.

This is the new world of global business, one in which the U.S. becomes simply a market among markets, and not even the most interesting one. IBM is one of the multinationals that propelled America to the apex of its power, and it is now emblematic of the process of creative destruction pushing America to a new, less dominant, and less comfortable position.

Another nail in geography’s coffin. As more nation-states slip into “failed” status – and depending on where you’re looking from, none of them are completely safe from that prospect, no matter how large or formerly powerful – the durability and mobility of the corporation will start to look more appealing to career politicos and rootless would-be citizens alike. Why sign up for citizenship when a zaibatsu-style contract offers you more benefit and opportunity?

Is the economic future of the US that of client status to multinational corporations? [via SlashDot]