Unifying the Value Universe

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EmergenceStrap in, this is a long one…and well worth it.  A common theme across a majority of posts on this blog has been the attempt  to understand the influence of technology on economic behavior.  Mainstream media generally accepts current commonplace institutions as intrinsic elements of ‘the economy’.  Readers of this blog, and others with an eye on innovation, recognize that digital platforms are empowering alternative forms of economic behavior at scales never before possible.  Digital currencies, reputation metrics, social capital scores, and collaborative consumption platforms are proliferating at a rapid pace.

Those of us who enjoy exploring this territory regularly run up against the lack of an appropriate language with which to describe these innovations.  I have been as guilty as anyone of hastily hacking together new terminology to brand my speculations.  Some of these language hacking efforts have been reasonably coherent (see: Attention Currency and Asymmetric Accounting) while others have been condemned to the depths of the archives.

Amidst all the confusion some terms are particularly ill defined.  ‘Alternative Currency’ is used to describe everything from gold coins to ebay feedback points to gift exchange and community grain receipts.  The only thing these various devices share in common is that they are not government issued money.

The term ‘Gift Economy‘ has also been used to refer to all manner non-monetary exchange.  Can we infer then that gift economies make use of alternative currencies?  Well…not exactly.

Clearly we need a better way to frame these concepts.  What is alternative currency?  What is a gift economy?  What is the attention economy?  How can we systematically explain the economic impact of user-generated content or peer-to-peer exchange?  In the current parlance terms like ‘user generated’ and ‘peer-to-peer’ might as well be defined as ‘not professional’ and ‘not corporate’, respectively.

If we are to have any luck making sense of evolving economic relationships we must begin defining those relationships in terms of what they are, rather than what they are not.  Here is my attempt…call it public version: 1.0 (private version: countless).

Constructing the Map

Now for the let-down…the outcome of all that build up is a mundane two by two matrix.  There will be no intellectual acrobatics found here.  Nor will the quadrants of the diagram present any dazzling new ideas.  The explanatory power of the framework described below stems (hopefully) from correctly identifying the variables that reliably correlate with distinct forms of economic behavior.

X-Axis: Relatedness

Relatedness refers to the relationship of the parties to a given exchange.  At the summary level, it describes the closeness of the relationship between two parties.  The closer the relationship between two parties the more awkward it becomes to engage in highly quantified, thoroughly negotiated transactions.  In close relationships it is uncomfortable to be ‘nickel-and-dimed’.  Instead, the mutual understanding that relationship will continue into the future allows both parties to operate by an intuitive sense of fairness.

Unrelated parties consistently demonstrate the opposite behavior.  The weaker the relationship between two parties the more likely both are to prefer an immediate ‘balancing of the books’.  When dealing with strangers you have no reason to expect that your intuitive sense of fairness will match theirs. And even if by chance you were dealing with a particularly honest stranger, your lack of repeated interactions would leave little opportunity for future reciprocation.  Easier if both parties simply move on without any expectations.

The analysis above suggests a more technical definition:

  • the degree to which mental bookkeeping between any two parties is both feasible and socially appropriate

Socially appropriate mental bookkeeping demands a great deal of trust from both parties, and the basis for that trust is shifting.  Rather than belabor this point in an already long post, I highly recommend those interested in this topic read John Hagel’s recent piece: Resolving the Trust Paradox.

Y-Axis: Refinement

Refinement is the trickier variable.  Refinement refers to two characteristics:

  1. the degree to which a given value proposition can be accurately judged prior to exchange
  2. the ease with which that value is extracted by the recipient

Some examples from the domain of information content descending from most refined to least refined:

  • ‘For Dummies’ Guide
    • value proposition very clear
    • easily consumed (well edited and structured), application obvious
  • Typical Business Book
    • value proposition relatively clear
    • easily consumed (well edited and structured), application requires reader interpretation
  • Typical Blog Post
    • value proposition often unclear
    • may not be easily consumed (less editing and structure), application requires reader interpretation
  • Tweet Stream
    • value proposition very unclear
    • requires significant filtering, evaluation, and interpretation from reader

The underlying principle in the examples above is that greater refinement indicates more effort committed by the producer on behalf of the consumer.  Less refinement requires that the consumer must become an interpreter, collaborator or cocreator in order to derive value.

Obviously, the more effort Bob expends (towards refinement) for the benefit of Jim, the more likely Bob is to expect tangible compensation from Jim.

The Four Quadrants

Value Universe1

As promised there is nothing surprising here.  Each quadrant represents concepts you are already familiar with, though the descriptions below clarify common imprecise usages.  Some of the questions I offered at the beginning of this post can be answered through description of the quadrants alone.  Other questions, which I will return to at the end, can best be answered  by describing shifts in economic activity across quadrants.

The quadrants do not necessarily represent strictly defined boundaries.  Some economic behaviors may drift across the axes.  We could debate whether the quadrants should be drawn with certain skews, for example by drawing the transactional economy in such a way that it eats into a portion of the gift economy.  Nonetheless, the framework will provide context for those debates and help us understand why certain behaviors are difficult to plot.

The four quadrants, in descending order from most obvious to most misunderstood:

The Transactional Economy – Refined/Unrelated

The upper left quadrant represents the familiar monetary economy.  The exchanges that occur in this region generally involve unrelated parties exchanging highly refined goods.  Those two characteristics lead naturally to the predominant mechanism of exchange: money.  High refinement suggests that it is relatively easy to assign discrete prices to the goods commonly exchanged in this manner.  Low relatedness leads the trading parties to prefer symmetrical (transactional) modes  of exchange (both sides of the exchange are balanced at the same point in time).

However, the transactional economy is also the mode of exchange that has crept furthest into economic behaviors for which it is ill suited.  Readers will surely be able to provide numerous examples of money changing hands between related parties or in exchange for unrefined forms of value.  This state of affairs persisted stubbornly until very recently because mechanisms mediating other forms of exchange were grossly underdeveloped.

The Relationship Economy – Unrefined/Related

The relationship economy describes behaviors commonly referred to as social or collaborative – the exchange of intangible or difficult to quantify forms of value within ongoing trust-based relationships.  The lack of refinement suggests that efforts to assign a monetary price would prove specious.  High relatedness permits mental bookkeeping and intuitive maintenance of unbalanced accounts.

These two characteristics compliment each other.  The inability to quantify tangible value makes symmetric exchange difficult, but within the context of long term relationships, symmetric exchange becomes unnecessary.  Related parties can freely provide value to one another with the security that reciprocation will balance out over time.

For more perspective on the relationship economy, check out this prezi by Jerry Michalski: Thriving in the Relationship Economy

The Attention Economy – Unrefined/Unrelated

This is where our definitions begin to get tricky and references to clearly defined variables help to provide some precision.  ‘Attention economy‘ is a term that seems to conflate traditional marketing activities with relatively new scalable peer-to-peer behaviors (social media).  The former (marketing) would seem to be a transactional activity, while the latter (social media) might seem to belong to the relationship economy.  This is the confusion I explored in my previous analysis of the attention economy.

The key to unifying these disparate definitions is understanding that the attention economy as an inherently unstable domain.  Both types of contributors use the same mechanism (attention) to parlay their contributions into interactions belonging to an adjacent quadrant.  In other words, everyone in the attention economy is marketing.  Traditional marketing is attention acquisition intended to motivate monetary transaction.  Social media participation is attention acquisition intended to motivate movement into the relationship economy, for example by networking with potential collaborators.

Contributions to the attention economy are only rarely intended to motivate perpetual activity within the attention economy.   Few people aggressively pursue the exchange of intangible value with weak ties as their ultimate goal.

The exceptions to this characterization are activities like fame seeking (for it’s own sake), public awareness campaigns and political campaign advertising.

The Gift Economy – Refined/Related

Lastly, time to tackle one of the most confused concepts in all of the interwebz…some of that confusion created by yours truly.  ‘Gift economy’ is a term originally used by social scientists to describe tribal cultures in which scarce resources were allocated through a social norm of gift giving rather than by market mechanisms.  In these cultures the act of gift giving deepens interdependencies among members of the tribe.  Certain gifts also served to increase the status of those tribe members able to regularly bestow them.  For example, in hunter gatherer tribes the best hunters would frequently find themselves with kill too large to consume themselves.  Sharing with the rest of the tribe avoided waste and elevated their own status within the tribe.  The details of specific case studies are well beyond the scope of this post…perhaps a topic for follow up if the interest is there.

Given recent innovations it has been tempting to apply the gift economy label to any and all forms of exchange that are not mediated by monetary transaction, i.e. that are asymmetric.  Now open source culture is a gift economy, social media is a gift economy, blogging is a gift economy, wikipedia is a gift economy.  As noted, I have been as guilty of that temptation as anyone else.

I am backing away from that position because most of the behaviors that have attracted the label are more accurately described as belonging to the previous two quadrants, or as movement between quadrants.

So what is gift economy?

Gift economy is the set of economic behaviors described by reference to tribal cultures.  It is high refinement and high relatedness.  High refinement indicates that ‘gifts‘ are items with clear tangible value.  High relatedness suggests that ‘gifts’ are exchanged between closely related parties, such that mental bookkeeping is feasible and socially appropriate.

Based on those criteria, this blog post is not a gift.  Though I certainly expect this post to provide value to the reader, that value proposition is not sufficiently refined to consider it a gift.  Moreover, many of you are largely anonymous to me, placing this blog post squarely in the attention economy.  (I encourage you to move us towards the relationship economy by contacting me through any of the services indicated on the right!)

Putting It To Work

In the introduction I posed a number of questions with the promise that this framework will help us answer them.  Some of those questions have been answered simply by clarifying the four quadrants.

The conception of attention economy presented above unites two definitions that superficially contradict each other.  In marketing conversations, attention economy refers to the usage of various tactics that convert attention into sales (represented in the image below by the vertical arrow).  In discussions of peer-to-peer social media, attention economy refers to analogous tactics that empower individuals to convert weak ties into strong relationships (represented by the horizontal arrow).

Both definitions are consistent if we recognize that both conversion processses begin with analogous behaviors, but apply them towards distinct ends.  If I were a better artist the two green arrows would be drawn as funnels to indicate that both processes involve drawing a sub-population out of the overall audience.

Value Universe2

The framework also identifies a distinct definition of gift economy by locating the current wave of unmonetized production in other quadrants:

  • Peer-to-peer social media content converts attention into relationships
  • Content marketing and brand-based social media content convert attention into money (or more attention and eventually money)
  • Emerging collaborative arrangements expand the scale and scope of the relationship economy

Lastly, the framework allows us to visualize the big shifts affecting the economy.  Up to this point I have drawn each quadrant as approximately equal in size.  Instead, we might vary the size of each quadrant to represent the volume of economic activity occurring within a given domain.

One obvious big shift rocking the economy is the advent of social technologies that enable the maintenance of vastly expanded social circles.  Though these technologies may not override the psychological limits described by Dunbar’s number, they undoubtedly enhance the ability to maintain weak ties.  This shift might be represented as follows:

Value Universe3

Another significant shift in recent years has been the overwhelming volume of ‘amateur’ and intrinsically motivated content that is now produced.  This shift could be characterized as growth in unrefined production, and added to the previous image as follows:

Value Universe4

These last two are offered for illustrative purposes only and are not necessarily meant to accurately depict the current economy.  Prior to recent trends, the scope of the transactional economy overwhelmed the other three quadrants.  As such, an accurate depiction would need to start from a baseline in which the quadrants skewed significantly in the opposite direction.

Questions For Further Consideration

This post only scratches the surface.  Assuming the reasoning above survives peer review, this framework provides a consistent language with which to analyze a wide array of questions.  Here is a sampling for your consideration:

  • How would you depict various alternative currencies?
    • Time-bank
    • Facebook credits
    • Barter
  • Would they exist within a single quadrant or would they cross axes?
  • How would you plot a retweet? A ‘Like’?
    • An influence metric that measures retweets?
  • Do people you know personally retweet your content less? Why?
  • How would you depict the following series of exchanges:
    • Staying in a hotel
    • AirBnB
    • Couchsurfing
    • Staying with a friend
  • What does that series suggest about the future health of ‘the economy’?
  • Plot the life-cycle of an ‘open enterprise’
  • What does indirect monetization look like?
  • Which quadrants are underutilized?
    • What mechanisms would enable greater utilization?
  • What would a personal equity investment look like?

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  • http://www.wildintent.com Julio Rodriguez

    I really like this model for thinking about the different ways in which we exchange value. Right away it triggered some wild speculation, especially given the subject of my recent post on currency over at Wild Intent.

    Using currency for unrefined / related exchanges of value feels unnatural because you’re using
    something which is the externalized mental model of an aggregated mass of humanity. There is a conversion cost, so the implied lowered transaction costs of having a universal language of exchange is diluted or eliminated. I wonder if primitive / young currencies are more easily used (psychologically) for exchanges belonging in the other quadrants.

    Also, it seems as if each quadrant is strongly associated with its own kind of “native system”, which most efficiently uses the medium available there. Transactional economy could be associated with financial institutions, Attention economy with political / public entities, relationship economy with families / clans (?), and gift economies with guilds / fraternities / secret societies (?).

    • http://OnTheSpiral.com/ GregoryJRader

      Happy to hear this has facilitated your own wild speculations.  I have definitely found over the past week or so that many ideas I had been playing with snap into place immediately when I map them out.  

      I think the problem you are getting at in your second paragraph is that the ‘universal language’ of currency simply doesn’t convert into unrefined value very well.  Using currency for exchanges in the lower half of the plane forces us to assign discrete value to stuff that is inherently illegible.  This is why Likes and Retweets work so intuitively in the attention economy.  What is a retweet worth?  Who knows?  It is itself illegible, just like the attention exchanges it is mediating.

      Interesting speculations regarding native systems.  I agree, each quadrant will foster it’s unique organizational forms.  Another topic for future consideration…

  • http://www.ribbonfarm.com Venkat

    Very solid start. I believe you’ve identified the key axis variables. I think this is solid enough to actually use as the basis for a more mathematical model around transaction costs. For example search costs decrease as you go right on the relatedness axis, negotiation costs rise as you go up the refinement axis (because of less standardization and other product attributes that favor clear pricing, and therefore less haggling…).

    I think this is not even a 2×2. It is a more general cartesian plane on which you can do continuous calculus. Since you have a fortuitous last name, let’s call it the Rader plane. For example, you could represent the entire history of a relationship as a trajectory on this plane (and heh, heh, you could say things like, “that product/personm is now on my Rader”)

    Some questions/comments I have for you:

    1. Is it really value of the transaction or the value-add of a transaction? A gold ring given to a fiance has 3 components: gold (commodity value, easily priced), craftsmanship (branded/art value, fashion-priced) and sentimental value (not cash priceable at all BUT can probably be preference ordered in relation to the others and can depreciate/appreciate as the relationship does).

    2. I think high refinement is likely to be easily priced because of some sort of social-proof/imitation effects creating a volume supply and making supply-demand dynamics easier. Unrefined objects/services tend to be unique. Refined objects/services tend to be at least partly identical, or quantitatively comparable on key attribute vectors. I know some bureaucratic journal paper reviewers who barely even LOOK at results in submissions. They go straight to the citations and look for number of citations, presence/absence of citations that indicate which “camp” the work falls into, and so forth. The question… how do imitation/social proof create a “market” via facilitating comparisons?

    3. I think your view of attention marketing needs to be refined into a trajectory view. An marketing relationship is NOT a point transactions. It is a series of transactions. I suspect these weave their way across the Rader plane. Can you draw some mathematical inferences? Like is the path integral = trust or something?

    4. Another reason to use trajectories is that it allows you to analyze an important missing component: time. At zeroth order, a transaction occupies a certain amount of time, and for a bottom-right transaction is exactly equal to attention “given.” Elsewhere on the Rader plane though, the attention itself has intrinsic value because the value exchange becomes practically an excuse for spending time together with people whose company you enjoy. How do you factor in this “transaction value” (by analogy to Coase’s “transaction cost”… a sort of positive transactional externality that can become larger than the core value).

    5. Another reason to use time somewhere is that I think relationship and gift economies are more willing to defer gratification or have it diffuse into the general economy of the related small-world of people via a pay-it-forward effect. It’s a “pay me back, whenever” or “just do the same for someone else” type expectation. This confuses calculations a bit, but I think you can handle it. Regular money is basically legible debt with defined parties and counterparty risks. Other quadrants have other kinds of debt and currency equivalents. Instead of solving a dual coincidence of needs in a clean way by balancing the books at the micro level, they use sloppy book-keeping and solve multi-party coincidence of needs using sloppier collective balance books that track more lumped variables. For example, people who routinely eat together often take turns paying for meals, but don’t keep track and expect it will “all even out in the end” and only notice if one party routinely freeloads. How do these sloppy book-keeping models work? What fuzzy currencies are at work? What lumped variables do people mentally track within the 7+/2 Miller magic number constraint (since the reason regular precise accounting won’t work  is precisely the complexity at larger scales which cash currencies solve)?

    6. Finally, I’d like to see the information-theoretic angle here. My own interest is in analyzing this whole bucket of stuff using a time/entropy/information/energy analysis. Not at Jaynes level of technical analysis, but at least loosely.

    Enough for now. I think you’ve struck on a deep vein here that can be mined a lot more, and the real value is probably a dozen feet of tunneling away.

    • http://OnTheSpiral.com/ GregoryJRader

      +1 to Venkat for ‘the Rader plane’!

      Your questions could keep me busy for at least another month of posts.  Here are some first impressions:

      1.  I am thinking you could use either one so long as both parties to an exchange are operating on the same premises.  If someone were to take a ring to a pawn shop, he would surely be compensated for the gold, maybe for the craftsmanship, certainly not for the sentimental value.  If both parties agree on that then the transaction will clear.  If the seller thinks sentimental value constitutes value-add, then they are stuck.

      2.  Interesting point.  It works in both directions.  A refined object will tend to be easily priced.  Someone who seeks to earn a transactional return will tend to imitate other highly refined objects.  This makes sense given that in the transactional quadrant we are considering exchanges between unrelated parties.  When the two parties are related they can put trust in the relationship, but when the two parties are unrelated the trust has to be put in the product exchanged.  Therefore the value of that product must be easily ascertained.  

      3.  Agree, the green arrows would certainly not represent instantaneous transitions.  The interesting thing to consider here, which complicates any potential mathematics, is that much attention marketing is manipulative.  For example, brand advertising is often aimed at creating trust in the brand, developing a relationship with the brand, NOT necessarily creating trust in the product.  In these situations the consumer feels like he is taking the horizontal arrow into the relationship economy when really he is taking the vertical arrow into the transactional economy.  The brand itself has no intention of nurturing a relationship…

      4.  This one will require more pondering.  Time is surely relevant though I’m not sure how to represent that.  The second part of this question gets complicated because sometimes the “transaction value” is the value itself.  Perhaps an alternative way to consider this is in terms of externalities.  Monetized activity has negative externalities to the degree that you need to employ costly systems to find, convert, execute, and track transactions.  Exchanges in other quadrants may have positive externalities to the degree that the “overhead” may itself be of value.  

      5.  Yes, the transactional quadrant is generally symmetric, or contracted in such a way as to impose symmetric exchange.  The other three quadrants are asymmetric to various degrees.  The attention economy has a kind of probabilistic symmetry.  Value is given freely with the expectation that some subset of the takers will be converted into givers.  The relationship economy works as you describe in the eating-together example, asymmetric but balancing out in the long run.  The gift economy may be permanently asymmetric but there are sometimes power dynamics that balance that out – gifting to demonstrate status, create dependency/indebtedness, etc.

      6.  To be continued…

      • Gene Linetsky

        Like Rader Plane. I’d also introduce Rao’s Razor: always favor the hypothesis with the fewest moral assumptions.

  • http://twitter.com/sebpaquet Seb Paquet

    In the Attention Economy quadrant it is often unclear who is giving and who is receiving. Are you giving me content, or am I paying you attention?

    • http://OnTheSpiral.com/ GregoryJRader

      Both…

      In the transactional quadrant, am I giving you money or are you giving me a product/service?
      Both.

      Now, if I know what I am doing then my intent is to convert your attention into either money or a relationship.  But you have no obligation to play along.  I still have to make the sale or develop the relationship.  On the other hand, if you perpetually consume content while stubbornly refusing to be converted then I might stop trying to gain your attention, in which case you lose access to the content. 

  • http://garymlewis.com/instchg Gary M Lewis

    Hi Greg – This is definitely over my head. But I’ll provide an uninformed initial reaction. I have three hesitations: i) reality is seldom so neat as a 2×2 matrix; ii) I couldn’t detect much fun or hope for the future; and ii) are you really certain that this statement is true?
    “Few people aggressively pursue the exchange of intangible value with weak ties as their ultimate goal.”
    Seems like there might be lots of potential for more activity there. For example, suppose I’m a learner using a bunch of Open Ed Resources (OERs). Seems like intangible value and weak ties is exactly what I as a learner and the OER creator would both want. Probably I’m missing something fundamental.
    Gary

    • http://OnTheSpiral.com/ GregoryJRader

      Hey Gary,
      Thanks for the feedback.  I will do my best to clarify…

      i) Agreed.  The title of the post is somewhat tongue-in-cheek.  This framework certainly isn’t the answer for everything but I have found it very helpful for quickly comparing and contrasting various behaviors.  There are still many questions to be asked and I am sure it will show cracks as it is pushed further…which just means we will have to create version 2.0 ;)

      ii) I am confused by this comment.  Did you detect a note of cynicism or pessimism while reading?  I thought the tone was relatively neutral.  The framework itself is more explanatory than predictive.

      iii) I absolutely think that sort of arrangement will exist.  The question is why will it exist?  What are the motivations of the participants?  I am skeptical that the OER creator would produce content with the goal of accruing weak ties.  I suspect such a person is more often motivated either by the desire to either upsell learners to more refined paid content, or by the desire to attract people of a similar mindset with whom he hopes to develop more substantial relationships.  I don’t think the end goal is fame, though that is surely the case on occasion.

      The other possibility is that the OER creator is inspired purely by intrinsic motivations.  He has no expectation of attaining money, attention, relationships or anything else.  He is simply sending content out to completely anonymous learners.  In that case his behavior does not really fit anywhere on the plane…it is not ‘economic’ in nature, there is no exchange of any sort taking place.  

      • http://www.quora.com/Ho-Sheng-Hsiao Ho-Sheng Hsiao

        What does that make of Sal Khan? Taking what he says at face value, those videos started as gifts to his relatives. They just happened to be posted on Youtube (probably because it was the easiest way to get the videos to the relatives) and accrued much attention. The attention did open up doors, relationship-wise when Bill Gates dropped some money into the non-profit.

        • http://OnTheSpiral.com/ GregoryJRader

          Hosh, you bring up a good point.  Sal Khan presents an interesting confluence of circumstances…

          Based on your description I would say Khan was motivated primarily by relationship considerations (and likely intrinsic interest).  The notoriety was a fortunate side effect of his choosing to post the videos on youtube.  

          The interesting question then is, what motivates him now that he is planted firmly in the attention economy?  I suspect he sticks with the attention model because that is how he can reach the most amount of people…so he is not so much seeking personal fame as he is seeking “fame” (i.e. widespread distribution) of his content.  That would be a similar situation to “public awareness campaigns” which I mentioned briefly as an example, but didn’t give much consideration.

          Thanks for pointing this out.

          • http://spiritsentient.com JasonFonceca

            I feel that fame plays a huge role in this model, though it was only mentioned briefly, because what is ‘fame’ if not a measure of the combined variables of attention + relationship?

            Kim Kardashian might be said to have ‘high’ attention and ‘high’ relationship with her fans.

            John Smith going to his 9-to-5 might be said to be ‘low’ in both variables.Anyway, love the entire thing, really great stuff Greg. Thank you again.

          • http://OnTheSpiral.com/ GregoryJRader

            Hey Jason,
            Thanks for the kind words.  I’ll give you a teaser of a future iteration that I am still in the process of pondering…

            There seems to be a push towards frontiers that moves in counter-clockwise direction and a countervailing pull in the clockwise direction as one achieves success in those frontiers.  Here is what I mean: suppose you are a nobody signing up for twitter for the first time.  Initially you survey the landscape and start making some tentative relationships.  If you are successful you eventually accumulate so many followers that you can’t maintain 1:1 communication will all of them.  In a sense you have achieved a kernel of fame.  You shift into more of an “attention seeking” broadcast mode…more one-to-many type messages, fewer personalized replies.  If you are successful again you will get pulled into a transactional mode of interaction.  As you “colonize” the attention economy you accumulate a following and some of those people will be willing to pay you for preferential access to your attention, or the products of your attention.  

            Taking your example, I would bet that as Kim Kardashian gains in attention, and particular as she begins to monetize that attention, she loses her ability (lacks the bandwidth) to effectively interact with her following on a relationship level.

            Thoughts?

          • http://spiritsentient.com JasonFonceca

            Excellent extrapolation, I love it! I can definitely see that trend, and I’d like to add a bit to it.

            I would call what you’ve described as Economic ‘Seasons’.

            I’d also add that (using Kim as an example), as she successfully moves (graduates?) through the seasons, nothing she is doing changes all that much. She still promotes herself, she still sends out personally messages (possibly MORE than she originally started with on a pure #’s basis), she still takes opportunities to gain ‘attention’, and she still aims to monetize things.

            The difference is that more and more of Earth’s population desire a *connection* of some kind (any kind) that is easy and convenient for them.

            For some that means being a Kim-Evangelist. For some it means buying the occasional product, for some it means gossiping, but it is mainly the increase in numbers and spread of behaviours from her colony that determines things, and her ability to direct + influence that colony — which is I believe what you were outlining in your model (Kim’s ability to influence, attitude-wise, bandwidth-wise, etc.)

            Yes?

  • http://twitter.com/geniusnowblog Greg Burton

    Very nice work. How would we plot a pay-to-play game on this? It seems there would be several loops in an MMORG environment, where the largest transactional loop is between punctuated monetization and attention per period. This argues for including a time measure as well. Recurring billing is a repeated weak-tie transaction, and needs to remain that to be cash viable – otherwise the pressure of stronger relationship ties makes continued monetization more difficult. (“You should just give it to me, not charge me”.) This is apart from the stronger relationship ties among players, which tend to encourage the attention required for recurring billing to work.

    A lot to think about – thanks :)

    G

    • http://OnTheSpiral.com/ GregoryJRader

      It sounds like you already worked out most of it.  One interesting consideration is how much of the in-game content is created by the users relative to that created by the host company.  If the in-game economy becomes particularly vibrant then the players may begin to feel like they are getting more value from each other then from the game provider. 

      The same goes for platforms like facebook and twitter.  They must perpetually add features new features.  Otherwise the users eventually wake up, realize they are creating all the value and jump ship for some less heavily monetized alternative with the minimum essential features.

  • http://www.coffeetheory.com Greg Linster

    Interesting thoughts.  Until there is a more coherent lexicon many of these ideas will remain confusing.  Nicolas Pujol wrote a book called The Mind Share Market that covers some of the same points you mention.  If you’re interested, I reviewed the book here

    • http://OnTheSpiral.com/ GregoryJRader

      Nice review, definitely a lot of similarity there.  The one thing I would add is the point @twitter-42090865:disqus brought up in his comment.  Companies that follow such a strategy must be careful to maintain an appropriate distance and continue delivering highly  refined value to their customers.  Otherwise mind share with the customer can quickly lead to relationships wherein the customer starts to feel less like a customer and more like a collaborator.  

  • http://twitter.com/r_ganesh Ganesh Ramakrishnan

    Thought-provoking. Did not feel like a long piece. Just as I was wondering about how things have been changing you touched upon the relative sizes of the quadrants. Very neat. Enough left unsaid, tickling the brain to ponder on the implications, as evident from the comments so far.

    • http://OnTheSpiral.com/ GregoryJRader

      Happy to hear I didn’t bore you with my 2k+ words ;)

  • http://twitter.com/r_ganesh Ganesh Ramakrishnan

    Thought-provoking. Did not feel like a long piece. Just as I was wondering about how things have been changing you touched upon the relative sizes of the quadrants. Very neat. Enough left unsaid, tickling the brain to ponder on the implications, as evident from the comments so far.

  • Kurt Laitner

    Well, Greg, outstanding work as usual.  Though I agree with one of the comments that it isn’t this simple, a model is useful for what it leaves out, and this model is extremely useful and has good explanatory power. 

    The fact that Venkat was able to extend the model and give it more explanatory power is also a good sign.   Refinement is extremely interesting to me as a potential dimension of Value (dimVal).  It is a composite, but a useful composite for bridging to the existing economic paradigm.  You speak of Intimacy (relatedness) Venkat speaks of Time dimVal, Trust, Risk (deferral of reciprocation in Time)..

    I VERY much like that transformation is being explored here, and this is what I have called value equations.    While Attention can be said to flow Trust is more of a value store and a factor in other evaluations. In the architecture of Value, Time is a base, Attention is a function of Time, Trust is function of several dimVals and relationship is both a medium and an integral created by accumulations and attenuations of Value.

    A reasonably complete list of dimensions of Value can be found here http://www.mindmeister.com/86243784/value.  Equations are not published as this is less refined.. already I am able to use your meme. 

    Regarding the limits of mental accounting, I don’t think we have become any better at managing mental books. I think there is a space between anonymous and ‘close’ type relationships which is occupied by the dunbar+ but not anonymous population, and the size of this population, (see Shirky and others) is growing with the available technologies.  A method of evaluation is needed between the inner circle and outside the outer circle.  This is not transactional but rather descriptive of flows, stores and conversions.  This space is where reciprocity is intended but not manageable.  In particular this is the case when reciprocity is not bilateral or cannot be bilateral, or is prospective in time, or where causation/value chains are not directly perceivable by a single party.

    As usual, thank you for the stimulation.
    /kdl

    • http://OnTheSpiral.com/ GregoryJRader

      Agree that trust is more of an asset within a given quadrant than a currency.  We could also conceivably talk about different forms of trust.  The you have in a business to give you a fair deal is probably not the same as the trust you have within a reciprocal relationship.  Haven’t quite thought that through…

      I also agree with your assessment that we are primarily expanding our ability to maintain weak ties. If I am understanding you correctly then the process you are describing is what I intend the green networking arrow to represent.  Social mechanisms such as Likes and Retweets are the first step in that direction, providing a quantifiable unit of attention exchanged between two parties.  There is room for additional mechanisms to further bridge that gap between reciprocal attention exchange and true collaboration.  

      Your mindmap link is broken…

      • Kurt Laitner

        Trying again: https://www.mindmeister.com/maps/show/86243784

        For each dim need to determine measurement method (meta currency if you like, or possibly multiple currencies) then sets of dims organize into functions/ dependencies Attention = fn(Time,…) and the whole into transformative equations, still thinking about this but I see conversion ending at ‘dimReward’ assuming source and sink – may be infinite cycling on some value dims, much work to be done.

        • http://OnTheSpiral.com/ GregoryJRader

          That one works…

          Will have to take some time to look through this.  I see you have some listed as both rewards and values…is that what you mean by infinite cycling?

          • Kurt Laitner

            partly yes, however there are also cycles of transformation within dimVals, dimRews may be nothing other than dimVals in the end, but those that are an ‘end’ or consumptive.  key piece in *net is that all actions against a value equation must add value or they are consumption. as to how we determine if they are adding value, that is much more complicated :-)  if I remix your song and it sucks, perhaps I am a hobbyist that is consuming your track, if I remix it and turn it into a hit, I’ve added value (simplistic example for illustration purposes only) – cheers, let me know when you have digested and want to chat – maybe we can try out google hangouts

  • http://www.postlinearity.com gregorylent

    no expert, just some thoughts the flowed while attempting to read/skim ..

    monetizing the river, not the boats floating on it

    the network is the value, not the nodes

    value is inherent in consciousness, as objects become increasingly concrete, value lessens (up til now           we do the opposite)

    valuing the unity of the universe (flipping your title… valuing things/institutions/products that unify as opposed to those that separate) (think, ecology, and the globalized unity of nature, as a model)

    breaking the wealth=debt equation (product here, hole in the ground there) (asset here, liability there)

    • http://OnTheSpiral.com/ GregoryJRader

      To your first point – ‘monetization’ will mean something different in each quadrant.  Traditional money belongs to the transactional quadrant but we might have complimentary mechanisms that mediate flows in the other quadrants.  

      One thing I find interesting about this model is that it relates various types of exchange to variables that we can project with some reasonable degree of foresight.  It will surely be the case that for the foreseeable future we will have some need to exchange refined values with anonymous parties.  As such, it would be unreasonable to expect transactional money to disappear entirely.  We may however see the volume of exchange shift between quadrants as noted in the final two graphics.  

  • Gene Linetsky

    Finally, a Unified Field Theory of Economics, or eUFT. Albert would be proud. Thanks Greg!

    • http://OnTheSpiral.com/ GregoryJRader

      The title is a bit tongue-in-cheek…

      Hopefully it allows us to understand the role and value of 10 minutes of time with a little more clarity.  If we can discuss somewhat more coherently what a 10 accomplishes as compared to a retweet, then it will have done it’s job ;)

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  • James Bach

    This helps me better characterize why calculating the “ROI” of software testing is irrelevant and, well, icky.

    As a tester, the value of my work is unrefined. It comes into refinement only in the occasional strobe flash of a terrible (and easily quantified) problem that is discovered before it’s too late. Most of the time, testers exist in a relationship economy with their managers and clients. It is imperative for testers to develop their credibility, and to work those relationships.

    When this fails, one consequence is massive outsourcing of testing (which is the revenge of the transactional economy on testers who failed to establish themselves in the social system). Outsourced testing tends to be done very badly– although the cost per tester goes down, the actual value of the *apparently* refined product (mostly consisting of ceremonial paperwork) also plummets.

    That’s why I say there is a real testing industry (in the relationship quadrant) and a fake one (in the transactional quadrant). The fake one seems to be bigger.

    – james bach

    • http://OnTheSpiral.com/ GregoryJRader

      Thanks James.  That is a nice example that I will have to ponder some more.  It seems like the same could be said for a number of similar arrangements in which the ROI is based on a small number of improbably but high impact events.  

      The obvious example would be the insurance industry, and anecdotally I think you would see the same phenomenon there.  A significant portion of traditional insurance business is now undercut by low cost providers who sell a minimum legal product.  A few providers manage the relationship side of the business impeccably and therefore are able to charge much more.  However, charging for relationship management as a line item would destroy the contract implicit in the relationship.  Instead, buyers overpay for the insurance product itself and the customer service rolled in.

      • James Bach

        Exactly. “You’re in good hands with Allstate.” or “State Farm is there!” Just as the actual product sold by lottery companies is hope, the product most peddled by insurance companies is trust. And that belongs to the realm of relationships.

        – james

        • http://OnTheSpiral.com/ GregoryJRader

          That is, assuming the relationship actually exists ;)

          One of the more interesting speculations this model has lead me to is an answer to the question:
          What is branding?
          Answer – Branding is an attention economy activity that leads consumers to believe they are moving into the relationship economy when in fact a corporation is pushing them towards the transactional economy.  

          “State Farm is there!” is a bit of trickery that makes you think you have a relationship with the company.  In reality that is impossible.  You have a relationship with your specific agent.  Or you have a series of brief relationships with anonymous customer service agents.  You don’t have a relationship with State Farm…you transact with State Farm.

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  • http://www.quora.com/Ho-Sheng-Hsiao Ho-Sheng Hsiao

    Example in the field: “Of course, Facebook already offers Facebook Pages, which can be used for similar a similar purpose. But Co-founder Chris Tam says service professionals want to be able to engage customers but also maintain a distance, which is the problem with using Facebook Pages as their centralized business page. Tam adds that this product is built specifically for professionals in certain industries, such as DJs, bartenders, models, hair stylists, personal trainers, cooks, and waiters.” (http://techcrunch.com/2011/08/11/yc-backed-opez-is-yelp-meets-facebook-for-service-professionals/)

    • http://OnTheSpiral.com/ GregoryJRader

      Exactly, get to close to your customers and it becomes increasingly awkward to transact with them.  The professions noted are instructive in that many of them offer a very clear delineation between what is work and what is not work.  A personal trainer can give you lots of advice for free, but when you walk into the gym and want to spend an unbroken hour together, than is work and is monetizable.  Much harder to do for people whose work IS the advice they give.  

      • http://www.quora.com/Ho-Sheng-Hsiao Ho-Sheng Hsiao

        Hmm, cool. (I’m thinking if this could be applied to the way mass education is set up).

        Field example: http://www.asymco.com/2011/08/15/the-perils-of-licensing-to-your-competitors/

        This one is about the announcement Google made to acquire IP from Motorola, though the headlines today emphasized, “Google Buys Motorola Mobile for $12b”. From the article:

        “The lesson (and warning) was that a licensor that is also a licensee makes other licensees uncomfortable. The supplier is also a competitor. This is classic channel conflict and never ends well.”It is easy to call this, “conflict of interest.” But what if we applied the Rader plane to it? Is the reason vendors are uncomfortable because the situation now strays outside of the Transactional quadrant? (If so, does this mean that megacorps can interact outside of Transactional quadrant, though with each other and not necessarily with individuals?)

        • http://OnTheSpiral.com/ GregoryJRader

          Hosh, could you expand on this thought?  I have trouble seeing corporations acting with non-monetary interests, particularly amongst themselves, because ultimately they exist to produce shareholder returns.

          Why not just look at this as a situation in which Google has strengthened its negotiating position, potentially at the expense of its manufacturing partners?  

          • http://www.quora.com/Ho-Sheng-Hsiao Ho-Sheng Hsiao

            I had forgotten about the profit motive of corporations.

            I was thinking along the lines of conflict of interest among actors. If we look at it purely in the transactional quadrant, then conflict of interest means conflict of primary profit loyalty.

            Example, when Steve Jobs, as CEO of Apple, sat on the board of directors for Google, he has to put on his “Google hat” and signal a primary profit loyalty for Google. But this is a leaky abstraction. Of course he’s going to use what he heard sitting on the Google board for benefit of Apple (and his equity in Apple).

            In the case of the channel conflict, the corporation owning the intellectual property and licenses it to other party (Google and Android) also becomes a licensee. They enter into a contract to supply the license, yet in entering as the licensee they may changes in the technology that benefits Google-the-licensee and not *all* the licensees. That sounds like an attempt to apply *relationship* dynamics.

            Example: Adobe Systems published specs for PostScript early in their founding days. They claim to make it open, but they also added undocumented features to PostScript appearing in Adobe products. This includes proprietary font technology. That’s why non-Adobe’s post script products don’t seem to have very good typography.

            I guess the question is, can corporations enter into relationship economies (with each other) even though they work primarily in transactional economies — or is that an illusion, and its really the people involved forming relationship economies?

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  • http://spiritsentient.com JasonFonceca

    I was sent here by Danny Iny of FirePoleMarketing, and I am beyond impressed. This is like everything I’ve thought and felt since I was a teenager in regards to attention, relationships, transactions, and gifts, explained succinctly, visually, and solidly.

    Bravo sir, bravo.

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  • Medwards20x6

    A few partially-formed thoughts I haven’t seen added to the mix just yet:

    Relationships:

    Firstly, one might argue from an evolutionary stand-point that a “relationship,” which we think of at a high-level as very different from economic activity, is in reality an adaptation specifically for the purposes of encouraging our species to engage in the Gift economy.  Why even be a part of a social group?  Safety and mitigation of risk (didn’t catch anything today, the other hunter helps me out).

    From this standpoint a relationship is, at it’s core, precisely the fuzzy book-keeping that goes on over the course of time with respect to these on-going “transactions.”  The fact that survival is no longer our only concern, and now we are interested in entertainment as well, means that we have migrated our expectations of a relationship away from concrete means of survival and toward “enjoyment” of company.  But this is a unit of value as well.  If I don’t have fun when I hang out with you, I probably won’t continue to do so.

    Another important aspect of this is that relationships, social currency, and knowledge (blogs, attention economy) are all highly reproducible goods.  Scarcity is not a significant aspect of the equation, as long as the fixed cost overhead of initial production is covered.

    Money:

    One key aspect of money is that it enables multi-way transactions.  In fact, in some ways, that is it’s purpose.

    Example: I grow food, I need shoes.  The shoe-maker already has food, but needs a hammer.  The blacksmith needs food, so I give him my food for a hammer, then trade the hammer for shoes.

    With money instead I sell my food to the blacksmith, then buy shoes from the shoe-maker.  Then the shoemaker goes and buys a hammer, but I don’t need to know about that.  I don’t have to concern myself with who needs what except for what I need and who needs my goods.  I don’t have to understand the entire web of need in order to broker a transaction.  Money becomes the broker.  Money becomes a surrogate for me having a personal relationship with every other member of the economy and understanding their needs.  No surprise then that where money is, relationships aren’t.

    I also think this example is crucial – no aspect of the relationship or attention economies can provide food.  That is fundamentally a scarce transaction.

    Corporate Relationships:

    Someone else already touched on the fact that it’s impossible to even have a “relationship” with a corporation.  I think that’s true, or not, depending on how you define “relationship.”  We now define a relationship primarily using “social” currency.  Enjoying conversations, shaking hands, paying attention.

    Corporations have loyalty programs, good customer service, and provide discounts to long-time or high volume buyers.  That’s a kind of relationship.  It’s a relationship based on the company trusting that you will come back for more, and you trusting that they will provide quality service.  But ultimately I agree that what we traditionally define as a relationship cannot exist with an aggregate entity (many employees), because when you engage with a new employee they don’t know your history, and that’s what a relationship is – shared and understood history.

    That’s why corporations are moving toward advanced CRM systems so when you call, before the rep even picks up the phone their computer loads a file with all of your personal information and transaction history.  Having a relationship with an entity (person or corporation) is highly related to the speed with which information about you can be transmitted between members of the entity (employees, neurons).

    Corporate Relationships with The Market:

    The push for relationships with the customer is highly related to the fact that now a corporation is pursuing a relationship with the aggregate “Market.”  Facebook, Twitter, Yelp, and in general Word-of-Mouth advertising means that information about the corporations behavior and quality is being rapidly transmitted between members of “The Market.”  This is forcing their hand, and increasing the quality of customer service overall so they can maintain a good relationship with this emerging aggregate.

    Employee Relationships:

    Really, the closest thing a corporation can have to a relationship is with an employee of that corporation – thus, much shared and understood history.  Imagine a corporation that began providing free housing, an in-office grocery, company provided vehicle, a pension (via continued access to services after retirement).  Take it to the logical extreme and the employee doesn’t get paid in money at all, but instead via services.  The company doesn’t pay or keep careful track of outlays because they trust that the employee values their job more than the opportunity to rip them off, and vice versa.

    In some ways, the employee is also a customer – consuming housing, groceries, etc and providing labor in return instead of cash.  If either party is found to be acting in bad faith, the other party ends the relationship and tells the world.

    Half Relationships:

    In some ways, “relationships” mediated by money are only half of a relationship.  They provide a good or service in exchange for a marker(money), but they may cash that marker in with someone else.  When they cash it in, that’s the other half of a relationship.

    If you are also an employee, they may cash that marker in with you, at which point handing the marker back and forth all the time will begin to seem silly.

    • http://OnTheSpiral.com/ GregoryJRader

      Thanks for the thoughtful comments.  It would take me all day to reply point by point so here are just a few reactions ;)

      On relationships – I agree there is a sense in which the quadrants build on top of each other.  I made an attempt at that hypothesis here: http://onthespiral.com/charting-course-of-socioeconomic-evolution

      Money – agreed that money is one of the key technologies that facilitates movement in the “unrelated” direction.  I don’t necessarily agree though that the relationship economy cannot provide food.  It does in fact provide food in many cultures where the procurement and distribution of food is mediated by cultural norms and customs.  Scarcity of food in our current situation relates to our current social structure (predominantly transactional).  I agree though that procuring food via relationship economies would be quite difficult today.

      Corporations – your comments about CRM systems are interesting.  I do think there is a sense in which opposite quadrants emulate and/or supplant each other.  In other words, a relationship can be replaced/emulated by a particular series of transactions.  To some extent I think we are currently seeing attention economies replace bureaucracies (i.e. institutionalized gift economies).

      Employees relationships – your description actually sounds similar to the state of affairs about fifty years ago.  Employment was seen as a long term relationship in which the employer took substantial responsibility for the employee’s long term well being and security (pensions, health care, etc).  Since then employment has increasingly taken on the form of a transaction, or as you call it, a half relationship.  

  1. photo courtesy of HubbleColor

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