WHAT IS YOUR MOTHER WORTH?

# OPENING SHOTS ON THE FINANCIAL OLIGARCHY

During the 9/11 attacks in New York City, federal investigators were certain that the terrorists had used the black market and a network of friend-of-a-friend connections to covertly move the funds they needed. In truth, they used an FDIC-insured bank based in Florida. At the same time, foreign workers the world over whose earnings could spell literal life or death for their families back home transferred their funds using the same underground network the FBI was worried about the terrorists using — because they felt it was safer.

As part of the exact same trend, someone is tweeting more than 45 times a day right now so they can get upgraded to an executive suite the next time they book a room at a hotel. Someone else is spending hours and hours after work painstakingly answering other people's technical questions, for free, without ever having a use for the solutions themselves. Neither of them is getting paid for this work, and yet they each consider this a significant career investment.

What's going on here? What's the connection, and what does this have to do with reputation, or the new world order of technology?

This book answers those questions. It is a guide to how the present moment in history is in the eye of a very peculiar storm, a deeply indrawn breath by the collective population of our tiny blue and gray planet before we jump into the next stage of global commerce. It's about destroying the unnatural assumption that financial currencies (and their related banking, loan, credit, and other services) are the pinnacle of human commercial development, and not an artifact of a time before the internet. It's about how we're beginning to stop pretending, as a species, that it's normal or even preferable to use money as our sole system of exchange.

This is happening thanks to an influx of powerful new methods of computer intelligence, sensor networks, and social platforms that are just beginning to shake the existing world of financial commerce in favor of a more human form of regulation and currency: reputation.

In the process, our expectations of otherwise ancient methods of exchange — and the technologies now encapsulating them — are leaving us woefully unprepared for the markets that are emerging. Businesses are flailing as they're subsumed by competitors created literally overnight in garages and basements. Traditional models of exchange are being undercut by the sudden appearance of cryptocurrencies like Bitcoin. Marketing and political campaigns backed by extensive customer research are falling flat as those "customers" suddenly vanish into crowdsourced purchasing mechanisms. Entire product categories are eroding into person-to-person exchanges backed by broad, cheap online platforms. At its extreme, consumer groups are starting to appear with the sole purpose of obviating entire markets, armed with the technology, relationships, and networks to actually do so.

Those are just the changes we're seeing in the First World. Meanwhile, the existing financial system that's been so preeminent as a commercial method here has set us up to be seriously blindsided as the rest of the world evolves. While we've been toiling away since the industrial revolution under the illusion that money is the only way to exchange value, the rest of the globe has been getting around their own exchange problems in other ways, often with no participation in financial mechanisms like loans, credit cards, or bank accounts at all. The result is an enormous global network of overlapping markets, trust relationships, unregulated commerce systems, and mixed currencies, every one of which is uniquely derived to represent the individual valuations of its participants.

Until now this rich diversity of methods has languished under the usual panoply of Second World and Third World market problems: communication restrictions, price discovery issues, missing transaction mechanisms, et cetera — all of which made them generally much less efficient than the existing global banking network. And until very recently that was all there was to it.

At the same time, the global technological elite have enjoyed the advent of platforms such as Facebook and Twitter and started finding ways to connect, person to person, at a whole new scale. Then, as the financial systems we relied on became unable to support these platforms, we started implementing workarounds for new kinds of exchanges of our own: cryptocurrencies like Bitcoin to enable more anonymous payments online; eBay seller ratings to allow strangers to buy from strangers with confidence; sites where peers rate each other's ability to answer questions germane to their field, resulting in better job prospects for those who rise within the meritocracy; self-aggregating car services to help people find a cab when their city's "official" taxi monopoly fails to meet demand.

Suddenly, there are a whole variety of emerging marketplaces available to us, all of which use this new, wide web of social networks and the reputation they engender as currency in part of the exchange. This isn't new as a mechanism — it's how most of the world does, and has always done, its business. What's really changed is that for the first time all the limiting factors that have kept these methods underground are being freed of their restrictions of scope and scale. The Internet is just now shaking off a primitive monopoly of financial exchange to allow people to exchange with all the multitudes of methods they have used for most of human existence. The result is massive opportunity in the form of new markets — and an incredible destructive force as consumers begin circumventing traditional business models entirely.

This confluence of global evolution, technically, socially, and economically, is setting us up to either take a terrible fall or make an incredible evolution (or both). The World Wide Web is becoming truly worldwide, and the openness of data and new platforms, and the resistance to regulation and control that are literally coded into them, will rework everything we know about commerce. Just as the twitterati and foreign workers of the world already know — and the 9/11 terrorists carefully avoided — a person's reputation can function as a far more powerful and effective means of ensuring a person's welfare than the machinations of massive, deeply bureaucratic, and highly impersonal institutions. That enlightened self interest is about to reshape commerce as we know it, particularly as the slumbering third world begins to onramp into the technology platforms and exchange systems we're creating in the first via the web.

Welcome ... to Reputation Economics.

# THE STATUS QUO IN A DISRUPTIVE ECOLOGY

So what are reputation economies? It's actually pretty straightforward — they're exchanges that use more...