Who Owns the Future? (39 page)

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Authors: Jaron Lanier

Tags: #Future Studies, #Social Science, #Computers, #General, #E-Commerce, #Internet, #Business & Economics

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Anytime the calculation that led to your marriage is referenced in any way, then a tree of dependencies back to your original provision of data would lead to a nanopayment to you.

For instance, suppose the dating service creates advertisements that highlight the happy marriage of a new couple, a match that was inspired from analyzing the example of your marriage to a greater degree than the examples of other marriages. In that case, you’d be owed something for the reference, and in the event business went up because of the ad, you’d be owed more. Or, if the dating service business model consists of just vanilla monthly dues, then a steady monthly calculation would determine the payment to you.
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When I talk to my Silicon Valley friends about these ideas, they leap into the puzzle of how one would cheat, spoof, phish, or spam such a system. My purpose now is not to present an airtight design. The goal here is to demonstrate that the way we are doing things is not the only conceivable way. In real life, there is no question that setting up a system along these lines would have to be undertaken with great care and patience. It will never be airtight, but might become more beneficial, fun, and easy to embrace than to defy.

A crucial question remains: What are the network finance implications of a romance that goes bad?

CHAPTER 25

Risk
The Cost of Risk

The most basic attribute of a digital network is what is remembered and what is forgotten. In other words, what is entropic about the network?

The second most important attribute concerns risk pools—specifically the granularity of risk pools.

The easiest way to clarify the idea of a risk pool is by recalling a conversation I’ve had many times. I’ll ask, “How much do you think it should properly cost to watch, say, an online video, even though it could be easily copied?” Most people feel it is proper to pay something, but don’t think it should be very much. What feels fair?

The usual answer is “I’d add up how much it cost to make it and then divide that by the number of people who watch it, so we all support it. That would be fair.”

The better answer would be for the people who enjoy the video to expect to pay enough to cover the
risk pool
that financed a batch of videos, some of which were more or less successful. Capitalism and the survival of liberty both depend on people deciding it is proper to pay this higher amount.

Freedom demands accepting the cost of risk. So therefore a venture capital firm has a portfolio. Some of the investments will do great, some will fail utterly, and some will be in between. A movie studio or a book publisher is in a similar game. It’s not so much that the hits pay for misses that are supported out of love or some
other nonremunerative criteria, but that no one really knows what will be a hit.

Internet commerce has evolved with the benefit of a number of free rides that create the illusion that somebody else can always pay for the non-hits, and that we should only have to pay for the hits. Mom and Dad can pay for the production of the first movie, for instance. That way of thinking leads to plutocracy and stagnation.

In a real market, players invest in a variety of bets to cope with uncertainty. By investing in a spread of bets, you increase your chances of supporting not only conventional successes, but also unconventional ones, which might open up new options you had not imagined. This is why most risk pools invest in a scattering of small, weird things, in addition to the more obvious bids for big hits. The oddball startup, movie, or book might launch an important career, or open up a new genre. You never know.

Studios, venture capitalists, and the like earn the scorn of hopeful young people because they seem like gatekeepers. The new “open” systems can offer easier ego boosting for contenders but less material support for risk taking. We’re all poorer as a result.

The current network architecture centralizes money and power in a way that gathers the benefits, but puts the risk on everyone else. In the present era, it’s becoming expected that people will self-fund to the point that they can demonstrate success.

An obvious example is YouTube, where you put up stuff for free. Once in a blue moon, you might get some benefit if you achieve the very highest level of success. So Google essentially gets the benefits of a risk pool without the cost of a risk pool.

This should sound reminiscent of what goes on in networked finance, because it is almost the same pattern. Financial concerns, through the magic of digital networks, can now take risks without paying for those risks, while gaining benefits for successes. It’s sometimes called “too big to fail.”

Essentially what has happened is that a global risk pool has been created, in which everyone must pay for the risk, but the server that skims the pool for benefits is private. This is also called “privatizing benefit while socializing risk.”

Since this is the new model of how to be powerful, it is natural that when you ask people what feels fair in paying for a benefit over a network, an ordinary person will imagine themselves to be in the new kind of seat of power, running the server—and from that perspective it feels right and proper not to have to pay for the risk side of the equation.

Risk Never Really Goes Away

Consider the startup Airbnb.com, which has grown very rapidly and is by all appearances the sort of quick candy investors love the most. It smells like one of those Silicon Valley stories that instantly attract gigantic fortunes.

Ah, but there’s a catch. Airbnb’s business plan is to pretend risk does not exist. The idea is that many people travel, so while they are away there might be a spare bedroom going to waste. The full capacity of the world’s housing isn’t always used to maximum capacity!

So, Airbnb applies the standard playbook to use the power of network technology to optimize the world. It connects people looking for a place to stay with people who have a spare bed in the right place at the right time. The efficiency of the Internet ought to be able to disrupt the hotel industry just like Napster et al. disrupted the recorded music business! The number of available beds in the Airbnb system can quickly outstrip the entire hotel industry, and at almost no cost.

This is classic Silicon Valley thinking. And it works! To a point . . .

After millions of happy engagements, some horror stories started to appear. A woman in San Francisco lent her home to Airbnb visitors who trashed it and stole everything from her, including information to steal her identity.

One of the Airbnb founders wrote on the company blog that the good experiences of millions of transactions shouldn’t be discounted because of a few bad ones. People are basically good, he decried. I agree that people are mostly good, and yet, in a functioning
economy, it is necessary that those millions of good transactions account for the effects of fools, creeps, and just plain randomness.
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This is a universal quality of Siren Servers. I selected Airbnb, but I could just as easily have selected any of the other sites in which people coordinate their affairs efficiently so that some faraway entrepreneur enjoys their money without sharing their risks. Skout, a social network for meeting people, turned out to be the medium for a scattering of rapes of underage users. See
http://travel.usatoday.com/destinations/dispatches/post/2011/07/plot-thickens-airbnb-renter-horror-story/179250/1
, and
http://bits.blogs.nytimes.com/2012/06/12/after-rapes-involving-children-skout-a-flirting-app-faces-crisis/
.

This is how money has to work if it’s to be about the future at all. Criminals and creeps are rare, but the sum of risk is unavoidable.

We like to imagine ourselves as being eternally young, and flowing about in a world of trust. A perfect world, without the tragedy of the biological life cycle, without risk, could run on trust, and wouldn’t need an economy.

Puddle, Lake, or Ocean?

The right question is not whether risk should be paid for honestly by the people who stand to gain from corresponding benefits. That answer has to be “yes.” An open question is “How big should risk pools be?”

If the risk pool is the size of the whole society, then it isn’t really a risk pool at all. This is what happens with Google, Facebook, networked finance, and the other Siren Server schemes. This is precisely the Local/Global Flip.

If each person must be her own risk pool, then we are also back where we started. Then everyone would have to sing for each supper. Material dignity and the middle class would be lost. Risk pools only become meaningful when they are bigger than individuals but smaller than the whole society.

So the quest for sustainable middle classes in an advanced information economy is also the quest for finding the right sort of risk group. This is a Goldilocks problem. Not too big, not too small.

The project here can only be to illuminate a possibility, not solve
all the open questions about it in detail. I would guess that in a functioning humanistic economy, there would be a quite a wild range of risk group types.

But remember, our premise is that only individuals are real. If the risk groups start to function as persons, gaining benefits at the expense of real people, then the project might falter.

Risk groups can invest in individuals, however. Unions invest in apprentices, venture firms invest in inventors, labels once upon a time invested in unknown musicians, and, remarkably, this book is being written in an age when publishers still invest in writers.

The next chapter will propose the use of theatrics to make the funding of risk more palatable in the long term.

CHAPTER 26

Financial Identity
Economic Avatars

As discussed earlier, once people start to rely on networks for a living, there will appear a balance of desires between wanting to earn money and not wanting to spend money. Just as must always be the case, everyone will realize that if we want to enjoy the free agency of being participants in an economy instead of relying on politics alone to deal with each other, we have to accept the price, which is, well, a price.

Right now, we’re used to the familiar dual forms of unsustainable online economic life (fake free and fake ownership). At some point we need to make a transition to sustainable practices in which people are full economic participants in the information economy. But that shouldn’t mean that a transition to a new set of practices must be forced on everyone all at once.

A dictated transition would be rough. But software can help make the transition gradual, voluntary, and smooth. Instead of utopians trying to design the perfect new style of economic life for ordinary people, people will be able to explore an evolving variety of transaction styles to find those that come most naturally.

Another way to express this is that people will be able to choose “economic avatars.” Long ago, I had the pleasure of being the first person to experience being an avatar in an immersive virtual world. When you become an avatar you can become a different creature, like a lion or a Klingon. That concept is entirely familiar now.

In the same way, your interface to the information economy might take on varying qualities, as if you were a different sort of
economic creature. People might even interact with you economically in a different way than you experienced the interaction.

A seller might think that a service or content is being sold on a pay-as-you-go basis, but a customer might experience the same business relationship as if it were a case of “first sample is free.” The network would adjust the interface to transactions so that each person can function within the transaction style they prefer at the same time.

It might sound like a strange idea, but this capability will help make the new economy both more usable by ordinary people and more robust overall.

Economic Avatars as an Improvement on the Forgetfulness of Cash

In old-fashioned economies, the seller usually designs the transaction and the buyer must take it or leave it. That needn’t be the case in an advanced humanistic economy.

Through clever programming, buyer and seller can think in the terms of different transactions and still do business with each other. Just as the cloud can translate between English and Chinese, it can translate between market participants who prefer different kinds of deals.

One reason economic avatars matter is that without them, it will be hard to create incentives and mobility for people in the lower rungs of an information economy. Right now, if a newspaper wants to charge you a monthly fee and you’re poor, you pirate it, or you accept being disadvantaged. If you are poor but hopeful and motivated in a mature information economy, you might instead enter into a transaction type that gives you initial free access to the paper without breaking the economic social contract.
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More complicated events might unfold: You might enter into a risk pool with other aspiring people who have something in common with you. Maybe you’re young aspiring decision reducers, or dress designers, or Bopper mixologists. Once in a risk pool, you’d have a much better shot at attracting investors than as individuals. Maybe then you could issue a bond to the newspaper in order to read it. As far as the newspaper was concerned, you would have bought a normal subscription. The newspaper shouldn’t be required to understand or approve of your economic avatar if you can generate the capital.

That’s not unlike what cash achieved in physicality already, as discussed earlier. Cash allows us to interact without having to reveal everything. Fluid online economics is currently designed for one-sided revelation, however. A new mechanism is needed to preserve the selective bidirectional blindness accomplished by cash, while retaining the benefits of the huge amount of valuable information that can now be harnessed. Cash unfortunately forgets
too
much for an information economy.

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