What Good is a

microEconomy?
Tim O’Reilly quoting William Gibson:

The future is here. It’s just not evenly distributed yet.


Economies aren’t evenly distributed either. We Americans live in a microeconomy that’s so advanced it’s a distant fantasy to most of our fellow humans – 300 million people living like 3 billion. Among us are people who cashed out of their dotcom shares at the right time who live in an even smaller, even more unbelievable microeconomy.

It’s often a matter of luck meeting a remarkable opportunity and a prepared mind. Sabeer Bhatia had an idea he thought was obvious, which he later called HotMail. Why should a web user have to know his SMTP & POP settings to do email? The idea seemed obvious and technically trivial. HotMail “was so inspirational because it seemed like an idea anyone could have.” (link)

HotMail proved to be a self-imagined microeconomy for Bhatia, his partner Jack Smith and VC Steve Jurvetson. So it goes with the most extraordinary microeconomies – they’re magical but not evenly distributed.

If you’re dissatisfied with your microeconomy, it’s because the economy you’ld like to live in doesn’t yet exist for you, though it probably does for someone – an unevenly distributed future.

Alan Kay famously said that “the best way to predict the future is to invent it“. The challenge is to design a user-friendly microeconomy and then distribute it evenly enough that it can touch any life. To build that microeconomy from scratch, what to focus on? Yesterday, I suggested that data is the heart of the problem.

Every economy is data-based. Every database is forms-driven. In our lives, we say or write some things and if they fit a certain requirement, a form is presented to us, filled in, and then our Social Security Number becomes a blip in a database which causes resources to flow in ways dictated by the database rules. Maybe you get a check every two weeks. Maybe you get a phone bill every month.

Most (all?) microeconomies are scarcity-based – they mine a lot of people’s too-scarce cash and distribute it to very few. They’re interesting to us for the same reason the lottery is interesting – not because it makes a difference to so many, but because it makes such a big difference to so few.

Knowing how hard it is to get rich, these opportunistic microeconomies are built to be uneven – their candid goal is to make as much money as possible for a relatively few people, so that’s the purpose of the operational databases they build. Then they build a back office database called an accounting system to collect from the many and distribute to the anointed few.

If our proposed  microeconomy is to be even-handed, it must be built from the inside out, starting with an open source accounting system and then building the open source operational database(s) to handle the actual transactions. As a public microeconomy, there can be no central control and no definition of what work is done by this enterprise, since there’s no enterprise in the usual sense. Instead, it’s a free-for-all where we collectively track the quality of transactions and conduct the marketplace as we would in a village, where all promises and all outcomes are visible to everyone.

Universal Assurance

AT&T’s old slogan, Universal Service, has been realized, but there’s still dissatisfaction with the service we’re getting. What people purchase is not a product or service, but a sense of assurance that it will give them the benefit they seek. Disappointments arise because you pay in advance for everything you get, whether it works as advertised or not. What we need is a transaction protocol so favorable to the customer that it creates an economic ambience of Universal Assurance. Here are the elements of Universal Assurance:

  • All previous customers have thoroughly rated the proposed benefit
  • The seller will deliver the proposed benefit in advance of payment, “on approval”
  • The seller is willing to reduce the price of the benefit to match its worth to you
  • The price you pay is based on the grade you give it once you’ve tried it out

In that microeconomy, you won’t contract for anything unless it’s already been rated highly, which makes it worth the time and effort of trying it out, knowing your own acceptance protects you against unsuitability.

Our microeconomy is designed to be peer-to-peer, so everyone is buying and selling all the time. Our peers’ competence is visible, quantifiable and are tough competition for the “Brand” names. Branding looks pretty weak compared to strong ratings from real customers.

Our next challenge is to teach people how to productize whatever they might offer, whether it’s plumbing, massage, web design or managing your Wall Street Journal subscriptions. Then their skills can be describable, sellable, reputable and worth more next month than they are today.

10:27:50 PM    

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