Escapable Logic

Every society has an economic model which is woven into its cultural structures and biases. Early European societies chose their leaders like wolves do – the toughest, snarliest male ruled everyone who was less nasty, and so forth down the chain of outrage – “the divine right of thugs” (John Perry Barlow). After a while, political savvy and stability counted for as much as toughness, so confidence (and power) became vested in a single family’s line of orderly succession which was always being tested and occasionally altered, but there was a single king at any one time. After that, history has been a gradual spreading of the wealth to more and more participants.

Today there are forms of prosperity which do not depend on one’s place on the Forbes 400 list of jillionaires: most North Americans and Europeans enjoy a standard of living beyond any medieval king’s.

Feudalism’s rule of force

Perhaps the most hierarchical model: In this system, everything and everyone in the kingdom belongs to the king, who shares his rights with nobles on a conditional basis, dividing up the economic production (i.e., game and agriculture) based on what frontiers they protect. As long as they remain loyal, Lord John gets most of the production from one county, called a “shire,” and Lord Alfred from another shire. (The old word for cop was “reeve,” so the lord’s henchman was his “shire-reeve” or sheriff.)

The king and his nobles are woven into a web of wealth but there’s almost no chance for upward mobility for others and very little portable wealth. The system works because each productive person – the serf – is woven into a web of support and is reasonably safe from foreign soldiers. The serf’s only wealth opportunity is as simple as the possibility that his son might join the crusades and be fed and clothed better than dad and end up with a little bit of ill-got plunder.

Aristocracy – the rule of position

Of course, the nobles have children, so the goodies get divided up into smaller and smaller parts, but everything still belongs to the nobility – the only ones woven into a web of wealth. Like the feudal system, technology moves imperceptibly in an aristocratic economy, so there isn’t much of a chance for someone to break into the higher brackets by inventing a steam engine or motorcar. Upward mobility is limited to sucking up to someone higher up the pecking order, so most of the aristocrats hang around the king’s court acting as fashionable as possible. In the case of Europe, the wealth stayed pretty much where it was, although subdividing a little each generation. The common people still had their web of support and could look to warfare for a faint wealth opportunity.

Mercantilism & Colonialism – the rise of mobility

Nobles need fine garments and exotic foods, spices and trinkets to impress each other, so a merchant class rises which becomes the engine for change and possibility for the lower classes. Adventurous souls who colonize and administer foreign lands can win a ticket into the aristocracy by opening new possibilities for power and ostentation for the aristocrats, who retained their exclusive web of wealth. This kind of thing is too rough for the gentlefolk, so there’s a lot of upward mobility compared to feudalism and aristocracy – for those few who are mobile and audacious enough to conquer the seas.

Most of this population led the harsh and hopeless life of their ancestors, but for the first time there was a chance at a slightly less military prosperity by gaining a foothold in the colonies and cultivating new lands – an unintentional shifting of emphasis from conquest to productivity. Naturally, this all depended on the unconscionable, systematic eradication of the rich cultures encountered by the relatively uncultured soldiers and serfs. But, from the viewpoint of those emigrating from the European underclass, colonialism/mercantilism was an unprecedented opportunity.

The possibility of going to a new land was a wealth opportunity which may have been statistically insignificant but was tangible enough to maintain hope, at least for kids or grandkids.

Industrialism – the rise of productivity

For the first time, the extractive kinds of wealth (farming and mining) became less compelling than the transformative kinds of wealth (milling and manufacturing). The wildcard role of technology really started to shine once a novel machine or process could leverage the impact that a given set of resources (capital) could produce.

This is a fundamental shift from those who hold power through their position to those who hold power through their know-how: the statists vs. the producers. Naturally, those who want to rule because of some assumed right to rule did not give up their power gracefully. One could argue that the world wars were the conflicts of the statists vs. the company men. The companies won. Actual wealth started to count as much as position.

Johnny marched home to more jobs, hope and the promise of more upward mobility than ever before. But real wealth? That was hardly a consideration for any but the old aristocrats and the corporate chieftains who owned a piece of their own companies. They were the only ones woven into a new web of wealth – based on the accounting systems of the companies in which they owned stock – rights to a little bit of many others’ productivity. The stock market itself had not yet become a universal wealth machine nor had corporate salaries and stock options skyrocketed. The worker’s wealth opportunity was defined as a slowly increasing paycheck and increasingly accessible homes, cars and vacations. Given the historic options, that looked pretty good.

Corporate Capitalism – the rule of meritocracy

Free-market capitalism is neither aristocracy nor democracy. Its special “ocracy” is meritocracy – those who are most able rise to the top of the pecking orders of multi-national corporations and their management teams, not determined by any static biases of family, ethnicity, national origin, birthright or even gender. But the lack of those perceptible biases doesn’t mean there’s a lack of bias. The bias is for a special blend of intelligence and energy called merit. Most of the significant wealth is managed by corporations which need a steady supply of hungry young tigers with big brains and bigger egoes to attack markets and destroy competition and launch killer products to conquer market segments.

It sounds as brutal as feudalism. The expendable foot soldiers of these campaigns are people from the same social classes as those who rise to the top. The difference may be in their genes – their hearts don’t seem to be in the unending fight – and at some level they know they’re expendable as soon as a wave of re-engineering or acquisition dictates. There’s been a steady increase in the level of commitment, intelligence, energy, ambition and ruthlessness required to rise to the top of any organization, so the few who make it are reaping greater rewards compared to the people who fight in the trenches. And that’s why they’re in the game.

Money, not nobility, is the only way to differentiate oneself from the run-of-the-mill. The stock market wealth engine has reduced the process to a formula: Own stock or options in a company; build the company (perhaps from scratch); buy another company or be bought out; own stock and be perceived as instrumental in building the new organization; buy another company or be bought out… That process builds the winner’s web of wealth. Stock is never given out of generosity, so folks who don’t negotiate hard have a more constrained web of wealth. If they are downsized, they are separated from their web of wealth, perhaps before they have any significant bit of other people’s productivity.

Meritocracy is a profound, perhaps counter-genetic shift. Historically,
those who were woven into a web of wealth maintained a web of support for the many whose productivity they laid claim to. For the first time, technology means that more productivity does not mean more workers. The genetically based contract – that the powerful protect the weak in exchange for their productivity – has broken down. It would never occur to a king or noble (or silver-backed gorilla) to estrange a loyal and hard working serf simply because there were other, harder-working serfs. This all changed with the pervasive application of the Net Present Value calculation.

With no alternative in sight and general agreement that capitalism won the battle of the isms, no one seems to see any alternative but to keep carrying a heavier load each year, like the farmer carrying a calf around each day until he falls under an unsupportable load of bull.

Perhaps this is not the final system. Perhaps there’s life after meritocracy, especially when one observes that the products and services produced by the meritocrats are not always satisfactory. Just because these hard-charging companies are defeating each other in the market doesn’t mean they’re winning customers’ hearts and minds. There’s something about large organizations which squanders most of the participants’ time and energy in producing motion rather than progress. Too often, they seem as competitive with customers as they are with competitors, designing byzantine structures to lock a customer into a complex dependency when all the customer wanted to do was surf the net or call home.
12:57:20 AM    

meretricious? So we see an evolution of the personality types running the show, with today’s rulers seeming to be more like James Spader than Arnold Schwarzenegger. Most of us are dancing to someone else’s tune, whether we’re resentful, accepting or in denial. Even those who seem to be masters of their destiny are usually also caught in the trap of reacting to larger forces.

The interesting question is not who runs the show, but what is the purpose of the show? What force is driving the engine of greed, fear, manipulation and capitulation that circumscribes most people’s quietly desperate lives?

The Tyranny of Net Present Value

All capitalism is based on a single strategic algorithm: calculating the Net Present Value (NPV) of a series of anticipated cash flows by discounting each future cash flow (cf) by a desired annual return % (discountRate) over the period of the expected cash flows:

Why would this dry formula be so important to a design study for a new microeconomy?

The NPV calculation lies at the center of all modern resource allocation decisions.

You may resent it, but all your economic possibilities are defined and constrained by this simple calculation buried in the computers of people you will never meet. It is what they are talking about when people say “Follow the money.”

Philosophers surely regret the idea that the greatest civilization in the history of civilization has been reduced to a single simplistic formula, but that is the case. If in the beginning was the Word, then in the end there’s only the Net Present Value formula. With it, managers and financiers and governments and pension plans compare any set of cash flows to any other set. Then they sell the lower one and purchase the higher one. Even though it ignores the sweep and drama of the rise of civilization, it’s a democratic yardstick. It’s also the basis of meritocracy.

That is the process of “capitalizing” every cash flow, whether it’s an inflow (customer payments and collections, bond yields, corporate earnings) or an outflow (employee salaries and benefits, supplier payables, social security payments). Corporate managements have an uneven track record in growing their revenues but they are masters at reducing their expenses and making optimistic forward-looking statements. A company’s stock market valuation is some multiple of forecast earnings. To increase the value of the shareholders’ (i.e., management’s) stock holdings and options, the best strategy is to reduce expenses, which appears to instantly increase earnings. As available capital exploded in the 20th century, every discernible cash flow opportunity in the economy shows up on someone’s radar screen and is targeted for assimilation or annihilation, whether it’s mom & pop retail sales in rural Arkansas (a Wal-Mart opportunity) or a 48 year-old engineer at Chevrolet (a GM expense).

The logic of meritocracy says that an electrical engineer may be a star at 27 but a liability at 48. This is the basis of the pervasive, subconscious grievance against meritocracy, even when it’s not framed in those terms. The conventional wisdom of the age is that everyone needs to re-train themselves on a moment’s notice to become a software programmer or help line staffer or home health care specialist.

The question is, what is the obligation of an economy to consider and support the preferences of the majority of its participants? Naturally, the “moving hand” school of thought is that the market economy is driving all these choices, and complaining about it is unreasonable, as G.B. Shaw pointed out. Even if individuals can adapt as quickly as proposed and remain employable, they are repeatedly separated from their last company’s web of support and their only opportunity for a web of wealth – often, it appears, by intention. Even when they earn stock worth more than a million or so dollars, they may feel as far from their dream as did some Silicon Valley millionaires before the Big Bust:

“Before there was a Silicon Valley, there was a Santa Clara Valley. This was a place like most places in America. People lived at many economic levels, but most could live comfortably, with some confidence that tomorrow would work out.
“But today, anxiety is everywhere.
“So it is rather interesting that, no matter what their financial status, the people of Silicon Valley all seem to want the same thing. They want a good life. They want their families to be safe from harm, with quality food on the table, a sound roof over their heads and a good education. And they want a secure future.
“Surely, if we can be so clever as to create all this miraculous technology and all this massive wealth, we can create a society that enables a stable and sustainable quality of life for everyone.
          – Here’s the Pot of Gold, Now Where’s the Rainbow?
            (San Jose Mercury News, 8/24/99)

The deeper problem with meritocracy in the corporate age may be that it is judged in a court of appearances no more reliable than the royal palace where the nobles fawned over the king. What appears as merit in the boardroom may not look that way to the customers, flawed as they are with their self-serving yearnings for software that’s yielding and hardware that’s durable and support that’s uplifting. What if tasks were performed in the harsh light of the global market and were rated by the customer before her tears of gratitude or rage are dry?

Super-Meritocracy

It’s possible that some successor to corporate capitalism could allocate people’s time better and reward them more generously, which has happened with every previous shift in economic operating systems. If there were such an improvement, it would have to rise alongside the current system, starting as a minor solution to some pervasive need in the larger system. It might be called the Peer Economy, where you transact directly with your peer and not their company, although you’ve never met nor will, each with absolute confidence in their security and total satisfaction.

The Peer Economy will appear if it has a means to weave webs of support and wealth which cut across corporate borders and are aggregated in the very fabric of the Internet, not locked inside the balance sheets of contending companies with inconstant loyalties to their people and variable reliability in the marketplace. It must depend upon a data structure free of control by any entity, open to all and shared among the participants to any transaction. Until the introduction of XML in 1998, that was technically unfeasible. Today, it is technically trivial.

Xpertweb is a set of mechanics to serve the Peer Economy’s open data requirement.

10:24:26 PM    comment [commentCounter (15)]

Most of us consumers think of products as the object or service we hold in our hand or in our memory after the product is delivered. This is only the expression of the product, not the real deal. The main event is the Value Chain that has moved the product into our possession.

Take a bag of Fritos. Frito-Lay is just the begining and the catalyst for a process that comprises scores of steps and thousands of people, most of whom don’t work for Frito-Lay.

Value Chains are the means by which originators get rich in a market economy – they are combinations of producers, distributors, middlepeople and retailers.

Value Chains have always been hard to forge, defend, manage and collect from, which is why they’re so profitable. The Internet is poised to combine productive individuals into value chains which reward their participants as richly as traditional value chains.

the Xpertweb Manifesto

You probably know that the real rewards in the Fritos product don’t go to the farmers who produce the corn, salt and oil nor to the people in the hair nets who use the machines to produce the critters. That’s because there are so many people ready willing and trainable to do those things.

The money goes to the people who direct the tricky process by which a bag of Fritos* is in your face in so many places, and is recognized by you when you see it.

1. corn grown by the farmer is
2. combined by the combine owner is
3. trucked by the trucker 
4. to the Co-op which buys it in order to
5. sell it to a distributor who 
6. sells it to Frito-Lay (maybe through another distributor) where 
7. it’s made into little curls and 
8. put into little bags made by a bag maker and 
9. put into boxes made by a box maker and 
10. shipped to a warehouse leased from a real estate investor 
11. filled with equipment leased from a leasing company which is
12. owned by an investment group, where it is 
13. re-distributed to regional warehouses (same structuring) where it’s
14. bought by a local franchisee who
15. sorts it into leased route trucks driven by
16. their route driver who
17. stops by each store to arrange the little bags and update the inventory with a 
18. leased handheld computer 
19. programmed by an ISV to
20. make sure the bags and the signs are current and to
21. train the shopholder about the special bonus he’ll get if 
22. you buy a little bag of salty curls this week.

It seems like a lot of commotion just to feed your habit, and we haven’t even mentioned the marketing ziggurat that makes sure the right synapses close when you see the red and yellow bag. Every step along the way the product changes ownership as it increases in price. If the baggie costs you a dollar and the corn and salt and oil cost a nickel, then the Gross Domestic Product increases by about 8 owners x $.45 average price = $3.60 because of the series of sales to get you your $1 bag. There’s probably another couple of bucks in there when you add the pennies paid in marketing and leased real estate and equipment and their financing. Call it $5-6 of GDP to sell the dollar bag.

None of this is news, but it’s usually forgotten in talk about the Internet economy. We all know that productivity is the key to a successful economy, but each of those intermediaries is already as efficient as it can get. The next step is to remove some steps from the chain. But which company and its employees and owners and their congressmen do you think will volunteer to step out of the loop?

That’s why the next step in productivity will be as disruptive to existing value chains as file swapping is to the record labels. The other dirty little secret is that better productivity through disintermediation lowers the GDP. Which administration will get behind that initiative?

Meanwhile, NetFlix has removed several steps from the delivery of movies to the movie watchers, eliminating a lot of jobs and profits. They are the model of how the Internet decimates value chains.

Peer to Peer Value Chains

What’s in it for the Rest of Us? None of those eight transactions report on the satisfaction of the next owner in line. If they did, other distributors or jobbers or farmers would step up to prove their higher quality/lower cost.  Some of these might be loose alliances of experts working like the farmer’s Co-op to consolidate several steps.

Xpertweb requires each user to have a web server and to know how to use a series of specialized forms. It’s no easier than setting up a blog, so it’s still beyond the appetite of the average farmer, combine owner or snack jobber. So every Xpertweb user has a mentor who has used an FTP tool to upload the newby’s files and configured his business preferences. In exchange, the Mentor receives a 1% fee from every transaction made by the new user and from transactions of other new users mentored by his users. Fees never total more than 5% of each transaction which is a lot less than any current value chains, but it’s a little bit of automatic income that few individuals are used to.

Mentorship puts each mentor at the beginning of a value chain of people doing whatever they can get high ratings for. Though the share is modest, the range of transactions is far greater than in any single business. Suppose the farmer mentors his combiner, his trucker, his son and his wife. He might start receiving fees on tasks they perform – combining soybeans, trucking pigs, programming Cisco routers and selling afghans over the Net. If he had become the King of Corn his rewards could only come from the corn business – a riskier kind of automatic income.

So your Xpertweb Value Chain builds itself automatically, one user at a time, extending out over the horizon of comprehensibility: A microeconomy of people who always report quality, beginning to compete, one task at a time, with people and enterprises unwilling and incapable of demonstrating satisfaction at the task level. It’s Darwinism at work.

12:21:20 PM    

After a couple of weeks of jabbering on, I might as well describe what the chatter’s about. This blog is a design study. We’re designing a micro-economy where the details of every transaction are visible and satisfaction of both parties is explicit and archived. Sellers and buyers who build an archive of satisfactory transactions are hugely valuable to each other, so they accumulate a currency of trust that untested parties can’t match. It’s the missing piece that keeps our economy from operating like a village market, where everyone is known to each other, and received accordingly.

1. Buyers and sellers record duplicate data about each transaction: quality, timeliness, etc.
2. Services are delivered before payment
3. Mandatory customer satisfaction grades may reduce the invoice amount
4. The records are open, mirrored and permanent

This design study looks at the current economy and sees what we all perceive – the natural antipathy between sellers and buyers and between employers and employees. The only entities that don’t see this are the sellers and the employers. The economy relies on the collective record of who did what to whom. It’s interesting that those records are always maintained by the sellers and employers and never by the buyers and employees.

Further, the study team is amazed to observe that, in making policy decisions at the company or government level, the only transactional data point that’s publicized is the price (or cost) of things: Price paid vs. costs incurred, yielding earnings. Earnings today compared to yesterday and tomorrow, to competitors and allies. All presided over by an oligopoly of analysts (could the label be more telling?) who read the entrails and determine the fate of huge organizations, all for the maintenance of a supervised lottery of equity tokens unrelated to the companies’ real worth or the value of their teams. The lottery’s supervisors and analysts always do well, yet rarely raise the suspicions of the parishioners.

No one has even commented on the lop-sidedness of the record-keeping and the bizarre limitation on its data type.

So Xpertweb is a data problem, challenging not in its complexity but in its unique architecture.

Not to Scale

Businesses live to keep their data proprietary and to know a little bit about a lot of consumers. They don’t try to know much about each consumer or transaction so their data bases tend to be blindingly fast at presenting uninteresting information.

Information for and about real customers – buyers for whom purchases are customized – must be much more rich and interesting. But they don’t have to be designed to take over the world, so they can be small and not so efficient. For the customer, though the wealth of information can be rich and useful, especially when the customer is getting a copy of her own to use as a lever when she wants some custom treatment.

Armed with that distinction, all the raw materials for a useful design study are available, and that’s our purpose here.

Doing Something About the Weather

Usually writers can only write about reality as it exists rather than as it might become, so usually it can only be a kind of elevated griping. But the Internet does change everything, and it requires only a specialized form of writing to make it work. These specialized writings – code – can be developed at reasonable cost if we know exactly what is our purpose. Thanks to the low-level protocols and standards now in place, we don’t even need to get permission from others to change the world. Apache and Linux and HotMail and Jabber and Radio and Blogger and all the rest have sprouted like weeds by offering something easy enough to fill a need that wasn’t even felt when the first code was released. But good genetic material has a way of prevailing and a micro-community quickly coelesced around each of those nascent standards.

Xpertweb is designed to form a little microeconomy with a better feature set than the larger one it’s planted in. Then we’ll see if the nutrients are suitable.
9:29:43 PM    

John Robb is a prophet who has proven his wisdom, but the BigCos don’t get it, and I wonder if they’re suffering from a structural problem. Today he describes a project he helped create at Gomez where they were able to tie their fees from business clients to their clients’ customers’ satisfaction levels, yielding unprecedented profits.

Here’s John’s formula describing what works:

Focused content –> Trusted decision support —> Performance-based advertising = huge profits

Let’s break it down. Trusted decision support is the heart of this success story. Clients and customers who defer decisions due to, well, indecisiveness, leap into a transaction when they understand the quantified benefit of a prospective purchase. Amazingly, companies are united in their rejection of the simple technique of tracking the measured quality of their transactions. As John reports,

Of course, this isn’t going to happen anytime soon.  Why?  Trust needs to be inserted into the equation.  Trust by customers in the decision making tools.  Trust by media companies that advertisers will accurately report their customer conversions.  Trust by the advertisers that the decision making tools will be objective and not treat them unfairly.  As always, trust is in short supply, but I think that can change.

John believes that web logs and knowledge logs will eventually help us compile the record of trust left by a satisfied customer. I’m interested in the mechanics of capturing the customer’s feelings before the tears of gratitude are dry. Since Trust is the key, the obvious question is…

Who Do You Trust?

Everyone has a great bullshit detector, because we were all children. We’ll accept a remarkable range of rumors as facts, but we carefully filter the facts we trust with our money. Presented with a pitch, we reject it out of hand. Presented with a fact, we assume it’s false if a statement by the seller. If it’s a quote by a previous customer, we listen with new openness. If it’s a statistic reporting the satisfaction ratings of past customers, we take notes and act on the evidence, as John reports. Companies’ failures to report their customers’ satisfaction costs them billions every year. Despite that cost, companies will refuse to report satisfaction because of the risk that even a few transactions will be unsatisfactory. Of course they will, but companies can’t release the illusion that all their efforts are perfect.

So we can’t trust the sellers to report the good, the bad and the ugly, then we have to look to the customer’s records for the truth, but we need a means to compile all customer ratings of a seller into a meaningful overall average rating compelling enough to attract a new prospect. The average rating must be supported by enough detail that the prospect can drill down into the individual tasks’ ratings and customer comments to feel the fabric of the seller’s tapestry of quality. This will require a disciplined but distributed data store comprising all buyers and sellers willing to subject themselves to its rigor and to maintain the data according to an agreed-upon standard. This looks daunting to me, but Xpertweb provides all those attributes in a way that makes it as accessible as blogs are becoming.

There’s never been such a data store, but never before was there a world wide web and XML. Their very existence implies a shared satisfaction data standard.

Brought together, they demand it.
10:56:23 PM    

Any line so attractive and quoted by Adam Curry deserves our attention.

I’m nitpicking to observe that it’s probably not true, but the world’s certainly controlled by C students. Modern organizations demand a grasp of scores of dynamic components – finance, legal, regulatory, marketing, etc. To run such an operation is one of the most demanding roles ever attempted, and Adam would probably concur. In most enterprises, what matters is whether you deliver the goods, not whether the Board thinks you walk on water. The notable exceptions we’ve seen this year are not the majority of businesses.

CEO jobs aren’t popularity contests, except of course for the biggest, toughest job on earth, but Dubya probably wouldn’t have received many C’s either without his connections.

(Digression of the day: “Dubya was born on third base and thinks he hit a triple.”)

Who are those guys?

Ken Werbach looked at the copyright fight and saw two distinct personality types:

Herein lies the conflict between Hollywood and the technology industry in a nutshell.  One sees content as the critical resource, and data networks as simply another mechanism to deliver it.  The other sees connectivity as the essential factor, with movies being one of many resources that can travel along those connections.  Hollywood sees a moral dimension in protecting its property and the creative works of its artists, as well as a nobility in bringing entertainment to the masses.  The tech industry thinks bits are bits, and the only moral value that really matters is freedom.

Werbach is really on to something here. What looks like a straightforward difference of opinion may reveal a deep and fundamental distinction in how people see things and act on what they see. To put a label on them, you might say the content people are part of a type called Pushers and the tech people are Pullers. The Pushers see markets and consumers as targets to be captured and held, a grand game of capture the flag. Pullers pull together the details that fascinate them and don’t think too much about the pecking order they’re trapped in. More interestingly, it looks from here like the Pushers have been running things for-frickin’-ever.

If these are indeed distinct personality types, and Pushers have been running things forever, what if the Pullers are beginning to supplant the Pushers in the power structure? How will it affect the way decisions are made, how resources are allocated, what the society considers fair or not?

Organizations are run by the middle managers who look like they are doing their job and so are promotable. But there’s no task-level quality metric in an organization, so the test is whether an employee is liked and admired by management – a highly personal choice. Who gets picked? The same ‘C’ students who’ve been picked since Junior High. The cool kids.

Be Cool to your School

Remember high school? I recall a fundamental division among my peer group of adolescent males – the cool guys and the rest. The cool guys got the girls and the rest wondered how they did it. The difference was their confidence that they had all the answers that mattered and their mastery of socialization skills and the pecking order. We, on the other hand, made no pretense at being clued in to everything, because we were interested in how things really work, whether it was computers or rockets or math or literature or western civilization, geeky interests that lowered the cool factor. That would be most of the people writing and reading blogs.

Remember how disengaged the cool kids were? They seemed to avoid the details, maybe because it’s a full time job being cool. It requires a kind of social genius and real attention to a vapid but disciplined repartee. Many of the coolest kids really did nothing more than date, drink and all the rest. Their primary discipline was to remain cool, so everything served that expediency. Even when they were very smart, they couldn’t afford to deal with complexity, since their priority was to emerge from every encounter with their coolness enhanced. That’s why they deal in OR logic, not AND logic.

I believe we adopt these archetypes early and they stick with us forever. Think about your own classmates and how they ended up. The coolest guys, if they don’t get sidetracked by booze, drugs or rock ‘n roll, seem to move up the corporate or political ladders with an easy grace beyond comprehension. Their true organizational genius is to get people to do their bidding, which is no mean feat. They’re usually surrounded by can-do Pullers who love being close to His Coolness. Those are the people who actually get things done.

At some deep, tribal level, we resonate with certain personalities and do what they want, whether or not it’s in our own best interest. Those are the personalities who easily engage bosses, senior partners, directors, bankers, analysts and all the other people whose nod puts a career on a fast track. They also fascinate political party workers and voters. They were at the Hamptons this summer and Pullers weren’t.

Revenge of the Nerds

In Mindwalk, Liv Ullmann plays a nerdy nuclear scientist who fears we’ll destroy the world because leaders don’t think through the implications of their initiatives – that we need to think about systems, not expediency. Sure enough, the web erupted four years later and started requiring people to think about systems and how things work under the surface. The Pullers who were good at that designed the Internet and now it’s caught the attention of the Pushers, who don’t have a clue how it works, but have directed the Pullers who work for them to figure out how to dominate their fair share of the Internet.

It may not be possible for Pushers to co-opt the Internet. If that’s true, it could precipitate yet another shift in the personality types that dominate the economy. Each era favors certain leadership archetypes.Todays leaders are nothing like their warlord predecessors, so is it possible the Internet age could change the type again? How could that happen?

Each phase of history has its natural leaders, though I can’t think of any that weren’t Pushers. Monarchies arose due to the divine right of thugs. Leadership of the medieval church went to those who could be simultaneously pious and manipulative, with no relationship to physical strength. The Industrial Age asked for some technical prowess, but no more than the horse- or swords-manship required of an earlier aristocracy. Today’s middle managers are those with a leaning toward finance and corporate structuring, but no more than is required to inspire the Pullers who get things done.

The principle of Procedural Disadvantage is also the principle of Procedural Advantage. In an Internet world, systems people understand how to get things done and their bosses are hostage to the systems the Pullers put together and only the Pullers can maintain. Since creaturtes started organizing for mutual advantage, there’s never been a feedback
quality loop so the group could see if their leaders were making good decisions. The good leaders’ groups prevailed and the bad leaders’ groups died off. Darwinism is a powerful invisible hand, but it’s workings are not obvious to the participants.

With the growth of Procedural Advantage as a visible force, the dynamic has changed forever. When systems fail, we all see it immediately: the switchboard lights up, the web orders stop and the damage is visible to every analyst, shareholder and customer that’s plugged into the system.

Good news for Geeks, Nerds and Pullers everywhere: the Pushers will never stuff the Procedural Advantage genie back in the bottle.
1:49:50 PM    

We’ve been talking about setting up a tipping point by adding a new metric to the single data point that’s interesting to sellers today: what things cost. This is a failure of record-keeping and imagination. Previously, I found myself amazed by the fact that the only datum tracked by sellers is what something costs, or a lot of somethings:

Today’s companies report just one kind of data – price, but they sometimes call it cost. (price received from the buyer, price of all the costs & expenses, and the difference between those prices, called Earnings). That’s all the sellers in our economy care about, and they’re the only ones keeping the data. It’s also the only fact keeping your portfolio above zero.

Cluetrain Rule 1: Markets are conversations. Not about price or costs or earnings, but about quality. If the Internet is going to talk about quality, we need to capture data about quality. Xpertweb does this by capturing quality data at the moment of payment, in the form of a number and a comment. Here’s an example of a $100 Xpertweb transaction:

1. Buyer picks a service
2. Seller delivers the service and invoices the buyer, subject to the buyer’s rating
3. On the invoice, the buyer rates the service 1-99% plus a comment
4. The Buyer’s grade may adjust price
            85-99% earns $100
            50-85% earns $50-85
              1-50% earns $0
5. On a transaction summary form, the seller rates the buyer 1-99% plus a comment

All grades and comments are recorded and permanently visible.

TipWare for the Rest of Us

Why would a seller trust a buyer to give a fair grade when a low grade reduces the buyer’s cost? Probably for the same reason that a waitperson trusts most of her income to strangers’ appreciation of her service. Further, the Xpertweb seller knows the buyer’s grading history before accepting the assignment. That history is a lot more detailed than eBay’s huge rating system, which has had the kinds of problems that may be inevitable with a centrally managed rating system.
11:56:43 PM    

I had lunch with two intelligent women today, my wife Tamara Bavendam and a former student of hers, Soojin Park. They’re both high-functioning physicians, each with their own network of similarly high-functioning friends. We wondered what fraction of people are so pleased with their jobs that they aren’t seeking a better situation. Among Soojin’s circle, she felt less than 30% are satisfied, including herself. Tamara feels that perhaps 10% of people are pleased, again including herself.

We all agreed that Tamara’s estimate seemed more accurate. If we consider the economy as our real-world Operating System, this one has some serious defects for most of its users. Deconstruct the eOS and ask, who programmed this system, and why is it so buggy?

Perhaps it’s because each economic protocol is designed by a seller or an employer. There are two primary relationships in an economy, seller/buyer and employer/employee. When rules or customs are formalized, it is invariably by the seller in a purchase transaction, or the employer in a job situation. Of course not all employers and sellers can make their biases stick, since the other party is free to seek alternative employment or purchases. But in those new circumstances, the rules will also be laid down by the employer and seller.

These protocols are bound to favor the protocol-maker, so we’d expect each transaction to be less than glorious from the viewpoint of the buyer or employee, and that jibes with our collective impression. Since there are more employees than employers, and more buyers than sellers, we should expect the majority of participants to be dissatisfied.

But there’s a disconnect here. All the work is produced by the employees, who are the biggest expenditure in the economy, so most of the money is in their hands as they play their role as the buyers. They have great influence, but their influence is not organized to make the rules of engagement so their transactions remain unsatisfying.

The Xpertweb protocol is aimed at the smallest unit in our eOS, the individual transaction. Xpertweb is designed to expose the quality and history of each transaction to scrutiny after the fact. It’s a laboratory, really, though one that’s designed to be viral enough to grow rapidly. Xpertweb transactions are service-oriented, and it is never assumed the transaction is satisfactory until the buyer says so. Therefore, the service is delivered, no strings attached, to the buyer who must grade and comment on it before payment is due. If the grade is low enough, the price may be reduced, or the work rejected.

What’s to prevent a buyer from downrating a transaction in order to get a lower price? It’s a good question that we’ll look into tomorrow.
8:10:31 PM    

A few years ago I got to wondering about the differences among people – why some live in the Big House on the Hill and some sleep next to a dumpster. I know of no more important issue to examine.

Whatever the reasons for people’s different circumstances, it’s obvious that some people have done things that led them to “better” circumstances. and some have done – or failed to do – certain things, so they find themselves in “worse” circumstances.

What is behind those actions or failings? Are these different people better or worse human beings? What are the habits of thought or action that sculpted their different lives? Several years ago a college president tried an experiment. Fascinated with this question, he went out in old clothes with no wealth tokens in his wallet and lived on the economy for a few months.

On the Economy What an interesting term! It describes a resourceful person without resources (interesting distinction) who lives hand-to-mouth and somehow gets through each day. Are the rest of us “off the economy”? I need to understand where this comes from.

We’re describing the Disadvantaged, those whom middle class Americans are likely to describe as unable or unfit to take advantage of everything our country has to offer. We see them all around us, but we don’t, I think, study the specific nature of their disadvantages.

Are they lazy? Perhaps, but the article about the posing college president reported that he had never worked harder in his life. Are they dumb? Arguably so, but researchers who have followed them around report that they juggle a daunting set of variables – weather, affecting them more than most of us, so reckoned with in a serious way; the various offerings of shelters, and how shelters’ availability varies with demand. Danger on the streets is as real for these people as it is imaginary for most Americans, who melt into terminal dysfunction at the thought of spending a night out here. Could most of us actually do what these people do every day? I think not.

So what, exactly, is the nature of their disadvantage? All I could come up with is that these people are procedurally disadvantaged. For whatever reason, they are unwilling or unable to take the actions which would put them into a halfway house or apartment or starter home. They don’t have a checking account, so obviously they have been unable or unwilling to take whatever actions lead to having a checking account.

That’s a superficial tautology, but it feels like it leads somewhere. As I go through my day, I always feel procedurally deficient – disadvantaged, in a real sense. What is the best way to structure a section 179 deduction on a 1040 Schedule C? Should I lower the price on the home we’re trying to sell? Is it better for my client to expose his entire training syllabus to his web site or keep it close to his vest? I’m not prepared to answer any of these questions, and they sound trivial compared to the life-threatening issues that the homeless deal with.

Facing those confusions, I cannot honestly say that I am more competent than someone who is dealing with being homeless. Can you?

The secret to this riddle must be complexity. The issues many of us deal with seem to be more convoluted and abstract than those faced by the homeless. That’s not to say they require more intelligence, just a kind of fractal symbolic manipulation, like comparing the exhausting subtleties of etiquette faced by a diplomat at the U.N. compared to the demanding real-life tasks managed by an F-18 pilot over Afghanistan (or a C-130 pilot in Vietnam, with which I have some experience).

The Aristocracy of Complexity

So are we ready to say that we have a privileged part of our society dealing with numbingly complex issues that don’t matter, but for which we’re rewarded disproportionately? And that there’s a dark underbelly of society comprising flexible, resourceful, emotional people dealing with danger and deprivation and alienation who have to be extraordinarly aware of the real dangers of their marginal existence?

In short, are we describing how we live today compared with how our hunter-gatherer ancestors lived?

If the difference is simply complexity, how authentic is that complexity? Is it in some sense a contrivance to discriminate among our people to determine who gets the goodies?

That’s the conclusion I can no longer avoid. If you are willing and able to manipulate increasingly complex symbols of decreasing real-world significance, then you get promoted to the next rung on the academic/socioeconomic ladder. If you drop out of that silliness at an early age, probably abandoning whatever native symbolic-manipulation skills you might have, then you are destined for a tackier, scrappier, nastier future.

Even though you couldn’t, you shoulda known.
12:08:21 AM    

Before there was a Bazaar, there was a cave. Socrates, via Plato, said that what we call reality is only flickering shadows on the wall of a cave, cast by the true reality which is forever hidden from our gross senses. The only way to divine the truth is to understand more about how the shadows are cast rather than getting absorbed in the flickers.

We are not what we think we are, nor is anything else as it appears. Dave Winer says things are even worse than they appear.

Plato made a compelling point, lost in the mists of philosophy, and in our day popular media has made a business of literally casting shadows. The fact that most of our knowledge is now based on flickering patterns on screens is an irony beyond comprehension. We may know that the flicker rate is 75 Hz or 30 fps, but we don’t see what the shadows mean. Plato’s teacher, Socrates, was executed for describing his version of the truth to anyone who would listen. Today,David Touretsky finds himself hounded by elders as vengeful as the Greek Olgopoly.

Certainly nothing works the way it seems to – the more we know about anything, the more absurd are the news stories or gossip we hear about it.

So we’re wondering if our real lives have been eclipsed by our ‘productive lives’ – making a business of our lives as the media has made a business of casting shadows. This is an optimistic journal, even when it frets about the wrongs of our current system. Ours is the first system with enough insight to realize how hostile our economic surroundings always have been. Ours is the first economy that has evolved to the point that it’s worth criticizing (tip o’ the hat, Alan Kay).

So we’re all struggling with an economic Operating System (eOS) – one which we are obligated to use, but one which responds better to some than others – as C code does. The good news is that, like computer operating systems, the eOS is getting more user-friendly all the time, opening up possibilities to people who were put off last year by its complexity, but are now able to log on and do something useful, with even more to be empowered next year. Its metaphor is this weblog phenomenon[~]people empowered to build and manage complex websites that were impossible for them a year earlier.

The optimism is based on the inescapable fact that the economy[~]our productive lives[~]is impossible for most people to succeed at this year, but may be trivial to master and manage in a couple of more years. Most people’s economic angst is from feeling trapped by intractable structures requiring permission from harsh masters. Call it the Old Testament economic model. In truth, the economy is just technology mediating the needs of all of us. It’s ours to fix.

Or, we can just sit here gaping at the flickering shadows cast on the glass pane or silver screen in front of us.

The Problem

Now that many of us are accustomed to using a computer, we have a sense of how a computer operating system (the “OS”) can get between us and the application programs which are the real reason we use the machine. The OS is promoted as the bright landscape of promise and possibility, but we know that it’s the OS which often lets us down, encumbered as it is with the baggage of thousands of functions and millions of lines of programming. It’s all conceived and executed by bright kids who love computers, unlike the rest of us who may share neither of those traits.

So it is with our economy. The world seems to be filled with honest, hard-working people who want to be paid fairly by doing work for people just like them who really want the work done. But so much seems to get in the way. The current situation in U.S. medical care is one example of this frustration: most of us respect our doctors and their staffs, yet find ourselves estranged from them by the companies we or our employers have selected to protect us from ailments only the doctors can help with.

Tom Robbins, 1990:

During periods of so-called economic depression, societies suffer for want of all manner of essential goods, yet investigation almost invariably discloses that there are plenty of goods available. Plenty of coal in the ground, corn in the fields, wool on the sheep. What is missing is not materials but an abstract unit of measurement called ‘money.’ It is akin to a starving woman with a sweet tooth lamenting that she can’t bake a cake because she doesn’t have any ounces. She has butter, flour, eggs, milk, and sugar, she just doesn’t have any ounces, any pinches, any pints.(Skinny Legs and All)

What we have here is nothing more than a failure to communicate. Since the fields have corn and children need carbohydrates, why can’t something simple be worked out? In a small village, it often is.

Apparently their eOS is just better than ours.
12:11:54 AM