The Trust Profit

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    

The Mediocrity of Meritocracy

“I think the world is run by ‘C’ students.”
                                 -Al McGuire

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    

Can We All Just Get Along?

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    

Economic Operating System (eOS) Revisited

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    

I am a former patient of your wife’s Dr. Tamara Bavendam from Seattle, WA. I am wondering if you guys still at same address as 2002 then just please send me an email. Thanks.

sushma goyal • 7/17/06; 2:14:55 PM #

I know that this has nothing to do with your article but I am trying to find out what hospital you wife Tamara Bavendam is associated now 05/25/2004. Could you please email me? Thank you so much, I am a former patient of hers and need to see her. Thanks so much!

Cath • 5/25/04; 4:28:50 PM #

I too am a former patient of Dr. Bavendam and would like to know where she is practicing. Last time I saw her, she was at MCP in Philadelphia, and I need her expertise again. Any info would be grately appreciated. Debra A. Schreidl

Schreidl • 8/5/04; 5:56:32 PM #

Procedural Disadvantage

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    

Squinting at the Cave Wall

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    

Back to the Future

The ever-insightful Cory Doctorow reinforces the observation that our economy could stand an upgrade. He cites an abstract of Yale philosophy professor Nick Bostrom’s obscure notion that the odds are 1 in 3 that each of us is living in a computer simulation designed by our future, post-human self. Cory is skeptical:

…if I am a simulation of my pre-post-human self, then why wouldn’t I simulate an environment for me that, generally speaking, kicked more ass?

Why not, indeed?, most people ask. If the economy were designed like a computer’s operating environment, it would surely be more even-handed. Sure, it takes some specialized skill to run a computer, but there’s no one locked in or locked out of some or all of a computer’s features, based on their type of business, education or connections – political or corporate.
6:38:51 PM