Hacking the global economy: review of Reputation Economics
Who you know is worth more than what you have. That’s both the subtitle and thesis advanced by Joshua Klein in his new book Reputation Economics. Klein is hacker that will hack anything that moves according to his TED profile. His latest target is the global economy.
Reputation Economics is a disruptive book that challenges all preconceptions of value systems based on economic growth and wealth creation.
In the First World Klein argues that we’ve reduced everything to a monetary value. For much of the rest of the world that’s an almost offensive reduction of the value of a product or service.
Klein sets up his hypothesis provocatively asking the reader to calculate the financial value of their mother.
He makes the case that as traditional financial systems fail, they are set to be replaced by markets based on reputation.
Reputation economies are markets based on a currency other than finance or tokens.
This isn’t a new idea. We’ve had systems of exchange such as barter and direct trade for most of humanity.
Money has served us well as a means of exchange since the industrial revolution but Klein reckons that we’re increasingly set to return to more traditional forms of value, as financial systems and citizens become disillusioned with the state, or operate outside it.
For much of the world this is already the norm.
A return to reputation economies
Systems of trust, barter and trade accounted for 1.8 billion of the world’s population in 2009 according to the OECD. This is more commonly known as the black market or shadow economy and is forecast by the OECD to rise to two-thirds by 2020.
Reputation markets and platforms are starting to operate alongside existing financial systems, such as Airbnb, and Skillshare, to help users get more value from their assets or skills.
Other platforms such as eBay, Etsy and Kickstarter are disintermediating traditional markets and connecting investors with entrepreneurs, and buyers with sellers.
These markets are all regulated by the community. There is no safety-net of social security, taxation or legislation to police discrimination, or the environment.
In this new world Klein argues that money will evolve into a digital currency. Bitcoin is one possible solution.
Bitcoin is a cryptographically derived currency that is irreproducible, does not suffer from inflation, and can be exchanged in pieces down to eight decimal places.
If this is to become a reality Bitcoin will need to be integrated into virtual transactions online and offline. There’s a growing list of 10,000 organisations that accept the virtual currency. Cumbria University is the latest organisation in the UK.
The leveller is technology. Now anybody with a connection to the Internet can participate in an economy.
Only a third of the world currently has Internet access. The geographies most likely to use new reputation based economies are set the come online in the next five to 20 years.
Making the numbers add up
When that happens Klein suggests that it could bring about a complete redistribution of industry and wealth as regional inequalities are replaced by a global meritocratic marketplace.
In the reputation economy participation in a market creates value. It’s the opposite of the traditional capitalist scarcity model.
The reputation economy suggests that our personal interests are best served when they are aligned with the interests of others.
I personally worry for the future of my children’s generation. In the West they face a future of educational debt, low salaries and expensive housing and medicine. The numbers no longer add up.
By contrast Klein provides an optimistic vision. He points out the signposts on the route to the reputation economy that will see a redistribution of wealth and calls on us to join him in the journey.
It’s a vision of abundance, equality and ultimately meritocracy.
Reputation Economics is an important book. It will challenge what you value.