The Reputation Economy
Rachel Botsman on how online reputation is becoming a currency
AMP Amplify Festival 2013
Online reputation is becoming a bigger and bigger problem (or opportunity) for organisations and individuals. Rachel is here to open our minds to where this could be going. First, a little on Rachel:
Named by Monocle as one of the top 20 speakers in the world to have at your conference, Rachel Botsman has already presented at high profile events including The Clinton Global Initiative, TED, HP, Google, and No.10 Downing Street.
She received her BFA (Honors) from the University of Oxford, and undertook her postgraduate studies at Harvard University. Her work has taken her to every continent, except Antarctica.
Rachel opens by stating that she thinks reputation will become a currency more powerful than our credit histories. To help paint the picture of what might happen, she asks – what is reputation?
What is Reputation?
Rachel says that people agree reputation is important, but find it very difficult to actually define what it is.
“It’s what people say about you when you have left the room”
Personal reputation is held in the mind, it is intangible but Rachel says this is changing with the access to more and more data.
The Great Trust Shift
From Institutions to Individuals
We’re changing from institutional trust, to peer trust. Power is moving from the centre to the edge. For this to work, we need ways of measuring, new indexes, new ways to capture peer trust.
Startups building reputation systems
Kennell care is a 10 billion dollar industry. Most people dont actually want to put their dog in a kennel though. This startup helps you find a home for your dog whilst you are away, based on space, owner and playmates. When checking out the people to look after your dog, you also shows a reputation index of the owner. So this is using personal reputation to make a trusted marketplace.
This startup is about on demand ride-sharing. This startup recently received $60 million funding. Why? Only been going three months. Why is it working? Because of social, personal reputation system that works two way – the driver is rated by the passenger and vice versa. This company has had legislative problems from incumbents such as taxis, but were able to scientifically show that using their reputation model, it would actually be safer to use Lyft, than traditional taxis.
A travel matching system – match a person with a home with a person looking for somewhere to stay. They have had staggering growth – 10 million nights have been booked. It uses verified identification, and has systems for building personal reputation and peer to peer trust. They have systems to work out does your online identify match your real identity. They also use social connections to help work out who you could trust.
The Reputation Economy
“the currency of the new economy = trust between strangers”
Scientific studies have shown that we are neurologically already wired to think of reputation as currency. We already think of our reputation like money.
Rachel defines that the measure of trust is reputation, which is the sum of what an individual or community thinks of you.
People have started to use online reputation on one platform, as an example of personal reputation for external systems. Rachel uses an example of a friend using airbnb feedback to help obtain a property lease in the real world.
Implicating for Financial Services Industry
If you can use reputation data, and combine it with traditional credit histories, you could create a better picture of what a person is, why they should get that loan or account.
How could you use all this reputation information to assess people differently?
LendingClub – the largest peer to peer lending system, but there are many in this space. Interestingly these systems allow the lender (you) to set how risky a client you want to lend to, and are rewarded with greater interest rate. This peer to peer lending system could really disrupt the banking sector, and it relies on peer-trust.
Rachel closes off the presentation, saying that “We really are in day 1 of the reputation economy”. It’s going to bring more humanity back to business, old market ways of doing things.
This is one of my favourite topics for debate at the moment – the fact that the whole idea of social networks, of peer to peer trust is a new thing. But it’s not new at all – we’ve just forgotten it. Picture the old village, with two plumbers, one is great, reliable, likeable and fair, the other is unreliable and less scrupulous.
The whole village would know who was the most trusted plumber, and their work ethic would be rewarded by getting most of the work. It would be common knowledge who should be first preference. But at some point in our history, we lost the ability to know this information before choosing someone to work with or use.
The change we seeing now, in startups like the ones mentioned above, is just a return to the way we used to be able to know who to trust from those around us. I think it’s great and provides opportunities in every industry.
Thanks Rachel, an awesome talk that was right up my alley!
Thoughts – comments? Hit me up below!