King Ludd #20: Paying for it

The magic of money

cabin cabin

Anyone passingly familiar with poker will recognise the idea that unless you’re playing for money, even a trivial amount, the game is not the same. In certain circumstances you can substitute something of value to the holder which is not money for essentially the same effect, and if you’re of a particularly evil persuasion you can construct a system with all the problems associated with gambling and none of the potential upside for the player.

The point is that money changes things. It indicates that your vote is backed not only by words but by serious intent. This means that if you have an economy where, outrageously, people charge money for services then whole new structures become possible.

For example, imagine Tinder, but as an auction: instead of simply expressing interest in whoever appears, or dismissing them, you give them a price which you would pay to meet. The system would then sort all possible meetings for each individual based on the sum of how much they are bidding to meet the other person and that other person is bidding to meet them. The higher bidder would then pay the difference in bids to the lower bidder, minus some percentage for the operator.

The really neat thing about that mechanism is just how many properties emerge from it. If two parties really want to meet each other and both bid large but similar or equal amounts then they don’t pay the price for it. If the bidding is asymmetrical then the bidder putting in more is going to have to bid enough to compensate for the lack of interest on the other side, and consider that is worth the extra spend.

The practicalities are a bit different, with the idea of implementing the probably necessary escrow procedures enough to put me off. What’s interesting is that so many people will respond to making an explicit link between finance and dating utterly repulsive, even if the implicit links that already exist are much worse. In this case the use of money helps to weed out people that are not serious, which is really the whole point.

A more likely application of the same idea would be business development teams attending conferences. Companies want to discover other companies to work with, and such a mechanism would enable organisers to prepare meetings at conferences which are based on the highest combined expected value from the meeting.

Prediction markets are another application of this idea. In a very real (and, in many jurisdictions, legal) sense they are using gambling data to predict the outcome of an event. Using play money for legal reasons, such markets are increasingly gaining traction within organisations hoping to get more useful insights from their workforce. (See Google here). Use within a single organisation has serious limits though, thanks to the potential for abuse by stakeholders in what is being predicted. An individual on a project may suddenly sabotage it in order to drive the price down, buy up the market, then resolve the problem causing the price to rise. The problem for organisations is this ability to get honest opinions about projects from stakeholders is definitely something you want, but you end up incentivising people for being good at prediction, not for getting their job done.

Finally, there is the whole question of search. Previously I’ve written about the idea of businesses that are just pieces of software running somewhere on the net and conducting all their administration automatically. Android has the famous “Intent” system for enabling apps to discover each other and access their services, but what’s needed is to extend this into the cloud as I described in “What the cloud should learn from Android” to enable our automated businesses to discover and transact with each other without human intervention.

There are several steps to resolve here:

  1. Find potential services which could handle your request
  2. Filter the list based on those you trust (generally by some sort of endorsement mechanism)
  3. Get quotes from the remaining services on how much to execute the request, if they think they can handle it at all
  4. Pick the best quote and go with it

This would all work much better if the person doing the searching is paying, as the search needs to be done in their interest. (The results are to be handled automatically, so there is no benefit to either side in returning anything less than an accurate representative list, as step 3 eliminates any advertising based advantage). The exception would be the seller looking for endorsements, which could be paid for brands not dissimilar to the Better Business Bureau that your agent may choose counts in favour of or against the bid.

Conceivably such a system could be built around a blockchain like mechanism, however, I suspect that some centralised entity will end up dominating this area, and come to control a horrific amount of the global economy. The conflict in such a situation would come down to pricing information. From a macro efficiency perspective you want the prices to be public, enabling the market to stimulate shifts to areas where there is more spending. Really large profits come from exploiting economic inefficiencies, often only temporary ones, so individuals happily doing so will resist having the spotlight being shone on their areas.

Ultimately it’s annoying that our culture has developed such an aversion to acknowledging the positive aspects of a formal economy based on financial transactions. It does not help that the financial world does such a good job of justifying that point of view, however, if we can shake off some of the squeamishness about it there remains a whole world of applications where their very existence is enabled by some side effect of the fact money is involved.


Nigel Birkenshaw runs Atomirex and one day will have enough time to make some progress on Umbrella again.