Gift economy – an idea to change the world

We live in a society organized on the principles of scarcity as driver for profit and social recognition. Our free market system works on a pretty simple principle: people exchange goods with each other with the help of a monetary system. As a result the ones that are better at playing this game get more social recognition, live longer, better and attract better mates.

Open markets vs Centralized planning.
Capitalism vs. Communism

The last hundred years proved that the open market is a better response to people’s needs and wants than the communist economic theory. Communism failed to deliver the results it promised. Centralized economic planning eventually lead to mass social movements, frustration and eventual destruction of communist regimes. The communist governments were parasitic in essence, planned the economic development and backed their decisions through military force.

There are still some communist states at the moment and the highest profile is clearly China. With a booming economy one might wonder what did China do and other communist states (such as the former Soviet Union) did not.  First of all, given time, the Chinese regime will have to change its approach to governance. It already started doing so. Right now China is not as communist as we expect it to be. Collective ownership and central planning are rarely found in China’s economy as every business is at least partly private.

Although there is still just a single party, the almighty Communist Party, the economy is a mixture between capitalism and communism, with very few Marxist methods. Local leaders are evaluated based on economic growth indicators and are encouraged to find innovative ways of fostering growth.

Therefore – the one communist regime that did make it is not that communist to start with. Basically the Chinese government managed to reach a smooth transition to capitalism.

We can see that capitalism was a better bet than communism but is there something better than capitalism? I believe so and we can see this in a very old type of economy that resurfaced in the Internet Age: the gift economy.

The gift economy

Think about the the post you are reading right now – you are getting information that was distributed freely. It is hosted on a free blogging platform, developed as open-source software, based on an open-source programming language, having data stored in an open source database. This is an example of how “free” and “open” can happen. You are able to read this because I wanted to share this information with others, some people thought of the idea of hosting blogs for free, some other people contributed freely to the blogging software and some other people developed the tools to make this happen. Asking nothing more in return than gratitude and recognition.

“I can’t buy food with gratitude and recognition”. Of course you can’t but you gratitude and recognition mean prestige and prestige is a very good way to land a good job or deal.

Have a look at what some of the best developers in the world are doing: they write free software, they get recognition, they get people using their free services and then get founded by venture capitalists to expand their software into large companies. Take Facebook for example: it charges nothing, its prototype was built and distributed freely by Mark Zuckerberg. In time the social network made Mark very rich and it all started with a gift he offered to the world.

If you think about it, what we call wealth is basically a recognition of our contribution to the world. We provide a service or product, the price people agree to pay for this is just quantified recognition. That’s basically the whole basis for our current economy.

If we were to take out the monetary system we would basically have a gift economy that would cycle through groups of individuals.

Why did the internet develop a gift economy?

I believe the Internet is not just a technology. It is a world in itself. It has its own rules, its own citizens, its own localized governing groups (highly influential internet users that can provide leadership for their friends or fans). It must develop its own economy. As this economy does not (yet) have a specific largely spread monetary system (we still use offline payment methods) we needed to find a way to address this issue.

Books and ideas as gifts: Paolo Coelho allows people to pirate his work.

Gifts are the solution and intellectual property is exactly the kind of product we can offer without losing anything and at the same time gaining prestige and recognition. Best selling writer Paulo Coelho was talking about piracy and the S.O.P.A. (Stop Online Piracy Act) in some terms we would not expect from someone that makes a living (actually a fortune) from selling his books:

As an author, I should be defending ‘intellectual property’, but I’m not.

Pirates of the world, unite and pirate everything I’ve ever written!

The good old days, when each idea had an owner, are gone forever.
First, because all anyone ever does is recycle the same four themes: a love story between two people, a love triangle, the struggle for power, and the story of a journey.
Second, because all writers want what they write to be read, whether in a newspaper, blog, pamphlet, or on a wall.

If we think about it his actions are actually very sound in terms of business: he wouldn’t sell anything unless people would know about his work. The more people know about his work, the more prone to buying they are. Behavior economics principles state that we care about other people think and we are prone to do the right thing. We know about the writer as we have read his books online. So did our friends. We know that he should get some kind of financial incentive for the work he put into writing the books. The easiest way to do that is to buy the books.

As a result Paolo Coelho, a writer that somehow pirates his own books, has sold more than 100 million books. “This has nothing to do with giving away your work for free” you might think. Yes it does. Uploading a free Russian translation of his book “The Alchemist” resulted in an increase in book sales from 1000 to 1 000 000 books per year.

Shockingly … Africa still has a poverty issue.

Piracy and Gift Economy

Piracy is an issue of great debate this days. Supposedly this form of information sharing is harming the media industry. I guess piracy plays its part. However, piracy is the cause AND effect of increasing knowledge, curiosity and need to access information.

Wealth distribution inequality

Wealth is not distributed equally. Not by a long shot and the gap is increasing fast. Here are just a few facts (Sources: The Conference Board of Canada, Fight Poverty):

  • 42 % of world income is distributed among the first 10% of world’s richest people
  • 1 % of world income goes to the poorest 10% 
  • half the world’s population lives with under 2 $ per day
  • 20% of the population consumes 86% of world’s goods

Those numbers are astonishing and poverty is not going to go  away unless we do something about it. Foreign aids do not help as corruption seems to go hand in hand with poverty. State loans don’t help either as the poorest countries seem to be the ones most prone to impose the repayment of loans to their already impoverished citizens. Humanitarian donations and philanthropic concerts performed by Bono don’t work either as they usually help the ones that need it less: the rich and powerful.

There is however something that does work: education. Studies showed that education is very effective in fighting poverty. Educated individuals improve their own life quality and help economic development.

Empowered, informed, educated

Empowered, informed, educated should be the three words on any agenda that addresses poverty issues. With the proper infrastructure anyone in the world can have access to information that can make the difference between famine and prosperity.

The gift economy can help those in need more than money can. Right now the motivated individual can find all kinds of information online regarding all sorts of topics from survival techniques to quantum physics and advanced health courses.

India GDP Growth
Source: http://www.marketresearchanalyst.com/2008/01/06/indian-civil-aviation-market-posed-for-growth/

Internet is already helping lives. The information should be free if we are serious about addressing world issues. Piracy helps. Software companies are outsourcing their IT departments to countries like India thus lowering costs. Fun fact: piracy rate in India is 64%. Do you see a correlation there? I do. Those people needed to learn  and increase their revenue before they could pay for software. If they would not have had access to software and information they would have never had the kind of skills that allows India to have the economic growth it has (see chart).

Looking at numbers and charts we cannot fully understand the impact gift economy and information sharing has had on countries like India. But think about the numbers of lives that were saved, the millions of people that could afford to eat each day and the impact this has on the future to better understand the bigger picture.

Gift economy is changing the world

Many people are worried about the impact gift economy has, the way information sharing is changing the world. That’s why we are seeing more and more talks regarding things like SOPA, ACTA or other intellectual property management acts. The media is changing, software is changing, access to information is changing and that means less money for those in control right now. It also means a better future, a future where everyone actually stands a chance at living a decent life.

There are 7 billion people in the world right now and the numbers are growing fast. Relying on centralized organizations to improve life is not the way to go. The individuals need to be empowered, informed and educated if we are to survive the next millennium. The gift economy is still in its youth but things are moving fast in the age of Internet. Ideas spread fast and the gift economy is the kind of idea that changes civilizations. As Voltaire said:

“An invasion of armies can be resisted, but not an idea whose time has come.”

Is Facebook trading information with Apple regarding its users? Facebook-Apple partnership?

This is the question that popped into my mind as I saw a Facebook ad leading to an iTunes Album I have previously bought four of songs from (this one). I bought the songs on my iPhone from the iTunes Music store.

I instantly started thinking how could had Apple (or Facebook for that matter) target me so well. I can now see three possible explanations here:

  1. Sheer coincidence. Maybe … just maybe … Apple happened to market that album to the demographic group I happen to be in. Facebook had just shown me an ad pointing to the exact album I had purchased some songs from. Those 4 songs out more that 20 million songs currently available on iTunes. Not very likely, I presume.
  2. Apple and Facebook started an partnership and are now sharing user data. That means that right now Facebook may have access to my contacts, application data I use, purchase history, browsing history and others. Apple has access to my Facebook data, off-iOS related browsing history, Facebook related purchase intent and so on. More likely.
  3. Apple is using data from my Apple account to remarket products on other web platforms. Such as Facebook. This might mean that Apple is not actually sharing data but might be using data collected on the iOS to target users on other platforms. I believe there is an automated marketing system setup on Facebook for ads that run and target users based on their previous purchase history. Very likely
  4. Apple is using application data to target users. Possibly without express consent from the Apple Developers. I use different emails for Facebook and Apple login. This got me thinking about possible data usage by Apple without express consent from Facebook – or other developers. As I believe an integration with Facebook Ads would be impossible in this case without a partnership between the two companies. I would rather rule this one out.

Apple-Facebook partnership highly probable

Having two of the fastest and largest growing technology companies partnering is pretty much amazing in terms of products they could develop. However several privacy and monopoly questions might arise. Apple was part of a privacy controversy in 2010, regarding the iOS 4 privacy policy:

“The revised policy states that Apple has the right to share this information with 3rd parties who provide services to the customer, including advertising and promotion services. Apple also states that “it may be necessary” to provide this [real-time] information in response to “requests from public and governmental authorities within or outside your country of residence or if [Apple] determines that for purposes of national security, law enforcement, or other issues of public importance, disclosure is necessary or appropriate…. Additionally, in the event of a reorganization, merger, or sale we may transfer any and all personal information we collect to the relevant third party.”

The revised policy does not make any distinction between warrant-based and warrantless searches, nor provide what criteria would trigger the sharing of personal real-time information with government entities, nor allow an opt-out for the location-based information.”

Apple, and all the other technology companies for that matter, don’t really deal well with privacy. Mark Zuckerberg is known for stating that the age of privacy is over.

While that might be true and the younger generations are letting go of old-timey privacy concerns I still want my data taken care of with a bit of responsibility. After all I am a paying customer to Apple and not just a target for advertising. While I do appreciate a more contextual advertising as opposed to classic mass communication I believe I and all the other Apple users have the right to share our my information to whomever I choose.

Is there more to the Facebook-Apple partnership?

On one hand we have Apple with more than enough cash than it needs (110 billion dollars to be more precise). On the other hand we have one extremely high potential technology company that might change the way humans interact and is not doing very well on the stock market right now (Facebook stocks have dropped 47% from the IPO and keep going down).

Apple can take advantage on the blow Facebook took on the market and buy stocks that, in my opinion, are sure to rise again. Facebook could do really well with such an unexpected help. Both companies would benefit from such a move:

  • Apple is reaching a innovation plateau and it needs a young, visionary leader or product that might replace Jobs. Facebook and Mark Zuckerberg could fill the gap. Although Zuckerberg is still young and inexperienced he has a certain charisma that could develop in the future. Apple fans need an icon, they need innovation. Also – let’s not forget that Facebook is an one billion users market that Apple could turn into consumers.
  • Facebook is not harnessing the huge potential it has. Facebook gaming, social commerce, mobile are all things that are there but the Facebook team cannot yet capitalize on the growth. Apple is doing really well in all those areas and could share some of the knowledge.

In the end – maybe Apple will not take over Facebook but such a move would benefit both companies and is sure to add at least 10-15 years in the spotlight for them. Unfortunately such a technology behemoth will not be taken lightly by the Federal Trade Commision so the two will have to find ways to find ways to address this.

Mobile phones to help save lives

There are almost 6 billion mobile phones in the world and almost three quarters of these mobile phones are in developing countries. The mobile phones are probably the best connection people of the world have right now. With costs dropping and mobile penetration closing in to 100% mobile phones might be some of the best ways to tap into human behavior, especially in the developing world.

Digicel, the largest mobile operator in Haiti offered anonymized data regarding the post-earthquake behavior of almost 600 000 people. Results were astonishing. Using the data provided scientists Xin Lu and Linus Bentsson managed to create an algorithm that was able to predict with a 85% accuracy where were people going to go after the disaster.

Mister Xin Lu and Linus Bentsson started FlowMinder.org , a place where they can share their research and mobile operator data for NGOs and relief agencies. They believe that the 30 million people displaced by natural disasters can benefit form this and offer Haiti study as a proof of concept.

What are the opportunities and dangers ?

Several uses can be found in working with such data:

  1. Mobile medical assistance – there are places where the patient to doctor ratio is close to 20.000:1 . Using mobile services and self-help information we can states and private companies can setup healthcare automated services that can deliver helpful information to those in need. Moreover such services can help track the appearance of epidemics and evolution of diseases.
  2. Mobile war relief – on most cases war victims are just estimated statistics and data is gathered rather slow. Real time information is of the utmost importance when dealing with war casualties and refugees. NGO’s and relief agencies can quickly get an outlook on the situation and provide assistance where and when is needed most.
  3. Help fight literacy issues with mobile services – Ghana has an adult literacy level of 64% and an mobile penetration of 80.5% . Using mobile services and in the future rich media streamed through smartphones is a quick and cheap way to fight illiteracy issues.
  4. Help setup the base for barter-based markets in developing countries – using classifieds like services through mobile phones governments in developing countries can fight poverty and hunger while at the same time encouraging micro-entrepreneurial movements.

The dangers of  using mobile data

While many positive ways to use mobile services can be found there are several issues that arise such as privacy, ethical usage of data, security of provided data etc. For example – having data publicly available in a natural disaster such as the Haiti earthquake one might wonder how would this kind of data be used by robbers.

Even worse – in such tragic events such as war, public availability of data can, in the wrong hands, result in many deaths and suffering.

I can only hope that in this connected world we will all feel closer to one another, we will be able to put aside our differences and use technology for good rather than personal interests.