As the Internet continues to make information free, sites like Angie’s list, customer review sites, blogs, forums, and even sites for whistle-blowers like wikileaks, will all start to take a dominant role in the regulation of business.
Reputation and word of mouth are pivotal to businesses, and perhaps one day they’ll be more pivotal than a state license or registration. The purpose of registration and licensure is, after all, to protect consumers and provide them with information about a firm’s legitimacy. This has been a pretty good system so far (though I agree with Milton Friedman that licensure is not unlike the guild system of the Medieval period). I predict that the Internet will effectively replace the need to have practices licensed by the state. While the Internet might not always provide perfect information regarding the safety and legitimacy of a business or practice, neither does a state-issued license.
Internet-powered business regulation won’t stop there. As a society, our behavior and decisions will be influenced by the omnipresence of social media. I believe that as we continue to put our whole lives and the lives of others on the Internet (see first couple posts about branding), we will increasingly find ourselves trying to find the ethical way out of a dilemma. As our lives become more transparent, our selfish desires will be overshadowed by the threat of being exposed.
Think of the impact that sites like wikileaks will have on the future of business. Right now, federal and state regulatory agencies aggressively investigate and prosecute businesses for anticompetitive behaviors like price-fixing and creative accounting. Likewise, there’s organizations like the EPA and the FDA. Their purpose is to monitor products and regulate operations in order to ensure the public’s health and safety. Regulatory agencies are also good, like licensure, but they’re also complex, quite easily bypassed, and they indiscriminately slow all businesses down. They’re also frequently coaxed into protecting one company from another, with overall societal benefit a moot point. A whistle-blower, however, is an omnipresent threat. In any situation, even the most Machiavellian of future managers will have to take into account the very likely threat of being exposed.
An information asymmetry is an economic term referring to a situation in which one party has access to information that another party does not, resulting in some sort of economic advantage to the one who “knows.” Information asymmetry has always been a component of business, and it’s present in all market types; the less consumers know, the more leverage a seller has. The Internet is destroying information asymmetries on multiple fronts.
As mentioned in the previous post, DIY and personal money management sites empower the self with information. At best, these sites teach you how to be thrifty. They show you how to get something done without having to pay a repair shop or consultant. Also destroying information asymmetries are sites like directly.com or pearl.com that offer expert advice. Ebay, Craigslist, Amazon, and Google aren’t DIY sites, but they cut out the search costs in any transaction, and they remove the cost of not knowing you could’ve paid less for something.
My hypothesis is this: as the Internet evolves, the equilibrium price of information continues to approach zero. Finding out how to do things and where to find things are becoming free. Buyers and sellers can find each other easily. This epitomizes the intended spirit of the free-market. It’s as though Adam Smith’s invisible hand has at last been set free to engage individuals in the most mutually beneficial transactions possible.
I debated purchasing a bicycle recently, but opted instead to fix up an old Huffy road bike that had been collecting dust in my parents garage. I don’t think I would have gotten anywhere without helpful sites all over the Internet like Park Tools. Maybe I would have gone to the library and gotten a book on bicycle repair. Probably I would have just ended up paying a bike shop to do it.
Fixing a bike is the tip of the iceberg of what you can teach yourself to do on the Internet. You can use it to teach yourself how to start a business, build a nuclear bomb, or make ice cream using a fire extinguisher. DIY sites all have the same motif: they show you how to achieve some desired end goal with cleverness rather than money.
Mr. Money Mustache, Get Rich Slowly, Early Retirement Extreme, and 4-Hour Work Week are blogs about personal money management, but I see them as extreme DIY sites. Rather than narrowing in on a specific task or DIY project, they discuss and share experiences that empower readers towards more independent, productive, and enjoyable lives. They are embodiments of a kind of DIY lifestyle that is taking hold in our society.
This new sense of self-empowerment is a sign of the rise of proprietism within our society. As our culture begins to popularize the DIY lifestyle, we will feel increasingly compelled to use social media tools to share our own thrifty habits. In other words, promote our brands.
There are some folks who have really embraced their brand and have learned to sell it in both their social and professional spheres. They are the bread and butter of the proprietist movement–the rising army of independent-contract workers. This phenomenon is well covered on the blogosphere (for example by EMSI, and this interesting organization), and in Daniel H. Pink’s “Free Agent Nation,” though the data backing this movement is at times opaque due to the lack of a universally agreed upon definition for free workers. According to a 2011 study by Kelly Services, 4 in 10 workers are “free agents,” who consult, perform temporary, freelance, or contract work, or have their own business, up from 26% in 2008. Most statistics from Kelly and EMSI are pulling data from the US Department of Labor or from the Bureau of Economic Analysis at the US Department of Commerce. Perhaps a thorough meta analysis should be conducted, but I find the data quite convincing.
As of right now, of these independent workers have a craft. They’re web masters, programmers, writers, artists, consultants, and various specialists. Their work is typically needed for one particular project, so from the employer’s perspective there’s little point in hiring them as an employee if they will not have permanent daily tasks. Pink calls this a trend in shorter job cycles.
The movement is enabled by the Internet, and fueled by businesses following outsourcing models for projects.The self-employed lack the security of a constant source of income, and that’s certainly a lifestyle adjustment to be made. The Internet allows many of them work from home. It also helps them find more work, build their brand, and hone their craft.
The Internet makes valuable information free and easily accessible. This empowers all people, self-employed or not, and it is a profound paradigm in its own. Next post will be about the DIY revolution.
In undergrad, I once attended a résumé workshop hosted by business department faculty. They frequently used language that encouraged us, the attendees, to think of ourselves as a product. Our résumés are like sell sheets; they enumerate the benefits* of you and your skillet to your potential customer employer.
This is very similar to the concept introduced in the last post. With a résumé, you promote your brand to the professional world. With a Facebook page, you’re promoting your brand to the social world. LinkedIn’s business model is based on this similarity. Perhaps many of us would like to think of our social selves and our professional selves as two separate brands, but the paradigm of this new world is that they’re inescapably not.
To put it more explicitly, employers can and often do use the Internet to access information about individuals. But we don’t have to fear this; I wouldn’t want to work for an organization that decided not to hire somebody because of a picture of that person spilling their solo cup on their shirts.
The zeitgeist has reached a consensus: networks are the way to get a job. The concept is as old as mankind itself; family and friends have always hired each other, but the Internet has raised our awareness of it considerably. Some may believe their social and professional networks are compartmentalized. If that’s so, I don’t think the challenge in maintaining that separation over the course of their careers would be worth the trouble, but that’s me.
Of course there’s risk to hiring or recommending an acquaintance or a close friend. If he fails, it might inflict a little collateral damage on your own reputation. My opinion is that overall, communication flows easily across friendly lines, and there’s nothing wrong with a healthy bit of social pressure not to fail.
The new proprietist paradigm is this: embrace your brand, and sell it well in both your social and professional spheres.
* “Sell benefits, not features!” -Paul Kurke Sr, a retired and hardened veteran of sales and sales training
Facebook was new when I was a sophomore in college. Back then, the only photo was your profile picture, so you wanted to pick one that made a strong statement about yourself. We proudly advertised our favorite movies, books, music, and political views on our profiles. Zuckerberg’s world was allegedly rather black and white back then; the options for your political perspective were “very conservative, conservative, moderate, liberal,” and “very liberal.”
Facebook users could create a “group,” replete with its own profile picture and the ability to invite members and appoint officers. Facebook groups were on your profile, and they could be anything from a communication hub for real-life organizations (like SGA) to something totally silly. My second most successful Facebook group was “I was peer pressured into Facebook.” I uploaded a picture of an array of illicit substances as the group’s profile picture (which seemed funny to me at the time, and I’d like to think it was the inspiration for the world’s first Facebook/crack cocaine comparison). Facebook took the picture down, and I of course re-uploaded it thinking there must have been some technical problem.
It was exciting. We were exploring a new frontier in which there was no cost to sum up your entire identity in a page and post it for everyone to see. Facebook is much more complex now, and it propagates this sense of individualism just as well as it ever did. Twitter and YouTube are very similar; they give you the chance to market your identity.
Put another way, social media services let you develop and advertise your own personal brand. Your brand is as unique as your fingerprint, and you control how much of it other people see. You can put your brand out there for others to consume; maybe they’ll love you, maybe they won’t. Maybe your brand is so outrageous that people want to show it to their friends, or maybe your brand is so normal that its forgettable. Maybe your brand is inspiring and others will mimic it.
This concept of personal brand is central to understanding proprietism in our society. Next post, I’ll expand upon the concept of personal brand.