Transcapitalist

Most terrifying application of crowdsourcing ever

2010-03-08T04:23:46Z

The term alone is mildly disturbing - "human flesh search" - and its application - vigilatism translated from the online to real-life worlds is terrifying. Simulatenously, it may be one of the more impressive examples of crowdsourcing around. Human flesh searches in China have tracked down individuals accused of wrongs ranging from stomping a kitty to death to instigating the suicide of a young woman based solely on images and videos uploaded to the internet. Intensively active chat room users put together the pieces to identify the wanted individuals' identities and place their personal details online for the community to enact its retribution.

The terror arises from nearly exclusively anonymous chat room participants who spend vast time (60% of users spend over 3 hours/day) investigating supposed crimes committed by people they don't know based upon accusations made by fellow community members who, thanks to psyeudonimity, they also don't know. I have expressed my optimism that the American way of using the internet increasingly based on building a verifiable online identify will encourage more creative expression. Now I'm also relieved that it is unconducive to vigilante mob behavior.

Project to watch: Zafen.org, microfinance to Haiti

2010-03-04T04:21:22Z

Several organizations are making an impact in Haiti in innovative and powerful ways, notably CrisisCommons and Samasource. The latter's CEO Leila Chirayath Janah has a great blog profiling her training activities there and beyond to teach women and refugees how to perform dignified, digital work.

Add to the list zafen.org, a microfinance organization in Haiti aiming to provide support to small and mid-sized businesses. Creole for "it's our business", Zafen seeks to make the remittance process more sustainable. As remittances now account for a quarter of Haiti's GDP and are expected to grow, Zafen believes that there is a more sustainable and less risky way for the Haitian diaspora to invest back in their home country. Rather than sending money to a single known individual, they can now divide it up among many possible projects, reducing risk and spreading the impact.

Coining the term "peer-to-project", the organization is seeking to enable individuals abroad to help job-creating enterprises in Haiti grow and flourish. I've already staked my position that development efforts in Haiti should be about job creation. This may be the organization to help build the economy from the ground up.

Flickr Creative Commons credit: United Nations Photo

Book Review: You are Not a Gadget by Jaron Lanier

2010-03-01T05:42:19Z

The ascendant tribe is composed of the folks from the open culture/Creative Commons world, the Linux community, folks associated with the artificial intelligence approach to computer science, the web 2.0 people, the anticontext file sharers and remashers and a variety of others. Their capital is Silicon Valley...their favorite blogs include Boing Boing, TechCrunch, and Slashdot, and their embassy in the old country is Wired.

Thus Jaron Lanier describes the "cybernetic totalists" or "digital maoists" whose rising influence Lanier fears is leading us down a path of online culture where appreciation for humanity is displaced by blind trust in technology. In You are Not a Gadget Lanier laments recent trends in the online world - belief in the wisdom of crowds, reliance on algorithms for recommendations rather than people, mashups and other piecemeal appropriation of others' content, templated web 2.0 designs - and argues that this failure to appreciate individual expression in the web world may have grave consequences for creativity and culture.

Lanier presents a variety of compelling examples of the web 2.0 platforms that online users now rely upon as well as basic structural elements designed decades ago that help drive to the characteristics that he fears most: fragmentation, anonymity, abstraction, plagiarism, and uniformity. He is most skeptical of many technologists' excitement over tapping into collective wisdom or consciousness: "Emphasizing the crowd means de-emphasizing the individual humans in the design of society, and when you ask people not to be people, they revert to bad mob-like behaviors."

He also strikes hard against the claim that "information wants to be free," focusing on Google's project to digitize the world's books. He fears that if the user interface of this project in the cloud encourages cutting-and-pasting and mashing up, then the result will be like the Bible: an anonymous single book. Such a scenario seems overly hysterical, but I am glad to see a strong stand for the value of content and the people who produce it. I agree wholeheartedly that information does not deserve to be free. But in arguing for a humanistic approach to technology, Lanier laments that "authorship - the very idea of the individual point of view - is not a priority of the new technology." This is hard to defend - the concept of shaping your online identity - one that is not psyeudonymed - and contributing via it online has never been stronger. People use their full names as their Twitter handles, they use their real names as they blog, they create Facebook profiles that connect them publicly with other real people. The movement to me seems to be in the opposite direction than Lanier describes - towards honesty and transparency rather than away from it. Sure, anonymous trolling still exists, but in mainstream online culture, that behavior is nearly universally rejected.

I was surprised that Lanier omitted crowdsourcing from his list of complaints. Given his concern for the "artistic middle class" that he views as assaulted by a file-sharing and mashup culture, I would suspect that he would be sympathetic to the arguments of the NoSpec! movement that lobby for online designers. These anti-crowdsourcers hold that the work of designers is constantly devalued by sites like 99designs that use contest formats rather than an interactive format between client and designer. Such interactions produce two outcomes that Lanier loathes: 1) stale and predictable web 2.0-ish logos and websites, and 2) only a small chance of compensation for the artists who produce them.

The book is a manifesto for humanistic creativity and quality online. He is right that much of the content on the web is repackaged, mashedup junk and he makes some suggestions about how people who contribute to the content of the web can improve it: designing a website that says something about who you are that isn't templated, creating an online video that took 100x longer to make than to watch, and writing a blog post on something you've been thinking about for weeks.

But the point that struck me the hardest and that I have been thinking about since I finished the book two weeks ago was around the web's influence on music. This challenge of Lanier's has inspired me to undertake conversations with every fellow music-lover I know:

Popular music created in the industrialized world in the decade from the late 1990s to the late 2000s doesn't have a distinct style - that is, one that would provide an identity for the young people who grew up with it. The process of the reinvention of life through music appears to have stopped.

Lanier himself is a musician and makes this accusation soberly. As evidence, he points to his own "experiment" to play varied songs to members of the "Facebook generation" and ask them to identify the decade that it was created. His observation is that people can do very well for the decades 1940s-1980s (clearly gansta rap didn't exist in the '50s and Depeche Mode is a definitively '80s sound), but that even true fans have a hard time telling if an indie rock or dance track is from the 1990s or 2000s.

In response, I began furiously attempting to brainstorm examples to prove him wrong. I have failed. Even the bands who I admired in the 2000s for their fresh sound - Arcade Fire and The National for instance - could plausibly be bands that emerged in the 1990s. But later conversations challenged me to view the absence of a single distinct musical style to be an asset rather than a weakness. Online music has opened up access to entirely new worlds of music to its listeners and if that diversity leads to an inability to clearly identify an artist's sound as "characteristic of the late 2000s" then so be it. I blame my terrible taste in music in the 1990s partially on the limits of the taste of my immediate networks and partially on the limits of traditional curators of content at the time. For their weaknesses (which I wrote about recently), Pandora and last.fm still serve as an amazing discovery engine. I am into more diverse types of music than ever before - I am better for it and so are the artists whose music I purchase daily. Yes, I agree that the mashups he critiques are a total bore, but I think that trend has passed. Musicians are drawing upon a variety influences just as they always have but that doesn't make them "retro".

Though I don't agree with some of his conclusions and I could do without some of the grand philosophizing asides of You are Not a Gadget, Lanier's challenges regarding current online culture are provocative and important. There are real weaknesses of online culture worth confronting (especially when we see them penetrating beyond the web as covered in today's NYT article on plagiarism as the new mashup-like "technique" in fiction writing). But what I see now in the rising online communities are people interacting as individuals and striving to engage thoughtfully in content and these trends promise a brighter online future.

Financial innovation that is necessary -- impact investing

2010-02-13T19:42:20Z

Achieving a double bottom line - making financial gains while also contributing to social or environmental progress - is increasingly the objective of many institutions. Individuals are also interested in putting their money to good use financially in ways that they can feel good about morally, as evidenced in part by the rise of practices like peer to peer lending and microfinance.

But while institutions can make meaningful contributions, individuals are constrained by regulations that limit their impact. One such regulation is the "accredited investor" requirement, which requires an income above $200,000. P2P lending, which is small enough to avoid such a requirement, is a powerful platform, but it's hard to see an individual investment really scale when you are looking at loans in $25 and $50 increments.

The truth is that even for large institutions, many of the tools and infrastructure are not there to efficiently move into this new space. The weak traditional framework of credit agencies, market clearinghouses is insufficent to account for this new value, which requires standards for measuring and benchmarking performance. Depression-era regulations meant to protect investors further restrict the move of individuals into this emerging market space.

For a market that allowed all kinds of innovative and creative practices to invent the instruments that led to the recent financial crisis, it is a disgrace that regulations are now preventing the emergence of a genuinely good and transparent new investment framework. This past fall, however, a network of powerful players launched the Global Impact Investing Network (GIIN) dedicated to creating the conditions to achieve a thriving climate of impact investing. The network's members include a variety of institutions including banks (Citigroup, Deutsche Bank, JPMorgan), philanthropic institutions (Bill & Melinda Gates Foundation, Rockefeller Foundation), and the Acumen Fund (which we wrote favorably about a while ago for their free market approach to international development).

From their website,

The GIIN supports collaboration, develops industry infrastructure, and undertakes research and advocacy to foster a coherent impact investing industry. The GIIN's programmatic agenda is rooted in the challenges investors face. It serves as a forum for identifying and addressing the systemic barriers that hinder the impact investing industry's efficiency and effectiveness.

If enabled, impact investments have the potential to scale to provide a genuine complement to non-profit and government efforts to solve world problems. Individuals and institutions are interested in investing in socially good efforts - they just need the legal and regulatory framework that lets them. I hope the GINN helps us get there.

Flickr Creative Commons credit: 10b travelling

The Middle Man can be Good and Sometimes Essential

2010-02-11T22:41:26Z

On this blog we often discuss new models that find creative ways to cut out the middle man and bring greater transparency to the customer. The benefits of disintermediation (coming about increasingly from the internet business models) are straightforward: lower prices for the customer, greater profits for the producer, and more transparency.

But are there negatives to disintermediation? And are there times when the middle man adds significant value?

Middle men are a part of our supply chain because they have a variety of important functions from facilitating better customer service (such as retailers—who wouldn’t like to talk directly to a person as opposed to searching on a website for the answer to your question) to creating an actual market (such as the role of brokers who help buyers and sellers trade at the same price.)

While in some cases eliminating the middle man can create an innovative and valuable business model, in other cases adding a middle man can also be the innovative solution. This is generally the case in underdeveloped markets or in places where a market is completely non-existent, where the middle man is essential for connecting suppliers and customers. Take for example MicroEnergy Credits (MEC), which is an organization that connects microfinance clients with both green technology that reduces carbon emissions and with the actual carbon markets so that they can gather the revenue of their carbon offsets. By standardizing and integrating the numerous small projects, MEC’s intermediation helps to connect the world’s poor to the carbon trading market—something otherwise nearly impossible.

On the other hand, disintermediation seems to work well when it involves tapping the creativity and diversity of the masses. Controversial design contests in which the masses submit various designs to one customer are a great way to increase the number of different design ideas and options for visualizing a brand or concept, and they are able to do this by removing a big middle man (a marketing agency) and putting the client directly in touch with hundreds if not thousands of smaller-scale suppliers (the individual designers.) Etsy and is another example of disintermediation meets the masses to create a successful model.

With this post we would like to ponder the many roles of the middle man and ask the question, of when is intermediation the solution to a problem and when is disintermediation an evolution to a superior business model?

Flickr Creative Commons Credit: AndyRob

An Interview with People Capital: P2P Lending for Education Finance

2010-02-09T13:41:36Z

The limitations of the current credit risk modeling approach – the FICO score – are manifold, but nowhere are they more glaring than the complete inability of FICO to evaluate young people. A system based entirely on prior payment history discriminates against youth who are just entering the financial world. For students seeking to continue their education, and needing loans to get there, the consequences are severe – automatically labeling as a credit risk may shut them out of the private loan market and prevent them from attaining higher degrees, regardless of their potential.

Around this striking weakness of the current education finance market is where People Capital, a p2p student loan platform, is seeking to innovate. I wrote about them nearly a year ago when they secured a major funding round and became further intrigued with their recent announcement of the beta launch of their platform. This past week I had the opportunity to speak with Alan Samuels, their Chief Product Officer, about the company and its fresh approach to credit risk modeling.

Our discussions focused on the Human Capital Score (HCS) – a methodology developed by the People Capital team in conjunction with leading labor economists and academics that provides an alternate measure of credit risk. Alan explained the need for this alternative, saying “there is a world of different between an 18 year old with a poor credit score and a 30 year old with a poor credit score.” HCS seeks to value ability to pay rather than propensity to pay and calculates future income potential based upon a variety of variables including GPA, standardized test scores, college and major. Alan explained that “there is a body of knowledge around early achievement” and the data sets of the above variables – representing hundreds of thousands of individuals tracked through their college experience and after graduation – were pulled into their model. With this theoretical and data-driven underpinning, student borrowers can enter in the necessary attributes into People Capital’s model to receive their HCS, which is used in conjunction with, or in place of, FICO on the site to help lenders evaluate credit risk.

I asked Alan why he thought lenders would participate in the platform, whether the main selling point was social (helping students achieve their goals) or financial (accessing a strong asset class). His quick response was that there is a clear “socially responsible element” that is helping them gain traction with community development organizations and credit unions. He also emphasized the “double bottom line” that can be achieved via the platform for mission-driven organizations that are also looking for a return. Finally, from a purely financial perspective, “student loans typically have a lower default rate and we provide an additional mechanism to improve that” and their construct offers “a slightly different asset class than on Lending Club or Prosper in that the loans are tax-efficient for borrowers (because they can be deducted from taxes) and good for lenders (because they cannot be discharged in bankruptcy).”

People Capital is currently focused on the undergraduate experience, but I asked, given the potential of disruption offered by their innovative risk approach, about their plans for the future and whether they could see themselves transforming the way young people interact with the financial system. Alan responded that the HCS really focuses on future potential and sees possible applications in a variety of spheres, including the recruiting industry to rank the potential of individuals, financial services to serve as a platform for youth, and major purchases such as when young people buy their first house or their first car. I would add that the HCS approach holds promise as a robust way to evaluate individuals who are entering the emerging market of selling equity in themselves.

Something Alan said during our conversation has really stuck with me: “It is shocking that given how expensive college is, people don’t have a more rigorous way to evaluate whether they are going through a good decision process.” Answering my question from a previous post on investing in people, Alan has the data to show that, “the Yale English graduate may be more interesting to talk with at a cocktail party, but the score shows that you have a much more solid income stream from the person who chooses to study engineering at a third tier school.”

The HCS innovation shows potential to greatly improve the current approach to education financing in two major ways: 1) More fairly and accurately evaluating the risk of young people seeking loans for educational purposes; and 2) More robustly challenging future students to think critically about what the education they seek will realistically help them achieve post-graduation before making such an investment in time and debt.

Perils of web taste personalization

2010-02-06T17:15:51Z

Nice variations, but nothing particularly disruptiveI am exhausted of Amazon's recommendations to me. And I'm tired of hearing the same songs continuously on Pandora and seeing such similar music recommended to me by iTunes Genius. In short, taste personalization is feeling constrictive and extremely limited.

It wasn't always this way. Not two months ago, I was writing about how much more music and books I was buying thanks to the wisdom of smart algorithms of recommendation sites. Now I'm beginning to realize that only so many bands sound like The National and there are really only so many books like Nudge that I want to read. In the beginning, "if you like this, you'll also like this" can be a powerful way to find new artists and authors, but eventually this approach limits rather than broadens my perspective.

The value of independent curators of content is rising in my mind. The New York Times 100 Notable Books of 2009 led me to try out Death in Venice, Jeff in Varanasi, a piece of fiction unlike anything in my Amazon browsing history, and I loved it. I'm also now working my way through much of the Modern Library's 100 Best to find recognized, time-tested classics rather than just stuff that I like. I trust the collective (and attributed) criticism of Rotten Tomatoes and ignore Netflix's recommendations. For music, Pitchfork is not a bad option, although my most trusted curators are usually drawn from friends. My father, who works with last.fm, recently argued that I should abandon Pandora if favor of that site because social networking approaches to discovery are more powerful than algorithms. I still would probably just prefer to ask what he is listening to these days.

Smart recommendation algorithms have their place, but I look to music and books to expand my outlook, and I'm realizing that the human connection, whether from friends or prestigious curators I trust, is a better way to get there.

Flickr Creative Commons credit: Laurence and Annie

Rethinking aid to Haiti : An argument for work

2010-01-30T22:05:09Z

The outpouring of charity and aid to Haiti from official government efforts to citizen micro-donations via mobile phone to volunteer web developer Crisis Camps is a powerful testament to human care and outreach in the face of suffering. Recently though I heard a story that I found quite troubling: A friend recounted that his father's long-time business in Haiti is struggling mightily now that the US government response is in full swing. This would not be so shocking post-crisis, except two of this business's core products are buckets and paint, two goods in extreme demand in country right now. The problem? Not only are donated supplies flooding the market, but companies like Home Depot are allowed to mass import their products now tariff-free, significantly undercutting the local businesses.

This is a dangerous way to kick-off the "fresh slate" that many hoped could describe Haiti during its rebirth post-crisis. Sustainability in Haiti requires that Haitians provide for themselves. As Leila Janah Chrirareth of Samasource often says, "work is at the core of human dignity". The US Government announced this week that it is moving from search and rescue operations to recovery. With that transition, we also have the opportunity to move from giving to enabling. Yes, basic help is still required and we should be providing it, but should be creating opportunities for Haitians to rebuild their country themselves.

The US government can take macro-steps to provide advantages to Haitian companies, such as subsidizing firms that employee locals, but citizens can also support Haitian job creation just as easily as mobile giving to the Red Cross. I would recommend two organizations in particular:

Samasource: With the simple tagline of "give work", Samasource is changing the way we think about what the very poor are capable of achieving. Samasource connects women, youth and refugees to meaningful "microwork" via the internet.
Microplace: Like Kiva, Microplace connects lenders to microfinance institutions in the developing world who in turn provide the unbanked with access to financial services. Through small loans of a few hundred dollars, small business owners and entrepreneurs have the opportunity to grow their ventures, creating in their communities. Microplace is partnering with Sevìs Finansye Fonkoze, Haiti’s “Alternative Bank for the Organized Poor" and the largest imicrofinance institution in the country. Fonkoze serves more than 150,000 Haitians with microloans, savings accounts, term deposits, remittances, and credit / life insurance.

Flickr Creative Commons credit: UN Photo

Doubling the p2p portfolio on Lending Club

2010-01-27T04:33:31Z

Since I wrote recently (and critically) of the recent negative articles about p2p lending, I thought it was time to put my money where my mouth was, so tonight I doubled my Lending Club investment portfolio.

Of the initial $1,000 that I invested last month, $250 didn't clear (because loans either fund fully or not at all so if a borrower fails to attract enough investors, the lenders who initially pledged retain their money), so I began backfilling that portfolio. Then I used their investing tool to screen by a few filters - less than 3 defaults in the past 2 years, approved by Lending Club - and create a customized "moderate risk" portfolio. I scanned the 50 proposed notes and eliminated those that seemed particularly egregious. Like last time, "egregious" to me meant poor grammar, failure to answer investor questions, and bad business ideas, such as this gem:

I help executives with 15+ years of experience start their own businesses as solo Entrepreneurs, or "Solopreneurs". After streamlining the setup process and creating an "incubator" that has most of the systems already setup for them, I am now ready to deliver this service via the web using an interactive website. (Emphasis added)

I then filled in the gaps with handselected loans that met my most stringent criteria - verified income, no defaults in the last 2 years - plus an effort to get loans that will clear more quickly - notes that end in less than 7 days. My expected return, accounting for expected defaults, is just shy of 12%.

My standards are rather lower than I thought they would be. I suspect that if I actually knew these people, I wouldn't lend to the majority of them. Maybe I'm being elitist. The questions asked by the lenders also seemed particularly invasive, "e.g., what steps are you taking to ensure that you will not end up in this financial hole again?" I thought about signing up as a borrower as well to see the experience, but now realize that I would prefer not to be so examined by strangers myself.

Still, I'm really excited about my Lending Club investments. I've begun to receive my first deposits and I look forward to continuing to grow the portflio.

Web community of developer volunteers steps in to support USG and NGO efforts in Haiti

2010-01-25T02:41:14Z

The evolution of CrisisCommons just over the past week or so is an amazing example of how much a distributed online community can produce when united behind a common cause. A quick glance at the site reveals 7 new projects in addition to the 11 on-going and released projects, all developed by hundreds of techies across 12 cities in less than 2 weeks.

CrisisCommons co-founder Noel Dickover explains:

"We are witnessing the development of a transformational change in how an average citizen can participate in the crisis response effort. Previously you could only send money. Now, you can directly help in the response. An existing social network of national and international first responders, web 2.0 developers, and NGOs had been established, so the immediate response was just a matter of galvanizing existing relationships."

And to those who doubt the value to the Haiti relief effort of techies creating apps and other IT projects for the field: my Department of Defense client called me earlier this week looking for development assistance for a situational awareness capability that the DoD sought to implement in Haiti. I found Noel on Twitter, put him in touch with client, and now CrisisCommons has a top notch team of developers working directly on the project. This all happened within 2 days. I believe this process, created by Noel, Andrew Turner and the hundreds of CrisisCamp volunteers, is creating an entirely new value stream for relief efforts, delivering major impact.