When I got started, there were three emerging constructs that really excited me: social lending, peer-to-peer e-commerce, and prediction markets.  As this was late 2008 at the height of anti-market fervor in DC, what struck me about these platforms was that they were essentially distributed marketplaces, largely self-policing, transparent, efficient, community-driven, and enabled by the internet. At a time when much of the political rhetoric focused on how the market had failed, these seemed to be constructs that offered a purer and non-exploitative example of how market capitalism could and should work. Transcapitalist began with this idea – to explore the intersection of technology and free markets – with the presumption that the former had the potential to transform the latter and for the better.

My viewpoint evolved through the course of writing here and discussions with others, but I still think that web capitalism has a lot to offer our traditional view of market dynamics. I’ve summarized my thinking on these topics below, linking heavily to previous posts with more detailed coverage.

In the face of tightened financial conditions, new investing and borrowing mechanisms are emerging ranging from the “personal IPO” to crowdfunding. Peer-to-peer lending remains a viable alternative to banks for both borrowing and lending at small scales with better rates for both sides of the transaction.

Largely in response to the credit crunch and the restrictions of the current financial marketplace, interesting financial innovations emerged over the past few years. We were particularly intrigued by the new concept of selling a percentage of your future income in exchange for a cash investment up front, which I referred to alternatively as the Personal IPO, or “taking yourself public” or “selling your personal equity”.

Another emerging construct which holds promise is crowdfunding. We came out early with enthusiasm for Kickstarter, a platform to match creators and artists with funding through, and we’ve been thrilled to see it take off ever since. The first real example at scale was set by Trampoline which sough to crowdsource its Series B funding. We loved the trend for mobile payments like Square for merchants and Venmo for repaying friends. More troubling financial innovation is on display at eToro which aims to create a “Zynga for real men” in the world of foreign exchange trading.

However the most prominent innovation is in p2p lending which experienced great change over the past two years as they sought to create an entirely new financial product and asset class. The original innovators Lending Club and Prosper Marketplace made it successfully through the SEC process (which at the time was far from certain as Prosper alternatively opened and closed), while promising privacy-focused hybrid upstart Pertuity Direct folded.  What began as a platform to browse individual profiles prone to adverse selection is now a more scalable steamlined dashboard experience to select target characteristics from vetted borrowers in order to create a custom portfolio. Since opening my Lending Club account, my discussions with their team and continuing healthy returns (~10%) encouraged me to expand my portfolio, and I plan to keep up my investments there for some time to come. The appeal of p2p lending is that it is simple and commonsense: by cutting out the middleman of the bank and lending directly, investors earn better returns and borrowers pay lower rates. Why give that spread to the bank? However, even with high interest rates and the credit crunch, p2p lending has not gone mainstream. Uncrunch America was an effort by a coalition of non-traditional finance platforms to encourage people to look beyond the bank, but it’s not clear that the message was heard.

More niche markets also emerged to mixed results. Yadyap (“payday” spelled backwards), which aims to provide an alternative to the payday lending market, has yet to get off the ground.  On the other hand, People Capital has secured significant financing and during my interview with them, they impressed me greatly with their concept of a Human Capital Index to replace the FICO as the credit evaluation metric for young people. Unithrive seeks to connect Harvard students with alumni who can provide interest-free loans. Vittana targets helping students in the developing world.

Internationally, internet-enabled market-based practices are introducing new concepts to traditional international development approaches.

Muhammed Yunus, godfather of the microfinance movement, pointed out that Grameen Bank’s microfinance investments performed steadily through the financial downturn where other lending arrangements failed and could be a means to “return the economy to health”. I keep a small amount of money with MicroPlace, interest-bearing investments in microfinance institutions in Nicaragua and Uzbekistan, which each send me $0.50 or so every month.

In China, p2p lending is a nascent movement, as  CreditEase offers a p2p lending platform to institutionalize informal lending practices, and Qifang employs clever cultural pressures for repayment, including posting the pictures of family members to shame defaulting customers.

I greatly admire Acumen Fund’s approach to international development, which seeks to invest in targeted local ventures, providing an example of a free market solution providing social good. And one of the top startups of the past couple of years is socially responsible outsourcing nonprofit Samasource which encourages you to “give work” through paying the poor to do online tasks.

New e-commerce platforms have the potential to cut out the middleman to directly connect small-scale sellers and buyers, but many remain in the realm of gimmick.

Etsy remains one of the most amazing and promising sites on the web. A destination for handmade goods which defied the odds to become the fastest growing e-commerce site, I covered it a full 20 times. It’s a prime example of an open marketplace, from its open API to the Community Council that brings the buyer and seller community together to talk about the future of Etsy, and it serves the artisan community well. Its blog encouraged me to join the outcry against the Consumer Product Safety Improvement Act, and I argued that the community-enforced handmade standards of the Etsy community were an approach to support, not smother with regulation.

I was an early fan of Groupon with absolutely no idea of how huge it would become just a year and half later, but my opinion now is considerably tempered. Also out there with innovative selling platforms are  the cleverness of Gilt Groupe and the fast purchase decisions made through online sample sales, the scam-like approach of Swoopo, and gaming travel deals on Off and Away.

Crowdsourcing is opening up problems sets previously thought as being too complex for non-“professionals” resulting in more efficient and open approaches.

Netflix set the model for challenge competitions as it successfully crowdsourced the improvement of its recommendation algorithm, setting off a trend within government to procure technology and approaches through contests, saving taxpayer dollars.  Other crowdsourcing projects we enjoyed included:

• Peer-to-Patent, an effort to open the patent examination process to the public, providing transparency to all and improving the process by collaboratively engaging the scientific community in patent right decisions
• The attempt by Freerisk to open up the credit rating process under the principle that own open data and transparent, crowdsourced calculations can provide more accurate risk modeling of the assets that underpin our financial framework
• Crowsourced micro-volunteerism at the Extraordinaries
• Quirky,  a fun place for aspiring product designers to participate in a collective creativity platform and bring real products to the market
• Crowdrise, a combination of social networking and fundraising

However, when I was ambivalent about its application in crowdsourced design sites such as 99 Designs, I received an unexpected outpouring of support from the design community and a simultaneous beatingon HackerNews by those who believed that this was simply a more efficient marketplace. I was less sympathetic to the artists’ cause when they rallied against the Australian government’s decision to seek citizen photos for its website rather than professionals’.

I was generally unimpressed with crowdsourced Q&A sites like Yahoo Answers, Mahalo, and Aardvark; however, Quora seems to be on to something.

Crowdsourcing was also applied in dumb, troubling, or useless ways, including:

• One Book One Twitter, or #1b1t, a crowdsourced book group on Twitter
• “Human Flesh Search Engines” – terrifying, kind of also awesome crowdsourced vigilatism
• Polling for facts regarding terrorism on Sean Hannity’s website

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And finally, the two posts that didn’t fit into any clear bucket, but which were the two most read and commented upon posts on Transcapitalist …

After the first release of classified documents, I came out strongly against Wikileaks with “How Wikileaks threatens transparency”, arguing that its actions threatened transparency where it really mattered: between government agencies. All commenters both on my site and on HackerNews disagreed strongly, but I still stand fully behind my original opinion: with the latest release, we see exactly the closing down of information channels that I feared.

“Markets at Burning Man” explored my personal experience of the gift economy on the playa and the contrast of the commercialism that is in the outside world before and after the event. The post started a fascinating thread on HackerNews by fellow Burners and Burning Man novices alike.

Thanks for reading and keep in touch.

Melody & Anita

Unsurprisingly, one of my most embarrassing moments took place my freshman year of high school.  My dad had motivated me to run a fundraising campaign at school for the Heifer Foundation and I was full of enthusiasm and ideas about fun dances and bake sales that would help our class raise enough money to donate the exciting Gift Ark to a poor African village of our choice. (The Gift Ark donates $5,000 worth of livestock to a poor village so that the villagers can breed, sell, eat, milk, shear, or otherwise use it productively.) 

As it turns out, in order to start my fundraising campaign I had to present my idea to the Student Council—a body of older, much cooler, juniors and seniors.  Needless to say, after my undecipherable mumbling about dancing and buying cows and chickens, the perplexed student council body did not vote to approve my campaign and my idea wafted away.

A decade later I am happy to see that a new site called Crowdrise can make it so that the story above never has to take place; Crowdrise combines social networking with crowdsourcing to provide an innovative fundraising platform.

Of course as Thaler and Sunstein are economists, the arguments are made to emphasize incentives. And because goverments play a critical role (in the shaping) but the fundamental decision is left with the individual,  they refer to this approach as "libertarian paternalism".

Here in the United States, Sunstein is already an adviser to the White House, but I've yet to see any examples of how this theory has been translated to policy. In Britain, the newly-elected conservative government is hoping that Thaler can help effect change initially in the realm of public health, tacking societal challenges such as obesity, alcoholism, and limited organ donation.

The aim of the unit ... is to explore ways of encouraging citizens to behave in social ways relying on market incentives, as opposed to regulations.

This is an approach that I support. In complex arenas such as savings and health, people are bombarded with decisions daily and often take the choice that is easiest or the default rather than thinking about the issue thoroughly. This is human. Governments should recognize this reality, however, and frame these decisions thoughtfully themselves (they are usually the ones to frame them anyhow). It's a public policy approach that's both free-market and smart.

It's a terrific way to visualize the power and impact that is Wikipedia - our collective consciousness and knowledge of information. But it also highlights the an ideological debate about history that the continual editing format of Wikipedia offers.

Of course, through my week on the “playa” I learned that trading is not the point at all. It really is an economy based solely on gifts. The generosity of strangers at Burning Man is overwhelming. Random giving occurs constantly, from the small – I witnessed a guy smoke his last cigarette while the guy next to him, unprompted, took 5 cigarettes out of his own pack to replenish his neighbor’s – to the large – one camp ran a daily steam bath that utilized many hundreds of gallons of water (a critical commodity in the desert) to provide any burner who wanted one, a hot bath and shower. No exchange is equal, yet somehow it all works out collectively.

For a market lover like me, this was a radical concept: nothing has a fair market value. Only 2 items are available for purchase: ice and coffee. Any other commerce is expressly outlawed. Sharing a bottle of wine may gain you a string bracelet or maybe nothing at all. Everyone rejoices in generosity and if you give more than you receive, that feels good rather than annoying. The spirit of giving so permeates your being that you seek the opportunity to give away the most valuable item that you possess there that you do not need for your own survival. All transactions involve the highest level of personal choice.

I left Burning Man refreshed and optimistic about humanity, but a friend of mine described the experiment well: it’s “a perfectly unsustainable utopia”. Back in Reno for my first meal post-playa, we experienced terrible service at a sushi restaurant, demanded to speak to the manager, and ended up with the meal comped. Alas, it took me less than a day to adjust back to my normal self … in the real world, we only pay what things are worth.

The comparison approach, leveraging new behavioral science, is proving to be a startling effective way to convince people to take small steps to be more like their efficient neighbors.

To effect energy savings, Opower targets 2 areas:

• Small changes with immediate impact:  Modification to daily habits, such as turning off the lights when leaving the room or adjusting the thermostat.
• Big changes with long-term impact:  Structural, one-time activities, such as insulating the home or installing EnergyStar appliances.

But by knowing you and your energy habits, it makes targeted recommendations that you are more likely to follow. For example, it won't recommend a large structural change such as insulating your home if you are a renter. This targeting leads partner utilities to broad customer engagement; Opower claims that 85% of customers exposed to the platform take some type of direct action.

I love this type of behavioral approach because unlike efficiency regulations forced by the government, change with Opower is effected by citizens armed with greater knowledge about their own consumption patterns and habits who consciously choose to adjust their behavior. The collective impact is meaningful and it is organic, positive, and self-sustaining.

So, @sarahcuda and the TechCrunch team, next time you talk about DC and its tech scene, let's not look to 1990's AOL but 2010's Opower, a leader in innovative energy efficiency, on track to post $35 million in profits this year.

Luckily, Allie is amazing and this request is credibly reluctant, but still, it is undeniably cheesy, ugly, and has exactly the same look as such requests did 5 years ago. Worst of all for the cause, it is kind of a pain for the reader to go through the PayPal process. As cute buttons have been developed across the web, it's surprising that PayPal hasn't decided to innovate a bit upon their peer-to-peer processing to make micropayments for web content a bit easier.

But this is why I'm glad to see the launch of Flattr, a social micro-payment platform that makes it extremely easy for consumers of the web to not only "Like" content, but actually show some financial appreciation for it. What I love about their model is that participants choose a set budget for each month for their online web consumption, and that amount is divided equally among all of the authors/sites that they choose to "Flattr". So I can commit $10/month for all the ad hoc web content that I consume and if I Flattr 10 articles, then each author will get a dollar. It's a small but tangible way to say, "your content is valuable enough that it deserves more than just to be further shared."

For bloggers, aesthetically, the benefit is that Flattr is an unobtrusive button that you can put next to your Twitter or Facebook buttons without looking desparate for cash. Your readers can simply click without being taken to any other site to confirm the transaction, reducing the barriers to participation. It still remains anonymous and at the time, the reader isn't committing to any set value, so even if by the end of the month I end up Flattring 50 articles and each one only gets $0.20, I don't feel cheap at the time, which may otherwise prevent me from participating at all (for more on this phenomenon, see here).

I see Flattr as a great step forward for content creators and consumers. People deserved to be compensated for good work and consumers are willing to pay to keep the things the value going.

While the Pentagon is still investigating the source of the leaks, media outlets are speculating that they originated on interagency information sharing portals. Wired writes that PFC Bradley Manning, who is already charged with leaking classified documents to a blogger and is under investigation for the Afghanistan leakage, obtained 150,000 State Department cables through a program known as Net-Centric Diplomacy. CBS News is now suggesting that this latest batch of documents may have come from Intellipedia.

It may seem hard to believe, but the type of open sharing of information between government agencies on platforms like Intellipedia is a relatively new phenomenon. The public may gripe that too many documents are classified Secret, but even within government, issues around "need to know" and fear by some officials that sharing information outside their department will lead them to lose control of it has lead to closed information policies. Intellipedia is a small example of the movement to break down knowledge barriers and share information between government agencies (and beyond) in order to effect better outcomes in the field.

The public wants to know more about the decision making behind Afghanistan and WikiLeaks provides a rare direct from the field account (I've griped before that the field reporting from Afghanistan is dominated by contractors rather than Soldiers and Marines due to DoD policies). Some people may argue that WikiLeaks has provided value in this way, but we should consider the collateral damage.

The public also wants their government leaders and those in the field to have the best information available, whether that comes from State, Defense, Commerce, or elsewhere. In this case, a Department of Defense employee may have leaked Department of State classified cables that he was able to access online thanks to open policies. Information security officers across government are probably thinking twice about new initatives to share information both with each other and with non-traditional partners like trusted NGOs and foreign partners. A really bad outcome from today's WikiLeaks news would be a step backwards in inter- and intra-governmental transparency. Our success in Afghanistan depends on open information sharing.

Sadly, not a joke

Square will revolutionalize merchant payments. But for peer-to-peer paybacks, I'm excited about Venmo, a 100% free way for individuals to text each other payments. Users can deposit money directly into their Venmo account or have it pull from their bank. So instead of writing I O U $2.50, I can text Venmo "send Anita $2.50". We're immediately settled up and transactions costs are 0. Lovely.

Upon reflection, I also wonder if the people who participated in the pay-what-you-want with half-to-charity scenario now deduct that amount from their total giving by, for example, deciding against buying a chocolate bar from high school fundraisers. The researcher examined whether net spending in the amusement park was offset by the photo purchases (which it wasn't), but I would be interested to see a survey of the charitable pay-what-you-want participants to see if they offset their future charitable contributions based on that purchase. In that case, the bottom line to charity remains the same - the researcher just found the subset of people (about 5%) interested in charitable giving.