Defending Humanity Against The Techno-Optimists

I've been involved in tech since the mid-90s, have experienced the rise and burst of many 'bubbles', and have been writing about SiliCon Valley's war on the human race since 2014. But the latest battles involving crypto and AI are proving to be especially dangerous. A cult of 'techno-optimism' has arisen, with a 'manifesto' asserting the dominance of their own self-interest, backed by a well-funded 'political action committee' making targeted political donations. Laws and lawsuits are pending, but humanity has to play a lot harder on defence... To chart a safe route, we must prioritize the public interest, and align technology with widely shared human values rather than the self-interest of a few tech enthusiasts, no matter how wealthy they are.

As Michael Lewis illustrated in The New New Thing, SiliCon Valley has always had its share of people eager to get rich flogging a 'minimum viable product' that leaves awkward 'externalities' for others to deal with. Twenty five years on, we are still wrestling with disinformation and other harmful content that flows from social media platforms, for example, never mind the 'dark web'.

Regardless of the potential downsides, the 'Techno-optimist manifesto' seeks to elevate and enshrine the get-rich-quick-at-others'-expense approach in a set of beliefs or 'creed' with technology as a 'god':

"Technology is the glory of human ambition and achievement, the spearhead of progress, and the realization of our potential." a16z

The techno-optimist creed commands followers to view the world only in terms of individual self-interest, to a point verging on malignant narcissism:

"We believe markets do not require people to be perfect, or even well intentioned – which is good, because, have you met people? Adam Smith: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities, but of their advantages.” a16z

In other words, techno-optimists aren't interested in humanity, good intentions or benevolence. They are only self-interested and believe that you and everyone else is, too. It's you against them, and them against you. In this way, the techno-optimists absolve themselves of any responsibility to care about other humans, because other humans are merely self-interested and technology is the pinnacle of everyone's self-interest. 

The cult only needs to focus on building new tech. 

The only remaining question relating to other humans is whether your self-interest is aligned with the techno-optimist's chosen technology. If not, you lose - as we'll see when it comes to their use of your cryptoassets or your copyright work or personal data where it is gathered among the training data they need to develop AI systems...

You might well ask if there are any constraints at all on the techno-optimists' ambition, and I would suggest only money, tech resources and the competing demands of other techno-optimists.

They claim not to be against regulation, so long as it doesn't throttle their unrestrained ambition or 'kill' their pet technology. To safeguard their self-interest, the techno-optimists are actively funding politicians who are aligned with their self-interest and support their technology, and attacking those who are not... with a dose of nationalism for good measure:

“If a candidate supports an optimistic technology-enabled future, we are for them. If they want to choke off important technologies, we are against them,” wrote Ben Horowitz, one of [a16z's] founders, in a Dec. 14 post, adding: “Every penny we donate will go to support like-minded candidates and oppose candidates who aim to kill America’s advanced technological future.” Cointelegraph

"Fairshake, a political action committee [PAC] supported by Coinbase and a16z, has a $73 million war chest to oppose anti-crypto candidates and support those in favor of digital assets... Fairshake describes itself as supporting candidates “committed to securing the United States as the home to innovators building the next generation of the internet.” Cointelegraph

Nationalistic claims are typical of such libertarian causes (Trump's "Make America Great Again") and invite unfortunate comparisons with European politics of the 1930s, as George Orwell pointed out in his Notes on Nationalism in 1945:

Nationalism is not to be confused with patriotism... two different and even opposing ideas are involved. By ‘patriotism’ I mean devotion to a particular place and a particular way of life, which one believes to be the best in the world but has no wish to force on other people. Patriotism is of its nature defensive, both militarily and culturally. Nationalism, on the other hand, is inseparable from the desire for power... 

A nationalist is one who thinks solely, or mainly, in terms of competitive prestige. He may be a positive or a negative nationalist — that is, he may use his mental energy either in boosting or in denigrating — but at any rate his thoughts always turn on victories, defeats, triumphs and humiliations. He sees history, especially contemporary history, as the endless rise and decline of great power units, and every event that happens seems to him a demonstration that his own side is on the upgrade and some hated rival is on the downgrade. 

But finally, it is important not to confuse nationalism with mere worship of success. The nationalist does not go on the principle of simply ganging up with the strongest side. On the contrary, having picked his side, he persuades himself that it is the strongest, and is able to stick to his belief even when the facts are overwhelmingly against him. Nationalism is power-hunger tempered by self-deception. Every nationalist is capable of the most flagrant dishonesty, but he is also — since he is conscious of serving something bigger than himself — unshakeably certain of being in the right..."

Yet in 2014, Google's CEO at the time, Eric Schmidt, 'warned' us that humans can only avoid the much vaunted Singularity - where computers out-compete humans to the point of extinction - by finding things that 'only humans can do and are really good at'. Ironically, by dedicating themselves utterly to the god of technology, the techno-optimist is actually asserting the 'self-interest' of machines! 

Of course, technology is not inherently good or bad. That depends on their human creators, deployers and users. There's a long list of problems in the techno-optimist manifesto which they claim technology itself has 'solved' but self-evidently has not, either because the technology was useless without human involvement or the problems persist.

And what of their latest creatures: crypto and AI?

While 'blockchain' or distributed ledger technology does have some decent use-cases, the one that gets the techno-optimists most excited is using crypto-tokens as either a crypto-currency or some other form of tradeable crypto-asset. They insist that the technology is so distinct that it must not be subject to existing securities laws. Yet they use the terminology of existing regulated markets to describe roles in the crypto markets that are really only corruptions of their 'real world' counterparts. Markets for cryptocurrencies and cryptoassets are riddled with examples of fraud and market manipulation that were long ago prohibited in the regulated markets. A supposedly distributed means of exchange without human intervention is actually heavily facilitated by human-directed intermediaries, some of which claim to operate like their real world equivalents that safeguard their customers' funds, while actually doing the opposite. The shining example of all these problems, and the numerous conflicts with the participating techno-optimists' self-interest, is the FTX scandal. And there are many others.

As for AI, again there are decent systems and use-cases, but the development of some AI systems relies on huge sets of 'training data' that would be prohibitively expensive to come by, were they not simply 'scraped' from the internet, regardless of copyright or privacy concerns: the technological equivalent of toxic waste. The creators of several of these 'open' AI systems defend their activity on techno-optimist grounds. Midjourney founder David Holz has admitted that his company did not receive consent for the hundreds of millions of images used to train its AI image generator, outraging photographers and artists; and OpenAI blithely explained in its submission to a UK House of Lords committee:

“Because copyright today covers virtually every sort of human expression – including blogposts, photographs, forum posts, scraps of software code, and government documents – it would be impossible to train today’s leading AI models without using copyrighted materials.”

So, there we were in 2014 being warned to be creative, but it turns out that the techno-optimists believe that your self-interest and the rights that protect your work can simply be overridden by their 'divine' self-interest. 

Needless to say, many humans are not taking this lying down (even if some of their governments and institutions are).

In January 2023, illustrators sued Midjourney Inc, DeviantArt Inc (DreamUp), and Stability A.I. Ltd (Stable Diffusion), claiming these text-to-image AI systems are “21st-century collage tools that violate the rights of millions of artists.”  A spreadsheet submitted as evidence allegedly lists thousands of artists whose images the startup's AI picture generator "can successfully mimic or imitate." 

The New York Times has sued OpenAI and Microsoft for copying and using millions of its copyright works seeking to free-ride on its investment in its journalism by using it to build 'substitutive' products without permission or payment.  

Getty Images has also filed a claim that Stability AI ‘unlawfully’ scraped millions of images from its website. 

Numerous other lawsuits are pending; and legislative measures have either been passed (as in the EU and China) or regulators have been taking action under existing law (as the Federal Trade Commission has been doing in the US). 

Meanwhile, the right wing UK government has effectively sided with the techno-optimists by leaving it to 90 regulatory authorities to try to assess the impact of AI in their sectors, and even cancelled plans for guidance on AI copyright licensing that copyright owners had requested. 

As the Finance Innovation Lab (of which I’m a Senior Fellow) has pointed out, the AI governance debate is dominated by those most likely to profit from more AI - and the voices of those who may be most negatively impacted are being ignored. Government needs to bring industry, researchers and civil society together, and find ways to include the perspectives of the wider public. To chart a safe route forward, it is essential that we prioritize the public interest, and align technology with societal values rather than the self-interest of the techno-optimists. 

Commercially speaking, however, there's also the point that consumers tend to reward businesses that act as 'facilitators' (who solve our problems) rather than 'institutions' (who solve their own problems at our expense). Of course, businesses can start out in one category and end up in another... The techno-optimists' commitment to their own self-interest (if recognised by consumers) should place them immediately in the second category.

Meet The Schadenfreuders

As the majority of voters in the western liberal democracies - ironically labelled the "liberal elite" - work their way along the 'change curve' after shocks like Brexit and the rise of Corbyn, Trump and others, their initial shock, denial, anger and blame is giving way to resignation and acceptance... and with it a little pleasure at the growing misfortunes of the 'winners'.

I'm the first to admit that the premise of "Lipstick on a Pig" was that 'people power' would be wielded more wisely than the power of the institutions they topple.  Yet I also pointed out that we are badly short of scepticism, that democracy should be a messy process, and that greed and stupidity are still winning. Pragmatism, after all, is not a destination but represents the constant struggle of "intelligent practice versus uninformed, stupid practice".

So it's all part of the familiar trends toward greater personal control that the Brexiteers can't agree what Brexit means; Corbyn is not proving the electoral champion that his supporters had believed; and Trump has had to concede that the US will in fact pay for any 'Wall' along its southern border, in the hope that Mexico will pay later... 

In other words, the recent populist 'victories' have merely wrung the same old institutional failings out of the same old political parties. And those who fell for the latest examples of 'stupid practice' will need to learn that lesson before we will begin to see the triumph of intelligent practice from genuine 'facilitators'. 

The question is how many more opportunities for schadenfreude there will be in the meantime...

I love the Germans. They've got a word for everything (as Nigel Farage will surely know).

Will You Share Your NHS Records?

You may have received a letter from your local NHS trust, giving you the chance to opt out of the NHS plan to share your health records with Big Pharma and others. 

I've found the process incredibly light on detail about how your data will actually be used, and I don't see how it can be said that any consent you give this way is fully-informed. You can't be expected to give a single 'yes' or 'no' for all your records in such a wide variety of circumstances. 

The issue of consent is not only a question of privacy, but also a question of the value that Big Data derives by exploiting your data without recompense, as explained here. The NHS scheme is just another Big Data play that takes a free ride on your data, and nowhere near the kind of mutually beneficial and trustworthy ecosystem that it's possible to construct today.

For instance, with your own data account you would be able to receive a request to use some of your health records for each specific project. You might choose to 'donate' some of your anonymised data to help find a cure that will be available to everyone at cost price. But you might put a high price on your data if it is to be mined by Big Pharma to create a premium branded drug. 

Hell, for enough dough you might even add your name and a nice photo!

Such a system would not need to be created specifically for your health records, nor paid for by the NHS. In fact, given the NHS record on technology projects it would be best developed by others.

At any rate, I plan to opt out of sharing my health records until the NHS cooperates with a more flexible, user-centric system.

P2P Goes Cloud-to-Cloud

In Part 2 of my response to Google's 'computers vs people' meme, I explained that humans can win the war for economic control of their data by transacting on peer-to-peer marketplaces. That's because the P2P platforms don't derive their revenue primarily by using their users' data as bait to attract advertising revenue. Instead, they enable many participants to transact directly with each other in return for relatively small payments towards the platforms' direct operational costs, leaving the lion's share of each transaction with the parties on either side. This post covers some technological developments which move the P2P front line deep into Big Data territory.

Perhaps the ultimate way to avoid Big Data's free ride on the ad revenue derived from your data is to cut your reliance on the World Wide Web itself. After all, the Web is just the 'human-readable' network of visible data that sits on the Internet - just one of many other uses. As I've mentioned previously, having your own pet 'open data spider' that gathers information based on your data without disclosing it would transform the advertiser's challenge from using Big Data tools to target you with their advertising, to enabling their product data to be found by your spider as and when you need it.

But that would not necessarily solve the problems that arise where your data has to be shared.

Fortunately, all but the most hardcore privacy lobbyists have finally moved beyond debating the meaning of "privacy" and "identity" to realise two important things. First, 'personal data' (data that identifies you, either on its own or in combination with other data) is just one type of user-related data we should be concerned about controlling in a Big Data world. Second, it's critical to our very survival that we share as much data about ourselves as possible to the right recipient in the right context. The focus is now firmly on the root cause of all the noise: lack of personal control over our own data. 

Perhaps the leading exponents of this turnaround have been those involved in the Privacy by Design initiative. As explained in their latest report, they've become convinced by a range of pragmatic commercial and technological developments which together produce a 'personal data ecosystem' with you at the centre. You are now able to store your data in various 'personal cloud' services. 'Semantic data interchange' enables your privacy preferences to be attached to your data in machine-readable form so that machines can process it accordingly. Contractually binding 'trust frameworks' ensure data portability between personal clouds, and enable you to quickly grant others restricted access to a subset of your data for a set time and revoke permission at will. The advent of multiple 'persistent accountable pseudonyms' supports your different identities and expectations of privacy in different contexts, allowing for a lawful degree of anonymity yet making your identity ascertainable for contractual purposes. You can also anonymise your own data before sharing it, or stipulate anonymity in the privacy preferences attached to it, so your data can be processed in the aggregate for your own benefit and/or that of society.

All that's missing is a focus on determining the right value in each context. I mean, it should be a simple matter to attach a condition to your data that you are to be paid a certain amount of value whenever Big Data processes it. But 'how much'? And are you to be 'paid' in hard currency, loyalty points or cost savings?   

The ability to put a value on your data in any scenario is not as far away as you might think. The Privacy by Design report notes that the personal data ecosystem (PDE) is "explicitly architected as a network of peer-to-peer connectivity over private personal channels that avoid both information silos and unnecessary “middlemen” between interactions."

Sound familiar?

As explained in the previous post, P2P marketplaces already enable you to balance your privacy and commercial interests by setting a value on your data that is appropriate to the specific context. Your account on each platform - whether it's eBay or Zopa or one of many others - is effectively a 'personal cloud' through which you interact with other users' personal clouds to sell/buy stuff or lend/borrow money on service terms that leave most of the transaction value with you and the other participants.

The wider developments in semantic data interchange, trust frameworks etc., that are noted in the Privacy by Design report enable these clouds or marketplaces to be linked with other personal clouds, either directly or through the 'personal information managers',  as envisaged in the Midata programme. 

Ultimately, we could use one or two personal information managers to host and control access to our data and derive income from the use of that data by transacting on different P2P platforms dedicated to discrete activities. Not only would this make it simpler to understand and verify whether the use of our data is appropriate in each context, but it would also enable us to diversify our sources of value - a concept that is just as important in the data world as it is in financial services. You don't want all your data and income streams (eggs) in the one cloud (basket).

The Privacy by Design report claims that "all these advancements mean that Big Privacy will produce a paradigm shift in privacy from an "organisation-centric" to a balanced model which is far more user-centric".

I agree, but would add a cautionary note.

In the context of the 'computers vs people' meme, I'm concerned by references in the report to "cloud-based autonomous agents that can cooperate to help people make even more effective data sharing decisions". Has Privacy by Design been unwittingly captured by the Singularity folk?

I don't think so. Such 'cloud-based agents' are ultimately a product of human design and control. Whether the technologists at the Singularity University choose to believe it or not, humans are in fact dictating each successive wave of automation. 

At any rate, we should take advantage of technology to keep things personal rather than submit to the Big Data machines.

Humans Win In The P2P Economy

There's been a lot of heat rising from Google CEO Eric Schmidt's recent assertions about a "race between computers and people" that obliges people to avoid jobs that machines can do. Initially, I suggested this was somewhat disingenuous, given the belief amongst the Silicon Valley elite that machines will achieve the 'Singularity', a state of autonomous superintelligence in which point they will outcompete humans to the point of extinction. Merely pushing people into a narrower and narrower range of 'creative' jobs only furthers that cause, since their creative output attracts the vast advertising revenues Big Data needs to build ever smarter machines.

But I also suggested there's an antidote, and today I want to focus more on that.

Not all Internet platforms finance themselves primarily by using free content as bait for advertising revenue. Since eBay enabled the first person-to-person auction in 1995, the 'P2P' model has spread to music and file sharing, voice and data communications, payments, donations, savings, loans, investments and so on. There are now too many such platforms to list. Even political campaigning has become a person-to-person proposition. In Japan a person can offer to care for another person's elderly parents in his city, if someone else will care for his own parents in another.

Like their meat-space counterparts - the 'mutual society' and the 'co-operative' - online P2P platforms enable people to transact and communicate directly with each other in return for relatively small payments towards the platforms' direct operational costs of facilitating the connection. The P2P model vastly limits the need for advertising, since the platform either enables participants to find each other or automatically matches and connects them using the data the participants enter. Through central service terms, each participant agrees with the others how the platform works and how their data is to be used. Typically, every participant has their own data account in which they can view their transaction history. Some platforms will allow that data to be downloaded, along with all the transaction data on the platform, and this is to be encouraged. Low charges make this a high volume business, like Big Data, but platform operators are able to achieve profitability without commanding the lion's share of the margin in each transaction. This helps explain why eBay is solidly profitable but has a lower market capitalisation than, say, Facebook or Google. It's a leaner intermediary - a facilitator rather than institution. That Wall Street attaches a lower value to a comparatively democratic and sustainable business model tells you all you need to know about Wall Street.

Google and Facebook might argue they are a kind of P2P platform. But aside from a few services, like App sales, they don't directly facilitate the negotiation and conclusion of transactions, so they cannot justify a transaction fee. Perhaps they might say they own the web pages and the servers or virtual 'land' on which their advertising is displayed. But that doesn't ring true. They provide the tools for users to create web pages, but if users did not build them there would be no facade on which to display ads, and no one to look at them. Besides, the supply of creative tools is a one-off, while users supply limitless amounts of data in return. Meanwhile, the advertising revenue that was once merely enough to sustain the Big Data ecosystem now dwarfs the value derived by all participants except the platform operators themselves. Any essence of mutuality - and humanity - has been lost in exactly the same way that banks grew from their mutual origins to capture more and more of the 'spread' between savings and loans. And just as banks now allocate most of the money they create to add financial assets to their balance sheets, rather than financing the productive economy, the Big Data platforms are investing in more ways to capitalise on free user data to lure advertising spend, rather than figuring out new ways to leave most of the value with their users.

Dealing with people and businesses over P2P platforms is a good way to use your own data to claw some of that value back.

Labour's Rocky Horror Show

As the Labour Party took it's "jump to the left" this week, we saw firsthand how "madness takes its toll."

Things turned ugly when the faithful realised there'll be no pot of gold at the end of the 2015 campaign rainbow - brutal medicine for a party infamously free with the public purse. So the furious mob turned its sights on the private sector, just like in the bad old days.

Gordo's lieutenants did their best not to disappoint the baying crowd, smashing in a few shop windows in an effort to claw back some of the profits they'd gleefully handed out when their old boss proclaimed the end of boom and bust. But the private equity boys are a vicious crew, and they were waiting. They went after those dogmatic party geeks like a bunch of Paras on PCP, strangely trailed by Lord Mandelson waving a socket wrench.

The geeks took a hiding, but they weren't giving up, or venting their sterile rage on public sector waste. Or gnashing their teeth about the six ways 'the System' is in a worse state than in 2008. No way. Back in the safety of the Hilton Metropole they were hell-bent on re-nationalising everything this country's sold off in its vain attempt to keep kicking the economic can down the road: "railways, power, water, Royal Mail." Savagely yearning for the return of British Leyland. A time when the State could do no wrong and Jimmy Savile ruled the BBC.

As the great Gonzo once said, "when the going gets weird, the weird turn pro."

Doomed, you might think. And so too is the old Labour rort of hiring public sector employees so they can automatically join the unions and unwittingly subsidise the party's lust for power. Snubbed by these ingrates, Milibore now wants to slip his hand into the public purse to fund his dreams, and is tempting the other parties to follow suit. He might be onto something there. Party political types are united in greed, if nothing else. But the Tories know there'll be nothing left by 2015 anyway. Soon they'll be sewing patches on the elbows of their suits...

You'd think that should mean a blissfully quiet election. But based on this week's performance I reckon Labour's rocky horror show has only just begun.

We're in for a mind flip.

We'll be into a time slip.

Labour will do the Time Warp again.

The Reform Of Our Institutions Won't Come From The Top

It's been a difficult month to finish this post. Every day another dollop of decrepitude is revealed amongst our rotting institutions. Systemic slaughter in the NHS. The convenient collapse of a major police corruption trial through 'missing' evidence. Police concealing the misuse of private investigators and spying on victim's families for the chance to undermine public sympathy. Sunlight on vast pay-offs to the departing management of the Savile-stricken BBC. The lengths to which the unions will go to control the Labour Party and use it to enshrine their own power. The Church of England deciding to turn money lender. And, surprise, surprise yet another massive bank fine...because, yes, any bank that relies on a public guarantee of its liabilities and massive tax subsidies through ISAs and so on should regard itself as a public institution.

It's a core theme of this blog to contrast the decline of faith in institutions that have evolved to suit themselves at our expense, with the rise of facilitators who exist to help us solve problems more effectively for ourselves.

Our institutions won't align with the interests of the those who rely on their services while they suppress evidence of their ineptitude, or while trustees and management quibble over their extent of their responsibilities, or while politicians spend their time blaming each other for the mess. These are sure signs that our institutions are stuck in denial and that the MPs and Ministers whose job it is to supervise them are stuck in their own cycle of blame.

Until our institutions understand and accept the need to align with the consumers of their services, rather than the desires of their pompous managers, they will not evolve into efficient, facilitative organisations worthy of our trust and respect.

But I don't believe that our so-called political leaders or the managers of our institutions have either the self-awareness or the skills needed to achieve this evolution. They are merely products of 'the system' that so desparately needs to evolve.

Sustainable reform will only come come from the grassroots rather than the top down. It will only come when each of us takes personal responsibility for turning things around, whether by exposing institutional failings or genuinely working to solve other people's problems rather than merely our own. 

In other words, both the problem and the solution are in our hands.

Thatcher Failed To Make It Personal

Whether you loved or loathed her, you have to be impressed that 23 years after she was hunted out of office Margaret Thatcher's funeral is as divisive as a Poll Tax riot.

Clearly Britain has failed to 'move on' from the Thatcher years, which suggests to me that the work she started was on the right track but is seriously incomplete. I mean, if her policies had been just plain wrong-headed or disastrous, Britain would have dropped them like hot coals - or the notion of 'light touch' banking regulation. Instead, we're still trying to balance Thatcher's blast of economic reality with its personal and social impact.

Whatever your politics, it's clear from all the recent commentary that Thatcher was focused solely on improving the way the failing British economy 'works'. She spent her energy arguing relentlessly with people about the nature of the problems, their causes and the improvements that should be made to resolve them. The resulting policies obviously appeared 'right wing', but this was largely by comparison with the dogmatic lunacy espoused by the economic lemmings in charge of the Labour Party and trade unions at the time. Their policies seemed predicated on the private sector operating as a charity for the public sector, rather than economic sustainability. Thatcher's opponents were not arguing either on the same rational terms or with the same rigour. Her disciplined approach ruthlessly exposed dogma, from both left and right, and homed in on the most feasible economic solution. Then she rammed it home...

While Britain's reward was increased productivity and employment, far too many of its people were ill-equipped to cope with this fairly brutal brand of politics. Thatcher is infamous for the quote that "there's no such thing as society" which is often unfairly given without the qualification she gave it. But even the full quote reveals a serious flaw in her approach:

"They are casting their problems at society. And, you know, there's no such thing as society. There are individual men and women and there are families. And no government can do anything except through people, and people must look after themselves first. It is our duty to look after ourselves and then, also, to look after our neighbours."  Women's Own, 1987.

Thatcher's words "and then" raise the issue of when, which we naturally interpret as 'when we have enough for ourselves'. But enough is never enough. Our society is obsessed with personal rights and entitlements, rather than the duties and obligations which must be performed if those entitlements are to be delivered. After all, who ultimately bears the responsibility for delivering everyone's rights and entitlements if not each of us personally? Thatcher was right to the extent that the state cannot perform our personal obligations for us - ultimately, it can only act as a facilitator for our own endeavours - but it was a mistake to assume that society would automatically benefit if each of us looked after ourselves as a first step. Perhaps this was as much a flawed belief in the 'efficient markets hypothesis' as that of Alan Greenspan (and Gordon Brown) a decade later.

At any rate, we are now faced with the fact that, in Thatcher's own terms, we are not looking after a fairly large number of our neighbours. While it's worth noting that Thatcher's governments produced consumer-oriented legislation such as the first Data Protection Act (1984), the Hospital Complaints Procedure Act (1985) and the Consumer Protection Act (1987), it took British society several more decades to establish even a basic sense of 'customer service', and most of the UK's institutions are still not designed around the 'customer'.

In my view, we will continue to struggle with significant social imbalances until we grasp the idea that society and the economy only 'work' if each of us - whether acting as individuals or employees of corporations or the public sector - acts in ways that are sustainable for both ourselves and society at the same time. It's not a matter of looking after ourselves first "and then" our neighbours, as an afterthought. Our activities have to be aligned to be sustainable. And only by focusing on our duties and obligations to everyone else will we secure our own rights and entitlements. That is the fundamental concept behind what I would call “the Personal State”. It's time we built it.

Image from DelhiNewsRecord.

Big Data: Is Reputation Really Portable?

At the recent London New Finance session on Big Data in Finance, Mark Hookey of Demyst.data suggested that a more accurate profile of a person is obtained by observing the breadth of the person's behaviour, rather than the depth of their history in any one area. The challenge is knowing which types of data from each area of the person's behaviour are representative (and having permission to use that data). He conceded that the profile is probabilistic rather than predictive.

Rachel Botsman has also talked about the concept of 'reputation capital', which is a product of all who have trusted you, when and why. She says it's only a matter of time before we are able to aggregate, monitor and use our ratings on the many sites on which we interact, so that we extract more value from the total of our "reputation capital". Rachel suggests this capital will be more powerful than our credit score. Rachel also suggests we'll be able to intentionally 'shape' our reputation, and so build-up our reputation capital (or reduce it). Two challenges she suggests are:

• knowing which data should be included in the data set that comprises your total reputation -  the same challenge facing Demyst.data and others Rachel mentions; and

• how to enable 'digital ghosts' to leverage their reputation capital (subject to privacy and data protection), since they don't interact online and therefore do not personally generate their own reputational data. 

But even if you do manage to identify the limited set of data that best represents a person's behaviour in a given context: 

• how relevant is that behaviour in any other context?

• what more does 'total reputation' tell you about a person in a given context than what you can see of their behaviour in that context?

As we observed in the programme on Rethinking Personal Data, the significance and value of personal data can't be captured in a single dollar amount, or a 'yes'/'no' answer to whether it can be used. Instead, the value and utility of personal data is a hugely complex dynamic that varies by: 

• the context or the activity we are engaged in;
• which persona we are using at that moment;
• the actual data being used or provided;
• the permissions given;
• the rights that flow from those permissions; and 
• the various parties involved.

It follows that a reputation derived from a specific activity is also purely contextual, and attempts to rely on a 'good' reputation in one context as suggesting good behaviour in another are flawed. At best, as Mark Hookey conceded, the total profile or reputation data might indicate probable behaviour in another context to a greater or lesser degree, but it won't be predictive. And the person relying on the reputational data still has to know or discover the reliability of making the association.

Of course, we already know how unreliable a reputation from one context can be in a different context. Brands are key reputational badges, and while sticking a trusted brand from one industry on a new product in another market or industry might work from time to time, generally it's not a sure-fire thing. If the brand is extended to enough products that fail, the brand eventually becomes diluted, or less trusted, as the failures outweigh the power derived from success in the original context.

Indeed, I believe that internet technology is liberating us from the tyranny of a single reputation, such as a credit score.

The highly contextual nature of both identity and the behavioural data generated suggests that if you want a good reputation for doing something, then you simply need to do it and do it well. Other people will only rate you highly if you do things they find helpful (assuming you can't simply buy ratings). In other words, the vast array of reputational data available on the internet is enabling us to distinguish the facilitators, who solve other people's problems in a specific context or market, from the 'institutions' who merely claim they're here to help, but actually exist to solve their own problems at other people's expense.

So, no, reputation is not really portable. And the idea that disparate reputations can be unified or expressed as a total amount of 'reputation capital' that can be reliably leveraged over time, regardless of context, is similarly flawed.

Image from MasCanc.

Auntie's Fall From Grace: Death Of Another UK Institution

The resignation letter of the BBC's latest director-general reveals deep flaws in yet another of the UK's self-serving institutions.

One assumes the document was the product of some discussion, and that the "unacceptable journalistic standards of the Newsnight film that was broadcast on Friday 2 November" was carefully chosen as the narrowest possible reason for the top bureaucrat to go. Some care was taken not to mention the mishandling of the Jimmy Savile revelations, for example, or the seismic cultural implications of the BBC choosing to spike a story about his criminality in favour of a series of fawning tributes. But isn't it simply the case that a cosy insider is incapable of cleaning the place up? After all, Lord Patten said he only hired Entwistle to make the BBC "10 or 20% better" and it's now a vastly bigger job than that.

This tendency to cover up, to obfuscate, defend and deflect is the stuff of mere politics. It should not feature in the management of a public organisation in the public interest. 

Yet it's what we've come to expect from the British establishment. It permeated the Parliamentary expenses scandal and the conduct that led to the bank bailouts. It resurfaced in the failure of UK banks to honour Project Merlin, their Libor-fixing activities and attitude to international money laundering. It was present in the activities of GlaxoSmithKline that yielded a $3bn criminal settlement. It's there in the evidence to the Leveson Inquiry, the handling of the Hillsborough disaster by South Yorkshire Police and the systemic cover-up of child abuse.

And you can be sure we have not seen the last example. It seems that Britons are fascinated to learn just how rotten the country's institutions really are.

The Enemies of Growth

The Economist article on The Question of Extractive Elites certainly resonated with me last week, as it did with those involved in the subsequent discussion on Buttonwood's notebook. It's another way of looking at the difference between 'facilitators' and 'institutions'.

In “Why Nations Fail: The Origins of Power, Prosperity and Poverty”, Daron Acemoglu and James Robinson, suggest "extractive economies" experience limited growth because their institutions “are structured to extract resources from the many by the few and... fail to protect property rights or provide incentives for economic activity.”

"Because elites dominating extractive institutions fear creative destruction, they will resist it, and any growth that germinates under extractive institutions will be ulimtately short-lived."

Acemoglu and Robinson place certain 'third world' economies into the "extractive" category, but place the developed world into an "inclusive" category on the basis that their institutions tend not to be extractive. But as Buttonwood notes, there are elements of developed economies that fit the description of extractive economies, citing banks and the public sector as the most likely candidates - although I would add the institutions that comprise the pensions and benefits industry as another example. And we should define "public sector" quite broadly to include political parties, unions, quangos and so on.

These extractive institutions tend to be linked, since the public sector is not only capable of extracting resources in a way that starves business or crowding out private investment, but it is also responsible for regulating the private institutions that are themselves extractive.

As previously discussed, high levels of public spending and national wage bargains are partly to blame for throttling the UK economy and preventing the development of manufacturing, particularly in regions which struggle to capitalise on the lower cost of living to keep wage costs down. The tax and regulatory framework favours banks and regulated investment institutions over new entrants. 

The current UK government is trying to spend less, but it's refusal to regulate means extractive frameworks are not being overhauled. Of course there is a danger that the new entrants seeking a level playing field may be tomorrow's "extractive institutions". But that would at least imply significant creative destruction in the meantime. Ideally the rise of "extractive institutions" would be kept in check by more dynamic regulatory intervention, but future overhauls may be required.  

That is the politicians' job. But they, too, have a tendency to be the enemies of growth.

Gen Y: Rise of The Pragmatists

On Wednesday I attended the launch of The Faith of Generation Y by Sylvia Collins-Mayo, Bob Mayo and Sally Nash, which the Daily Telegraph responded to on its front page on Monday.

Bob and Sylvie are friends (well of course, but also friends of mine), so this is a bit of a plug.

But in the course of the co-authors' presentation of some key findings, one of many interesting observations struck me in particular. Bob explained that Generation Y people are not so reactive to organised religion as their elders in Generation X, who tended to have had it forced on them as kids. Instead, Gen Y'ers are just as interested to hear what religion is and what it stands for, as any of the other spiritual messages out there. However, they aren't interested in whether the message represents the 'truth' in some dogmatic sense, but pragmatically whether it 'works'. So you will find a Gen Y person chilling out in a church because it is a chilled, spiritual place to be, rather than because he 'believes'.

Bob says this attitude is also encouraged by Gen X people as parents (and teachers?), who tend to be friends with their kids and tolerant or permissive of independence, critical thought and discussion, rather than more authoritarian or controlling as their own parents' generation tended to be.

I suspect this has at least two broad implications for all of our society's public and private institutions. First, while other research shows there has been a decline to low levels of trust in our institutions, this may be driven by and limited to Gen X'ers, as a result of the previous generations' tendency to trust in or tolerate institutions, regardless of how badly they perform. Secondly, Gen Y may be free of the emotionally reactive element of Gen X's attitude to institutions, but very focused on what those institutions stand for - what they promise - and whether those institutions 'work' or perform accordingly.

So if you thought the internet and Web 2.0 marked a revolution in personalisation, you ain't seen nothing yet.