Open Agentic AI And True Personalisation

Sixteen years on from my own initial posts on the subject of a personal assistant that can privately find and buy stuff for you on the web, and we have 'open agentic AI'. But are you really any closer to the automated selection and purchase of your own personalised products without needlessly surrendering your privacy or otherwise becoming the victim? Should this latest iteration of open generative AI be autonomously making and executing decisions on your behalf? 

What is Agentic AI?

An 'agentic' AI is an evolution of generative AI beyond a chatbot. It receives your data and relies on pattern matching to generate, select and execute one of a number of potential pre-programmed actions without human guidance, then 'learns' from the result (as NVIDIA, the leading AI chip maker, explains). 

A 'virtual assistant' that can find, buy and play music, for example, is a form of agentic AI (since it uses AI in its processes), but the ambition involves a wider range of tasks and more process automation and autonomy (if not end-to-end). 

You'll see a sleight-of-hand in the marketing language (like NVIDA's) as developers start projecting 'perception', 'understanding' and 'reasoning' on their agentic AIs, but computers don't actually do any of those human things. 

It's certainly a compelling idea to apply this to automating various highly complex, tedious consumer 'workflows' that have lots of different parameters - like buying a car, perhaps (or booking a bloody rail ticket in the UK!). 

Wearing my legal hat, I also see myriad interesting challenges (which I'd be delighted to discuss, of course!), some of which are mentioned here, but not all...

Some challenges

The main problem with using an 'agentic AI' in a consumer context is the involvement of a large language model and generative AI where there is a significant (e.g. economic, medical and/or legal) consequence for the user (as opposed to a chatbot or information-only scenario (though that can also be problematic). Currently, the household or device based virtual assistants are carrying out fairly mundane tasks, and you could probably get a refund if it bought you the wrong song, for example, if that really bothered you. Buying the wrong car would likely be a different matter.

There may also be confusion about the concept of 'agency' here. The word 'agentic' is used to mean that the AI has 'agency' in the sense it can operate without human guidance. That AI is not necessarily anyone's legal 'agent' (more below) and is trained on generic training data (subject to privacy, copyright consents/licensing), which these days is itself synthetic - generated by an AI. So, agentic AIs are not hosted exclusively by or on behalf of the specific consumer and do not specifically cater to a single end-customer's personalised needs in terms of the data it holds/processes and how it deals with suppliers. It does not 'know' you or 'understand' anyone, let alone you.  

Of course, that is consistent with how consumer markets work: products have generally been developed to suit the supplier's requirements in terms of profitability and so on, rather than any individual customer's needs. Having assembled what the supplier believes to be a profitable product by reference to an ideal customer profile in a given context, the supplier's systems and marketing/advertising arrangements seek out customers for the product who are 'scored' on the extent to which they fit that 'profile' and context. This also preserves 'information asymmetry' in favour of the supplier, who knows far more about its product and customers than you know about the supplier or the product. In an insurance context, for example, that will mean an ideal customer will pay a high premium but find it unnecessary, too hard or impossible to make a claim on the policy. For a loan, the lender will be looking for a higher risk customer who will end up paying more in additional interest and default fees than lower risk customers. But all this is only probabilistic, since human physiology may be 'normally distributed' but human behaviour is not.

So using an agentic AI in this context would not improve your position or relationship with your suppliers, particularly if the supplier is the owner/operator of the agentic AI. The fact that Open AI has offered its 'Operator' agentic AI to its pro-customers (who already pay a subscription of $200 a month!) begs the question whether Open AI really intends rocking this boat, or whether it's really a platform for suppliers like Facebook or Google search in the online advertising world. 

It's also an open question - and a matter for contract or regulation - as to whether the AI is anyone's legal 'agent' (which it could be if the AI were deployed by an actual agent or fiduciary of the customer, such as a consumer credit broker). 

Generative AI also has a set of inherent risks. Not only do they fail to 'understand' data, but to a greater or lesser degree they are also inaccurate, biased and randomly hallucinate rubbish (not to mention the enormous costs in energy/water, capital and computing; the opportunity cost of diverting such resources from other service/infrastructure requirements; and other the 'externalities' or socioeconomic consequences that are being ignored and not factored into soaring Big Tech stock prices - a bubble likely to burst soon). It may also not be possible to explain how the AI arrives at its conclusions (or, in the case of an agentic AI, why it selected a particular product, or executed a specific task, rather than another). Simply overlaying a right to human intervention by either customer or supplier would not guarantee a better outcome on theses issues (due to lack of explainability, in particular). A human should be able to explain why and how the AI's decision was reached and be able to re-take the decision. And, unfortunately, we are seeing less and less improvement in each of these inherent risk areas with each version of generative AIs.

All this means that agentic AI should not be used to fully automate decisions or choices that have any significant impact on an individual consumer (such as buying a car or obtaining a loan or a pension product).  

An Alternative... Your Own Personal Agent

What feels like a century ago, in 2009, I wondered whether the 'semantic web' would spell the end of price comparison websites. I was tired of seeing their expensive TV ads - paid for out of the intermediary's huge share of the gross price of the product. I thought: "If suppliers would only publish their product data in semantic format, a 'widget' on my own computer could scan their datafeeds and identify the product that's right for me, based on my personal profile and other parameters I specify". 

By 2013, I was calling that 'widget' an Open Data Spider and attempted to explain it further in an article for SCL on the wider tech themes of Midata, Open Data and Big Data tools (and elsewhere with the concept of 'monetising you'). I thought then - and still think now - that: 

"a combination of Midata, Open Data and Big Data tools seems likely to liberate us from the tyranny of the 'customer profile' and reputational 'scores', and allow us instead to establish direct connections with trusted products and suppliers based on much deeper knowledge of our own circumstances."

Personalised assistants are evolving to some degree, in the form of 'personal [online] data stores' (like MyDex or Solid); as well as 'digital wallets' or payment apps that sit on smartphones and other digital devices and can be used to store transaction data, tickets, boarding passes and other evidence of actual purchases. The former are being integrated in specific scenarios like recruitment and healthcare; while the latter tend to be usable only within checkout processes. None seems to be playing a more extensive role in pre-evaluating your personal requirements, then seeking, selecting and purchasing a suitable product for you from a range of potential suppliers (as opposed to a product that a supplier has created for its version of an 'ideal' customer that you seem to fit to some degree). 

Whether the providers of existing personal data stores and digital wallets will be prepared to extend their functionality to include more process automation for consumers may also depend on the willingness of suppliers to surrender some of their information advantage and adapt their systems (or AIs) to respond to and adapt products according to actual consumer requests/demand.

Equally, the digital 'gatekeepers' such as search providers and social media platforms will want to protect their own advertising revenue and other fees currently paid by suppliers who rely on them for targeting 'ideal' customers. Whether they can 'switch sides' to act for consumers and preserve/grow this revenue flow remains to be seen.

Overall, if I were a betting man, I'd wager that open agentic AI won't really change the fundamental relationship between suppliers, intermediaries and consumers, and that consumers will remain the targets (victims) for whatever suppliers and intermediaries dream up for them next...

I'd love to be corrected!

Is BigTech Still Battling The Entire Human Race, Or Just Some Of Us?

Readers will be familiar with my view that we consumers tend to be loyal to 'facilitators' who focus on solving our problems, rather than 'institutions' who solve their own problems at our expense. Previously trusted service providers can also lose their facilitator status, and I'd argue that Facebook has already done so (owing to privacy, electoral and extremist content scandals) and Google is firmly headed in that direction (through behaviour incurring massive EU fines). Yet, despite announcements designed to suggest increasing transparency, it seems BigTech is actively resisting independent human oversight and the perceived battle between computers and the human race is far from over...

Part of the problem is that 'BigTech' firms still operate as agents of retailers and other organisations who pay them vast amounts of money for exploiting our personal data targeting advertising at us, rather than as our agents for the purpose of finding what we need or want while shielding us against exploitation. In fact, this is the year when digital advertising spend will exceed spending on the old analogue 'meat space' channels. 

Combine that exploitative role with rogue artificial intelligence (AI) and you have a highly toxic reputational cocktail - particularly because AI based on machine learning is seemingly beyond human investigation and control. 

For instance, Amazon found that an AI programme used for its own recruiting purposes was terribly biased, but could not figure out what was going wrong or how to fix it, so had to simply shut the thing down.  Alarmingly, that suggests other AI programmes that are already notorious for being biased, such as those used for 'predictive policing', are also beyond fixing and should be shut down...

Many BigTech firms are appointing 'ethics boards' to try to avoid their AI programmes heading in inappropriate directions. Trouble is, not only is there doubt about what data scientists might view as inappropriate (which drove the appointment of ethics boards in the first place), but these boards are also generally toothless (only CEOs and main boards can decide the actual course of development), and tend to be populated by industry insiders who sit on each other's ethics boards. 

It is unclear, for example, whether the recommendations of the ethics committee overseeing the West Midlands police 'predictive policing' algorithm will be followed. Meanwhile, 14 other UK police forces are known to be using such AI programmes...

Another worrying trend is for AI firms to prevent investors voting on the company's plans, using "dual class" share structures that leave voting control with the founders rather than shareholders. Lyft is the latest to hit the news, but other offenders include Alphabet (Google), Blue Apron and Facebook, while Snap and Pinterest give shareholders zero control. Those firms might argue that stock prices are a check in themselves. But the stock market and investor greed are notorious for driving short-term decisions aimed at only maximising profits, and even giant regulatory fines are subject to appeal and can take a long time to be reflected in share prices. Voting power, on the other hand, is more qualitative and not simply a function of market forces - and the fact that it is being resisted tells you it's a promising tool for controlling BigTech.

Regulation will also be important, since fines for regulatory breaches are a source of revenue for the public sector that can be used to clean up the industry's mess and to send signals to management, investors, competitors and so on. I'm not suggesting that regulatory initiatives like the UK Brexidiot ToryKIP government's heavily ironic "Online Harms" initiative are right in the detail or approach, but Big Tech certainly cannot keep abdicating responsibility for the consequences and other 'externalities' associated with its services and approach. There has to be legal accountability - and grave consequences - for failing to ensure that AI and the firms themselves are subject to human control.

I guess the real question might be: which humans? 

The Beginning of The End of Consumer "Banking"

Funny to see a story from John Gapper in the FT this morning, saying technology will hurt retail banks but not kill them, only a few pages before First Direct admits it mis-sold complex investment products to consumers.  While I agree that innovation doesn't 'kill' anything, and must co-exist with what it is replacing, John seems to have a misplaced faith in retail banks' ability to maintain their direct relationships with consumers.  Banks are steadily being relegated to the back-office of retail finance.

 

John may be right to point out that banks lose money on the limited activity of offering current accounts, and possibly even savings account functionality, so that these are not attractive areas in themselves for technology businesses to enter. But of course you can't view those 'products' in isolation. They are just part of the 'bait and switch' routine that banks operate to persuade people to part with their money so the banks can earn far more from using those funds for their own ends.

To understand what the tech companies are doing, you have to consider how much money the banks make out of the end-to-end activity of robbing investors/depositors of yield while fleecing borrowers with expensive loans - and making everyone pay a lot for slow-cycle payment processing. 

 

It is wrong to say that technology companies are merely playing at the edges of 'banking' by offering payment services and person-to-person loans. This is all part of the strategy for disrupting the 'banking' sleight of hand.

 

Tech companies know that if they can provide a decent, transparent consumer experience to savers/investors on the one hand, and those who need the funds on the other, then they are in a position to cut the cost of moving money between the two. In fact, the money may not even have to move at all: the important issue is who is entitled to it, and whether it is available. 

 

You don't need a bank to keep the data and transaction records that tells you who owns the funds. It's all just data, as Marc Andreessen is quoted as saying. 

 

And it's far safer to separate the transaction processing and record-keeping function from the cash, which should be held separately from the processor's own funds. That's how e-money institutions, payment institutions, P2P lending and crowd-investment firms are set up...  They may rely on segregated commercial bank accounts for holding that cash, but the banks who provide those accounts have no control at all over which consumers own the money in them, or what those consumers choose to do with it amongst themselves.

 

In the EU, the regulatory support for such new business models began in earnest in Europe in 2000, with the advent of the first E-money Directive, and has snowballed with the Payment Services Directive in 2007, a new EMD in 2009 and the proposed revamp of the PSD. There are now hundreds of these payment institutions in the UK alone. And it's no coincidence that the UK has led the way in both creating and regulating P2P lending and crowd-investment platforms.

 

All of this spells the beginning of the end for consumer 'banking'.

 

 

Twitter Gnip Shows Why Social Media Should Share Revenue With Users

Source: Financial Times

Like Google's declaration of war on the human race, the news that Twitter will buy Gnip illustrates why social media platforms should share their Big Data revenue with users. Indeed, they would seem to have no choice if they are to survive in the longer term.

Gnip's CEO claims that:

"We have delivered more than 2.3 trillion Tweets to customers in 42 countries who use those Tweets to provide insights to a multitude of industries including business intelligence, marketing, finance, professional services, and public relations."

And that's not all. Gnip also has "complete access" to data from many other social media platforms, including WordPress, the blogging platform, and more restricted access to data from other platforms, such as Facebook, YouTube and Google+. 

Quite whether users consent to all that is an issue we'll return to in another post shortly. 

Meanwhile, Twitter suggests that Gnip's current activities have "only begun to scratch the surface" of what it could offer its Big Data customers in the future. Yet, from a user's perspective, Twitter has barely changed since Gnip began its data-mining activities. So are users receiving enough 'value' for their participation to keep them interested?

The social media operators would argue that their platforms would never have been built were it not for the opportunity to one day make a profit from users' activity on those platforms. And it may look like the features have not changed much since launch, but part of the value to users is the popularity with other users and it costs a lot to keep each social media platform working as the number of users grows. Each platform also has to keep up with changes to other platforms so users can continue to share links, photos and so on. That means platforms tend to lose a lot of money for quite a long time, as the FT's comparison chart shows. 

But analysing the value to users gets mirky when you consider that the social media are already paid to target ads and other information at users based on their behaviour, and that the cost of that type of Big Data activity is reflected in the prices of the goods and services being advertised. 

And it doesn't seem right to include the cost of buying and operating a separate Big Data analytics business, like Gnip, in the user's value equation if the user doesn't directly experience any benefit. After all, that analytics business will charge corporate customers good money for the information it supplies, and the cost of that will also be reflected in the price of goods and services to consumers. 

In other words, social media's reliance on revenue from targeted advertising and other types of Big Data activity means that social media services aren't really 'free' at all. Their costs are baked into the price of consumer goods and services, just like the cost of advertising in the traditional commercial media.

And if it's true that the likes of Gnip are only just scratching the surface of the Big Data opportunities, then the revenues available to social media platforms from crunching their users' data seem likely to far exceed the value of the platform features to users. 

Yet user participation is what drives the social media revenues in the first place (not to mention users' consent to the use of their personal data). The social media platforms aren't publishing their own content like the traditional media, just facilitating interaction, so there's also far less justification for keeping all the revenue on that score. And it seems easier to switch social media platforms than, say, subscription TV providers. 

So the social media platforms would seem to have no choice but to offer users a share of their Big Data revenue streams if their ecosystems are to be sustainable.

Six Years On And Pragmatism Has A New Frontier

I see this blog has reached the ripe old age of six, so I felt compelled to squeeze in at least one post to celebrate.  

It's fitting that the reason for my absence has been the need to get to grips with the FCA's proposals to regulate P2P lending and investment-based crowdfunding - not to mention the revelations concerning the Chairman of the Co-op Bank. After all, this blog set out to chart the rise of facilitators who help us wrest personal control of our day-to-day lives from the one-size-fits-all experience imposed on us by our institutions. Rumbling the 'Crystal Methodist' marks the continuing plunge of faith in those same institutions, while the decision to finally let the 'crowd' into the regulated financial markets shows that even Parliament recognises you and I are better off dealing with each other directly than simply entrusting our life's savings to the banks and investment funds.

Of course, these are just a few examples of the punishment being doled out to our financial institutions. And they aren't the only ones under pressure from the trends sweeping society, as we struggle to figure out a more sustainable form of capitalism. All our institutions, from the BBC to the Police to the Church, unions, political parties, government departments and so on, face the choice of becoming facilitators or withering away. 

So is there anything 'new' to write about? 

Six years on we are still seeing the dawn of where these trends will take us. But to get a sense of the future, I've been following the rise of 'open data' - or open access to data in machine-readable form. This marks a new frontline between institutions and facilitators. Big Data vs You. Not only has it already created new facilitators, in the form of "personal data stores" or "personal information managers", but it may also redefine some of today's facilitators as the institutions of tomorrow... 

As a taste of things to come, last week a senior advertising executive insisted to me that "Big Data can accurately predict human behaviour." To be fair I made him repeat the assertion in case it had slipped out by accident. No one else at the table seemed to find that truly weird, and it wasn't until the end of the week, when I met up with some people working at the sharp end of data gathering, that I was able to fully enjoy the hilarity of that statement.

This is going to be fun.

Image from Data.gov.uk

A Directory of Crowdfunding Directories?

Crowdfunding directories are becoming useful, given the wide variety of potential models, specific geographic and other constraints, and the rapidly increasing numbers of new platforms opening up new niches. 

Each directory seems to take a slightly different tack or favour certain types of platform, so it will be interesting to see which 'prevail' and why, and whether they represent a source of customers. 

For instance, Nesta recently launched Crowdingin.com, which aims to list information on platforms open to fundraising from individuals and businesses in the UK. 

Directories with a broader focus include AllStreet, Crowdfund Insider, and Crowdsourcing. The Canadian NCFA has its own nationally-oriented directory.  

Of course, trade body membership lists are also important, particularly where regulation is still evolving and the trade body has a published set of rules that members have committed to follow, e.g. the P2PFA, UKCFA.

By all means suggest any others you have found useful (and why)... At this rate, we'll need a directory of directories!

Image from gCodeLabs.

Open Data Spiders?

Since 2009 I've hoped that the semantic web - that is my computer dealing with suppliers' computers - would replace the need for price comparison sites. Following a discussion last night at the CtrlShift Explorers' Club, I'm confident that we don't have much longer to wait.

If suppliers publish their product data in computer-readable format, I could then programme an application or 'spider' to search the provders' open systems to find the product that's right for me - ideally a bespoke product assembled from a menu of optional components. This spider would use my personal data to conduct its search without disclosing that data to any product providers, at least until the time of purchase (and disclosure might not even be necessary then). It could also collect, say, public sector Open Data related to my desired activity, and analyse it in the context of my relevant personal transaction history. This could vastly improve my choice of car, holiday or home improvement and how it's financed. Or it could save me money by keeping me on the right energy or mobile phone tariff.

This is not about 'intent-casting' or 'demand-casting' in order to encourage suppliers to send me thousands of offers. My spider would not announce to the world that it's looking for anything. It would simply run around the web looking at openly available product codes and report its findings to me. Ideally, the product provider will have no idea that it's actually me who's looking until I make a purchase, if ever.

And I would not need to read any screens or physically enter any data until my spider reported its findings - or it could save me the trouble by calling my mobile.

In a machine-to-machine world, the marketing challenge is to ensure that anyone's 'spider' can always find your product data, and that data is accurate and up to date. Perhaps it could be somehow 'spider optimised', but it seems to me it's the job of the spider developers to make sure the spiders are good at finding product data, even when it's in a sorry state.

My sense is that an Open Data approach to the market takes such a different corporate mindset that it is unlikely to sit comfortably within traditional suppliers, where "Big Data" is the latest buzzphrase. In the Open Data world the challenge is to enable your products to be directly embedded in the ecosystem, helping to solve problems as customers encounter them and their machines or 'spiders' look for an answer. The traditional product approach is not 'connected' in that way, or at all. And, as I suggested recently, "Big Data" approach to behavioural targeting of advertisting seems fundamentally hamstrung by the fact that personal behavioural data is highly contextual and not really 'predictive' from one scenario to the next. Why spend all that money on what is ultimately a shot in the dark?

Those who ignore the Open Data option could well be spending their way rapidly into oblivion. 


Image from Data.gov.uk

Banks Tell Customers Last

Bailing out (of) the UK

Two days ago it was all over the national media that ING Direct UK's savings and mortgage business had been sold to Barclays, with the actual transfer to occur in Q2 2013. Yesterday, the media were telling us what it means for customers. Yet only this morning do I receive the self-centred email from ING Direct UK (extract below). I'm not suggesting that we customers should get the information ahead of the stock market (if it's price sensitive). But I think we should've been among the first to know directly, rather than being told by the national media. 

Of course, the note also reveals that the bank views its customers as just a bunch of financial assets, and that the deal is a huge blow to competition and innovation in the retail banking market. The first three paragraphs blather on about the wisdom of ING slimming down and how the business "is a good fit" with Barclays millions of other customers. This makes us feel so special. Then, as an afterthought, they add the weazily statement that "there will be no immediate effect on the services you currently receive." Weazle word: "immediate". As in, "get your money out immediately." If I'd wanted to save with Barclays, I'd have followed the 15 million other sheep long ago. My old Egg credit card got bought by Barclays and that experience hasn't been warmly personal either. Time to switch.

"We wanted to let you know directly that it has been announced that ING Direct N.V has entered into an agreement with Barclays to acquire ING Direct UK’s savings and mortgage business.

This decision is a result of ING Group’s continued evaluation of its portfolio of businesses, in line with its stated objectives of sharpening its focus and streamlining the group. It is expected that the actual transfer of ING Direct UK’s savings and mortgage business will take place during the second quarter of 2013.

ING Direct UK is a good fit with Barclays existing UK Retail Banking Business that looks after more than 15 million personal and 700,000 business customers in the UK. With a network of around 1600 branches in the UK, customers can bank in person, over the phone, online and through mobile applications. Barclays look forward to continuing to provide a secure home for your savings and/or mortgage in the future.

There will be no immediate effect on the services you currently receive."

Facilitators and Institutions Defined

The distinction between 'facilitators' and 'institutions' is a theme that has emerged quite strongly in this blog and is discussed in Chapter 2 of Lipstick On a Pig. In essence, I've defined "facilitators" as organisations that exist to solve their customers' problems; and "institutions" as organisations that exist to solve their own problems at their customers' expense.

To be more specific, I've extracted the following characteristics that I believe mark an organisation as being one or the other. Broadly, these characteristics group into themes of alignment, openness, adaptability, transparency and responsibility.

So, a 'facilitator' is organised to solve its customers’ problems, operates openly, adapts well to changing circumstances, is committed to transparency and takes responsibility for the impact of its activities on the wider community and society.

I update this post from time to time and am interested in any comments you may have.

Facilitators:

 Alignment

• exist to solve problems that their customers encounter day-to-day as part of wider end-to-end activities (i.e. customers don't 'pay' or 'bank', they make a payment as a single step in a much longer purchase process);

• don't presume to 'own' the relationship with people who use their products, and see customers as the controllers of that relationship;

• accurately define real problems, assess their real scale, identify root causes and implement proportionate, efficient solutions;

• view the world through the eyes and experiences of people who use their products;

Openness

• are prepared to work with complimentary businesses to support their users' end-to-end activities (including linking to material produced by others);

• seek feedback, welcome input and criticism;

• interact well with users in open forums;

• are 'free-rider tolerant';

Adaptability

• are highly adaptable and responsive to criticism; 

• allow ideas to develop from staff and users bottom-up, generating passion and connection amongst them;

• see uniqueness, change and adaptability as a source of competitive advantage;

Transparency

• work to simplify their products and users' experience;

• their terms and communications are clear, fair and not misleading;

Responsibility

• seek to make the world a better place in which to live, addressing the impact of their activities on the wider world.

Institutions:

Alignment

• Exist to solve their own problems at the expense of 'their customers';

• View the world through the lens of their own products (whether goods or services), rather than the activities in which users are engaged when acquiring or using those products;

• Regard themselves as controlling the relationship with users. 

 Openness

• Resist criticism and change – believing that their own processes, judgement and publicity should prevail;

• Impose their own views on staff and 'their' customers, top-down;

• Interact poorly with users (if at all) in open forums, experiencing 'vicious cycles' of adverse publicity; 

•  Are 'free-rider resistant';

• Mandate the use of their own add-on services, even where these are inferior those available from third parties; 

 Adaptability

• See running with the herd, or 'fast-following' as a source of competitive advantage;

• Demand that 'their' customers must become more capable if their products or experiences are to improve; 

Transparency

• Deliberately adopt complex pricing, conditions and 'pressure' techniques in their sales and marketing activities;

• Rely on cross-subsidies to distort the attractiveness of new products;

• Their terms and communications tend to be unduly complex and legalistic;

Responsibility

• Avoid addressing the impact of their activities on the wider world.

ID Theft Insurance: Bonfire Of The Gullible

I guess it started out as a reasonable idea - provide card customers with comfort that someone else will help if your credit card is stolen and your card issuer let's you down.

But your card issuer isn't allowed to let you down, unless you do that yourself through fraud or negligence - in which case why would an insurer help? Slow as they are, it's very much in the legal and financial interests of card issuers to invest in anti-fraud protection. And they're usually 'first-on-the-scene' in a card fraud scenario, as you'll be aware if you've ever been called to confirm you weren't standing at a point of sale in both Brazil and Bulgaria in the past few hours.

If you're an ID theft policyholder and you don't agree, are you are among the 0.5% who've actually made a claim?

Cue the FSA probe into CPP, purveyor of fine ID theft protection at £80 a year. The investigation was prompted by Which? who have campaigned against this rort for some time. A glance at the fund managers who backed the IPO tells you all you need to know. Those people have no right to complain. Either they knew the drill or they were gullible enough to think this product had a real future.

As for the attitude of the card issuers: the FT cites at least one analyst's view that:

"You could argue that half the companies on the high street shouldn't exist because the things they sell are vulgar, tasteless or tacky... Which may be true, but it's irrelevant. The point is, there's demand there."

Demand or gullibility?

Of Love Marks And The Institutionally Deluded

I'm reading Henry Jenkins' Convergence Culture at the moment, which discusses the attempts to transform brands into 'love marks' by developing more intense relationships with consumers.

I guess the increased interaction between the 'brand' owner and consumers might have the side-effect of facilitating the resolution of real consumer problems, or improving consumers' day-to-day activities in some compelling way. But the strategy seems to view the world through the products the provider has chosen to sell, rather than from the individual consumer's standpoint. And that implies the business ultimately exists to solve its own problems rather than those of its customers. In which case, the business is exposed to the downside of the trend towards increasing consumer power over the design and supply of the products they use or consume.

As a case in point, I had a conversation recently with someone who believes that the most important brand that is present during a consumer's purchase from a retailer is the brand on the consumer's debit or credit card. This of course ignores the fact that the consumer activity in question is 'buying a widget' of the right quality from a merchant one trusts, rather than merely 'paying'. Then I showed him the latest random survey of the UK's most trusted brands - although this one might be a little more reliable, to the extent that any of them really is. But clearly consumers think their retailers are doing more for them than their banks or card schemes.

Image from LoveMarks.

The End Of Cheap Travel?

I've been an avid supporter of low cost travel operators, but recently I've detected a marked change in their attitude, and some fairly hair-raising pricing ploys. Perhaps it started with some of Ryanair's tactics, but I'm afraid it may not have stopped there.

My recent experience seems to bear out Stelios's complaint that easyJet no longer deserves to use the word "easy". Not content with a 2.5 hour delay on the way to Mallorca because of the need to change crew, easyJet cancelled the return flight for 'operational reasons', according to the unapologetic desk attendant. We opted for a flight scheduled to leave 2 hours later, but a further 2 hour delay ensued while a charter company jet (typically configured on the assumption that humans grow no higher than 6 feet) was summoned because EasyJet had run out of planes (according to the pilot, who also mentioned strikes by French air traffic controllers). It appears that if we'd chosen to fly at midnight, we'd have paid £25 less per head. Should low cost airlines be obliged to refund the difference if flights are delayed beyond such a price band? The difference was almost enough to cover the cost of carrying our bags, especially as I'd foolishly failed to pay for baggage online when booking the flights 5 months ago, so incurred a baggage charge at double the online rate - £109 or 17% on top of the flight itself.

Meanwhile, back at the car rental desk, there was the usual kerfuffle over the fine but expensive distinction between "damage waiver" and "super damage waiver". I confess to always querying staff about the rationale for two 'waivers', as I suspect the cost of a combined waiver would be significantly less. But this time I was truly gobsmacked at having to pay Europcar an extra €173.32 to cover the insurance excess of €730 for 14 days (€12.38 per day on top of a base rental of €35.92). I was similarly stunned to learn that Europcar proposed to charge €75 each for two booster seats that we bet (correctly) you could buy in the local Carrefour for €16 euros a pop (€32 for the Ferrari-logo version). We'd pre-paid the basic rental of €502.88, so €348.32 worth of pretty essential 'extras' meant that the real cost of what we wanted was an additional 70% of the prepaid amount. Certainly true to the Europcar tag line: "You rent a lot more than a car".

But why all this nonsense? Is it perhaps because if 'low cost' travel operators were up-front about the 'real' cost of their services the average budget traveller would simply stay home or travel less often but with a 'traditional' operator? How many infuriating experiences will it take for many customers to take one of those options?

I sense that in this Age of Conspicuous Thrift the Western experiment with low cost airlines and other allegedly budget travel operators may be coming to an end. And we may well see a return to the era when the closest most people came to international travel was the effervescent luxury of a Peter Stuyvesant commercial.

You Must Switch Cards To Pay For London Olympics

I see that finally the competition authorities are looking at Visa's exclusive arrangement for the Olympic Games. I can well imagine that neither the Canadian nor Chinese authorities were as concerned as the European Commission and the UK's Office of Fair Trading. Visa is far better known to European competition authorities.

The BBC reports that:

"Visa is the dominant debit card supplier in the [UK] with 53 million customers compared with 17.5 million for Mastercard.

In credit cards, Mastercard has more customers with 36 million holders, compared with 22 million for Visa."

Of course, "dominant" has its own technical meaning under competition law, but you can see that even allowing for overlap amongst customers with both kinds of cards (poor Amex, JCB etc don't even rate a mention by the BBC), a lot of people may be frustrated at not being able to use a card to buy tickets and items at the Games themselves.

I have no trouble with the general principle that the Olympic Committee can grant exclusive deals with the aim of raising more money to help stage the Games. After all, being forced to switch soft drinks, beers or hamburgers for the day is no great hardship. But I do have a problem when that has the effect of requiring consumers to alter something as fundamental as their banking and/or credit arrangements, which may prove impossible or impracticable for many. That is similar to granting the Olympic television rights exclusively to a subscription-only television network.

A step too far.

In marketing terms, the arrangement may provoke something of a backlash (watch this space, for example). It may appear insensitive to impose an exclusive payment arrangement that obliges financially-stretched consumers to alter their banking and credit arrangements in these troubled times. And you would have thought that an event so massively undewritten by public funds should welcome payment in any of the generally accepted ways that any person can access and afford.

Social Currency: Think PayWells, Not PayWalls

A thought provoking post by David Armano on "Why Social Sharing Is Bigger Than Facebook or Twitter".

David identifies the implications of the social media in terms of 'data gathering', 'knowledge sharing and collaboration', 'content distribution' and, importantly, 'social currency' as a means to generate or extract value from the social dynamic.

The social media is certainly a daunting phenomenon to monetise - especially for businesses with decades and fortunes invested in proprietary 'walled gardens', like newspapers, struggling to get their offline activity to pay for the digital presence, and vice versa. The overall structure of their merged online/offline business model seems dictated by the dynamics of sharing that David Armano also discusses. However, while it's clear there is value being exchanged and costs saved in terms of shared content, hosting and other services, where is the cold hard cash to contribute to the rest of the overhead and profit? There isn't much ad revenue left on the table after the ad networks have had their fill, and the few 'paypoints' where people will actually make retail payments has remained very limited. Previous attempts at 'paywalls' by newspapers were unsuccessful, and there's little reason to think trying them again will prove any different. Only niche providers with deep, vertical content - specialist publications - seem able to make the subscription model work, by being intrinsic to their readers' day jobs.

Given the speed at which the social media phenomenon is growing, and the finite resources and revenues available, more and more businesses will need to cluster around the existing 'paypoints' and those businesses - the new intermediaries - that already have a place at the well. Businesses that erect paywalls which interfere with, rather than facilitate, our day-to-day activities, will lose out to those who can telescope their transactions and payments into existing transactions in a way that is seamless to the consumer.

Big media - like all online businesses - need to think about 'paywells' not 'paywalls'.

Photo from Ontario Ministry of Health:'Know Your Well - Basic Well Types' ;-)

Role of Social Media in Consumer Finance

Recent discussions about whether new entrants are pushing banks to the back office of the consumer finance space have prompted me to update several previous posts on the role of social media and brands vs facilitators.

Of course, "social media" refers to the co-operative mix of internet and mobile  network services that are themselves increasingly networked. Look at all the platforms or applications that enable people to send and receive Twitter "updates" for example. This enables sharing of content amongst users at a time and location that suits them and whatever activity they're engaged in at the time. Unlike the off-line media, we can  even have all our social media available on one screen. So any single social medium is merely a hint of something very much larger:

Anyone who believes we can predict the social network service that people will choose to manage their finances will be disappointed. Human physiology may be reasonably predictable, but human behaviour is not. There is no "mass" of consumers, no bell-curve to accurately describe their behaviour to enable us to predict with any precision how each person is likely to behave next. Even Twitter could disappear in a sudden puff of user indifference, like others before it. Black Swans are lurking - surprise events that have a huge impact and which we rationalise by hindsight.

Yet it's tempting to try to explain the social media as a reflection of numerous trends that signify a desire to assert control over our own personal lives and experiences. Perhaps this at least explains the birth of social media, if not the basis on which it will be sustained.

At any rate, the commercial challenge the social media currently presents for any business is how to facilitate the individual's desire for control, rather than be shunned for failing to do so or even for trying to resist or subvert that desire. This means presenting services that are designed bottom-up and which are highly flexible and adaptable, rather than inflexibly geared to suit the product provider's top-down view of the world.

To distinguish the two approaches, one might call providers of bottom-up, adaptable services 'facilitators', and the providers of top-down, inflexible products 'institutions'.  Another way of summarising the difference between them is that facilitators primarily exist to solve their customers' or users' problems, while institutions are primarily driven by the need to solve their own problems (like 'delivering value to shareholders').

The requisite flexibility and adaptability is delivered by the "architecture of participation" of the kind created by various Web 2.0 facilitators and their users that has enabled us to break down and personalise the one-size-fits-all experience traditionally offered by music labels, book publishers, retailers, package holiday operators, banks and political parties. Such facilitators make the difference between us 'raging against the machine' on customer 'help' lines in a lone, fragmented way and achieving real change by acting as individuals, yet in a concerted fashion.

In the social media environment, the consequences of institutions putting their own needs ahead of their customers can't be overstated. The institution risks tapping into the dark side of the trends mentioned above, and being exposed in a borderless environment of interested, active people. In public policy terms that means being exposed to the sense of frustration and disillusionment responsible for both the plunge in faith in society's institutions and declining articipation in formal politics over the past 30 years, and the corresponding increase in political awareness, informal political action and consumer activism over the past decade. In terms of change theory, people have recovered from their shock at the parlous state of  'the system' and are doing something about it. Similarly, that sense of frustration and disillusionment marks the turning point between vicious and virtuous circles of consumer sentiment and related publicity. This was a key difference between President Obama and the other guy.

This is nicely illustrated by the "Influence Ripples" graphic from David Armano's "Logic and Emotion" blog.

What struck me about this graphic was not so much the ripple effect of conversations about a product, but the 'aerial' view of the customer community (specifically in the case of Twitter, blogs and other "Level 2 Ripples"). This would seem to be a great tool to communicate about, and focus resources on, the architecture of participation users are relying on to personalise their use of a provider's products - a 'virtuous circle' - or bitch about them - the 'vicious circle' of adverse comment.
There are several instances of this dynamic at work, driven by privacy concerns (Phorm, the Data Retention Regulations) content ownership (see the ripples emanating from Facebook's revision to its privacy and content ownership terms) and straight "us vs them" (e.g. Ryanair's collisions over its 'idiot blogger' remark, which viciously spiralled on reports they were going to charge £1 for answering nature's call).

The dynamic relationship between facilitator/institution and its customers is extremely complex, largely because it is driven by the activity in which each customer is engaged at the time of interaction, as well as the stage at which each individual customer has reached in his or her relationship with the facilitator/institution or its product(s). The  following (rather crude) slide is my attempt to illustrate this complex dynamic in the consumer finance context (click to enlarge):

Finally, this dynamic is perhaps even more critical for B2B product providers to understand. Not only may their immediate business customers have their own social media presence (even if only to relate to retail customers), but the B2B service provider's own product is also part of the end user's experience. If the B2B provider's element of the consumer service or experience is unsatisfactory, sooner or later that fact will show up in the 'ripple analytics', and the B2B provider will come under intense public (and published) pressure to resolve the issue. This is happening increasingly in the area of public sector projects, for example, as taxpayers become alarmed at the terrible state of the public finances.

In this environment it's pretty much terminal for a business to ignore the social media or the supporting facilitators, and not to see itself as part of the social media mix. In fact, since we have the Webby Awards honouring business excellence on the internet, why don't we offer Webley Awards for businesses that don't get it (as in the old imperialist who retires to the library with his service revolver and a bottle of port)?

Does Individual Empowerment Risk a Social Void?

Oikonomics makes the excellent observation that "We consume not to conform and be like (or liked) but to be different and thereby feel that in some small way we are in control of our lives...However," he warns us that "instead of pulling together we begin to pull in our own individual direction leaving a void in the social world that needs to be filled if we are going to meet the collective challenges of the sustainability of our way of life."

I agree that control over one's life is the motivation for consumption, but I believe this enhances, rather than undermines, our ability to meet the collective challenges of sustainability.

I agree that (except for fads/crazes like yo-yo's or cabbage patch dolls), we really only consume what is useful in solving/controlling a real problem, and the trend is towards more personalised solutions. The challenge for product providers is how to facilitate that desire in a highly flexible, adaptable, bottom-up way, rather than dictate how it can be satisfied in a top-down, one-size-fits-all fashion. Brands need to be facilitators, not institutions.

I agree that this trend represents a growing 'void', but only to the extent that one size no longer fits all. We no longer share the same TV schedule. We don't all have the same experience of any web-based service that dynamically serves its home page to each user. We've unbundled our travel and music. Our computers and smartphones are each differently configured with different 'apps' [who ever thought 'apps' would end up a retail marketing term?!]. Each social network service 'feed' is unique. We are ignoring traditional, formal politics and congregating around single interest campaigns and informal deliberative processes.

And I agree that this growing diffusion of consumer experience is undermining the sustainability of our [current] way of life. In fact the tools that are enabling this trend, unleashing our ability to escape the institutional view of the world, have been a catalyst for the bottom-up realisation that the way of life preached by our institutions has become unsustainable.

Yet, for all these reasons, I must disagree that the utter diffusion of consumer experience risks creating a social void that threatens our ability to meet the collective challenges of sustainability. If anything, the trend has put us in a far better position to face those challenges in a concerted fashion than ever before.

Discuss ;-)

Internet Regulation Won't Stop Black Swans

I enjoyed Professor Michael Froomkin's recent "Golden Eggs" lecture on internet regulation. He foresees the future regulation of the internet being shaped by the tension between the 'Cypherpunk' vision for a distributed, democratic , libertarian environment - and 'Data's Empire' - where established institutions respond to the perceived threat of the internet by trying to create a centrally controlled environment. He cautions us not to be complacent or 'technologically deterministic'. There are opportunities for us to make real choices to avoid "killing the goose that is giving us golden eggs of innovation, decentralization, and personal empowerment".

This model does not only describe the two broad forces at work in the online regulatory environment. Generally, our individual desire to control our own experience tends to be opposed by institutions' desire to retain control of how they deal with us. Indeed, it might be said that explosive Internet adoption occurred because individuals pragmatically recognised and seized an opportunity for individual empowerment in the face of comparatively rigid institutional control in the offline world.

Yet institutions try to catch up, and the cycle continues. Michael hints at this when he notes "to a surprising extent both sets of trends have manifested themselves simultaneously. The question is whether those two trends can continue, or if instead we are witnessing the start of a collision between them." Of course, we are seeing collisions everywhere, all the time, between individuals and institutions each trying to control their relationships. Just consider all the markets, services and activities impacted by the Web 2.0 phenomenon, and the realisation that brands must become facilitators rather than institutions.

But we should also consider that 'control' is illusory. Human behaviour is not predictable and, while it may appear that people are acting in a controlled way in certain scenarios or under certain regimes, radical change is never far away. The fall of the Berlin wall and the credit crunch are two of many situations or activities which appear to be under fairly strict, central control but are in fact not - or at least not in any sustainable way. This is not a technologically deterministic view. It simply acknowledges the nature of the world. We are constantly exposed to the risk of "Black Swans" - surprise events that have a major impact which we rationalise by hindsight, as if they had been expected. Andy any inquiry into the why's and how's of such events is largely academic, albeit tantalizingly so.

So, while real regulatory choices of the kind Michael mentions may remain to be made, we should not count on those choices as having the intended effect of delivering 'control' for any sustained period of time. Regulation cannot possibly cover every eventuality, and is too slow to create, too blunt and too easily circumvented by anyone sophisticated and determined. Cryptography and the sheer volume of users and data make a mockery out of online access and content controls, centralised 'mining' and monitoring. We do rely increasingly on facilitators to find desired data and/or edit/adapt it in some way to make it more manageable for us or our devices - and these represent natural 'chokepoints' for regulators and commercial institutions, as Michael Froomkin points out. However, these chokepoints are also easily circumvented, either as described or by the rapid rise of the next facilitator or competitor, and related technological innovation.

This is not to say that those who purport to edit more actively what people see should not be subject to democratic controls over their exercise of editorial discretion. There seems to be (a somewhat surprising) acknowledgement of this in Google's decision to fund the Advertising Standards Association's efforts to regulate online marketing activity. The point is that new standards won't protect us from calamity.

The ultimate challenge, as Nicholas Taleb warns, is to minimise or avoid exposure to the potential downsides posed by Black Swans, while maximising one's exposure to the potential upside. To illustrate this in financial terms, it would be a mistake to borrow money to 'short' stocks, but worthwhile to invest a small proportion of your savings in Hollywood films. In the online world, Black Swans would seem to loom most obviously in the content arena - or perhaps fraud. Regulation is heavily focused in this area, but that is merely a signpost. We must take responsibility for our own practical choices. These include whether to share thoughtful or sordid content, to engage in copyright violation or to openly publish key personal financial data or photographs of your family. It's worth considering that the internet hasn't changed our propensity to behave well or badly, but may have amplified the outcomes.

To bring it down to a personal level, I maintain my anti-virus protection and avoid or minimise sharing what I'd regard as 'key' personal or financial data, even though there are comparatively fewer people out there who would use it to my disadvantage, since the impact their activity is so personally disruptive. However, I do acknowledge that the benefit to sharing certain limited personal transaction data - with credit reference agencies, for example, and some retail or social networks - can outweigh the downside of misuse. In these circumstances, you might think that more regulatory and commercial resource should be dedicated to quickly and efficiently restoring a person's control of their own identity once control is lost, rather than drastically limiting the availability of personal data or intervening too much in the exchange of information in social or retail networks.

Similarly, I post my thoughts and share others' because I hope they are better shared than consumed by me alone - and the (small) chance that millions might find such a thought worthwhile represents a very positive potential experience ;-). Conversely, I would not (even if I wanted to) create or share sordid content because it represents exposure to an extremely negative outcome. That said, I acknowledge a middle ground where (within reason) the assessment of what's merely in good or bad taste is hugely subjective and may change. For example, I recall being struck by the fact that 'topless bathing' was deeply frowned upon in Sydney one summer yet utterly commonplace on Bondi Beach the next. Similarly, we'll hear the last 'cautionary tales' of people losing their jobs over embarrassing photos of university hi-jinks once the 'Facebook generation' become middle managers.

The point remains, however, that we must take responsibility for our own personal vigilence, even if employers come to tolerate the odd embarrassing photo, or the government succeeds in tightening internet content controls. Those Black Swans will still be out there.

Big Media Must Make Itself Useful

Rupert Murdoch thinks search engines are getting a 'free ride' on News Corp's content. He also sees little value in 'occasional' visitors who are attracted by a headline they see on a search engine and click through. He says so much content is freely available online because the traditional media 'have been asleep'. Clearly, he wants people to use - and pay for - each of News Corp's media properties as an activity in itself, as in "I want to read the Sun," or "I'm going to watch Fox News now" rather than as an adjunct to their every day activities. To achieve this, he proposes withholding content from the search engines.

He's not alone. Lots of newspapers seem to be planning to reintroduce subscription services online, and there's plenty of discussion about what content might attract a premium.

Of course, many businesses look at the world through their own products, rather than what people are actually doing, or would like to do. Banks, for example, offer 'personal loans' and 'mortgages' quite independently of the use of the processes involved in actually using the money they lend. As a result, people have come to see their bank as just a very basic utility, rather than an integrated part of their lives. 'News' already seems to have gone the same way.

What the media and the banks of this world don't seem to 'get' is why search engines have become so central to people's behaviour.

People don't 'read' search engines. They don't even spend much time there, compared to their destination sites. So why do search engines dominate the advertising world? Because they are key enablers or facilitators of what people are actually doing or want to do. Even if some links are sponsored, a search engine doesn't try to determine what you see or do. Unlike the 'traditional media' or banks. A search engine enables you to efficiently answer the vast number of often quite mundane questions that confront you every day - 'Where are their offices?' 'How do I get there?' 'Can I get this cheaper anywhere else?' 'How many goals has Blogs scored this season?' 'Why are Australian animals so weird?'

No matter how much different content any one provider offers, it will never answer all of everyone's critical questions. And the more it tries to corral people and dictate what they see, the less they'll trust it to give them the information they want.

So the challenge for traditional media is not whether or not they charge for their content. Instead, opportunity lies in becoming more integrated with people's actual or desired every day activities. The more integrated the media are, the greater share of the consumer value chain they might command.