Community vs Currency

In The Nature of the Graph earlier this week, I talked about friction– ie, transaction costs– inside groups and how they impact the efficiency of groups.

A transaction cost within a financial relationship can be a lot of things: from a broker taking 10% to a lawyer drafting a contract. We have to pay these over and over, but they allow us to deal with a much wider group of strangers than was previously possible.

Within social situations, friction takes other forms– we have to build a relationship instead of trusting a middleman. Once we’ve built it, though, it’s there forever, so costs are reduced. One could also argue that maintaining the relationship is a kind of upkeep cost, but I’m thinking that social upkeep is cheaper than paying fees over and over again.

But what happens when people don’t comply with contracts?

Legal contracts are simple– clauses are outlined and noncompliance results in consequences that are written in black and white. They’re usually pretty severe, which is why we don’t break them.

Social contracts, in contrast, have lower transaction costs, but something scarier happens when we break them– we get ostracized from the group. So in a situation where community has been built, we chance lose everything we built.

That’s the interesting thing about community. It makes things easier but it also puts us more at risk.

I would say that 1000 years ago, the community may have been weaker than the market. But that was mostly due to their shorter reach– after all, currency travels farther than favours. But now that they can be global, community is once again very valuable.

What do you think?





3 responses to “Community vs Currency”

  1. Whitney Avatar

    Well, from the perspective of a lawyer, I look at my job drafting contracts as making the terms of the relationship and the expectations clear and explicit, simple and overt. Most social relationships outside of a pure business context have rules, but the rules aren’t explicit, and they are variable depending on who wants to be in the relationship and who does not.
    For example, “Joe” says he’ll call “Diane” tomorrow. If he does, he builds trust in the relationship; if he fails to do so, and she spent the evening waiting by the phone (even her cell) expecting the call, she’s going to be disappointed, and his “stock” with her will fall. However, if she did not really expect him to follow through, she doesn’t much care that he failed to deliver on his promise. I bet neither party made their intentions to act, or their expectations of each other clear in advance in this situation.

    Likewise, there are people I am close friends with, and they get significantly more “trust rope” and latitude with breaking rules than people I don’t feel as close to. If these friends break the implicit versus explicit rules of the relationship, I have these choices 1) get mad or angry or upset and then decide whether or not to tell them about it, and establish the rules in a more overt way by making my “boundaries” more explicit and less implicit or b) adjust my expectations so I do not expect more of my friends than they are able to deliver.
    I do think we are valuing relationships more than mere transactions as a whole now, partially because as we have become more “productive” as a whole, the micro-communities we create at churches and social groups in a face to face manner receive less attention from us in favor for the larger macro communities and relationships we can and do maintain virtually and online. We can find more people who fit our own definition of self better online-we’re no longer just limited to our neighbors to find like-minded folks, which also means we may spend less time looking for face to face communities, filling that need virtually instead.

    The part here I’d like to hear more about is your thoughts on relationship maintenance- how much care and feeding do you think online relationships need, especially when compared to those in real life?

  2. Lou Sagar Avatar

    I think the re-emergence of community as a force will be further enhanced as “trust agents” germinate across the web, and we begin them act as the intermediaries for commerce, and we will see more commerce conducted because of “trusted” community-based associations, and less trust and association with brands, as we have known them. By the way, I love the contextural imagery of your blog…Its a trusting space. Keep up the amazing work.

  3. Lou Sagar Avatar

    FYI…its hard to find the submit button.

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