Markets 2.0 - Social Finance. Affinity Markets.

The long tail, smart mobs and social networking are driving the evolution of economics to Markets 2.0. Social networks have been important venues for self-expression and interaction and now, with an increasingly linked online populace, are starting to add a new and important functionality, virtual aggregation for group power, both economic and political.

Two key concepts in Markets 2.0 are Social Finance and Affinity Markets. Social Finance is the virtual aggregation of dozens, hundreds or millions of people for the purpose of conducting an economic transaction. Social Finance is also known as crowd funding and crowd sourcing.

Affinity Markets are marketplaces where transactions can occur based on affinity attributes. Not just is the sweater red, woolen and made in China (legacy attributes) but under what conditions was it made, were renewable materials used, did female entrepreneurs make it (affinity attributes). Affinity Markets are also known as directed capital, cause-based capital and (in online aggregations) virtual affinity groups.

Markets 2.0 have the ability to completely disintermediate traditional financial institutions by providing instantaneous, cheaper, directed capital with more effective results.

What will it be like when people can get their mortgage and home equity loans online from peer finance, when anyone can have a local portfolio manager for commodities in India, when million-member virtual BuyGroups bid for insurance and healthcare services, when synthetic economies nominate and finance virtual candidates for physical world office, when Socially Responsible Debt means that states without measurable social progress cannot get their bond offerings financed?

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Universal voices, Message separated from Medium, Ubiquitous choice

Doug Rushkoff at the 2004 PopTech conference makes several great points related to some of the ongoing themes discussed in this blog, listen to the talk here.

Theme: Increasing democratization of the world
Rushkoff cites the European Renaissance as where media (e.g.; books) became distributable and everyone could access it and have opinions, it was the birth of the individual; the Renaissance human tech culture is currently going through is that everyone can now be an author. Some examples are via personal websites, blogs, building our own software (open source), applications (free APIs), games and new online mini-worlds/experiences. It is interesting to think about how collective consciousness models and other tools may evolve for orchestrating and making accessible not overwhelming all of these voices (15-20 million blogs as of Jan. 2005 and growing exponentially). They'll likely (self?)organize into like streams but should they?

Theme: The medium is the message - the tool is the innovation
Rushkoff cautions that the sexiness of the medium heavily influences the message, for example, because TV was new and personal and invasive in the home, Dan Rather could end newscasts saying "...And that's the way it is" and everyone would believe him. We don't believe the newscasters any more as full arbiters of the situation they are discussing. As critical thinkers, we need to separate the message from the medium and evaluate the merits of the message on its own. The message may be much less powerful and overwhelming than the medium, especially with a lot of new media likely on the way - holographic, 3-D, brain-implanted, etc. How are blogs as a medium influencing the message?

Theme: Shift away from market-centric life structure and value systems
Another interesting point Rushkoff makes is that yes, we are awash with choice, which is good, but it is only in a market context. He uses the example of if you are in love with someone, the only current societally accepted way to act on that is to be married. We don't yet have true choice in lifestyle and many other areas. Take work, for example, it is rare that it's not structured as location and time specific, when being efficiency specific makes much more sense. In the tech world is an example of a successful efficiency-based transition: search is going from statistics-based to relevancy-based. Hopefully new attention on the presence of choice in some arenas and not in others will allow it to be drawn into where it is not.