One of the tricky parts of doing social science is that a lot of the things that we try to study are not actually real. Or, as Steve Horwitz puts it in an interesting post trying to define Austrian Economics:
The “facts” of the social sciences are what people believe and think.
This has some important implications. One of them is that we always need to question the assumptions that underlie what we do. Many of the elements of the markets and environments that we work in are actually socially constructed. This means that they exist and have meaning because we all agree that they exist and have meaning.
One of the best examples of this is money. A dollar bill doesn’t have any inherent value. We are able to use it to buy things because we all agree that it has value, and moreover, we all agree (roughly) what that value is (here is a paper explaining how this works in a fair bit of detail).
One consequence of this agreement is that we take money for granted – it’s just there and it works. But the form of money that we use has biases built into it – that is one of the points that Douglas Rushkoff makes in this talk summarising some of the points from his book Life, Inc.:
The thing about social constructions though, is that since we’ve built them ourselves, we can also change them ourselves. If we start to question some of these deeply embedded concepts, it actually provides opportunities to create new things. We tend to think of money as the something that we get from banks. But if you start to question the basic assumptions around money, you start to realise that there are range of creative ways that we can redesign the money business model.
If you search for “the future of money”, you’ll get a Wired magazine article, a book, and a web project – just for starters. The web project includes this video talking about some of the ways that money could change once we start thinking about it:
There are a lot of different ideas about how to best create and exchange value flying around. As people experiment with these, we’ll start to see which ones might work, and which ones aren’t as good. I’d be surprised if we don’t see some significant changes to the way we conceptualise money over the next 10 years or so.
There is an important innovation story in all of this as well: to find opportunities to build new business models, look for socially constructed platforms in the economy, and look for opportunities to redesign them.
Here’s an example closely related to the ideas around money – personal lending. In What’s Mine is Yours, Rachel Botsman and Roo Rogers include an interesting discussion of the evolution of the personal lending market. They include this illustration of the changes (also available on the book’s website):
Take a look at the initial state – personal lending was in the domain of banks. Then we started to see peer-to-peer lending systems, building on the micro-finance idea. The cutting edge in this area right now are collaborative systems that are built around alternative currencies. And the future (and a great source of opportunity) is building reputation-based exchange systems.
None of these innovative business models would have happened if people hadn’t first questioned the basic assumptions upon which money and lending are built. But once these assumptions are questioned, then the opportunity arises to build novel business models that are based on a different socially constructed system. This is one very interesting method for finding innovative new business models.
What’s Mine is Yours has a number of good examples of how new business models can be built out of collaborative systems. I’ll talk more about these later this week.
But for now, just think about this idea of social construction. Most of our economic systems are built on concepts that exist simply because we all agree that they do, and which also have an agreed-upon meaning. If you start thinking about these concepts, you can find ways to build systems based on different concepts.
This is a great opportunity for business model innovation.
(photo from flickr/Sami Keinänen under a Creative Commons License)