intrust

According one account there are more than 80 chemicals in the strawberry flavour of a Burger King Milk Shake, in a formulae you would not normally commit to memory. Nor would you normally keep track of just what sort of trees and other substances this book is printed on. Every product tells a story, but we are usually only interested in the punch line.

Since very little is made or done without someone keeping track of the ingredients used and the methods and processes employed, it is not difficult to imagine all such information being made public. Unless a manufacturer or service supplier has some strategic reason for secrecy, then all sorts of relevant data could be posted on the Internet.

It is not far-fetched to imagine that for any shoe made by Adidas, or any medicine sold by AstraZeneca, there is a host of details that could be of interest to consumers. For example a prospective shoe buyer might just be interested in the labour conditions under which a particular model was made. Or a patient might want to know how one sort of pill would work in combination with another.

Yet as we have pointed out, there are considerable limits to our brain’s ability to keep track of details and we gladly let branding and commercials and perceived price advantages steer our choices. A maze of multi-dimensional product declarations on the Internet will only cause us headaches.

But if we never have to address this amount of detail? What if our “agents” do it for us? What if we, as decision makers, never have to bother with more than seven or so “decision components”? Lets say, for example, you wanted to buy some shoes by post order and the choices were products from Nike, Reebok and Puma. You have some notions about the shoe business, leading you to believe that the shoes of most manufacturers are probably made in similar factories somewhere in China, most likely by children, who perhaps should be in school. If in your catalogue, you find an equally attractive pair from each company, all at the same price, how do you choose?

Imagine the year is 2006, and there are 36 measurement systems in place to help you in your shoe purchasing decision. These mechanisms are not flashy web pages or portals; you will not be expected to browse about for the information provided. It will be done for you. Of course you must place your trust in these mechanisms.

These trust mechanisms range from indicators as to the financial health of each of the three firms, test results as to the strength and durability of materials used, sales rankings, the ethical track records of each company, their compliance with environmental— and labour, guidelines and laws (national, international and perhaps tabs kept by NGO’s), post-transaction service performance, and perhaps most importantly for your feet; profile matches between your size, which by now has been expanded from one simple ordinal number to a fifteen fold measurement system encompassing all aspects of podiatry; from the height of your arches to the ballistics of your gait.

Your job will be to let your robot know what matters most to you. Your robot will then weigh your preferences against what is available on the market or in the store you happen to be in. You might be told that you have to lower your ethnic demand level or raise your price.

Let’s define a market as that place where information flows with the least amount of friction. At the centre point of the market, the transaction costs of information flow is near-zero. The more friction involved in the flow of information, the further an exchange will be pushed out to the perimeters. Thus centre stage in our hypothetical shoe market is occupied by those buyers and sellers who can transfer whatever sort of dW3 that is relevant to a sale, with the least amount of effort.

The frictionless flow of information between all agents involved in a transaction is provided by a schema – a functioning taxonomy of all values and measures pertinent to the transaction domain. For example, in the case of our proposed new measurement system for shoes, there must be a common declaration structure for all of the 13 attributes. Any two parties who adhere to this scheme will reduce transaction costs and move closer into the centre of the market. Of course ethic standards will present us with another sort of schema problem. As in the gymnastics competition mention earlier, there must exist judges who dish out computable scores, or there must exist standards such as ISO 9001, that are backed by guarantees of actual compliance. It is the schema that defines the market and not visa versa.

// posted by Greg FitzPatrick @ 00:00