Relationship Economics (A shiny, busy graphic! Eat it for breakfast or for lunch!)

Some of you might be familiar with the notion of relationship economics. Or not.

Paul Jaminet describes it as “a form of Ronald Coase’s transaction cost economics which hypothesizes that the costs of forming and maintaining personal relationships, and the benefits of those relationships, dominate decision-making in many contexts.”

David Nour wrote a how-to book on the subject that basically covers off on ways to actually invest in business relationships for a maximized return.

A host of other influential thinkers (like Umair Haque and John Hagel) have mentioned or incorporated the concept with respect to how social dynamics quantitatively and qualitatively affect cost dynamics in emerging markets.

All of these ideas seem highly relevant and supremely interesting (we’re talking about relationships, people!), and so I thought I’d explore another version with y’all right here on the WWTID. Why? Well, because relationships are the foundation of the social web, and the basis for the flat, seemingly infinite distribution plane that is the Internet. And the Internet, ala the social web, seems to operate in direct conflict with normative economics, or that singular, hegemonic thing called capitalism.

For the record, I really like capitalism. But as oxymoronic as it might seem, I like social capitalism even more, because it implies that we can compete and profit over human values, not consumption, or hyper-inflated demand, or a slew of “brand values” that frankly don’t mean much at a time when people are struggling to survive.

And speaking of survival, there’s this brilliant guy named Thomas Kuhn who came up with a pretty amazing theory about how humans deal with it through the lens of science; in short, he posits that science plateaus, then gathers itself around a new set of ideas (almost always anomalies), and then leaps upward, a process later termed “paradigm shift.” This happens in steps, or increments, and then moves to the next plateau, at which point the previous stasis (or crisis) generates a new result that becomes an innovation of one sort or another.

So, as an example in Internet terms, think of an evolution such as this: An Alta Vista crawler indexing web pages and Netscape’s browser as state-of-the-art, hitting a stasis point and moving next to Google’s mastery of page-rank search and targeted ad analytics, then hitting stasis and moving next to real-time mobile social search and location-based services, then hitting stasis and moving to, most recently, biomimicry, biometrics and the Internet of Things.

I’d give an example of a stair-step evolution in economic terms, but there really isn’t one (well, none as cool as the Internet example). Basically, we produce and we consume and we have bubbles, and history repeats itself, over and over again (BOOOORRRR-rrrring!). It’s kind of exhausting, actually, and really, really unfair. Anyway…

Still with me?! (Hang in there!)

Okay, so despite my disdain for economic bubbles, I do believe, as many behavioral economists have posited, that there is a profound association between them and how we innovate collectively. In other words, part of our own evolution is the routine experience of economic collapse which forces us to generate newly aligned values that actually create sustainable markets.

Now think of this in terms of a relationship: What stair-step evolution happens in the phases of a relationship, say, between a corporation and a consumer? What comes of a “brand” that has truly invested in this relationship?

Alright, so here’s what this hot mess might look like. It ain’t perfect (far from it), but my hope is to kickstart a discussion. Yes, you can throw darts if you like… Just print it out on your 3-D unit and aim at the pretty neon circles…

Okay, so being a graphic by all accounts very busy (um, sorry), this bears a bit of explanation.

If you’ll recall – or rather, if you’d read – the last post, I mentioned phases of a relationship (interest, connection, relatedness, interaction, action) as expressed in the way we develop currencies and ultimately build trust. These phases move us from a state of scarcity (managing limited supply, hyper-inflated demand) to a state of abundance (controlled amounts of the stuff we need, when we need it).

Along the same parallel, in purely economic terms, we go from a state of wants (‘desirability’), then we transition to a state of compromises (‘accountability’), then to a state of needs (‘actionability’). What this means is that as our relationships strengthen, our wealth actually becomes more abundant, either because we learn how to consume better, and/or, because we have created new forms of wealth altogether. In this process, we merge hard values (attributes tied to how we transact), with soft values (attributes tied to how we transform), such that we learn how to build, consume and cultivate markets for scale in carefully measured and monitored steps.

Note that this whole matrix is transitional. While we can accelerate the mechanisms for them, we don’t build values, trust and markets overnight. (duh…)

Now here’s where things can get interesting.

IF corporations can learn how to actually engage in real relationships with consumers, and IF consumers are actually switched on enough to engage with corporations amid all that is slung at them in the form of shitty ads, subpar content and relentless messaging, then we get to a place where applied learning happens. This means that we can move further and further away from bubbles, and closer to situations where we are empowered by our mistakes or failures as a part of human evolution, rather than being embittered and encumbered by them (Is that even possible? Wait, don’t answer just yet!).

In short, we develop both context and perspective, from which we can make smarter, better, faster, more economically sound decisions. We create real social impact. And those respective actions are what comprise the real “brands” of today. The brands of right now.

Oh, and a quick aside on the numbers you see by the big “Cs” and the big “B”: Corporations comprise a single organism, hence the 1. Consumers comprise individuals who represent the relationship as equal parts, hence the 2. “Brands” comprise the symbiosis of the brand-consumer and consumer-consumer relationship, but always remain at zero point, hence the 0. Why? Because brands are as only as good and relevant as the relationships they maintain and the actions they carry out. The zero also represents a constant level of balance, or zero stasis, between the relationship and the action.

Alright, phew. What are your thoughts? What’s missing? What’s “out of order”? Shoot away!

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