Reputation Bank Account

Excerpts from "What's Mine Is Yours: The Rise of Collaborative Consumption" 

by Rachel Botsman and Roo Rogers

Reputation is one of the most salient areas where the push and pull between the collective good and self-interest have real impact. Reputation is a personal reward that is intimately bound up with respecting and considering the needs of others. Undeniably, almost all of us wonder and care, at least a little bit, what other people—friends, family, coworkers, and people we have just met—think about us. But this question of social reputation did not often affect our consumer behaviors. There was no central place where all these soft perceptions, opinions, and ratings accumulated; but also, as consumers operating in a hyper-individualistic world, we considered our credit rating far more important than any kind of peer-to-peer review. Now with the Web we leave a reputation trail. With every seller we rate; spammer we flag; comment we leave; idea, comment, video, or photo we post; peer we review, we leave a cumulative record of how well we collaborate and if we can be trusted.

Sometimes people are not conscious of their reputation capital or have to experience a loss to realize how important it is. Others are at first cavalier and don’t see the connections or ramifications of their actions. As Casey Fenton, founder of CouchSurfing, described it to us, in everyday life you might have a disagreement with somebody and go your separate ways. That person may speak badly about you to someone else, but is unlikely to damage your reputation in the long term. “But in CouchSurfing somebody cannot just tell one person, but tell everybody about it. So the consequences are vastly different. It means you really have to go the extra mile in the way you interact with people.”

Reputation has always functioned as a form of reward for humans. The striatum at the center of the brain is our monetary reward processor. Give a guy a buck and the striatum lights up. In April 2008, Professor Norihiro Sadato of Japan’s National Institute for Physiological Sciences added one other critical function to the striatum: a reputation award processor. Professor Sadato explains, “Although we intuitively know that a good reputation makes us feel good, the idea that a good reputation is a ‘reward’ had long been just an assumption without scientific proof.” Sadato developed this theory by conducting a series of MRI scans of the brains of nineteen subjects while they engaged in two different exercises. The first was a basic game. Participants had to choose one of three cards in the hope of winning a cash prize. The second exercise asked participants to have their characters appraised based on the results of personality trait questionnaires. The researchers found that the striatum activated as expected when the participants won money. But they also found that it responded to high and low appraisals (but did not perk up to more neutral comments).9 Online rating systems, as well as other examples of immediate and simple forms of community feedback, provide these forms of appraisal that motivate people to behave in a responsible way.

Today reputation serves not only as a psychological reward or currency, but also as an actual currency—called reputation capital. We have already seen how people build their reputations by playing within the rules, helping others, and touting their accomplishments. Reputation capital has become so important that it acts as a secondary currency—a currency that claims, “You can trust me.” As Andy Hobsbawm writes in Small Is the Next Big Thing, “Online reputation systems are a new mechanism for trust between individuals anywhere in the world and could become a cornerstone of the modern economy.”

The more you participate in Collaborative Consumption, the more reputation capital you earn, and the more you earn, the more you can participate. This dynamic manifests itself in tangible ways; for example, the more hours you bank with a local time bank or LETS scheme by doing things for other people, the more hours you have to spend on things you need. It also operates in softer ways; for example, the better the review and feedback you receive, the more choices are made available to you, whether it’s places you can stay, what and whom you can barter with, or who will lend money, tools, or a car, and so on. Reputation capital becomes a currency to build trust between strangers and helps manage our belief in the commons.

It is only a matter of time before there is some form of network that aggregates your reputation capital across multiple forms of Collaborative Consumption. We’ll be able to perform a Google-like search to see a complete picture of how people behave and the degree to which they can be trusted, whether it’s around products they swap and trade or money they lend or borrow or land or cars they share.

But isn’t it in each company’s best interest to design a system that is based on the actions performed within a single community? If you have invested time building your reputation on thredUP, why would you want to start from scratch on a new clothing exchange? Reputation systems that are confined to a specific context therefore help companies sustain loyalty and lower attrition because your reluctance to jump to a new entrant or competitor means you are locked into that community.

But we believe it will be possible to design a platform that aggregates your reputation trail and contributions across various types of communities. Joe Smith, for example, might show he is an eBay power seller, has a thredUp “stylie” rating of 8.6 out of 10, has uploaded fifteen hundred photos under a creative commons license on Flickr, is a five-star member on RelayRides, has a 100 percent loan repay rate on Zopa, and so on. In the same way that we can move our credit history from one credit card to the next, our repository of trust and reputation will carry from one community to another.

Your reputation bank account, so to speak, will determine your access to forms of Collaborative Consumption and could become a more influential and valuable asset than your credit history. “By the end of this decade, power and influence will shift largely to those people with the best reputations and trust networks, from people with money and nominal power,” Craig Newmark, founder of craigslist, recently commented.