Mapping out the value exchange universe (1), a quadrant view from Gregory Rader

Interesting attempt by Gregory J. Rader, to map out and distinguish different kinds of exchanges such as the market, the gift economy, etc ..

We present his “Mapping the Value Universe” in two parts. The first explains the following diagram just below, while the second part applies it:

The Value Universe

Gregory Rader:

“Now for the let-down…the outcome of all that build up is a mundane two by two matrix. There will be no intellectual acrobatics found here. Nor will the quadrants of the diagram present any dazzling new ideas. The explanatory power of the framework described below derives from identifying the correct variables that consistently correlate with distinct forms of economic behavior.

X-Axis: Relatedness

Relatedness refers to the relationship of the parties to a given exchange. At the summary level, it describes the closeness of the relationship between two parties. The closer the relationship between two parties the more awkward it becomes to engage in highly quantified, thoroughly negotiated transactions. In close relationships it is uncomfortable to be ‘nickel-and-dimed’. Instead, the mutual understanding that relationship will continue into the future allows both parties to operate by an intuitive sense of fairness.

Unrelated parties consistently demonstrate the opposite behavior. The weaker the relationship between two parties the more likely both are to prefer an immediate ‘balancing of the books’. When dealing with strangers you have no reason to expect that your intuitive sense of fairness will match theirs. And even if by chance you were dealing with a particularly honest stranger, your lack of repeated interactions would leave little opportunity for future reciprocation. Easier if both parties simply move on without any expectations.

The analysis above suggests a more technical definition:

* the degree to which mental bookkeeping between any two parties is both feasible and socially appropriate

Socially appropriate mental bookkeeping demands a great deal of trust from both parties, and the basis for that trust is shifting.

Y-Axis: Refinement

Refinement is the trickier variable. Refinement refers to two characteristics:

1. the degree to which a given value proposition can be accurately judged prior to exchange
2. the ease with which that value is extracted by the recipient

Some examples from the domain of information content descending from most refined to least refined:

* ‘For Dummies’ Guide
o value proposition very clear
o easily consumed (well edited and structured), application obvious

* Typical Business Book
o value proposition relatively clear
o easily consumed (well edited and structured), application requires reader interpretation

* Typical Blog Post
o value proposition often unclear
o may not be easily consumed (less editing and structure), application requires reader interpretation

* Tweet Stream
o value proposition very unclear
o requires significant filtering, evaluation, and interpretation from reader

The underlying principle in the examples above is that greater refinement indicates more effort committed by the producer on behalf of the consumer. Less refinement requires that the consumer must become an interpreter, collaborator or cocreator in order to derive value.

Obviously, the more effort Bob expends (towards refinement) for the benefit of Jim, the more likely Bob is to expect tangible compensation from Jim.

The Four Quadrants

As promised there is nothing surprising here. Each quadrant represents concepts you are already familiar with, though the descriptions below clarify common imprecise usages. Some of the questions I offered at the beginning of this post can be answered through description of the quadrants alone. Other questions, which I will return to at the end, can best be answered by describing shifts in economic activity across quadrants.

The quadrants do not necessarily represent strictly defined boundaries. Some economic behaviors may drift across the axes. We could debate whether the quadrants should be drawn with certain skews, for example by drawing the transactional economy in such a way that it eats into a portion of the gift economy. Nonetheless, the framework will provide context for those debates and help us understand why certain behaviors are difficult to plot.

The four quadrants, in descending order from most obvious to most misunderstood:

The Transactional Economy – Refined/Unrelated

The upper left quadrant represents the familiar monetary economy. The exchanges that occur in this region generally involve unrelated parties exchanging highly refined goods. Those two characteristics lead naturally to the predominant mechanism of exchange: money. High refinement suggests that it is relatively easy to assign discrete prices to the goods commonly exchanged in this manner. Low relatedness leads the trading parties to prefer symmetrical (transactional) modes of exchange (both sides of the exchange are balanced at the same point in time).

However, the transactional economy is also the mode of exchange that has crept furthest into economic behaviors for which it is ill suited. Readers will surely be able to provide numerous examples of money changing hands between related parties or in exchange for unrefined forms of value. This state of affairs persisted stubbornly until very recently because mechanisms mediating other forms of exchange were grossly underdeveloped.

The Relationship Economy – Unrefined/Related

The relationship economy describes behaviors commonly referred to as social or collaborative – the exchange of intangible or difficult to quantify forms of value within ongoing trust-based relationships. The lack of refinement suggests that efforts to assign a monetary price would prove specious. High relatedness permits mental bookkeeping and intuitive maintance of unbalanced accounts.

These two characteristics compliment each other. The inability to quantify tangible value makes symmetric exchange difficult, but within the context of long term relationships, symmetric exchange becomes unnecessary. Related parties can freely provide value to one another with the security that reciprocation will balance out over time.

The Attention Economy – Unrefined/Unrelated

This is where our definitions begin to get tricky and references to clearly defined variables help to provide some precision. ‘Attention economy‘ is a term that seems to conflate traditional marketing activities with relatively new scalable peer-to-peer behaviors (social media). The former (marketing) would seem to be a transactional activity, while the latter (social media) might seem to belong to the relationship economy. This is the confusion I explored in my previous analysis of the attention economy.

The key to unifying these disparate definitions is understanding that the attention economy as an inherently unstable domain. Both types of contributors use the same mechanism (attention) to parlay their contributions into interactions belonging to an adjacent quadrant. In other words, everyone in the attention economy is marketing. Traditional marketing is attention acquisition intended to motivate monetary transaction. Social media participation is attention acquisition intended to motivate movement into the relationship economy, for example by networking with potential collaborators.

Contributions to the attention economy are only rarely intended to motivate perpetual activity within the attention economy. Few people aggressively pursue the exchange of intangible value with weak ties as their ultimate goal.

The exceptions to this characterization are activities like fame seeking (for it’s own sake), public awareness campaigns and political campaign advertising.

The Gift Economy – Refined/Related

Lastly, time to tackle one of the most confused concepts in all of the interwebz…some of that confusion created by yours truly. ’Gift economy’ is a term originally used by social scientists to describe tribal cultures in which scarce resources were allocated through a social norm of gift giving rather than by market mechanisms. In these cultures the act of gift giving deepens interdependencies among members of the tribe. Certain gifts also served to increase the status of those tribe members able to regularly bestow them. For example, in hunter gatherer tribes the best hunters would frequently find themselves with kill too large to consume themselves. Sharing with the rest of the tribe avoided waste and elevated their own status within the tribe. The details of specific case studies are well beyond the scope of this post…perhaps a topic for follow up if the interest is there.

Given recent innovations it has been tempting to apply the gift economy label to any and all forms of exchange that are not mediated by monetary transaction, i.e. that are asymmetric. Now open source culture is a gift economy, social media is a gift economy, blogging is a gift economy, wikipedia is a gift economy. As noted, I have been as guilty of that temptation as anyone else.

I am backing away from that position because most of the behaviors that have attracted the label are more accurately described as belonging to the previous two quadrants, or as movement between quadrants.

So what is gift economy?

Gift economy is the set of economic behaviors described by reference to tribal cultures. It is high refinement and high relatedness. High refinement indicates that ‘gifts‘ are items with clear tangible value. High relatedness suggests that ‘gifts’ are exchanged between closely related parties, such that mental bookkeeping is feasible and socially appropriate.

Based on those criteria, this blog post is not a gift. Though I certainly expect this post to provide value to the reader, that value proposition is not sufficiently refined to consider it a gift. Moreover, many of you are largely anonymous to me, placing this blog post squarely in the attention economy. (I encourage you to move us towards the relationship economy by contacting me through any of the services indicated on the right!)

2 Comments Mapping out the value exchange universe (1), a quadrant view from Gregory Rader

  1. AvatarVanessa Mendes

    Great entry! I have been studying gift economy and I read that recognition and prestige would be a sort of gift given in return. What do you think?

  2. AvatarGabriel

    Excellent analysis Gregory! This advances way beyond most of what I have encountered out there. I really like the stance you’re taking on the “gift economy” – it’s good to confront all the buzzwords floating around out there and create some definitions that are more rooted.

    My only critical question to you would be about your word choices for “refined” and “unrefined” – for me these words have some negative connotations;

    – refined, as in refined white sugar; something which tastes good but is also addictive and potentially full of nasty industrial chemicals
    – unrefined, as in low culture, barbaric, sloppy, etc; something which indicates low class

    Do you think there are any other pair of words that might help to describe this continuum of value without these sorts of connotations?
    The reason I ask is because its very convenient for people with lots of money to look at this chart and feel superior to the poor “unrefined” souls bumbling around in the attention/relationship economy. I’d hate to give their classism any more rhetorical fire-power.

    Some pairs of words that I brainstormed when I initially encountered this critical perspective were:

    quantitative/qualitative (perhaps my favorite, though not sure if it says everything you want it to say…)

    Again, great post, fluid and articulate ideas!

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