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Intervention by Denise Caruso Read Intervention by Denise Caruso, Executive Director of the Hybrid Vigor Silver Award Winner, 2007 Independent Publisher Book Awards; Best Business Books 2007, Strategy+Business Magazine


by Mike Neuenschwander ~ June 18, 2008.
Permalink | Filed under: Hybrid Vigor, Social Trust Online.

Today’s USA Today features two cover stories that are interesting in their own right, but even more telling taken together.

One headline reads, “Report: Feds need better privacy protection for data.” The article states that “the government does not have adequate privacy protections for the personal information it collects, shares and stores as part of the effort to fight terrorism, according to a new report by a U.S. watchdog agency.” This revelation is neither shocking nor newsworthy to anyone familiar with subject matter. But thankfully, the significance of privacy problems are now disturbing to the popular consciousness as well. The article continues:

Committee Chairman Joe Lieberman, I-Conn., says citizens can be left vulnerable to identity theft, stalking, discrimination, unwarranted surveillance or loss of employment if their personal information isn’t properly secured.

The second article discusses how credit card issuers encouraged consumers — particularly in lower income households — to spend with their credit cards and then pay off the debt with equity (which turned out to be “phantom equity”) in their homes. Things have gotten severe. Sen. Robert Menendez is cited in the article saying, “We cannot allow the credit card problem to become the next foreclosure crisis.”

This situation, as stated in the article, “was no accident.” Card issuers have become expert at targeting their prey. They’re also exceptional at managing their own risk, while ignoring others’. The article cites several examples of this behavior; here’s one of them:

When banks extend more credit, younger consumers and the financially inexperienced are more likely to take on debt, a 2002 study by Amar Cheema, of Washington University in St. Louis, and Dilip Soman, of the University of Toronto, found.

Subprime borrowers, many of whom have little experience with credit, tend to use more of their available credit than others do. “Generally, these are consumers who have (greater) need for credit,” says Myra Hart, a senior vice president at Equifax.

During the boom, banks focused on getting more plastic into these borrowers’ hands: New cards issued to subprime consumers rose 137% from 2003 through 2006, Experian data show.

Ironically, companies like Experian helped target consumers in the first place.

In the face of the market upheaval, it’s easy just to throw one’s hands in the air in frustration. Clearly, a great crime has been committed. An entire nation has been robbed. World markets are shaken. But who’s responsible? Nobody. And everybody. The insidious nature of this crime is that we all collaborated to commit it — and without a master plan. Can such collective action crimes be avoided? Or is the commons forever doomed to be the scene of tragedy?

If such outcomes are to be averted, we must first acknowledge to role of the “stage” or “playing field” on which such tragedies play out. Game theorists use games like “prisoners’ dilemma” to demonstrate how the structure of a game largely determines its outcome. By adjusting the rules of the game, researchers can alter participants’ tendency to collaborate or defect. On a societal scale, it’s clear that the playing field in current use promotes an atmosphere of exploitation rather than cooperation.

A lot can be done to improve this situation. As a society, we need to insist on rules that promote stable relationships with cooperative outcomes. As I discussed on the Burton blog, exploitation is a predictable outcome of asymmetrical relations. But so much of mankind’s modern economic and social growth has come at the sacrifice of time-honored ceremonies for instinctual trust and establishing equilibrium in relations. In the context of the mortgage crisis and credit crunch, processes for empathy, reciprocity, signaling, reputation, demonstrations of skill and other natural pathways to trust are decidedly anachronistic. In the absence of such ceremonies, institutions instead rely heavily on your digital information as the basis for trust. And in doing so, as Sen Lieberman put it, make you “vulnerable to identity theft, stalking, discrimination, unwarranted surveillance or loss of employment.”

The issue here is not data protection: that approach attempts only to steady a playing field that is highly flawed. The issue is how to reintroduce pathways to social trust into today’s globalized, diverse, and complex civilization.

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