Entries in transparency (7)


The Middle Man can be Good and Sometimes Essential

On this blog we often discuss new models that find creative ways to cut out the middle man and bring greater transparency to the customer. The benefits of disintermediation (coming about increasingly from the internet business models) are straightforward: lower prices for the customer, greater profits for the producer, and more transparency.

But are there negatives to disintermediation? And are there times when the middle man adds significant value? 

Click to read more ...


Outrageous transparency: publicizing tax data in Norway

What could be worse for a society that upholds equality than to publicize in a searchable database the salary of every citizen? The Norwegian tax authorities have published to the media the full list of 2008 tax statements. Norwegians can now query a database to see how their salaries compare to those of their neighbors and kids can search to see whose parents are the richest (and poorest).

The New York Times writes: "Defenders of the system say it enhances transparency, deemed essential for an open democracy." Yet "transparency" is a curious term to describe the practice of making public information on citizens with no political ambitions or overt role in the political process. I call that a gross violation of privacy. I suspect that full knowledge of salaries will lead to more unequal treatment; it's human nature to treat people better or worse once you know if they make much more or much less than you.


For transparency...in government and p2p micro-lending at Kiva


Lawrence Lessig's article "Against Transparency" in The New Republic has sparked a lot of debate about the perils of going down the road of "naked transparency".  Lessig fears open data for government may end in citizen cynicism and withdrawal from the political process. Rather than being actually against transparency, he makes clear in his follow-on article and this interview that his real concern is that people will see transparency as the sole answer rather than the necessary combination of transparency + meaningful campaign finance reform.

I agree that transparency is not a panacea, but I believe he overstates the "perils" of open data. Take a look at the Sunlight Foundation's display of health care lobbyist contributions to Senator Max Baucus, author of the current main health care reform bill being debated in Congress. Will citizens reach "unwarranted conclusions" upon seeing the nearly half a million dollars Senator Baucus received from these lobbyists while he was shaping health care reform? It's a scandal that such a revelation does not lead his career to "be destroyed".

Of course, Prof. Lessig is in support of such thoughtful analyses and he is right to bring up the broader reform issues.  I believe we need more of the kind of transparency and analysis that the Sunlight Foundation has fostered, but the cynicism question raises an important point. One can imagine a scenario in which people are participating in a process that is ultimately good while ignorant of some of its messier internal mechanics. Should that process be made transparent at the risk of alienating the participants or is ignorance really bliss?

Take the case of Kiva. Yesterday the Harvard Businesss Review pointed out that the peer-to-peer lending platform tells a story that is not entirely true. A large part of Kiva's appeal for lenders is the implicit promise that your money goes directly to the needy entrepreneur of your choosing. In reality, the $25 that you donate on Kiva to Ndidi Bienose, for example, is routed through his sponsoring NGO, Lift Above Poverty Organization (LAPO). LAPO collects all lender money and in turn distributes it to their entrepreneurs. This is one reason for the unexpectedly high repayment rates of Kiva (~98%) -- individual losses can be easily disguised within a group under an NGO. Microplace uses the same model, but has always been straightforward about it.  Kiva, however, has been vastly more successful because of their more appealing, albeit untrue, story.

This unplanned transparency could turn into an example of what Lessig fears: that the exposing of the behind the scenes action will turn previously happy do-good Kiva lenders into cynics who now see P2P micro-lending as just as corrupt/misleading as the more traditional forms of aid that it hoped to supplant. Due to the attention problem that Lessig identifies, lenders will not take the time to learn that the end result of Kiva's and Microplace's approach is actually more effective and more efficient than direct peer-to-peer lending.

It's too soon to tell whether some Kiva lenders will be turned off enough by the revelation to stop participating, but I'm optimistic that the real Kiva story can be told effectively.  There is a powerful fact that Kiva can stand behind : Lending through a field partner is more reliable than direct lending and smooths the process for the benefit of the entrepreneur that the lender is hoping to help. The bottom line of Kiva remains the same -- to alleviate poverty through microloans -- and in the end, your money still goes to Ndidi Bienose. In Seth Godin's parlance, the P2P story is still authentic, even if it is not entirely true.

So is the new transparency in Kiva a good thing? A few lenders may be lost, yes, but the ones who remain will have full knowledge of the process and will no longer be duped. The strongest and most engaged communities are built on honesty. The same is true of government.

Flickr credit: bgblogging via Creative Commons, where I get all my photos and a concept for which I thank Lawrence Lessig for pioneeering


LittleSis: an "involuntary" Facebook for political heavy hitters

Robert E. Rubin has 69 relationships, including 1 son (Jamie Rubin), a close friend (Richard Perry), and proteges such as Larrry Summers and Jason Furman. Former positions include Secretary of the Treasury and Chairman of Citigroup. He recently supported the Democratic Congressional and Senate Campaign Committees.

Sounds a bit like a Facebook profile, doesn't it? I'm not friends with Rubin, but I got all of this information in one place at LittleSis, an "involuntary" social network for powerful people and organizations.

LittleSis creatively, and provocatively, bills itself as an "answer to Big Brother". It seeks to bring transparency to influential social networks by "tracking the key relationships of politicians, business leaders, lobbyists, financiers, and their affiliated institutions." By contributing data to the site, citizens can be a part of the "surveilling of the country's leadership" in the name of "transparency, accountability, and the public good."

To be clear, the site is not interested in gossip or personal affairs, but rather the professional relationships, political contributions, and education histories that may shape or influence the actions of these people in power. All of this information is public record, but the current challenge is that it is scattered across a wide range of websites and resources. And in what may be an even more interesting application, the site will help to expose the well-connected, but less public-facing individuals who hold a great deal of influence but lack the commensurate level of scrutiny -- Robert Rubin is a good example. You may have thought that he was out of the limelight until you realize through his social network that he was the primary mentor to the current administration's top two economic advisors.

Anyone can ask to become an "analyst" on the site and work to build out the network. Some of the data is automatically scraped, but the power will come from the contributions of citizens filling in the missing details. While readers can ingest the data like on Facebook -- wih tabs for relationships, interlocks, and giving -- for analysts, the process is more like Wikipedia. It is an ambitious effort to crowdsource transparency efforts and make any citizen a watchdog against corruption and abuse.

LittleSis is a project of the Public Accountability Initative and is funded by a grant from the Sunlight Foundation -- the gold standard of transparency. While the wiki format is elegant, I would love to see a visualization of the social networks -- like Sunlight's health care lobbyist complex. The soon-to-be-launched API should make that happen.


Crowdsourcing Patent Review: Innovation and transparency at the USPTO


The United States Patent and Tradmark Office (USPTO) may have the mission to promote the progress of science and the useful arts, but it has never been known for exemplifying a culture of innovation itself. That may be changing. A few years ago, a pilot program, the Peer-to-Patent Project opened the patent examination process to public participation for the first time. The project utilizes the collective knowledge of internet users to discover “prior art” that may be used against a patent request. Based upon its initial success, the USPTO has decided to extend the program and an optimist might hope that this signals a new working model for the agency, or perhaps, a broader portion of the government.

Brainchild Beth Noveck of New York University describes the effort as one that explores "how to design a more collaborative culture that involves the scientific community more directly in decision-making." With so many technologies and ideas being shared across the web without formal patent applications, the aim of the project is to reduce the number of frivolous patents and subsequent lawsuits clogging the legal system. Embraced by industry, this development is even better for consumers who should in the future be able to enjoy new products sooner and more cheaply, and without the fear of losing your favorite product as a result of a lawsuit.

Peer-to-patent applies social networking technology to the patent business to ensure that only the worthwhile patents actually receive 20 years of patent rights. The website brings transparency to the patent business, which to many inventors, has in the operated in a shroud of mystery. It also offers opportunities for efficiency, by crowdsourcing evaluation rather than relying only on over-worked patent officers.

And for the casual innovator, the site offers a small window into the type of ideas that people are trying to patent these days (e.g., Continual reorganization of ordered search results based on current user interaction, Process of encryption and operational control of tagged data elements, The community patent review site has new revamped website: http://www.peertopatent.org/.

 Flickr credit: nodomain1


Mint vs. Wesabe: the value of online communities


I recently had to pay the library on overdue charge for a personal finance book called “You’re so Money!” Unfortunately, my life is full of such “ironies” where my attempts to make the most of my money cost me more than I save. So when I heard about mint.com I ran home from work to check it out. The free personal finance website aggregates all of my financial statements from checking and savings accounts, credit cards, and investors in one place on a daily basis and then provides me with colorful charts on how I spend my money, ideas for how I can save, and alerts when I break my budget.

Like the p2p market places, social lenders, and prediction markets we’ve profiled, Mint is an example of how technology can cut out the middle man (financial planners in this case), heighten transparency, and facilitate informed decision making. By transforming our daily financial dealings into meaningful graphs and tools, Mint helps to demystify and even beautify (with its universally-loved interface) the world of personal finance.

Mint.com is not the first site of its kind. It competes with Wesabe, a site that began in 2005 and offers similar personal finance services. Many bloggers have compared the two: They both h aggregate all of your financial statements, track your cash flow, and help you create ad stick to a budget. Mint.com is more convenient and user friendly because it automatically updates your graphs and budget every night. It is also the Marcia, Marcia, Marcia of the bunch. Wesabe is more flexible and secure because it allows you to easily change how your expenses are bucketed and also gives you the option to manually update your financial statements—a slower but more secure process to aggregate your personal financial information.

While both models enhance transparency, cut the middleman, and engender more informed decisions Wesabe brings the extra element of community to the table. Its users join a social network where discussion groups allow them to ask questions and contribute to a variety of ongoing personal finance conversations, from limiting consumption to planning retirement, traveling the world and buying a house.

Nevertheless, the younger Mint appears to be doing better than its predecessor. (For an interesting analysis click here.) Is it because users don’t value the element of community? In p2p markets, social lending, and prediction markets, it is the online community that provides the key service. Etsy, Kiva, and Intrade bring no service to the user if there isn’t another user (to sell, lend/borrow, or trade with), but Mint brings the same value for the user regardless if he or she is the only user or one of millions. While Wesabe’s community might provide good advice to users it is not central to the provision of personal-finance services.

This is a reminder that there is a difference between an online community that provides support and one that provides a service. For Wesabe to increase its competitive advantage it will have to stop relying on its element of community and focus on its provision of personal-finance services. The twist is that its online community provides the key. The close relationship between the Wesabe’s management team and its users on the site’s discussion groups is where the answers lay. Improving its interface and convenience are the users’ first requests.



Kiva introduces its API

Kiva, the first p2p micro-lending website, is opening its doors to third party developers. Build.kiva.org is its new destination for developers looking to expand its micro-lending platform. Its blog explains:

Our website has already done so much to connect people and bring new opportunity to the developing world, but it is nothing compared to the impact we think that technology and microfinance together will have to alleviate poverty. It is going to take a lot of innovation, a lot of creativity, and a lot of passionate people bringing the opportunity of loans to places they’ve never been.


By opening up its data and enabling independent, inspired developers to create applications, Kiva hopes to further connect its community and expand its reach. This move shows that the non-profit continues to be a model of both innovation and transparency.