What are the Economics of Relationships?

by Jay Deragon on 03/15/2008


What is the Economics of Relationships?Everywhere we turn we are being surrounded by the message and the means for “giving”. It used to be that the message of giving was centric to religious institutions, non-profit causes and seasonal holidays.Today the message is permeating our culture through every means of media that surrounds us 24/7.

Consider some of todays hit TV shows i.e. Extreme Makeover,The Big Give, The Law of Attraction etc. with each demonstrating the transformational power of giving and thinking about giving. Unlike institutional messages of the past the underlying themes surrounding us today is aimed at changing how we think about ourselves, our surroundings, our relations and the methods we use to pursue “gains“.

Consider the conversational rivers within the social web centric to “free” and how one can use “free” to make gains. Free is a method of giving but in most cases with some kind of expected return. There are millions of people and businesses adopting the “free” model of the social web however everyone is expecting returns from all that is being given freely. Returns from free come from relationships first, transactions follow.

How Do We Define Relationships and Then the Economics of Relationships?

First the word “Relationship” being defined as connection or association; the condition of being related. Second is “Economics” being defined as the study of resource allocation, distribution and consumption; of capital and investment; and of management of the factors of production. So I will define the collective meaning of Relationship Economics as: The people and things we are connected with or have an association to which distribute or consume our “capital” which influences our individual production outputs. We will use the term “capital” meaning that which we give or take that creates numerous forms of value.

Practical Relationship Economics Examples: We have relations with people and things. Both either take or give to our “capital“. People and things take or give us time (capital). People give or take information and knowledge (capital). We work with people to make money (capital). We strive in business to create or loose money (capital). We use machines and technology that either give or take value (capital). We interact with “things” that either give or take value (capital). We participate in institutions that both give and take value (capital). Our governments provide the means to gain or loose our freedoms (capital). In essence we have relationships with people and things that give, take or both in terms of our individual abilities to be “productive with our capital”. Collectively “Relationship Economics” is about people and things we give or take which influences numerous forms of value, our “capital“.

When you think about the primary means of most interactions we have with people and things it is technologically based. Whether your working, playing or relaxing you ultimately interact with some form of technology, everywhere and in everything. For the most part technology increases the value of our interactions with people and things. It is hidden and assumed. Initially any new technology takes your time (capital) to learn how to optimize it. However, once proficient you begin to appreciate the value but expect more from it.

Is The Social Web Creating The Relationship Economy?

When we engage in human relations it takes time to learn whether the interaction creates value and whether the values are in common. When relationships become “disconnected” the primary basis is usually differences in value given or taken and differences in “values”. The primary difference between our interactions with people and things is one of values vs. value. Technology produces value while people dictate the “values” that technology enables for either the building or tearing down of relationships and the related capital, i.e. transactions.

Relationship Economics is just beginning to take shape and its future has significant rewards. The future,not to distant, will naturally emerge into a convergence of collective technologies which connect us to everything, everywhere. So How Do We give and receive value?

Many of us currently sell products and services in exchange for economic value. The future of Relationship Economics will be based on “value taken vs. value given“. The oldest exchange of value is that known as tithing and it is largely tied to religious organizations. Another exchange of value is that of “tipping for services rendered“. Another old paradigm which the masses have adopted as socially acceptable and expected. Fast forward.

In a world connected to everything everywhere we as individuals are enabled to profile and exchange our value and our values. Already, in today’s market, we’re seeing an exchange of value in terms of relationship introductions and the process of using the means for job recruitment. Job recruiters make money off of placement, an old model of exchange for value which HR departments have adopted as a better method to internal staffing and screening. Now combine the old models of value exchange with a new model. A model in which in the “networked world” we buy tokens of economic value globally. When some one provides us value it is assumed and expected, but not written in contract form, that we would be rewarded according to the perceptions of value by the receiver. The receiver would simply credit our token account with a value they deem appropriate for the benefit gained. In turn we would do the same for those that deliver us value.

Since the technology of the “networked world” provides us with the luxury of efficiency and effectiveness we are able to produce value to whatever degree we choose. The choice is individual. Some will work overtime because others will compensate them for their ability to produce. Others will receive and not compensate, they will be quickly identified as takers, not givers and the entire network will know the difference. The Global exchange of value ignites competitive propositions but the rewards provided are an individual choice, not unlike today’s market of products and services. Deliver value and you gain customers, Deliver defects and you loose them, period. However, both scenarios strt with a relationship.

Relationship Economics will create new mediums, new measures and accelerated exchanges that will displace traditional mediums and totally disrupt and displace existing paradigms. A new world order driven by value exchanges and relationships will emerge and mankind will learn to adapt or lose. Those that don’t adapt and create value will be quickly be identified and set apart from the larger network. Value migration will build momentum and create significance, individually and collectively.

What say you?

{ 3 comments }

TV Show Downloads March 31, 2008 at 4:34 am

That was some interesting peice of information. I am working on an article about the varying trends across decades in the entertainment industry and I believe that your page could support my work. So, I would want to refer to your page. I hope that is okay with you. Appreciate your help.

Respectfully,
Kashin Torwalds.

Hans Henrik Heming March 18, 2008 at 12:47 pm

Hi there

This is highly relevant and VERY interesting – the field of “social capital” is fairly new, especially when it comes to an corporate setting. In my company Wemind, we specialized in setting the right context to make sure that organizations can grow their “Social Capital”.

Today context is VERY much about handling The Social Web.

If you’re interested in the field of “Social Capital” we produced a “whitepaper on the subject. You can download it here on one of our international weblogs:
http://www.cph127.com/download-free-whitepaper/

Please write me if you are interested in further conversations on the subject.

All the best
Hans Henrik;

Martin Recke March 15, 2008 at 4:07 am

Recommended Reading: What are the Economics of Relationships? http://tinyurl.com/2nk4s2

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