If It Ain’t Broker, Don’t Fix It.

by Dan Robles on 02/26/2009

stockpic1-299x300The function of the innovation economy is to improve information. This has the derivative effect of improving knowledge which, by definition, fuels more innovation. Monetization is easy if we simply improve information between any buyer and any seller in any market, anywhere.

…If it is, please do

For example, the job of a broker is to mediate the transaction between a buyer and a seller. There are real estate brokers, mortgage brokers, stock brokers, etc. Unfortunately, it is not always in the best interest of the broker to provide perfect information to both sides of the transaction. Rather, the broker provides the minimum amount of information needed to complete the transaction, within which they build their commission for rendering such filtration services.

Any B-school undergrad can tell you that a market is most efficient when the buyer and the seller have exactly the same information as the other when making a transaction; this is called “perfect information”. As such, “supply and demand” can do its magic. Resources of production can be perfectly allocated in the glorious capitalist system. The financial meltdown has shown us that the more complex the product is, the greater the deficiency in perfect information becomes.

stockp2-299x300The Holy Grail:

The great opportunity for social media is the ability to improve information in almost every transaction conceivable and create wealth. The next generation of social media strategists will rise to tremendous heights in this domain of the Innovation Economy. However, the Holy Grail of information improvement is the knowledge asset market itself:

For example: Corporations have a great deal more information about employees than employees have about corporations. People are encouraged to compete with each other, not to cooperate, for that carrot on a stick. They are trained to keep their salary a secret. The “job statement” is in a secret code language that is only understood inside the company, not in the general work force. Managers “broker” information by filtering it on the way up and on the way down the corporate structure. It is little wonder that corporations are having a tough time with the social media stuff.

When the layoff comes, the outsourcing begins, or the life change happens, the resume is often no better than a bingo card in a key word lottery. By the way, customers have even less information than the employees. Peanuts anyone?

The mothers of Invention

The knowledge market is the mother of all imperfect information markets. Social media is a single iteration away from greatly improving information in all knowledge markets. Nothing happens without applied human knowledge, as such, the potential capitalization of the next generation of social media applications is as big as the market itself – and it will challenge the very structure of the traditional corporation and associated filtration services.

{ 6 comments }

Aron Stevenson February 27, 2009 at 12:45 am

If It Ain’t Broker, Don’t Fix It – http://tinyurl.com/cau8t3

jderagon February 26, 2009 at 12:11 pm

If It Ain’t Broker, Don’t Fix It.: The knowledge market is the mother of all imperfect information markets. Soci.. http://tinyurl.com/cau8t3

Barbara Ling, Virtual Coach February 26, 2009 at 7:23 am

Very thought-provoking article. Alas, the self-interest factor (ie, looking out for number one) will almost always slant deals in the favor of the mediator. :-/

Data points, Barbara

JDeragon February 26, 2009 at 6:11 am

If It Ain’t Broker, Don’t Fix It.: The knowledge market is the mother of all imperfect information markets. Soci.. http://tinyurl.com/cau8t3

prblogs February 26, 2009 at 5:47 am

RelationshipEcon: If It Ain’t Broker, Don’t Fix It.: The knowledge market is the mother of all .. http://tinyurl.com/cau8t3

JDeragon February 26, 2009 at 5:36 am

New blog post: If It Ain’t Broker, Don’t Fix It. http://tinyurl.com/cau8t3

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