Let’s Shake On It

I grew up in a place where handshakes mattered. Where a man’s word was his bond.

Call me old fashioned but the same principle still governs my worldview.

Doing business shouldn’t require contracts.

Except today, you’re probably making a stupid decision if you’re not getting something in writing.

Sure, contracts make things easier in some ways. Contracts define the scope of expectations for both parties. They provide a means for recourse if terms aren’t met. These legal instruments hedge against untrustworthy behaviors.

But contracts also create business friction. They introduce a third-party (lawyers) into a situation that could otherwise be settled between two competent, consenting parties. Contracts extend the sales cycle. They create a barrier to satisfying two party’s unmet needs.

Incentives matter.

People respond to incentives. Where there’s a big enough incentive, there’s also a temptation to violate an agreement. Sure, contracts provide an avenue for reconciliation in these cases – but at what cost? (Read: more lawyers).

Skin in the Game

As Robert Frost said, “Good fences make good neighbors.” In some sense, contracts are one way for a person to up the ante on someone else’s behavior. They add a little skin in the game for both parties.

Absent a contract, what’s the worst that could happen? Maybe it’s a line of thinking that ruining your reputation isn’t that high a cost. That with the right amount of money you can buy a new reputation – or better yet, buy the victim’s silence.

Kinda shady, right?

The Future

Blockchain holds a lot of cool possibilities for getting us closer to “handshake” agreements again. Not in the sense that everybody suddenly begins acting out of good faith. Rather, it takes everyone as they are. Hey, let’s just pretend everyone’s a shady motherfucker. Instead, imagine a world where people don’t have to trust one another to do business.

That’s not to say that blockchain will eliminate the need for trust. But what if it could minimize the need for trust? What if two parties could engage in transactions that didn’t require egregious legal fees, lengthy due-diligence, and an arthritic-inflicting pile of paperwork?

What if a handshake created an actual binding, digital contract? Instead of needing to “insult someone’s honor” or demand a contract – imagine if contracts generated spontaneously.

Pretty wild to think about, right? Maybe not.

Nice guys finish last.

Sadly, I don’t think honoring handshake deals is back on the rise. But the cost of transacting business AND providing means for enforcement is getting a lot easier.

I like to imagine a world where, instead of looking over your shoulder or worrying who’s going to screw you, you can confidently go about your business in good faith.

Maybe there’s still hope for the nice guys out there after all. But for everybody else, get it in writing.

 

 

 

 

 

 

 

 

Fix It Before It Breaks.

Innovation examines the whole world as a puzzle waiting to be solved rather than as a problem or nuisance of fate. Under this microscope possibilities to create and build a better one become endless.

I  bought into fear of innovation and change until I found a loophole. It’s a whole hell of a lot easier to embrace with the right mentality. Just focus on the reason innovation matters. It’s something we all know. Every improvement makes our lives better.

“Don’t fix what isn’t broken,” they say. How broken does something need to be before we replace it with something better?

Take the iPhone for example. I’ve heard sentiment expressed about the rapid release of newer technology.  Just ask around some afternoon. Before long, you’ll meet someone who expresses contempt that a newer version comes out every year. This frustration illuminates a common misconception about innovation.

Profit-motive might drive the innovation or it might not. The innovator might or might not have sinister intentions. It doesn’t matter. The product matters. So does the improvement the product yields for everyone who uses it. Every advancement, big or small, raises standards of living. Every advancement moves the world forward from where it was.

Innovation finds no satisfaction with the status quo. Intrigue prevails over frustration during gaps in performance or errors. Innovation figures out why these occur rather than damns them.

Innovation examines the whole world as a puzzle waiting to be solved rather than as a problem or nuisance of fate. Under this microscope possibilities to create and build a better one become endless.

Innovation and its entrepreneurial counterpart are at their core anarchistic. No set structure or central plan governs the moves. They testify of benefits from the chaos prevalent the absence a system.  In such chaos, harmony and spontaneous problem-solving arise.

Don’t believe me? Look around at any group. Be it work force, team, or committee, etc. In absence of guidelines for solving problems people spontaneously generate solutions. People naturally solve problems according to the information they have. I guess you could say there’s an innovator within us all.

That innovator needs to be unleashed. It needs to be given the proper fuel to enact change.  And it needs something to practice on. Lo and behold the world is full of problems waiting to be solved. The innovator needs to be given the driver’s seat.

Innovation doesn’t glimpse out into the world and witness problems. It looks at challenges as opportunities to create valuable solutions. It knows pessimism doesn’t solve problems. It arraigns criticism through speech as a hollow approach. Innovation attacks failing systems of thought by providing alternatives.

Innovation debates through the products of its ideas. It begins with a resolve to create. Innovation has little time for thought experiments. Innovation runs field experiments, instead.

Innovation and entrepreneurship witness harmony where once before only chaos existed. They see potential in everything rather than conflict or destruction. They trade in a doomsdayer perspective for hope and belief in ingenuity’s ability to solve problems.

Innovation recognizes alternatives as possible even if they don’t exist yet. That’s the essence of entrepreneurship and I believe it’s the foundation toward achieving a freer, more prosperous society.

Reputation Markets Change Everything.

Take-Home Message: The rules of the game are rigged against you. Do not be dismayed. Entrepreneurs to the rescue.

Before long, we’ll all be flustered, rushing to the accountant’s office with a stack of papers and a shoebox of receipts, begging them to perform a miracle. Meanwhile, we’re hoping not to get pulled over on the way to the office for speeding, or a seatbelt ticket, or for running a red light. Then, once we finally find a parking spot, we all hope that it doesn’t take more than 45 minutes, or we’ll earn a parking ticket.

You may have taken the highway to the accountants office, so, there may have been a toll. Of course, you’re already in your car, with your state-issued driver’s license, your mandatory insurance, tag, license plate, title and registration. Not to mention the money you put into the tank, or the oil, or the filter, or having the tire rotated recently. Those maintenance charges were all yours, though.

At every turn, there is a barrier. At every stop, there’s a new fine, tax, expense, surcharge, fee, or request for “charitable contribution.” On top of that, there are things to think about like putting food on the table, keeping the lights and water on, putting back for some future child’s college (or paying tuition already), regularly maintenance the vehicles, mow the yard, feed the dogs, clean the house, and on and on and on…

We stretch every dollar, nickel, and cent as thin as it will go. We stretch every hour and minute to cross of item after item of perpetually multiplying checklists. And for what? Is there a light at the end of the tunnel? Is there a way for our burden to be lifted?

How do we manage to juggle all of the impositions, restrictions, regulations, licensure requirements, fees, taxes, and (I’ll call it for what it is) bullshit that piles up commensurate our own lives’ duties?

One of the ideas I’ve been recently examining focuses on the role of entrepreneurship and innovation as means to combat these impositions in our lives and to free back up our money and time so we can spend both of them where we would rather prefer. So we can spend OUR money and time on OUR lives.

It’s basically the tangible application of public choice theory into the marketplace. , It’s ideas like Facebook, Twitter, Uber, Yelp!, Lyft, TaskRabbit, Tinder (Regardless of how you feel about it, Tinder achieves this), dating websites, AirBnb, HomeAway, and an exponentially growing number of other brilliant ideas from entrepreneurial minds.

It’s this concept of what I’ll refer to as reputation markets. Each of these takes the wants, needs,  and preferences of consumers, just like me and you, into account, and transforms not only the way we find businesses and people, but the way we perform transactions. And they’re drastically reducing prices for these things we want.

Not only do these lower transaction costs, though. These applications also provide a means of feedback. They put accountability back into the hands of consumers and service providers alike. It removes the need for “regulations that keep us safe.” It eliminates the middle man. It puts people with people. It’s the Peer-2-Peer revolution, and it’s dramatically transforming every facet of our lives–if we’ll only embrace it.

So, what does this revolution mean for us? It means that with every new advancement, we achieve a new means for finding whatever it is for which we are searching.

It means when I’m landing in an unfamiliar city, I don’t have to jump in a car with a cabbie about whom I know nothing. With the press of a button, I can signal my desire for a ride, while simultaneously checking out the reputation of the driver. And then I can punch another button and find a cool place to eat I’ve never been, and the driver can drop me off. And hell, if I have one too many drinks (and would prefer not to risk a DUI), I can just hit the same button again  to make it home safely.

It means when I’m doing an artistic portrait photoshoot and I need to find a lens that I don’t own, with the touch of a button and a quick charge to my VISA, I can summon this lens from outer space via the magic of entrepreneurial innovation and the stork will drop it off on my front porch the next day.

It means when I’m taking a vacation with my family but don’t want to stay at some cookie-cutter hotel or resort, I can search for someone’s vacation home and rent it directly from them for the amount of time I’d like to stay.

It means if I need something done around my house that I don’t know how to do or simply don’t have the time to do, at the click of a button, someone other people have trusted into their homes before me will show up and trade me money to accomplish the task at hand.

It means you can find someone with similar interests and connect.

It means you can find something to buy or rent. It means, too, that you can sell your stuff for cash. Instantaneously.

It means that we don’t need someone standing between us at every transaction. It means we don’t need anyone to keep us safe. We’ve got 2 billion friends out there watching our back, using their experiences to rate services at every turn–and this number is growing each day as entrepreneurs find creative ways to provide affordable internet worldwide.

It means you can have your life back and your money back. And it’s all right down the pipeline. So, pull out your Smart phone, visit the app store, and see what brilliant ideas entrepreneurs are cooking up to give you back your lives and hard-earned cash.

P.S.– As I spend more time in-depth researching these ideas, I will provide more data and scholarly resources to assess the way these innovations change human interactions in a positive way. (At least, that’s what I hope to prove).