RE: [projectvrm] 3rd party vs. 4th party

[Katherine Warman Kern < >]

-----Original Message-----
From: Judi Clark 
[mailto:
 ]
 
Sent: Friday, April 15, 2011 9:56 AM
Cc: 'Project VRM'
Subject: RE: [projectvrm] 3rd party vs. 4th party

A couple of points:

Katherine, I don't think credit cards are "saving" anyone money as much
as they've found an additional revenue channel which is to sell the
data. They get their 2-5% transaction fee AND more.

>>Judi - I agree completely.  When I say they "rationalize" this conflict of 
>>interest, by saying this I mean they build a case to justify it but there 
>>is no proof for that at all.  They do have choices to increase revenues but 
>>they choose the relatively easy one - selling data to a few institutions - 
>>rather than the harder one - creating incremental services and convincing 
>>individuals to pay more for them.

Doc and others have long been working on the language. We tried to get
Craig Burton involved a couple of years ago. The fact is that this is a
chaotic and fractal space, and the CRM side knows this. They try to
simplify using existing concepts. That's not (yet) wrong, but the real
picture has yet to be painted. Many of us understand this intuitively,
but until we have a working set of colors, we'll all continue struggling
with our black lead pencils.

>> I know a lot of people have been working very hard on this.  And there is 
>> a spirit of collaboration with existing entities. 

>> In my experience, the most productive innovative collaboration has some 
>> structure to it - a framework in which improvising happens.  Hey in Jazz 
>> improvisation, there needs to be a key everyone improvises on or it sounds 
>> like crap.  The more business oriented a collaborator is, the more 
>> important this is.  Everyone has to justify their time spent.  

>> I'm asking, what's wrong with starting some principles?  For example, 
>> what's wrong with starting with a transparent transaction, with no 
>> conflicts of interest, and accountability.


  judi


On Fri, 2011-04-15 at 08:46 -0400, Katherine Warman Kern wrote:
> Doc, 
> 
> There are many different issues raised in your responses below. But I think
> the most important is: If 4th party is the term then clearly establish what
> the criteria for using that term is so you can call out those who attempt to
> co-opt it for being a fraud and be willing to endorse anyone who meets the
> standard.  
> 
> A company which shares individual's data with businesses on their behalf and
> one which has a conflict of interest will look the same, superficially.  How
> will we know the difference?
> 
> The assumption behind Cluetrain is that when people are free to communicate,
> the truth will rise to the top.   
> 
> But the internet has proven that eventually, by necessity or by greed, money
> enters the market and without any rules or framework (i.e., a purely free
> market), the natural balance between buyer or consumer of information and
> seller or publisher of information is corrupted.
>  
> For example, one of the biggest businesses on the internet is the selling of
> words. Which means they can be co-opted and corrupted.  Especially words
> that the general public doesn't really understands the meaning behind. 
> 
> The only alternative is government regulation, but the risk is that the deep
> pockets will influence policy to protect current conflicts of interest - not
> incent companies with integrity to serve the buyer who pays them. For
> example, I'm not sure the Kerry bill isn't heavily influenced by businesses
> who wish to protect conflicting revenue streams.
> 
> I respond to your comments below.
> 
> K-
>   
> -----Original Message-----
> From: Doc Searls 
> [mailto:
 ]
>  
> Sent: Thursday, April 14, 2011 10:20 AM
> To: Katherine Warman Kern
> Cc: Project VRM
> Subject: Re: [projectvrm] 3rd party vs. 4th party
> 
> On Apr 14, 2011, at 7:53 AM, Katherine Warman Kern wrote:
> 
> > Credit cards are paid a fee by individuals. And the credit card companies
> profit by selling their data.
> 
> They also get a piece of the sale. That's a cut out of the seller's side in
> most cases. A seller makes less on a credit card sale than on a cash sale.
> One could say for that reason that credit card companies are fourth parties,
> in the sense that they help the buyer. I have been told this by people in
> the business, by the way.
> 
> They also protect both the buyer and seller from fraud, and offer other
> benefits (e.g. insurance) to both sides. 
> 
> >> They charge the seller a transaction cost and the seller builds that into
> their pricing which is paid by the buyer. So the buyer pays for it all.  
> 
> >> If they didn't guarantee payment, credit cards would not exist.  It is a
> cost of doing business for them to guarantee payment. In my opinion, saying
> that they protect the buyer and seller from fraud is marketing puffery.   
> 
> I don't know enough about card companies selling data. Fill us in on the
> particulars here. 
> 
> >> Hypothetical based on the observation that credit cards have been in the
> direct marketing business from the start.  Do you remember when you used to
> get all that stuff in the envelope with your bill?  Man was that annoying.
> But at least it was transparent.  Now, it is my understanding that they sell
> your name on a mailing list characterized by how they predict you will
> behave in the future based on historic purchasing patterns. Since this is
> not transparent I have no concrete evidence. But with some digging, I
> suspect there is. 
> 
> > They rationalize this conflict of interest by saying they can keep
> consumer fees down by selling personal data.
> 
> Evidence? Not saying there isn't any. I'd just like some. I'm writing a book
> right now, and this kind of information would be very helpful.
> 
> >> Hypothetical, based on how business, in general, rationalizes (read:
> talks to themselves about) monetizing personal data by arguing that it is in
> the customer's best interest.  The reality is it is a lot easier to monetize
> the data to sell it to a few businesses than use the data to offer a service
> that one must convince millions of people to pay more for.  But it would be
> great to get some actual quotes in the press or from lobbyists.
> 
> >  And they spend a lot of money on lobbyists to tell government regulators
> this.
> 
> Sure.
> 
> > A fourth party doesn't improve this. 
> 
> How not? If a credit card company doesn't sell data (or, only sells data
> with the customer's permission), and otherwise distinguishes itself by
> working for customers in particular, rather than for other parties, why not
> distinguish their position with a label? That's all the fourth party label
> does.
> 
> >> So a credit card company can be a 3rd party and a 4th party? Or are you
> saying, as in states where real estate agents have to disclose if they are a
> buyer's agent or a seller's agent, that they choose between one or the
> other? How does the credit card company set up a wall between their
> traditional business, serving two masters, and this buyer's agent product?
> How does such a company maintain accountability to the buyer or how does a
> government agency enforce living up to this promise? 
> 
> > I want a better third party that serves one master and has no conflict of
> interest, making more regulation less urgent, and shifting corporate dollars
> from paying lobbyists to serving me better.
> 
> I suggest that would be a fourth party.
> 
> > I would pay more for a credit card that pledges to serve one master.  I
> would pay more again if they made it simple and even kind of fun to make
> sense of my own data.  I'd pay more again if they used all the consumer
> research expertise they have to help me connect with peers and empower us to
> leverage our information as a group in the marketplace.  I would rather have
> a relationship with my peers and relate with business as part of a group,
> anonymously.  
> > 
> > And I would cancel my other credit cards.  
> > 
> > Net:  I want a better 3rd party that serves one master, has zero potential
> for conflict of interest.
> 
> Is "better third party" a good-enough label for that different kind of
> credit card company? Maybe it is.
> 
> >> I think what's more important than the word are the specifics: the
> operating principles, the method for accountability, and the business model
> to assure zero potential for conflict of interest.  I don't care if it is an
> existing company or a new one.  But if they are willing to live up to these
> standards, I would trust them more than all the folks make empty promises or
> offering free services with no transparent way to pay the bills.  
> 
> > The marketing campaign would be very simple.  "No Hidden Agendas" and an
> image of a one sentence terms of use and privacy policy statement.
> 
> Sure. But marketing by companies and categorizing them for the purposes of
> understanding them are different things. My interest here is making VRM
> easier to understand, in part by bringing a customer-based understanding of
> business to the fore. New words and phrases help for that. "Web 2.0."
> "Tipping point." "Open source." "Really Simple Syndication." None of those
> were in common use, or meant much, before 1998. Now they're unavoidable.
> 
> >> As discussed above, as long as these words can be bought they will be
> co-opted for marketing purposes - especially new words which are popular but
> the general population really doesn't understand.  
> 
> The hardest problem we've had to face as a community, so far, is the
> assumption that improving business as usual is the best that can be done, or
> good enough. We've seen that with CRM, and now with Social CRM.
> 
> I've attended two conferences recently wher smart and hip gurus and startup
> CEOs sang the praises of Cluetrain, and saluted me personally, then took
> some of what we've been saying in the VRM community about the rise in
> personal empowerment in the marketplace -- and went on to say that "social
> media" alone was behind this power change, and that what's needed next is
> "better personalization" by the vendor side, and by third parties mostly
> helping the vendor side.
> 
> So we have work to do here. It's the same work we were left with when
> Cluetrain failed its full mission.
> 
> We thought, when we wrote The Cluetrain Manifesto, that "markets are
> conversations" and "we are human beings and our reach exceeds your grasp"
> both made clear that free customers were more valuable -- to themselves and
> to vendors -- than captive ones. Instead understood Cluetrain came to to
> mean three things:
> 
> 1)  Marketing (and not just sales) now has to talk directly with customers; 
> 2)  Social media, because it's conversational, will improve the way
> companies deal with customers; and
> 3)  Social CRM is what CRM needs to make "relationships" with customers
> real.
> 
> In other words, what we got was better business-as-usual. Half a loaf.
> 
> >> I agree these ideas are half-baked attempts to co-opt the vision of
> Cluetrain. I do not think they are transparent and all have a conflict of
> interest problem.  What is needed is a manual for how business and customer
> can contribute to and benefit from the vision of Cluetrain.     
> 
> Our challenge is to prove that free customers are more valuable than captive
> ones, that freedom is native to individuals and not conferred by the grace
> of companies, and that dependency is fine only when it goes both ways in the
> form of agreements between parties of equal power.
> 
> That means we need whatever it takes to become independent on our own, to
> break out of captivity, and to become better customers in the process.
> 
> As that happens, and as business changes, we will see new categories emerge,
> along with new code, new means of engagement, new norms, and new names and
> labels for this new stuff. "Fourth party" is an early move in that
> direction. The fact that some companies already want to make that
> distinction, and either look for fourth parties to emerge, or to become a
> fourth party themselves, is meaningful. Could be we won't end up using that
> term, and a better one will come along, or -- as you suggest -- we won't
> need it. But as long as "fourth party" is current in conversations today, it
> helps to get the best possible understanding of it.
> 
> >> there are individuals motivated to take the time and deal with the
> frustration of figuring out how to do it on their own.  But most people want
> a service which is transparently dedicated to serving their interests.  
> 
> >>This is what I have described here.  
> 
> >>Perhaps one way to realize the vision of Cluetrain is for those who want
> to figure it out commit to what it looks like by outlining the operating
> principles, business model, and method for accountability and then build a
> community of people willing to pay for this service. Then you have something
> predictable, scalable, and worth changing business models or investing in
> from scratch.   
> 
> Doc
> 
> > Katherine Warman Kern
> > 203.918.2617
> 
> 

-- 
 Judi Clark, Digital ID Coach          

 
 Helping you pull yourself together   http://digitalIDcoach.com