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Sophie Kleber — As AI Meets the Reputation Economy, We’re All Being Silently Judged

Summary:
Welcome to the reputation economy, where the individual social graph — the social data set about each person — determines one’s value in society, access to services, and employability. In this economy, reputation becomes currency. The reputation economy is based on the simplistic, but effective star ratings system. Anyone who’s ever rated their Uber driver or Airbnb host has actively participated. But what happens when algorithms, rather than humans, determine an individual’s reputation score based on multiple data sources and mathematical formulas, promising more accuracy and more flexibility via machine learning? China provides a good example. Chinese leaders are now introducing credit availability on a wide scale. The chief issue is assessing credit risk in an economy with no credit

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Welcome to the reputation economy, where the individual social graph — the social data set about each person — determines one’s value in society, access to services, and employability. In this economy, reputation becomes currency.
The reputation economy is based on the simplistic, but effective star ratings system. Anyone who’s ever rated their Uber driver or Airbnb host has actively participated. But what happens when algorithms, rather than humans, determine an individual’s reputation score based on multiple data sources and mathematical formulas, promising more accuracy and more flexibility via machine learning?
China provides a good example. Chinese leaders are now introducing credit availability on a wide scale. The chief issue is assessing credit risk in an economy with no credit history. The solution they have come up with is assessing social reputation based on known behavior as a substitute initially, before credit information becomes available specifically. While the West is critical about privacy concerns, the people getting credit extension are happy to be doing so.
And China is aiming to implement a national social score for every citizen by 2020, based on crime records, their social media, what they buy, and even the scores of their friends.
Actually, economies were always reputational, since credit extension is ancient, and reputation also figures into many other fundamental areas of social life. Perviously, reputational assessment was largely local, but now conditions have changed and a much wider net is required. Big data and AI are coming to the fore.

Such as system might actually have advantages locally, too, since it is much more difficult to con an algorithm that has access to recorded behavior.

But no system is fool-proof and humans design and run systems. So controls are needed.

When AI starts determining an individual’s social worth, the stakes are high. As Kim Darah writes in The New Economy: “Far from being neutral and all-knowing decision tools, complex algorithms are shaped by humans, who are, for all intents and purposes, imperfect.” We must ask ourselves: How good is the data? How good is the math? How ready is society to be judged by AI? And what could possibly go wrong?
Harvard Business Review
As AI Meets the Reputation Economy, We’re All Being Silently Judged
Sophie Kleber
Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

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