The Social Capital blog points to Paul Resnick’s interesting analysis of a paper titled “When is Reputation is Bad?“. Paul summarizes some of the key points as follows, referencing his example of a car mechanic:

  1. Information about a player is revealed only when other players are willing to engage with that player, so that getting a sufficiently bad reputation is a black hole that you can’t escape from.
  2. There are “friendly” actions; a high probability of friendly actions is what causes partners to we willing to play. (In the mechanics example, honesty is the friendly action.)
  3. There are bad “signals” or outcomes that occur more frequently with unfriendly actions but occur sometimes even with friendly actions. It is these signals/outcomes that will be made publicly visible in a reputation system. (In the mechanics example, the bad outcome is recommending an engine replacement.)
  4. There are “temptations”, unfriendly actions that reduce the probability of bad “signals” and increase the probability of all the good signals. (In the mechanics example, the temptation is reporting the signal “tuneup” even when the car needs an engine replacement.)
  5. The proportion of player types who are committed to the friendly action regardless of its consequences is not too large. (These would be mechanics who would never say “tuneup” when you needed an “engine”, even if it meant closing their business tomorrow.

presnick: When Reputation Systems Are Worse Than Useless

This analysis seems incredibly appropriate in light of the discussion we’re seeing swirl around not only PayPerPost (1,2,3) but also the related sorties surrounding “blogging vs journalism” and “Edelman vs blogging“.

So let’s relate Paul’s points to our universe:

  1. We’ve seen the problem with bad reputations becoming as persistent as toilet paper on your shoe in the blogosphere. Specifically, we know that it is extremely difficult (read near impossible) to recover once you have lost your trust
  2. Friendly actions in the post-media universe often hangs under the banner of disclosure (you know, the italicized text usually surrounded by parenthesis)
  3. Bad signals are quite easy to spot in the blogosphere, and online in general. PayPerPost provides us two cues: first the text provided by the advertiser is a natural cue and second, the quite manual beacon that call’s home (note: it would take about 10 minutes to whip up a greasemonkey script to highlight the “bullshit” if you were so inclined). However, we should not overlook the best tool of all - blogger’s own innate desire to call bullshit on just about anything.
  4. Tempations come in the form of link love, technorati rank, and x-list status. Ultimately, we’re more than likely too obsessed already with our standing in the universal scoreboard that we feel less and less incentivized to put the game in play. We don’t want to run the risk of getting caught with our hand in the cookie jar, right?
  5. The proportionality of good vs. evil is what has the big minds in the space all worried. Today, the proportion of good players outnumbers bad players (haha, that’s probably not even true relatively speaking).

Which leaves us, yet again, in the same position I’ve been considering. The equation seems as if it will balance itself over time. The notion of balance still seems overrated, if not far-fetched. Perhaps the real worry is that we’re already past the point of equilibrium.

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