The relationship economy, and more

One of the few online newsletters I subscribe to is that of Doc Searls, co-author of The Cluetrain Manifesto and other great ideas – and this time he came up trumps, with an article called “Building a Relationship Economy” (not on-line yet, but with luck will turn up either on his personal blog or on his Linux Journal blog).

His original Cluetrain thesis was “markets are conversations”. In the ‘Relationship Economy’ essay he describes an in-flight conversation with a Nigerian Pastor named Sayo:

My main contribution to Cluetrain was a chapter called “Markets are conversations”. He asked me what we meant by that. After hearing my answer, Sayo acknowledged that our observations were astute, but also incomplete. Something more was going on in markets than just transactions and conversations, he said. What was it?

I said I didn’t know. I as close to verbatim as I can recall it, here is the dialogue that followed…

“Pretend this is a garment”, Sayo said, picking up one of those blue airplane pillows. “Let’s say you see it for sale in a public market in my country. And you are interested in buying it. What is your first question to the seller?”

“What does it cost?” I said.

“Yes”, he answered. “You would ask that. Let’s say he says, ‘Fifty dollars’. What happens next?”

“If I want the garment, I bargain with him until we reach an agreeable price.”

“Good. Now let’s say you know something about textiles. And the two of you get into a long conversation where both of you learn much from each other. You learn about the origin of the garment, the yarn used, the dyes, the name of the artist, and so on. He learns about how fabric is made in your country, how distribution works, and so on. In the course of this you get to know each other. What happens to the price?”

“Maybe I want to pay him more and he wants to charge me less”.

“Yes. And why is that?”

“I’m not sure.”

“You now have a relationship”.

He went on to point out that, in his country, and in much of what we call the developing world, relationship is of paramount importance in public markets. In the industrialized world, prices are set by those who control the manufacturing, distribution and retail systems. Customers do have an influence on prices, but only in the form of aggregate demand. The rates at which they buy or don’t buy something determines what price the “market” (meaning: the demand side) will bear. But the whole economic system is viewed mostly through the prism of price, which is seen as the outcome of tug between supply and demand. Price still matters in the developing world, Sayo said; but there is a higher context that tends to be invisible if you view markets exclusively through the prism of price. That context is relationship.

He said relationship is not reducible to price, even though it may influence price. It operates at a higher level. Families and friends don’t put prices on their relationships. (At least not consciously, and only at the risk of cheapening or losing a relationship.) Love, the most giving force in any relationship, is not about exchanging. It is not fungible. You don’t expect a payback or a rate of return on the love you give your child, your wife or husband, your friends.

Yet relationship has an enormous bearing on the way markets work, Sayo said. And it is poorly understood in the developed world, where so much comes down to “the bottom line”.

Searls has tackled these issues before, triggering a variety of responses and ideas from other people such as Esther Dyson (‘The Relationship Economy’ – sorry, can’t trace the link) and an unspecified ‘Rob’ in Canada (course-outline for ‘The Relationship Economy’ – March 2003)

One more quote from the “Building A Relationship Economy” essay that summarises this particularly well, then I’ll my own tuppence-worth:

I shared this conversation a few weeks later with Eric S. Raymond, who put the matter even more simply. “All markets work at three levels”, he said. “Transactions, conversations and relationships”. Eric is an atheist. Sayo is a Christian. I began to figure there was something more to this relationship business.

“Transactions, conversations and relationships” – three levels, says Raymond. But instead of hierarchical ‘levels’, think of them as dimensions.

Now let’s add one more dimension: purpose. It’s not reducible to a transaction, a conversation or a relationship (okay arguably it is, but in the sense that it’s a transaction / conversation / relationship with self and ‘that which is greater than self’, rather than directly with an Other, in the sense meant in Searls’ examples).

Then a simple re-map: