An entirely new role for brands in social media

I love flashmobs, I really do. And I like those moments of collective subversion, such as making Rage Against the Machine the Christmas Number 1.

But the real promise of collective action will only be realised when there’s money involved as well as time. When flashmobs become cashmobs. Theoretically, one of the greatest improvements in the quality of human life in a generation is already within our reach - it will become possible once we learn to use the internet to enable large groups of people to get together and collectively microfund public goods. This development would also provide a welcome opportunity for consumers to move beyond their obsession with individual acquisition and consumption, and to spend money on a healthy mixture of public and private investments.

The Victorians, being rather public spirited, were much better at collective funding than we are. Take the green taxi hut above. You may have wondered why these huts tend to be found in such upmarket locations (Grosvenor Gardens, Cheyne Walk, etc). The reason is that they were built by public subscription. The residents of these prosperous areas shrewdly reasoned that, with a cabbies’ cafe in their square, there would bever be a shortage of hansom cabs available day and night, so they got together and each pitched in a tenner or so towards the creation of a cafe.
At the moment, even with the internet, we aren’t very good at this kind of thing. So it falls to government to fund most public goods (see here for a definition) – with a few exceptions (such as broadcast TV and fireworks displays – oh and most of the internet) being funded by advertising or brand sponsorship.
The trouble with government is that it has so many calls on its money that it is very difficult for it to do anything that isn’t life saving or economically essential. Things that are merely entertaining or culturally interesting fall outside its remit. In fact one of the reasons the National Lottery was created was precisely to pay for the kind of nice but non-essential things which public opinion (“what with people dying in NHS hospitals, etc”) would no longer allow government to fund.
It seems to me that one possible role for brands would be to enable this collective action to take place. They may need to create a few financial mechanisms first – such as a credit card system where you would not be charged for your pledge until the required number of pledges had been reached. But, thanks to work on game theory by the economist Alex Tabarrok, there is another role which brand-owners can play in enabling collective action. That is to play the role of the entrepreneur in a Dominant Assurance Contract.
Unless you are a keen anarcho-capitalist, you may not have heard of the Dominant Assurance Contract, but it is a vitally useful concept if brands are to find an effective role as magnets for collective action.

  • Jayne Marar

    love this idea Rory. David Puttnam wrote a fantastic article (over 10yrs ago now) on how advertising, a powerful force, could be used to make the world a better place for everyone. it’s not only philanthropic, it makes good business sense. these days, people will warm to and be more loyal towards brands that give something back. but they have to be genuine about it i.e. walk the walk. in your (above) example everybody benefits.

  • Nicholas Green

    hmm…. the government’s problem isn’t a lack of funds for anything ‘lifesaving’ (such as public housing projects!), it’s that it’s incentivised through a 4-year popular vote system vs single private agreements. One is much more efficient and democratic than the other as I’m sure you understand.
    The only problem I see with assurance contracts is that if there was natural demand for them they’d already exist.
    Maybe it’s the fact that the government’s role (spending to gdp) is about 6 fold what it was in the victorian era, or far-reaching communications, or that people relocate more, but like it or not people really are less ‘local-community’ spirited. Maybe they’re more ‘death-metal rock’ or ‘apple products’ community spirited, but I can’t imagine examples where assurance contracts would work over private agreements for those collectives.
    There might be some hope in better public spending via technology that makes privatisation more feasible. i.e. e-tolls, micropayments, mobile phone scanning (a 5 second mobile phone payment to use a private park?)… yes I am a capitalist! But trust me, the parks would be so much better!

  • Rory Sutherland

    Nick, I think that technology makes the world a lot more “Coasian” than it was before – with far lower transaction costs entailed in organising this kind of thing.

    Also, I don’t buy your “would exist already” argument. This would also apply to micropayments, for instance. Yet noone denies a micropayment mechanism would be good, it’s just a question of settling on a common standard.

    And there’s no reason such activities need be geographically focussed. You could get a million people together to pay certain celebrities to retire, for instance.

  • Faustino B

    Unless there was an entirely trust worthy and above reproach way of doing this, adding money into Flash Mobs would be insanely open to abuse.

  • Nicholas Green

    Mr Sutherland,
    I’m not going to get a celeb to retire but I must admit this has aroused my interest. Here’s a site that makes it easy http://www.fundable.com
    And reading further on marginal revolution, it’s explained that in a DOMINANT assurance contract if the target isn’t reached the agreed payment PLUS a small bonus is refunded.
    Through some fancy game-theory equations an economist (A Tabarrok) claims this is a dominant public funding strategy because, in plain english, it’s a win-win for the donator (the bonus covers all hassle+perceived risk involved i.e. it still serves self-interest)

  • Nicholas Green

    Oh sorry you mentioned tabarrok. No surprises to you then!

  • Alastair Sloan

    Just mentioned a few of the issues here in my blog at http://alastairsloan.tumblr.com

    Permalink – http://alastairsloan.tumblr.com/post/380487083/cashmobs-and-credit-cards

  • Thomas Heginbotham

    Check out http://www.kickstarter.com. Its exactly the kind of collective project funding site you’re dreaming of. Though its probably not used to its full capacity yet. Mainly arts and film related projects. Get philanthropic everyone!

  • reuben turner

    This is also the model behind the foundation of the RNLI, which started as community-funded lifeboats for fishing villages. Today, it’s still the only essential emergency service funded by little old ladies from Solihull.

  • Kevin Gordon

    Hi Rory,
    Social Philanthropy is definitely a good route. The Rothschilds have been quietly doing it since the battle of Waterloo. It’s not new, but it is a very positive route that has not been overused yet.

  • Kevin Gordon

    Thomas, Thanks for the nudge.

  • Kevin Gordon

    Just looked at Fundable.com Site closed due to rip-off row.
    That’s what concerns me. The stink of brands on the make.
    The great danger is it all ends up as Cash for Gold.

  • Dara Bell

    Flashmobs to public financing from the victorian era this is interesting juxtaposition. They seemed better at it, you look at Botanic Gardens, they far surpass themeparks and zoos. Actually have they ever built a Botanics after the Victorians.

    The Eden Project would be good example of a modern garden, I would like to see this sort of financing for green projects, I think people are doing things like gorilla gardening but what about green taxi ranks or green places to shop like entire malls. The Centre of Futurology suggest flashmobs might be on the increases. George Simmel mentioned we have increased leasure tme so environments have to reflect that, this would be the opportune moment and the treasury has not got a surplus at the moment.

  • Brian Millar

    Cabstands also only serve cups of tea. The residents of Belgravia and Kensington were tired of their cabbies being pissed all the time. Subsidising cuppas was their way of nudging cabbies off the booze.

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