Network growth and viability

Oli to Pat Conaty, Jan 4th:
"We're wondering about how best to get through to our ideal Anchor Businesses:
Phone Co-op
Co-op Energy
Suma
I've tried emailing to all my contacts at each org but am not getting much luck…
It's a complex sell via email.
I've also tried phoning - and will continue to do so, but on our call this morning Dil suggested that, as an associate of ours and Co-ops UK, you might be able to use your clout to get through with a more "official" type of message, inviting the most appropriate person from each of the above to speak to us…

What do you think?
Does that sound like a possible / sensible plan?

Pat to Oli, Jan 4th:
"I think we are not ready to make a direct pitch like this to these organisations. We need a way to convey an opportunity and thereafter as a follow on to solicit some seed funding to develop a project plan. They also do not understand Mutual Credit. So this is the first obstacle to overcome. I also think it would work to our advantage to involve Credex as there boot-strapping does indicate this is emerging for one region already.

So I think a way in would be a roundtable event that maybe Co-ops UK could host on Mutual Credit and Mutual Guarantee Societies could work well. Co-ops UK has been lobbying for the latter and there could be link ups.

We could invite a few speakers - so maybe you and Tom Greco by Zoom link plus Stuart. Also Tony O'Rourke in Scotland is the expert on MGS and Alex Bird and I worked with him when we were researching Not Alone. He is an associate of Co-ops UK so if they hosted the roundtable, Ed Mayo could invite him.

We could float this idea to Ed Mayo and see what he thinks. He knows I have been talking with you and Stuart.

Pat to Oli 5th Jan:
"On a separate matter of how to find early adopters of mutual credit, I am not convinced that Suma and Co-op energy etc are the best. Maybe their wider contacts will assist. But the sell to them to me is not readily apparent. If other more natural partners would lead, I am sure they would join in. Suma has its network of shops but these are spread out and mutual credit does need more geographical density to build on the trust of local relationships. Hence I like the decision of Stuart to focus on the West Midlands.

This latter comment relates to more detailed conversation in the 'Scale/location' thread.

Oli to Pat, 6th Jan:
" am not convinced Suma or Co-op Energy or The Phone Co-op will jump at our offer, but if we can secure them as anchor businesses it will be VERY useful. Sure, they will want to buy things which the current network may not offer, but then we have a clear challenge ahead to bring in the businesses which sell what they want. Once we have done that we will have a very healthy economy.

So, I still think we definitely need to continue to explore all ways to approach them, and convince them - and will be putting my personal energy into doing so, no matter what other strategies we follow.

The shops which Suma sells to are much less interesting to us - as they are mainly, presumably B2C, and we are looking for B2B.

Approaching groups which can give us access to their networks of Business IS definitely a good strategy - and CDFIs make perfect sense, but I am not sure we will have an easy time convincing any of them… but they do clearly represent a big prize if we can.

Hi Dil,

Please resend the invite, I think it ran out.

Les

This document is based on a recent exchange of emails between Tom Greco and Tim Jenkin, founder and operator of Community Exchange System (CES) https://www.community-exchange.org/home/ . Over its long history, CES has brought to light most of the fundamental issues that need to be addressed in the design and operation of an exchange network. These are the subject of this document.

Tuesday, February 5, 2019
Tim,
Thanks for your reply.

Identity, reputation, resolution of complaints and disputes, governance, and size of each exchange node are crucial elements of any trading network.

As you indicated, "Many people offering things were not qualified providers, so they often got brought down by the higher expectations of their clients/customers/patients." Isn't that as it should be? Why would you want to support the continued offerings of incompetents?
That's why we have systems of education, training, and certification. Even then, incompetents manage to slip through. When I look for specialist physicians, I pay attention to patient reviews, which we are fortunate to have available these days. I can overlook one or two negative reviews if the bulk of them are positive, since there will always be a few patients/customers who are impossible to satisfy. For just this reason, providers should not only be enabled to rebut negative reviews, they should also be enabled to rate customers. The more information we have, the better prepared we are to decide who we wish to do business with.

I'm happy to learn that you "are developing new software and one of the requirements is a proper reputation system. There are many good examples to follow now, and people are more familiar with them."

If alternative exchange systems are ever to become scalable and truly useful in the economy, they must be built upon a foundation of business and professional members who provide valuable goods and services on a regular basis. These are the members who should be allowed to spend before they earn (i.e., receive a line of credit). Others should be required to earn before they spend, but as they demonstrate their competence to provide valued goods and services, they can then qualify for lines of credit. The vast majority of trade exchanges have failed to thrive, or gone defunct, because they have been too loose in the allocation of credit.
Credit lines are not an estimation of anyone's personal worth, they are an estimation of the value of the goods and services each member is making available to the market. In other words, your credit allocation algorithm needs to monetize (in the form of trade credits) the value produced and/or offered for sale in each local node.

You say, "We have lost several good administrators over the years because they could not handle the member complaints and disputes. Everything seemed to be directed at them. In the conventional economy, if you are not satisfied with what you have received you do not approach or blame the bank manager. You have to sort out your own disputes or seek impartial mediation somewhere else."

Yes, But your analogy is incomplete. You are running not only a "bank," but an online marketplace and a payment system. In that regard, your system also resembles Amazon and MasterCard. They, of course, have the advantage of being able to generate huge revenue streams with which to pay their employees to do those things.

One of the greatest powers the administrator has, and must exercise, is the power to reverse a transaction that is fraudulent or incorrect. When I was double charged for a hotel stay in Rome, (I paid cash but my credit card was also charged) I was frustrated in my attempts to get the hotelier to give me a refund. Upon submission of proof to my credit card company, the refund to my account was promptly provided.

Regarding node size, you say, "When exchange groups grow too large they become impersonal and the level of trust goes down. It is then difficult for members to know everything that is going on and who is a good or bad trader. There seems to be an optimal size for groups, which is not too big. Our group here in Cape Town is too large and active for members to feel 'part of it'. We are thinking of splitting it into smaller groups. That was built into CES from the start, as each group has semi-autonomous sub-areas which can easily be hived off to form new groups."

I agree that there is an optimal node size and it is prudent to subdivide a network into relatively small nodes. The questions we need to answer are:
1. What is the optimal node size?
2. What is a meaningful basis for subdivision?
3. What provides the group identity?
4. Which aspects of operation should be under local control and which under the control of the network administration?

I don't have good answers to those questions but there are some precedents that might be instructive.
I've often thought that members might be recruited not individually but as clusters of individuals or companies that already know one another or relate to one another and/or have something in common besides location, like shared interests or values, church membership (members of a parish), ethnic or gender grouping (like Hispanic chambers of commerce, or Women's chamber of commerce), etc.

Malcolm Gladwell cites the Rule of 150 and its application to industrial work units, but the number may need to be different for exchange units.

VISA and MasterCard are shared brands as well as networks. Each member bank is allowed to issue credit cards under one of those brands but they must abide by the agreed procedures and protocols that have been established for use of the shared brand.

One of the most important agreements for an alternative exchange network, in my estimation, is that each node allocate credit lines using the same algorithm, this to assure that trade credits among the nodes will all have close to the same value. Also, controls and remedies must be in place to prevent trade balances between nodes from becoming problematic.

Thanks for all your good work. CES has been a good prototype from which we can all learn.

Tom

Really useful experience and reflections here. Although we will start without sophistication around many of these features, it is clear that they will be needed if we are to be economically 'real' to members. Designing our systems so that these elaborations can be added and themselves refined will be a core policy from the start.

@matthewslater . We have been looking hard at the Credit Commons whitepaper. We think it offers much, but perhaps more even than it explicitly says.
We are starting on a B2B basis. However, many of the businesses expressing interests are 1/small and 2/ B2C operations.
It is abundantly clear that many, many of the offers and wants relate to personal rather than business exchanges.
Clearly, we have a problem - we either have the wrong audience, or the wrong plan.
But what if the plan is right, and the audience is the only one we have?
Clearly, some mechanism to allow the individuals within the member businesses to access the marketplace, without themselves being members (in other words, using their business' account to satisfy personal needs) might be useful in providing more trading /credit redemption pathways.
Within a co-op, in particular, all employees will have some idea of what the MCN is, as they will have voted to join - and so these co-op workers might be offered the chance to access B2C offers on the network, using the co-op's member account - and offset these purchases against wages (usefully converting MC earned by the business into better cashflow).
After getting that far, I re-read the whitepaper, and realised that the structure presented there is exactly analogous. That if the 'fundamental tier' of a federated B2B network will always be groups of people who are customers, who can be considered as a network of their own, within which their 'special member' - the one entitled to trade in the B2B network - is the entity they are part of.
The rules and structure of this 'internal' network clearly are not exactly the same as the standard network. At the outset, it can simply be an agreement within the business that workers may access the credit line of the business (under any rules agreed) to buy (but not sell) - taking the purchase as wages 'in kind'.
This appears to resolve the particular problem set out above, but actually, it does far more:

• It increases the size of the market - by adding more - and more diversity of - small buyers.
• It offers a clear social/legal model for connecting the traditional LETS type network (which mostly creates value through interpersonal services and minor trades) to B2C networks as envisaged in the whitepaper - neighbourhood groups constitute themselves as buying clubs with LETS tools built-in. Members can buy from Mutual Credit businesses either in straight cash, or as blended or fully MC deals, if they earn credits locally.
• This requirement to be a legally incorporated entity in order to join a network encourages communal action at local levels - offering a value proposition around that.

There is an issue which would require careful support, though - consumer groups cannot only buy - they must also sell. Obviously one thing to sell might be labour - perhaps the first pure consumer groups would be based around employees of participating businesses.
More work required here.

Nice thinking Dil. Would be good to ensure this is in the software requirements from the beginning. It could be framed as some or every Business member having an internal network; if we can build a general purpose nested accounting structure as the paper suggests, then this would be mostly a user-interface requirements. Or employees could have a separate app.