Todd Suomela's Library tagged asymmetrical →  View Popular, Search in Google

In 2008 a group of Norwegian researchers ran an experiment to better understand how police investigators come to a judgment about the credibility of rape claims. Sixty-nine investigators were played video-recorded versions of a rape victim's statement, with the role of victim played by an actress. The wording of the statement in each version was exactly the same, but the actress delivered it with varying degrees of emotion. The investigators, who prided themselves on their objectivity, turned out to be heavily influenced in their judgments by assumptions about the victim's demeanour: she was judged most credible when crying or showing despair.

In reality, rape victims react in the immediate aftermath of the event in a variety of ways: some are visibly upset; others are subdued and undemonstrative. There is, unsurprisingly, no universal reaction to being raped. The detectives were relying on their instincts, and their instincts turned out to be constructed from inherited and unreliable notions about women in distress.

No, I think it's because our online relationships aren't at all like my real-world relationship with Al. The full nature of the transaction isn't obvious, visible, and transparent and there is little chance a corporation will think like my friend. Most of the relationships you build with corporations are like icebergs and essentially hidden from view, and corporations like it that way. We don't really want people asking questions about stuff we think they won't understand. As corporations we may be sociopathic, but even a sociopath knows that awkward questions aren't just uncomfortable, they're bad for business.

So, assuming there could be a more human corporation, that could build symmetric ethically-grounded relationships with you, what would that relationship look like? Would transparency and choice be enough to make it symmetric? Could a relationship with a corporation feel at all like the one I have with Al? Could it be obvious, transparent, and a pleasure in its own right? Or, what if instead of asking ourselves "what data do we need and how could we get lift from it?" we asked "what is the value to our customer when we store and use this data and how do we make both the value and our stewardship of the data obvious and transparent?"

The synthetic CDOs that caused the trouble were expensive bespoke instruments that were very profitable for the banks involved – JPMorgan was paid $19m to structure and market the Squared CDO alone before it got stuck with $880m in unanticipated losses. Their complexity meant that only a few professionals could grasp them – most “sophisticated” investors went by credit ratings.

For investors, it was akin to being informed by a mechanic at the local garage that your vehicle needs expensive new parts and servicing. The garage has an incentive to charge you as much as possible and the information asymmetry between professional and customer makes it easy to pad the bill.

As long as the structure encourages it, investment banks will place their interests above those of their clients, no matter what they say. That is one reason why the US and European reforms to push as much of the derivatives market on to to exchanges and clearing houses – and into sight – are vital.