Reputation as a Metric

Thesis

Money is many things: a medium of exchange, a “social technology” (according to the economist Felix Martin), the metric by which we value goods (and often ourselves), and one of the best means by which we can interact peaceably with strangers. But money, an all-but-inescapable fact of modern life, is not the only thing on which we base contemporary value exchange.

Reputation is an often-overlooked attribute that underpins many of our interactions. Yet reputation is rarely desired, treasured and safeguarded as money is. While money is overvalued as a measure of success or a medium of interaction, reputation is undervalued, underappreciated, underquantified. Such is the nature of our modern social bias — or so my admittedly subjective analysis seems to indicate.

I’m willing to bet that I’m not alone in this perception. On some level, we all know it. The obsession with money and disregard for reputation is front and center in our daily lives. So what can we do to better understand this overlooked component of our daily interactions in order to better understand the interactions themselves?

Some Anecdotal Evidence

When I ask people what they like about their job, the most common responses I hear — that is, when they like their job at all — are the following (in no particular order):

1. It pays well
2. I enjoy the work
3. I like the people

Another response I hear is “It looks good on a resume,” but that’s less common and is usually said in a negative tone, leaving me to conclude that the only positive quality this unfortunate person finds in his or her job is that it can be leveraged for better work in the future. Some people get caught on a seemingly neverending ladder of such jobs, forever hoping that the job on the rung just above their own will provide something more than a mere paycheck.

Conversely, I have heard that “reputation is everything” from people in the banking community. Yet these same people — like most people — seem to place money above reputation on their value scatterplot. This was made evident by another discussion I had with them. When considering various hypothetical scenarios, they told me it would be foolish to “leave money on the table” despite taking a potential hit in those scenarios to their supposedly all-important reputation.

The Quantified-Reputation Iterative-Ultimatum Game

Reputation is a crucial aspect of repeated negotiations with each other. The ultimatum game shows us that — on average — people tend to negotiate evenly with each other in exchanges when they perceive a long-term net profit to being cooperative. Or in other words, exchanges in which reputation matters and which create, cement, or otherwise inform personal relationships.

In everyday interactions: reputation always exists as a factor because we live in a society where individuals communicate with each other. While we may not interact with person X on a regular (iterative) basis, we will likely interact with someone connected to person X.

Analysis

Let’s break this down:

1. Money is an important variable in the value-exchange equation;
2. Reputation is another variable in the value-exchange equation;
3. The reputation variable may — in practice and at times — carry greater weight than the money variable;
4. The money and reputation variables affect each other due to the transitive property of mathematics;
5. Reputation is a precondition for almost any meaningful value exchange.

Conclusion

The roles of money and reputation in the value-exchange equation are a weighted multivariate context-specific dealio.

f(Reputation, Money, Z?) = Value / ΔTime

…with unknown coefficients.

All of this is common sense. So why don’t the sort of hypothetical value exchanges discussed in water-cooler conversations like the one with the bankers mentioned above echo this sentiment? Maybe the issue is that we lack the technical know-how to accurately visualize, predict, and model the impact of reputation in both small- and large-scale patterns. We’re playing “Choose Your Own Adventure” blind, never sure how a decision that impacts our reputation one way or another will affect our future opportunities and menu of possible choices. Money, by contrast, is easy to quantify.

If you know of a game or experiment that allows us to categorize and quantify reputation in a way that could prove useful for decision-making , I would love to hear about it. Otherwise please share your thoughts about how we could construct experiments to help us better understand this vague, amorphous concept called reputation.