In a recent TED talk, Rachel Botsman discussing an idea of using internet reputations as a currency in the future. Similar to a credit score, Rachel hopes to assemble all of the various points a person can get for micro transactions online – upvotes, stars, ratings, badges, etc. This concept of a reputation dashboard could benefit the online shoppers of the world infinitely by allowing potential customers, buyers, donors, and collaborators to more accurately judge a person at a glance.

An inspiring idea, the applications are incredible. By lubricating online services, this dashboard could accelerate self employment by creating more ‘super-people’ on eBay or Craigslist. Overall this would reduce unemployment, strengthening the world economy as a whole.

What I’m curious about is the business strategy behind this new idea. If I were in Rachel’s shoes designing this new profiling/resume system, I would charge an initial fee, then an additional fee for each online service someone wants on their profile. If such an idea caught on strongly, then everyone would be jumping on the boat – companies and individuals. If a seemingly insignificant amount was charged – $10 for a profile and $2 per service for example, having every internet-based self employer pay these fees could add up to a lot of money.

Regardless of whether this service becomes a success, let alone a reality, I still think it draws attention to a very important yet unrecognized power in the modern economy – the internets ability to self employ.

During the Italian renaissance merchants transitioned from using Roman numerals (I, V, X, C, etc.) to Arabic numerals (1, 5, 10, 100). One of the innovations of using this number system was the ability to add and subtract more efficiently.

One of Leonardo Da Vinci’s friends, Luca Pacioli, took advantage of this innovation in his accounting.

Instead of just counting his cash at the end of the day, Luca was able to do what’s called double-entry bookkeeping. Whenever a product is sold, Luca would record how much money he made, as well as how much of his product he gave away. For example, if he sold one loaf of bread for one gold coin, he would record +1 gold coin and -1 loaf.

This allowed him to analyze which of his products were more successful and therefore allowed him to redirect his operations appropriately.

The use of such accounting is now essential to modern business. Some companies are unable to realize what isn’t working as apposed to what is. Without knowing what is failing, a business is unable to cut their losses. This relates to strategy discussions we’ve had in class. With double-entry bookkeeping comes the first way of evaluating strategy vs. operational efficiency. The merchant can cut losses and know when a new idea is necessary, whereas before there was only finding cheaper prices and better time management.

Luca Pacioli is an unsung hero of the modern business world.

http://en.wikipedia.org/wiki/Double-entry_bookkeeping_system

http://www.npr.org/blogs/money/2012/10/04/162296423/the-accountant-who-changed-the-world

Best-Buy is an electronics store chain that is famous for its larger-than-life facilities. Best Buy originally followed the same business strategy as CostCo or Wal-Mart – have absurdly large stores so that when the customer walks in they feel as if it goes on forever. This marketing plan made the customer feel as if the store had everything. Lately though, Best Buy has reported a decline in growth, and is rethinking its business strategy, and with good reason.

In the past few years, the power of internet shopping has done away with the needs for such large stores, especially for electronics. Best Buy has become the showroom for Amazon products. A company can’t be effective if it’s just advertising another company’s products. Best Buy discussed improving their online store, but entering a market that is already dominated by a giant like Amazon could be a lost cause. The opportunity for Best Buy’s one trick pony has passed, and updating their model is essential to their survival. I think the transition to smaller stores and mobile device outlets is a step in the right direction, but I think Best Buy should re-evaluate more than just their size. Something like stronger tech support, downloadable software packages, or specialized computer parts (like newegg.com) might be a viable option for the company. Either way, the cavernous buildings need to go.

http://www.npr.org/2012/03/30/149668767/best-buy-rethinks-big-box-model