Time Banking: Bringing Back Barter

In a recent post, we talked about the nature of social capital. Here, we discuss a related concept. Time banking is a great way to build your social capital as well as do something you feel good about.

In 1980, a man named Dr. Edgar S. Cahn suffered a massive heart attack. He was 46. Recuperating in the hospital and “feeling useless,” he dreamed up Time Dollars as a new currency to provide a solution to massive cuts in government spending on social welfare. The concept of Time Dollars recreates humanity's first system of commerce. Before there was a gold standard or fiat money, there was barter. In its original form, it was trade in the most literal sense of the word. Person A would give person B one cow in exchange for, say, ten bags of grain. There was no currency and no inflation, and the exchange rates were determined through haggling. Time Banks, which trade in Time Dollars, put a modern spin on the same concept.

The basic concept is that all hours are created equal. A hair stylist's hour of work is equal to a babysitter's, and both of those are equal to an hour spent helping someone with their garden. In a specialized society like ours, each person trades primarily in one skill. Suppose the auto mechanic wants to go to a two-hour concert. Using a time bank, he can "debit" his account two Time Dollars for the tickets, as long as someone who can get him the tickets also participates. At a later date, he can perform two hours' worth of mechanical work for another participant of his time bank, at which point he will have paid his debt.

Most time banks are local organizations. They are found all over the world with several websites dedicated to directing users to time banks in their area. Timebanks.org, a sort of directory, advises that the optimal size for any one bank is under 150. Since every time bank relies on mutual trust, keeping the numbers small keeps things personal without a whole lot of unscreened strangers. It also makes it easier to track everyone's time dollar accounts.

What kind of experiences do people have with time banking? Loretta B., a guest writer at my favorite personal finance blog, Get Rich Slowly, writes:

"When my Dad died, my yoga teacher from the timebank came and stayed at the house during the funeral. She removed all the medical equipment, restoring the house to normal. Others served food and cleared up at the luncheon after my Dad’s funeral. I cannot tell you the relief I felt having people I could trust take care of that for me, and financially, I would not have been able to afford the luncheon any other way."

Time banking is an exciting concept for many reasons. When Dr. Cahn concieved the idea, he imagined it being used for social welfare programs, a sort of volunteer effort with rewards. That potential is just now being recognized. Since this is a "pay it forward" system, it's more than just another charity effort. People who use a service from a time bank are called upon to offer their own services to others. This creates a ripple effect and keeps the system from being a handout.

Social Capital: It's Who You Know

When it comes to doing business in the world of peer-to-peer lending, connections count. Prosper.com, the most popular of the recent crop of P2P lending sites, has the statistics to prove this. This is the phenomenon of social capital. One Prosper user, islandmele, emphasizes its importance as a form of securing the loan:

"Should I ever even THINK about defaulting on this loan, I will never be able to leave my house again; prevented from ever catching a good wave; given the brush-off at family gatherings; be unable to run for local office; never be invited to the kewl parties; and shunned at the local Starbucks."

She proceeded to collect 40 endorsements from friends, colleagues and family to prove her point. Some backed their endorsements with bids on the loan, but many just lent their reputation. The result? Her loan for $25,000 was fully funded on the first day of its seven-day listing, and her interest rate dropped to an amazing 5%. She invested a great deal of social capital and the return on that investment was a great deal on a loan. She's not alone. More and more people are starting to realize that reputation and social connections matter. This is the new economy, and the repo man has been replaced by your next-door neighbor.

Some may see this listing as an extraordinary example, but islandmele simply used the social facilities many of us have been neglecting for so long and proved that they matter more than ever. The data backs this approach. Not only do lenders swarm to someone whose social network is willing to lend them money, but Prosper reports a default rate of just 1.2% for loans where a friend has given an endorsement with at least a $50 bid. This is a stark contrast to the 7%-15% default rates the peer-to-peer lender claims overall, depending on which source you reference. Of course, this "it-takes-a-village" approach makes sense. Would you default on a loan knowing that one of the people who lent you the money was the minister of your church, or even your boss?

Social Capital is being quantified more and more often in new ways. For example, I started writing this blog about a week ago. During that time, the only advertising I did was mentioning it on my Facebook news feed and a few e-mails, yet the number of visitors has already reached 100. This shows that I have at least enough social capital saved up among my friends that they would take a few minutes out of their day to learn about something new based just on my recommendation.

This sort of quantification can also be used to turn reputation and social network into profit. For example, if I add Google's AdSense to my site, I can get paid for every view of their ads. In a sense, I would be getting paid for my ability to draw people, much the same way celebrities get paid for endorsement deals. Funny? Well, You're reading this, aren't you?

If you're interested in finding out more about the scientific study of social capital and attempts to quantify it, you can take a look at The Social Capital Benchmark Community Survey, a study which looked at different samples of the population throughout the United States and used specific questions to establish metrics for the levels and roles of social capital in different communities. Also, please check back here next week for another article related to the subject.

Come Fly With Me: Ridesharing In The Sky

Ever feel like flying? Most of us don't have a pilot's license or access to a plane. Wouldn't it be great if we could find someone who did, split the costs and take off for a couple of hours? PilotShareTheRide.com aims to provide a solution kind of like carpooling. Just do a search for people looking for others to fly with them, or, if you're a pilot, post a listing, find a match based on time, departure and destination, and go.

Baldy Ivy, a cowboy working in Arizona, started the site back in 2004 and it has since developed a following over 8,000 users strong in the private aviation community. Baldy supports the site through advertising, merchandise sales and donations and is always looking for financial support, as a site of that size is expensive to run. It's an ideal place to meet others who enjoy flying to anywhere and nowhere in particular. It also helps keep flying economical, especially as aviation fuel reaches $4 to $6 per gallon. Splitting the cost between two people puts this hobby within reach for a lot more people.

After registering for a free account, I did a search just to see who was going where. The search returned hundreds of results, and about 30 just for the state of Georgia. Most of the people that post are just looking to get up in the air for a few hours and are game on any given weekend. A lot of the listings are flights with no destination specified. Go anywhere you feel like going that day! Some are described as "hamburger flights," which means flying to your destination, grabbing a bite to eat and stretching your legs, and flying back.


Aside from people just looking for a joyride, Baldy makes sure the site helps serve the community. The users of the site helped in the evacuation effort following Hurricane Katrina, with 270 pilots flying in to lend a hand. It's also a good resource for the pilot community. Anyone looking to share time in order to log the hours necessary to get a certain license or certification will find plenty of others who are willing to join forces.

If you've ever wanted to get off the ground for a while, take a look at PilotShareTheRide.com, a unique opportunity to do something different with your weekend.

A special thanks for help with this article goes to my friend, a long-time civilian pilot and fellow member of the armed forces.