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.

MyMission2: The World's First Aspirational Network

This month, MyMission2 took its BETA version public. The site hopes to use the idea of a "social contract" to connect people trying to achieve a goal with people who can help. The process is relatively straightforward; fill in some information about yourself, post your mission and start working toward the goal, or respond to the missions of others. This startup has a feel distinct from other social networking sites and is trying to maintain that distinction by concentrating on the mission at hand, so to speak. David Ashford, the CEO, calls this "content-to-people, rather than people-to-people," which makes it a refreshing change of pace for network sites.

Users of the site are known as "missioners". Those asking for help by posting a mission become "comissioners". Other users, the "responders", pledge their support by responding to the missions and form a sort of mini-community around each goal. Users enter their own mission descriptions and sort them by category. Each missioner has the ability to upload relevant files and reward the responder he or she feels has been the most helpful. Whenever a new mission is posted, select users are notified about it based on the information they provide in their profile. When I asked about this selection process, CEO David Ashford told me, "We only alert a small number of people... these are the people that are most likely to be able to help fulfil the mission."

These missions range from the ordinary ("I Want To Learn Spanish") to the somewhat more ambitious (one user aspires to "Live Forever"). What is surprising is the amount of support shown to almost any mission falling within this spectrum. Even the guy that wants to live forever receives a myriad responses, including links to articles on slowing the aging process. Admittedly, there are some strange and mangled requests, such as a plea to help "save the cheerlader" without any follow-on explanation. However, these seem to get weeded out quickly. The users on the site "get it" and tend to band together to discourage and report inappropriate and irrelevant inquiries.

The whole idea is a great example of building social capital. You can ask for help, but you will be rewarded for helping others as well. Each is expected to give and to receive based on a points system. For now, the points just add a bit of competition to the site and help distinguish newcomers from people who have been involved since the BETA went public. In the future, though, the site's creators hope to allow users to redeem their points for real-world rewards.

MyMission2 has been well-received by users, garnering over 3,000 members in its first week. One review has been mixed, however, citing lack of seriousness in the missions, as well as complaining about the amount of information the site wants from each user. It seems the first is being addressed by an active user community and a responsive customer service team, both of which insure that most missions appearing on the site are legitimate or at least not offensive. The second, however, is part of the nature of the beast. Due to the way others are notified of missions, the more information you provide the more you'll be able to help others.

Overall, the site has a few steps left till maturity, but it shows great potential and my experience with it has been extremely positive. Not only have I already seen feedback about this blog referred from MyMission2, but I've also made contact with other people trying to do similar things or accomplish goals which interest me. The MyMission2 team is working to improve usability and add functionality every day. New users are urged to take a look at the MyMission2 Blog for upcoming announcements. And of course, come support my mission on the site by providing feedback and ideas for this blog!

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.