Free Business Ideas: Time-based Barter Economy Targeted at Entrepreneurs (Timebanking Revamp)

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The other day I stumbled across a social experiment called “time banking,” at timebanks.org. Basically, Time Banking is a community improvement movement that revolves around the principle that every person’s time is worth the same (Yes,  quasi-socialist).  Each community creates a “Time Bank” where community members can make “deposits” by lending their time to others and “withdraws”  by calling upon other community members for help.  It facilitates a barter economy with currency denominated in hourly increments of service to your fellow man.

“For every hour you spend doing something for someone in your community, you earn one Time Dollar. Then you have a Time Dollar to spend on having someone do something for you.”

An example.  A lawyer helps a little old lady clean her yard  for an hour.  He ears a credit.  Then he can turn around and get an hour of guitar lessons from another guy around the corner.  The guitar player could then ask for cooking lessons, perhaps but not necessarily from the little old  lady.

During boom times, when everyone has more business than they can handle (ie. plenty of money but no time), this idea seems silly.  But in the midst of steep recession, when everyone has no money but plenty of free time, the concept might be once again applicable.  A year ago, it might have seemed crazy for a lawyer to swap services hour for hour with a plumber whose market rate is 1/5 his own.   But if the lawyer has nothing else to be doing and no way of generating business at his billable rate, is it so crazy for him to save the $50 needed to fix his sink by spending an hour helping his plumber resolve a legal dispute?

I think the concept of bartering services is particularly applicable to startups, a group that is always short on cash.  In fact, a good bootstrapping entrepreneur will  always barter services, whenever it is pragmatic, to preserve cash.   This happens all the time, albeit informally.

Time Banking started almost 30 years ago and has spread to “22 countries in six continents” according to the official website.  A  quick google search for “time bank your zip code” will almost certainly produce a small community website.  Unfortunately, the success of Time Banking appears to have been limited by the onerous setup costs.  If your community doesn’t  have an existing infrastructure, you are urged to set one up by buying a “Time Banking Start-up Kit for just $49! With the kit, you get a six month membership, access to the coordinator forum, and a 4.5 minute DVD from the founder of time banking!!!”

WTF?!? 

$49 to join a social network and get a DVD of some old dude talking about something he did three decades ago?

It sounds like a con scheme but no, this is actually a rather sizable nonprofit organization operating on a pre-internet infrastructure.

Check it out for yourselves.  Is there anyone out there that would be interested in writing a Facebook application to bring this concept into the 20th century*?  Seems like you could add a lot of value to startups that have complementary skills.

*Yes, they have a page, but I see no reason why the whole infrastructure shouldn’t  be put up on the web.

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What do Bankers, Musicians, and Professors all have in common?

1) They respond to incentives.

2) They are rewarded exponentially for being the best.

I’ll begin by saying that I don’t closely follow “the financial crisis.”  In fact I try to avoid thinking about it because thinking about it is a surefire way to know I’m being unproductive.   That said, I occasionally get ensnared.   This is one of those cases.

First, some very valid questions:

As long as executive pay is being dragged out into the gaudy light of mainstream media, i think there are some fair questions that should be asked:

Are the qualities that make for a successful “top executive” really so rare? what if a lot of these banks ascended to greatness based on the performance of 1 or 2 generations of truly brilliant minds, but have stayed on top largely because of their accrued resources, reputations, etc, while being run by guys who are not innately better strategists than your average wall street type? if this is wrong and executive pay really is matched with talent (with no upper-end plateau), how quickly does this drop off…i.e. how much “talent” are you losing with every dollar?

it’s entirely possible that there exists a virtually limitless pool of potential bank heads that could do the job as well for cheaper. what is the counter-evidence?

I understand these questions and I wonder them myself.  But again i ask you, if salaries don’t reflect/proxy  performance/value created, then why don’t all the stakeholders in all of the companies just cap management’s salaries?

Use any other industry as an analogy.  Columbia University is one of the most prestigious research universities in the world.  Why?  Its scientists are often the first to publish new findings.  Why?  Because it attracts the highest tech machines and the smartest faculty?  Why? Because it is well endowed.  Why?  Because it is one of the most prestigious research universities in the world.  Success is self-perpetuating because the best want to be around the best.

If you reduced Columbia’s prestige or the resources available to its faculty, Columbia Profs that could go elsewhere , would.  Off they would go to harvard, stanford and mit, where they would be able to both produce better research and receive more accolades for it.  Columbia would gradually become less attractive to talented researchers, its endowment would fall, and its ability to buy new research tools would diminsh.  The  downward spiral would continue until an equilibrium of talent, resources, and reward was reached.

Even if you took $$ out of this equation completely, and only subtracted prestige or reach or whatever it is that drives academics to publish, the result would be the same.

Furthermore, one could ask if the researchers at columbia are really that much better than the scientists at other universities?  Controlling for everything except for the researcher’s “skill,” wouldnt the profs at arkansas ultimately come to the same conclusions, albiet maybe a little bit later or slower? (And if the answer is no, why do you think that science as a discipline is any more prone to innovation than business?)

Returns for being the best are exponentially greater than being 10th, on any scale whether it be money, power, fame, talent, or anything else.  Ask Seth Godin.  Are the top 40 bands really that much more talented than every other band out there?  Should we mandate that no artist can sell more than 10mn records because the average band can barely sell 100?    Should we let the less successful (as defined on this one scale) artists vote about it?

I don’t think so.

The one conclusion we can draw is that the system is decidedly NOT fair.  But show me where in the “reality handbook” it says that life is fair.  Rather than hold down others, we should strive to enlarge the pie for everyone.