Transparency beats asymmetries

As I begin this post I’m realizing transparency is a big topic, but it’s coming up all over the place in business, personal, and social situations, so I want to start picking it apart.  I noticed Seth Godin’s post earlier this week, and liked his statement that the issue is not to be viewed as a moral right, but a business tactic, tool or threat.  So this post is about sharing information as a business tactic to win complex games.

I’ve had many discussions with friends about putting things on the Web and how fearful they are about things being used against them.  I hear comments about invasion of privacy, loss of employment, Gattaca and Big Brother.   One of my best friends refuses to participate in social networking sites so he won’t make it any easier for anyone to find out stuff about him.  He’s a very sharp guy, and I think he is playing a good poker game.  And, as Seth points out, poker is not much fun if you can see everyone’s cards.

Ostrich head in sandFor me the issue here is not about transparency, but what game you are playing.  Poker is a small scale strategy game pitting one person against another.  Transparency is the exact wrong thing to do in that game.  But most “games” in life and business are far more complex, and given our 21st Century context (see Thomas Friedman), I think it’s dangerous to live life with a poker face.  It’s more like having one’s head in the sand.

In a complex system, transparency is important as it relates to information asymmetries.  This is when one “side” in a transaction knows more than another.  In such cases, people tend to undervalue an opportunity to avoid risks based on gaps in knowledge. It has been shown in economic theory that the overall value of a system is increased when everyone has access to the same information.

In markets, individuals benefit greatly by sharing their information with others to allow for fair exchanges.  This sharing brings the added bonus of systemic aggregation of information (the Internet enables this like never before).  Aggregation allows people to discover patterns that provide opportunities to adjust tactics and “win” more often.

So here’s some “games of life” to think of as markets instead of as poker:

  • Job interviews/hiring decisions… what if employers and employees knew more about jobs and candidates? Better alignment of jobs and people lead to greater engagement and less turnover.
  • Health… what if people were able to share their health information more fully? They could see trends and patterns and share them with medical professionals to get earlier and better treatment.
  • Business… what if employers shared their performance goals and metrics more fully (even when it’s bad news)?  Employees could intervene earlier and with greater permission to prevent negative trends.
  • Dating… more disclosure about values and interests leads to better match making and longer lasting relationships.