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Marginal Utility
By Rob Horning
A blog about consumerism, technology and ideology.
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Social-media redlining and “social enforcement”

When I was in college, my mother, who worked at a bank, helped me set up what were essentially Potemkin credit card accounts for myself. She thought it was important to start early in forming relationships with banks to build a good credit score for the future. Get yourself in the system, make a few small purchases every month, and establish a track record of paying the bills on time.

Perhaps if I were young now, she would be forcing me to sign up for Facebook and managing the sort of contacts I should make there to improve my creditworthiness. As this Economist article reports, banks are beginning to gather online social-media data to perform risk assessment for personal loans.

An online bank that opens in America this month will use Facebook data to adjust account holders’ credit-card interest rates. Based in New York, Movenbank will monitor messages on Facebook and cut interest rates for those who talk up the bank to friends. If any join, the referrer’s interest rate will drop further. Rates and fees will also drop if account holders spend prudently. Efforts to define customers “in a richer, deeper fashion” might eventually include raising rates for heavy gamblers, says Brett King, Movenbank’s founder.

Sounds awesome, right? Nothing is so rich and deep and true as my online behavior. The more I can be defined in terms of that, the better. It’s also great to know that “employees at small banks often search social media or the web for the names of loan applicants, says Jack Vonder Heide of Technology Briefing Centers, a consultancy.” And at Kreditech, a German bank, “an applicant whose friends appear to have well-paid jobs and live in nice neighbourhoods is more likely to secure a loan.” I want to live in that world, where I can directly monetize my social media presence and leverage my contact base. Very excited to get to think of all my time online as an extended interview with a loan officer. And I would love to get nothing but updates from “friends” — they would just be the highest net worth individuals I can find — about how much they love their bank and how respectable (and implicitly white) their neighborhood is.

I’m looking forward to the time when the absence of such social-media presence becomes a disqualifier. One bank is already lending on the basis of borrowers being able to get Facebook friends to serve as human collateral.

Perhaps no company has gone as far as Lenddo, a Hong Kong start-up that owns online lenders in Colombia and the Philippines. Loan-seekers ask Facebook friends to vouch for them. To determine if those who say “yes” are real friends rather than mere Facebook contacts, Lenddo’s software checks messages for shared slang or wording that suggests affinity. What’s more, the credit scores of those who have vouched for a borrower are damaged if he or she fails to repay. Put the word out about this “social-enforcement mechanism” and “boom, the money shows up,” says Jeff Stewart, Lenddo’s boss.

Nothing like having your digital kneecaps broken because some deadbeat friend of yours couldn’t make a payment. Better purge all those high school friends from your Facebook who aren’t likely to be successful; get rid of all those college friends who seem weird or who update about unsavory low-class, low-status things. Reify your habitus! And do it fast, before it costs you. Never mind that your habitus is precisely what you take for granted about how you see the world: subject yourself to rigorous observation and then make yourself conform to the signifiers of status! You wouldn’t want your friends to get hurt, would you? You wouldn’t want them to drop you, right?

This is not exactly new, that social status and habitus constrain one’s opportunities and life possibilities. But it is dismaying to see how readily social media can be used not as a tool of connectivity but as a sorting mechanism that helps rationalize social inequality. It doesn’t merely map the social territory, but starts to dictate it, along the segregated lines it reveals and then reinforces. No doubt, commentators will then blame technology for the segregation it reveals. Nothing we can do about it, it’s what technology wants.

Ideally, the way in which “social enforcement” makes the stratification explicit would ultimately help spur efforts to mitigate it. Quantifying and graphing the social hierarchy that used to be somewhat cloaked not only makes that hierarchy a marketable commodity — something tradeable in the form of reputation management — but it could also bring about the situation akin to what Michael Young outlined in The Rise of the Meritocracy, in which rigorous measurement destroys everyone’s illusions about social mobility and makes them more restive. When the hierarchy is invisible, people can misapprehend their place, believe they have been merely unlucky and not systematically discriminated against, and continue to struggle to try to get ahead. Make the hierarchy explicit and people have no “fig leaf” to cover their failure with. (I wrote about Young’s book here.)   

Perhaps the most troubling part of that Economist article is its slant that this development is supposed to democratize credit, on the logic that better tools for measuring creditworthiness will lead to more loans and not more digitally driven redlining. The ideology at work here is that being surveilled is always to your advantage; the oppression of being constantly watched is repackaged as beneficial quantification — all the more beneficial if you self-surveil and confess your own behavior voluntarily. After all, the more data you provide to the institutions that posit your social identity, the more substantive a person you are. Now you can measure your substance directly in terms of interest rates you pay. Cultural capital, indeed!

But measurement in capitalist society is mainly is a matter of commodification. As another Economist article last week about TV ratings makes plain, being able to quantify heretofore nebulous things like attention (or status, or sociability, or likability, or what have you) makes them sellable; it’s the essential first step to enclosure. The article quotes Alan Wurtzel, president of research for NBCUniversal, who spells out the logic bluntly: “If you can’t measure it, you can’t sell it.” Capitalist hegemony makes it hard to measure anything for any other purpose but to commodify it, to make an opportunity for an exchange. More trading is always good, right? I know that I would like to devote my life to “growing the economy.” That’s why we were put on this Earth: to consume it all as fast as possible.

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