Prolog: A Thought Experiment -- Imagine a Value-Pricing Demon…

Prolog to the book, FairPay: Adaptively Win–Win Customer Relationships
by Richard Reisman

Imagine a demon that might power a system of commerce.  Imagine that this demon has perfect ability to observe activity and read the minds of buyers and sellers to determine individualized "value-in-use" -- the actual value perceived and realized by each buyer, at each stage of using a product or service.
  • The demon knows how each buyer uses the product or service, how much they like it, what value it provides them, and how that relates to their larger objectives and willingness/ability to pay. It understands the ever-changing attributes of current context, where the value of a given item or unit of service can depend on when and how it is experienced.
  • Furthermore, this demon can determine the economic value surplus of the offering -- how much value it generates beyond the cost to produce and deliver it.
  • The demon can go even farther, to act as an arbiter of how the economic surplus can be shared fairly between the producer and the customer. How much of the surplus should go to the customer, as a value gain over the price paid, and how much should go the producer, as a profit over the cost of production and delivery, to sustain their ability to continue those activities.
Such a commerce demon might thus serve as the brains of a system that sets prices that are adaptive and personalized -- to set a price for each person, at each time, that is fair to both the producer and the customer.  Imagine we could build an e-commerce system, with advanced programming and data that worked as an artificial intelligence version of this demon. Prices would not be pre-set by the seller, but would be set dynamically by the demon for each item or unit of service, at levels that would be fair and acceptable to both the buyer and seller.

Actually, a rather different pricing demon has long been widely accepted as central to our economics.  Isn’t Adam Smith’s invisible hand just the hand of a demon that guides the setting of prices based on a balance of supply and demand?

So if we have Adam Smith’s demon, why do we need my demon?  Because the invisible hand works nicely for markets of scarcity, but in the digital era, we face markets of abundance.  The task of these new markets is not how to allocate scarce goods, but how to sustain the creation of services that can be replicated without cost or limit.  What we now need to allocate is a fair share of the customer’s wallet. 

This book shows how thinking about my demon can help us do that. FairPay is a business architecture centered on a new value feedback process that adaptively seeks to approximate what the demon knows

(More on thought experiments and this demon in Chapter 5.)

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