Information asymmetry: A situation when one party has more or superior information compared to another party or parties.

Remember when, in the not too distant past, you had no idea what your neighbor’s house cost? Or when you were scoping out an area, the only guide was a local real-estate agent? Today we have Zillow, which single-handedly when it launched removed information asymmetry from the real-estate market. This data used to be available with the County government but Zillow made it accessible to everyone via a seamless interface and then allowed people to add qualitative data on top resulting in price vectors and indicators (e.g. make me move).

Remember when we discovered restaurants by just walking in? or by asking friends? Today we have Yelp, which pretty much can tell you almost everything about a restaurant and user opinions about the food there. Next step is to take it further to answer the question “What’s good here?” and DishOnIt, which brings the wisdom of the crowds to the dish level helps one figure that out. So one can ask the question: Where can I find the best Chicken Tikka Masala in town? Or a Cheeseburger? (Disclosure: DishOnIt is my wife’s new startup).

Remember trying to research a camera and the only information available was the vendor or consumer reports? Today we take ratings and reviews on Amazon and other sites like epinions etc. for granted and they are significant forces in forming our purchase decisions. These ratings are ones that are authored by people like us and as the Edelman trust barometer (pg. 13) indicates, our comfort level with people like us is increasing. Meta point: we are engaging in discussions and formulating opinions and moreover we are seeking people who might fit the same profile as us.

Removing information asymmetry in itself is not social; it is the basis of social engagement or in other words the removal of information asymmetry and easy access of information allows people to converge, networks to form, new value propositions to come about and people to start the cycle of sharing their opinions, thoughts, ideas, experiences etc. The self-motivated sharing of ideas is the basis of social engagement and feeds the information asymmetry cycle and they both get inextricably linked as the value derived from free and open access to information forms new channels and new ways of doing business.

What general networks such as Facebook and Twitter allow, is discussion, posts etc. about any topic which leads to creation of an ad-hoc forum that lasts as long as the conversation is relevant and interesting and then disbands (ref: previous post on KM and Social) but the conversation archives and spin-offs of the conversation remain forever providing more knowledge than existed previously to everyone who seeks it. So while specialist sites would grow and thrive, the general networks will step in (i.e. Facebook groups) and become repositories of information on many topics which are too fragmented to have a destination of their own. However one thing is for certain that discourse on any topic is going to occur, so no business is immune.

The problem that still exists and needs to be addressed is the filtering, presentation and meaning extraction of the data that is being accumulated on these groups, sites etc. therefore in my opinion companies that promote transparency and help customers make personal decisions based on crowd-sourced information by helping them identify satisfied customers like them, trends that have affinity to their personal likes and dislikes will tend to do better than ones that do not.

So, is social bringing about information asymmetry? Or is information asymmetry creating the basis for the discourse to occur? Chicken or egg, doesn’t really matter as the omelet is going to be cooked regardless!

Many questions to ponder upon: What happens when our sole opinion source is people like us and information is easily available? Does it fuel the fading away of the middleman? Does Social speed this process up or does this process speed up social engagement? Are companies preparing for information asymmetry removal or fighting it?