Second post in the Coordination Frontier sequence. Intro is here.

Once upon a time, we didn’t have money, or auctions, or markets. We didn’t have the concept of voting (let alone distinctions between first-past-the-post, or approval voting). We didn’t have banks or stock trading. We didn’t have Kickstarter.

We had to haggle over everything, which cost time. And it fundamentally limited the scale at which we could accomplish things. If a transaction cost exceeds the value of a trade, that trade can’t happen. [edit: arguably false, see discussion in comments, but fortunately not that cruxy for the rest of the post]

Once upon a time, someone had to be the first person to invent each of these concepts. The people around them were probably vaguely annoyed at having to learn a new thing. Many of the concepts required multiple building blocks and took thousands of years to reach saturation.

If you are happen to be around a lot of people around who:

geek out about coordination schemes, and
have an entrepreneurial bent

Then a really valuable thing you can do is explore new coordination schemes, while making an effort to distill them down into something the general population might actually be able to use.

This is hard. There are lots of failure modes. But, coordination schemes are a key thing that makes humanity powerful. Pushing the state-of-the-art forward is valuable.

With that in mind, let’s explore some examples and concepts.

Examples: Negotiation Technology

Second Price Auctions

I remember the first time I got the results of a second-price auction. It felt like magic. Instead of arguing for hours about who got which room in a new apartment, I just wrote down my true preference for how much I was willing to pay for each room. Then I automagically got assigned a room that was cheaper than I had been willing to pay for it. (In a second price auction, each participant submits a sealed bid, and then person who bid highest pays the second-highest bid)

At previous apartments, we had just eyeballed the size of each room, and then came up with rent-allocations for each room that had vaguely round, fair-sounding numbers, and then picked rooms. It was chaotic, and didn't have a good way to account for some people valuing particular rooms for subtle, personal reasons.

Second price auction was an important, conceptual advance. But it’s not very popular in broader society. Why?

At my...

The Coordination Frontier