What's $100 Between Friends (v1)

posted on Nov 27th, 2015

For the last two years I’ve worked in the industry of recovery auditing. For me, that has entailed writing software to discover errors in historical financial transactions. After finding these errors we seek to correct them by asking the offending party to reimburse our clients. When I’m feeling philosophical, I build binary abstractions on social contracts respecting history. The work has expanded my existential limits.

To explore this further let’s look at a concrete example with two imaginary companies: Acme and Omega. Ten years ago Omega installed windows at an Acme store for $100. After the installation Omega accidentally sent two invoices for $100 to Acme. Acme, who was opening many new stores simultaneously, didn’t notice and paid both invoices. Now, ten years later, my software discovers the mistake and we have requested that Omega reimburse Alpha the whole $100.

Reflecting, what value has the reimbursement request created? A simple answer might be that $100 has been freed that can now be spent on other productive services. Upon further examination, however, I believe the answer isn’t quite so trivial. Two things actually happen as a result of the discovery. Alpha recovers $100 while Omega loses $100. The net financial change is $0. No money was freed up. So what happened? A better explanation might be that the power to decide how to spend that $100 dollars shifted from Omega to Alpha. Focusing on power, I believe, starts to pull out the true value of recovery auditing. More on that later for now let’s do one more thought experiment.

Imagine for a second that an old roommate from ten years ago shows up. This roommate claims that you owe her $100 dollars from a month when she covered your share of the rent. Would you pay her? Of course the answer would depend on the situation. Maybe this roommate forgot to feed your pet goldfish when you went on vacation. Or maybe you also remember that month and feel guilty. Or maybe you don’t remember it and ask for more proof. The power of their claim is dependent on external factors with no amount of external factors ever being sufficient to require your consent (excluding force). As long as you refuse her claim no “value” has been created for your old roommate because nothing has changed.

Coming back to the idea of power then. The value created in recovery auditing is an exchange of social power. When Omega reimburses Alpha for $100 they are acknowledging that, in this situation, Alpha has the right to request the money. The interesting thing is this says nothing about Alpha’s relationship to Omega. Perhaps Omega is twice the size of Alpha. All that matters is there was a mistake and both companies believe they have a fiduciary responsibility to correct it, regardless of why. It is the shared social belief that gives value to my work. Without it recovery auditing would be value less.

This line of thinking brings us to the soft under-belly of capitalism. It has value because, when it involves money, we are all, by and large, obedient. Whether that is installing windows or correcting a 10 year old mistake. This obedience and balance is in no way required by natural laws as transactions in nature are. This obedience simply comes from generations of imparted cultural heritage. The obedience also becomes both savior and master. Savior, because by it we can influence our world without needing to resort to force. Master, because by it we can replace our deeper motivations with a more brittle veneer of greed. And so each day I encourage obedience from all, big and small.