How many friends do you have? Are they really friends? And does that same standard apply to your Facebook friends? Think hard, because your answers to those questions could spell the difference between you getting a loan, and not getting a loan.
It was bound to happen eventually. We all know how our use of social media leads to the creation of mountains of data about each of us. Marketers look at all that data to decide which commercial messages are most appropriate. Political campaigns analyze meta tags from Tweets to decide whether we’re swing voters, and which ads we should get. And now, we’re beginning to learn how bankers are combing through Facebook relationships to help gauge creditworthiness. On a related front, a growing number of tech startups is coming up with tools and methodologies to meet this need.
Let’s back up a second. How did we get from FICO to Facebook? What exactly do social networks have to do with loan applications?
Quite a lot, it turns out. The belief is that we typically connect with like-minded people, good or bad. In ye olden days, that meant asking for references from friends and family. Now, technology plays that role. Hence, if you have Facebook friends who defaulted on their loans, and if you interact with them on a regular basis, you might be the type to default too.
The companies offering these services see their mission in a more positive light. Lenddo, for example, says it helps the emerging middle class use social connections to build their creditworthiness and access financial services. However, could the same information be used to block a loan?
It was only a few years before Mark Zuckerberg dreamed up the almighty Facebook that British anthropologist Robin Dunbar developed what we know as Dunbar’s Number. Using research conducted on primates and building on the size of the average human brain, the theory suggests that there is a cognitive limit to the number of people with whom any individual can maintain social relationships. Dunbar posited that the number is about 150.
Random as it sounds, the figure comes up at numerous points throughout history. From Roman military history on down, the smallest autonomous military unit, the company, has typically been capped at 150 soldiers. Neolithic farming villages peaked at 150 members. Hutterite communities historically split when they reached 150.
For the record, Dunbar’s influence is now being recognized throughout the tech world. The Facebook crowd knows him well, and other firms are using his ideas to fuel their product development for the social media world. It’s why the messaging and photo-sharing service Path specifically limits users to 150 friends.
So maybe it’s a question we need to ask ourselves: Are all those Facebook friends really friends? At best, they might devalue the term; at worst, they could hurt our credit rating.
It’s not only Facebook, of course—as adherents of Big Data know, virtually every kind of online activity generates data points that contributes to the algorithm that computes the eventual credit score. What did you buy off eBay? What kinds of things do you get from Amazon? How active are you on PayPal? Who do you follow on Twitter?
To be sure, the genie is not going back in the bottle. Any given service we use regularly now might fall off our radar tomorrow (think MySpace), but the basic premise of social networking, and the behavioral changes the practice has induced, are here to stay. It’s unfortunate that a random re-Tweet or Facebook post can have such severe consequences. It’s also the reality.