This article was taken from the September 2012 issue of Wired magazine. Be the first to read Wired's articles in print before they're posted online, and get your hands on loads of additional content by subscribing online. 

Imagine a world where banks take into account your online reputation alongside traditional credit ratings to determine your loan; where headhunters hire you based on the expertise you've demonstrated on online forums such as Quora; where your status from renting a house through Airbnb helps you become a trusted car renter on WhipCar; where your feedback on eBay can be used to get a head-start selling on Etsy; where traditional business cards are replaced by profiles of your digital trustworthiness, updated in real-time. Where reputation data becomes the window into how we behave, what motivates us, how our peers view us and ultimately whether we can or can't be trusted.

Welcome to the reputation economy, where your online history becomes more powerful than your credit history. 

The value of reputation is not a new concept to the online world: think star ratings on Amazon, PowerSellers on eBay or reputation levels on games such as World of Warcraft. The difference today is our ability to capture data from across an array of digital services. With every trade we make, comment we leave, person we "friend", spammer we flag or badge we earn, we leave a trail of how well we can or can't be trusted. 

An aggregated online reputation having a real-world value holds enormous potential for sectors where trust is fractured: banking; e-commerce, where value is exponentially increased by knowing who someone really is; peer-to-peer marketplaces, where a high degree of trust is required between strangers; and where a traditional approach based on disjointed information sources is currently inefficient, such as recruiting. 

Joel Spolsky and Jeff Atwood, programmers and influential bloggers, saw the window of opportunity to reinvent the way people found jobs through online reputation a few years ago. "Traditional wikis and Q&A platforms drove me crazy," Atwood says. If you had questions, say, on Chrome extensions, double pointers or Tiny Pixels, "you had to wade through endless conversations that went in every possible
direction and where no comment is more or less important than the previous one. We realised there was a need to optimise the way people got answers, to unearth the little gems buried among a lot of dreck." The way to solve this seemed obvious to Atwood. "Have people vote on the best answers, and rank answers," he says.

In September 2008, Atwood and Spolsky launched Stack Overflow. A sort of Digg meets Wikipedia meets eBay, it is a platform for programmers to post detailed technical questions and receive answers from other programmers. "As soon as I touched it, I was hooked," says Marc Gravell, a 33-year-old user based near the Forest of Dean, who, with more than 315,000 points, has the site's second-highest reputation score. Stack Overflow reports more than 24 million unique visitors a month and around 5,500 questions are submitted to the site every day. 

Voting on and editing questions are just two ways in which users can earn reputation points on Stack Overflow. "Reputation is earned by convincing your peers that you know what you are talking about," Spolsky says. "The reason why the site is 100 per cent spam-free and that around 80 per cent of all questions get answered is entirely a function of the community. The way we do that is as you earn more reputation points, you get more powers on the site." 

Shortly after the site launched, Atwood and Spolsky heard that programmers were putting their Stack Overflow reputation scores on their CVs, and headhunters were searching the platform for developers with specific skills. "A CV tells you what schools they went to, what companies they worked for and how well they did on a standardised test when they were teenagers," Spolsky explains. "But if you read the writings of someone on Stack Overflow, you immediately know if they are a skilled programmer or not." In February 2011, Stack Overflow launched Careers 2.0, an invitation-only job board where companies can find skilled programmers. 

Stack Overflow demonstrates how a person's reputation score created in one community is starting to have value beyond the environments where it was built. By answering questions in an expert forum, you create more opportunities to find a better job.

Reputation information can also be used to look forward rather than back -- for instance, using past actions to work out the likelihood of someone honouring an agreement in the future, which could be particularly useful in the financial services industry. "Any kind of business based on credit has to take into account people's ability to repay and their propensity to pay," says Errol Damelin, founder of Wonga, the online short-term cash lender (Wired 06.11). "Even when they are able to repay, will they or won't they? It's a totally different question. That's when reputation really comes into play." Wonga claims to crunch on average 8,000 pieces of data to get a sense of how trustworthy its applicants are.

Brett King, author of Bank 2.0 and founder of New York-based banking startup Movenbank, founded in 2010, agrees with Damelin. "Credit scores are a lagging indicator -- they only look at what has happened in the past," he says. "They [credit agencies] don't use data to look into whether your behaviour is risky or not now."

Movenbank's goal is not just to use technology to personalise the banking experience, but to reinvent the traditional risk model. King spent more than 18 years working for traditional banks and was struck by the opacity of much of the credit assessment process. "Most banks reject around 50 per cent of credit applications. It's a pretty strange business when you reject half of your potential customers and don't even tell them why." 

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At the heart of Movenbank is a concept call CRED. This takes into account an individual's traditional credit score but also aspects such as their level of community involvement, social reputation and trust weighting. Do they have a good eBay rating? Do they send money peer-to-peer? It also measures their social connectivity -- how many friends do they have on Facebook? Who are they connected to on LinkedIn? Do they have an influential Klout score? It combines this data, not just to assess their risk, but to measure the potential value of the customer. If you refer other customers from your network or pay your bills on time, your CRED score will go up. "It's not about your credit, but your credibility," King says.

A big question mark lies around people's readiness to open up their social data, but King believes consumers are willing to make a trade-off if they know how it is going to be used and what they will gain in return. "People are currently underusing their networks and reputation," King says. "I want to help people to understand and build their influence and reputation, and think of it as capital they can put to good use." 

Social scientists have long been trying to quantify the value of reputation. In 2008, Norihiro Sadato, a researcher at the National Institute for Physiological Sciences in Aichi, Japan, along with a team of colleagues, wanted to determine whether we think about reputation and money in the same way, by mapping the neural response to different rewards. "Although we all intuitively know that a good reputation makes us feel good, the idea that good reputation is a reward has long been just an assumption in social sciences," Sadato says. "There has been no scientific proof." 

In order to prove his hypothesis, Sadato devised an experiment: participants were told they were playing a simple gambling game, in which one of three cards would result in a cash payout. Using functional magnetic resonance imaging, the researchers monitored brain activity triggered when the subjects received a monetary reward. When the subjects returned on the second day, they were each shown a picture of their face, with a one-word descriptor underneath that a panel of strangers had supposedly written about them. Some of the descriptions were positive, such as "trustworthy", others neutral, such as "patient", and others negative. When participants heard they had a positive reputation, a part of the brain, the striatum, lit up.

The same part would also light up if they had won money. As Sadato puts it: "The implication of our study is that different types of reward are coded by the same currency system." In other words, our brains neurologically compute personal reputation to be as valuable as money.