- The Social Security Scam
- Reputation versus Identity
- Multiple Personalities
- Fluidity of Identity
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Multiple Personalities
One solution to this problem would be to have multiple virtual identities. This is already quite common outside of financial circles.
I have an account on Slashdot, for example, where I post under a pseudonym. Someone who cared enough could probably link that virtual identity to me fairly easily, but most of the time it can be treated as a separate persona. It has an independent reputation, based on Slashdot’s karma system.
Since I post more informative comments than troll posts (or, at least, most of my attempts at trolling go unnoticed), that persona has a good reputation. That reputation, however, is in no way related to the reputation I have as a result of writings published in other places.
The idea of multiple personalities would make sense for financial markets, too. Going back to the earlier example, if I wanted to apply for a credit card, then I would not have to use my real identity to do so. I could create a new identity and have my real identity guarantee it up to a certain limit that would be sensible for the credit application.
From the credit card company’s perspective, the identity would have a fixed income of some proportion of my income and a fixed capital of some proportion of my capital. They would be isolated from my real identity and only see the subset of my assets that were required to construct an identity that was a safe risk for lending money to.
This kind of game isn’t particularly new. Corporations do it all the time. They set up shell companies, spin-offs, or joint ventures for a variety of purposes. Some have to do with combining resources from different companies; some have to do with shielding the parent organization from liability.
Both of these would be useful for individuals. Couples sharing a house, for example, might want to create a phantom shared identity rather than having individual responsibility for various payments. Limiting liability is the more important one, however.
The concept of limited liability has to do with limiting the amount of money you can lose. In simple terms, if a limited liability company goes bust, the investors don’t lose any money beyond that which they had invested already. Banks know this, and will not take the investors’ assets into account when assessing the risk involved with lending the limited company money.
Putting this in terms of identity theft, someone who could pose as the limited company would be able to do only a small amount of damage to the investors.
This kind of structure would be ideal for limiting the effects of identity theft. When applying for small loans, you could create a limited liability identity, and an identity thief who took it would not gain any more than a thief who took a credit card.