Trust me… there’s an app for that

Every day, we rely on big institutions to facilitate trust. Through Visa, I can exchange a promise and a piece of plastic for a bag of groceries, a pair of shoes or new laptop. I could try to do that without a big payment provider behind me, but the clerk would treat my promise with skepticism at best. These institutions provide an important layer of trust that enables billions of transactions. Of course, Visa’s not the only game in town, there are other payment processors, there are bank checks, and even a public option (aka cash).

The government is a major player in the trust game, often via regulations. At their core, regulations are usually created to ensure one of two things: a basic level of honesty during transactions (e.g. that a pound of berries, is in fact, a pound of berries) or a minimum level of public safety (e.g. employees must wash hands before returning to work).

But what happens when technology enables new options for trust, previously unheard of by existing regulatory regimes? For example, a frequent challenge for ride-sharing apps, like Uber, was the method through which the ride was “metered” (via GPS). Regulations regarding the method and process of taxi or livery metering were created to allow us to be taken for a ride, without being taken for a ride. But capturing distance information via a satellite in space (vs. a sensor attached to the transmission), while entirely within the spirit of the rules, was outside the letter of the regulations.

But GPS is a technology that we all use everyday, and showing how it fell within the spirit of the old rules was easy for public and government to understand. Newer technologies that sit outside the bounds of everyday use can pose much greater challenges: for example, digital currency. One of the most notable aspects of digital currency is that it enables two people who don’t trust each other at all to successfully transact without any intermediary, and (if they so choose) in complete anonymity. Naturally, one set of early adopters for this were consumers who were willing to put a high premium on these features (drug dealers). But, if we take a step back and think about the price we pay existing providers to provide that same trust (credit card fees, ATM fees, account fees, check printing fees), digital currency can be a game changer for everyone, not just the Dread Pirate Roberts.

The institutions we rely on to ensure honest, accountable transactions have always been a moving target. Even in the context of taxis, we’ve replaced old systems (calling 3–1–1 and taking a day to go to court to complain about your taxi driver) with new ones (e-mailing Uber and getting a $20 credit towards your next ride). Because these are private transactions, we are given a much higher degree of freedom to choose our own trust and accountability mechanism.

Doing this in the context of public safety will be a much greater challenge. But why should we rely on overworked (and on occasion, corrupt) manual inspection regimes if technology can achieve the same goals, more effectively at a fraction of the cost? Nick Grossman points out that low permission, high accountability regimes already exist on the web, and porting them to government can serve as compromise that fosters innovation while ensuring accountability. But I’d propose taking that a step further. Creating a fundamentally more transparent, almost unimpeachable system for health inspections, building inspections, environmental safety and other areas that currently face significant regulatory scrutiny is not a compromise to avoid an unpopular political fight, it’s an imperative for any regulator committed to maximizing public safety. Via sensors, mobile video, crowdsourced ratings systems and other new features to come, we can do this, but it will require a major rewrite of the rules as written.

The context of the debate today is often a question of too much regulation or too little oversight. But thoughtful public officials would be wise to take a step back and see the bigger picture. Our focus should always be towards getting closer to achieving the goals regulations were created to achieve. Jealously renouncing new technologies to protect old ways of doing things, can put lives at risk. If we spend our time looking forward, we can create a safer society while simultaneously reducing regulatory burdens on businesses large and small.

This post is written by Scott Schwaitzberg. Scott is a Managing Director of Tusk Ventures and identifies new opportunities for Tusk Ventures. He is currently focused on cryptocurrency, telehealth, transportation, and other emerging sectors.

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