Trust
“I have always depended on the kindness of strangers“— Blanche DuBois, A Streetcar Named Desire
We all depend on strangers.
We put our money in banks, our children in the hands of babysitters, our food comes from places we likely have never visited and is prepared by people in kitchens we can’t see. We ride in cars with strangers, stay in random people’s homes and put our credit card numbers on the internet. We share roads with unknown people and put letters and packages in the hands of people we barely know.
We live in a society built upon shared trust. The importance we have placed on collaboration with strangers makes trust a vital concept in our world.
We trust that those entities are going to carry out what they said they would. We have a legal system set up to protect us in many of these scenarios, but those can only go so far. If our shared trust is lost, chaos ensues. Bank runs, gas crises, looting takes over cities.
Oh yes, and full scale revolution, when people lose trust in governments and bad things happen to those in charge.
How do we know we can trust something?
If a general sends a letter across a valley, how can he be sure it gets there? That it contains his original message? How can the recipient know that it was sent by the general?
Middlemen — Trusted Messenger, 3rd party with no incentives. Insurance. FDIC. clearing houses, exchanges, FDIC, title companies, government, escrow, certificate authorities, internet domain registries, post office.
Shared Secret — the messenger, physical signals, something only the sender and recipient know.
Or perhaps an item (resource) that only the sender could possess. A gold block only a King could own. Or the seal of a letter.
Or it could be something unique to the messenger — DNA, voice, face, fingerprint, lie detector. These unique aspects have been increased and emphasized by technology, from the electric telegraph to the telephone.
Reviews and ratings
We now rely heavily on statistics. If enough people verify something, we place more trust in it. This is why crowdsourced reviews are so important. We have Amazon, Yelp, Uber, Angie’s List, Ebay. If you don’t do what you say you’re going to do, your reputation is toast. We get degrees and credentials (ratings of ourselves) in order to instill trust in others that we can do what we say we can do.
We have ratings agencies like Moody’s to act on our behalf to give ratings to bonds (although this didn’t work very well in 2008, perhaps because Moody’s is not a decentralized, transparent organization).
Even sellers are on the dark web need to build trust, probably more than anyone. Reputation matters everywhere.
It takes 20 years to build a reputation and five minutes to ruin it — Warren Buffet
This is why we have shared narratives — we can use heuristics to trust people in ways we couldn’t otherwise. If you’re a Christian, and see someone wearing a cross necklace you’re more likely to trust them. Our shared symbols, myths and traditions make it easier for us to trust people without having to get to know them deeply.
This is also why it is very easy to fool some people. Scammers and con artists prey on this. Simply pretend to ‘adopt’ someone’s sacred truths and they will trust you more than they should.
Fake news has tricked us all and won’t stop. Aviv Ovadya warns us: “What happens when anyone can make it appear as if anything has happened, regardless of whether or not it did?”
“Imagine … phishing messages that aren’t just a confusing link you might click, but a personalized message with context. ‘Not just an email, but an email from a friend that you’ve been anxiously waiting for for a while … And because it would be so easy to create things that are fake you’d become overwhelmed. If every bit of spam you receive looked identical to emails from real people you knew, each one with its own motivation trying to convince you of something, you’d just end up saying, ‘okay, I’m going to ignore my inbox.’”
If we can replicate people’s voices and even faces — as technology is increasingly allowing us to do, how will we be able to trust anything?
Transparency
We’re probably more likely to trust the food we’re about to eat if we’re in a restaurant with an open kitchen. We might trust our nanny more if we have a nannycam (though your nanny — or manny, no sexism here — may not appreciate it) and we likely feel more confident that a package is going to arrive at its destination if we can track it.
Transparency keeps doors and windows open into the actions of people we have put our trust in.
In What’s the Future and Why It’s Up to Us, Tim O’Reilly talks about government as a platform. SEC documents. Why public companies and non-profits get audits
If we can ‘see’ something, we trust it.
Money
Perhaps our greatest shared web of trust is money. Money is not real. Less than 10% of ‘money’ is actually in paper dollars. And that paper is ‘worth’ nothing, except the shared trust that I can give it to someone in exchange for something. The metal in a nickel is actually worth more than 5 cents. The money you have put in the bank isn’t actually there. The bank is only required to hold 10% of the deposits it has — the rest is loaned out. In other words, if everyone in the US went to the bank at the same time to get their money out, we’d all be mighty disappointed.
This 10% requirement allows for huge exponential economic growth, but it also requires a massive amount of shared trust. This is part of the reason the FDIC exists: to ensure the mindset of the American people. It couldn’t really do anything if
If you live in America, aside from 2008, you are…we have a very stable financial system, but in other countries and at other times hasn’t been the case.
Consider this sign, from Dan Wheelan’s fantastic book Naked Money:
The outhouse reference is not a glib throwaway. At the peak of Zimbabwe’s hyperinflation in the 1990s, the Zimbabwe 1,000 dollar note had less value than a single piece of toilet paper, prompting businesses in neighboring South Africa to post signs warning customers not to throw Zim dollars down the toilet. Photo by Eugene Baron.
Decentralization
Decentralization is just a type of transparency. We can see all things in many places. A bank could probably erase your account, and it’s just your word against theirs — a very scary proposition. Instead of having my accounting records locked in my desk, they are out there for the world to see.
If I have video of a murder, my life is going to be a lot less in danger if I mail out 1000 copies to other people and the truth is more likely to be seen.
Increased ease of replication has made it easier to build a decentralized world, where we can create copies and distribute in real time.
In the same way, decentralization as a concept enables power to be checked. Kings and monarchies held power in a completely centralized fashion, whereas democracy has checks and balances across many institutions, allowing for more equally distributed justice. And government is likely to continue moving in this direction.
Much like many of the themes of these articles, this concept of decentralization has moved from the physical world and networks of roads, geography and physical interaction and have found a place in the realm of the digital world with technologies such as blockchain.
Blockchain
As we moved forwards from trading and sharing only between our own small tribes and people we knew well, we created accounting systems to keep track of assets and ownership. We no longer had to keep our money stored under our beds because we could trust advanced accounting systems.
The blockchain is an incredibly revolutionary combination of algorithm and technology used to implement trust in systems. Its value may not be overtly obvious because it is designed to replace many societal systems that are already invisible to us.
The blockchain does one thing: It replaces third-party trust with mathematical proof that something happened — Adam Draper
There is even a book called The Truth Machine: The Blockchain and the Future of Everything coming out later this year.
Technically, the blockchain is a large network of computers. Each has the exact same copy of a database where each record is tied to the previous one. The database is updated on everyone’s computer when a transaction happens. It’s also essentially unhackable due to both its distributed nature and ‘chain’ that allows for immutability (inability to be changed):
Despite the several hacks on bitcoin, its ledger has never been hacked. What has been hacked are the websites or wallets exchanging bitcoin.
This combination of technology and algorithm will have astounding effects on the nature of our shared sense of trust. Entire industries that are based on ensuring trust will vanish, including disruption of money, titles, deeds, insurance and contracts.
