Trust: The Currency of the New Economy

stop-lightIf you commuted to work today or drove on errands, you passed through an amazing social miracle several times, but I’m certain you didn’t stop to think about it even once.

But you did stop. Because the “social miracle” to which I refer is the ubiquitous traffic light.

Think about what happens at traffic lights (and stop signs) thousands upon thousands of times every day. People seeing a green light facing their street proceed at full speed through the intersection. They do this without hesitation because their experience tells them that they can trust (with thankfully very rare exceptions) that people encountering a red light on the perpendicular roadway will stop.

Why do people stop at red lights? Sure there is the fear of possible punishment from law enforcement if you don’t. And there is the risk of being hit by someone coming the other way. But a mass disobedience by all the people encountering any given red light could obviate either of those in a moment. But that doesn’t happen. 99.99% of the time, people stop.

I submit that the primary reason they do is a conditioned understanding of the value of cooperative trust in a social system. My stopping on red gives someone else a chance to go; and the mutual stopping of others allows me to go in my turn. Through this unspoken but powerful social transaction, we all get where we are going faster and more efficiently.

Sure the punishment and injury threats strongly reinforce this behavior, but I still believe at its core is an innate knowledge, programmed into us by evolution, that cooperation based on trust aids the survival and thriving of our species.

Trust and the Power of Collaborative Consumption

All economies are built on a similar social trust in some form. In the capitalist economies of the Industrial Age, we were asked to place that trust in large institutions, primarily banks that control the capital and governments that regulate its flow. While that economic model built great and mighty things, it also thrived on scarcity and finite games resulting in a few big winners and lots of lesser players (or losers).

In the emerging connected economy trust and the capital that flows from it are increasingly decentralized and distributed. Now it is possible for virtually anyone to become a center of trust and reputation in any given field. And from that center can flow capital (in all forms, not just money) and power/influence.

Here’s one example of how such new economies are already emerging. In a TED Talk last year, Rachel Botsman spoke about the power of what she called “collaborative consumption.”

Here’s her definition of collaborative consumption from the video:

Collaborative Consumption: A social and economic system driven by network technologies that enable the sharing and exchange of assets from spaces to skills to cars in ways and on a scale never possible before.

Time Magazine called Collaborative Consumption one of “Ten Ideas that Will Change the World.” [Tweet the Collaborative Consumption definition]

airbnb-logoWatch the video for a number of examples of Collaborative Consumption, but let me highlight one that Ms. Botsman speaks about. AirBNB is an online service that connects people with extra space (from a spare bedroom to a spare medieval castle) with people looking for a place to stay in a particular city. It has taken off incredibly, with people now in 192 countries willing to open their homes and spare spaces to strangers.

How does AirBNB get that to happen? In part, they work hard to build security around the connections they make with things like verified profiles, damage insurance for hosts, holding of transactions until both parties are satisfied with the arrangements, and allowing guests and hosts to connect through mutual, already-established social connections via Facebook.

But at the core of the success of AirBNB is an effective trust rating system based on reviews. Both guest and host can be reviewed. The benefit for hosts is obvious, but what is different and powerful here is the benefit for guests from such a rating system. A frequent guest who earns a high rating can command special deals and preferences from potential future hosts. Reputation has its perks.

Online Networks Build Economies of Trust Between Strangers

strangers on a benchAccording to Ms. Botsman, ”It’s about empowering people to make meaningful connections, connections that are enabling us to rediscover a humanness that we’ve lost somewhere along the way…Instead of consuming to beat the Jones’s, consuming to get to know the Jones’s.”

At one point in her TED Talk she reminds us that a trust economy among “ordinary” people is nothing new. It was the basis of every medieval village or American small town. What is new because of the Internet is the ability to rapidly scale such powerful trust among perfect strangers across the globe.

A study by the Pew Research Center found that “the typical internet user is more than twice as likely as others to feel that people can be trusted.” Online connections really do help establish reputation which turns into the power of trust. [Tweet this!]

However, we all know trust doesn’t eliminate danger, especially when strangers are involved. Someone could run that red light and kill us. That deposed Nigerian prince sending us emails offering to share his wealth may not be who he says he is.

The Importance of Reputation Scoring

Every economy needs ways of evaluating trusted sources of capital and trustworthy individuals in whom capital should be invested. In the industrial economy we had tust markers like ratings of bond issues by businesses and municipalities, and credit ratings for consumers.

So every online community needs trust measures and reputation scores. There have been some somewhat ham-fisted attempts at assigning a very high level score, such as Klout or Kred. But such scores have very limited utility when it comes to figuring out who you can actually trust to perform a certain service for you or join you in a partnership of some kind.

Ms. Botsman makes the point that reputation is contextual [Tweet this!]. Just because you’re trustworthy in one thing doesn’t mean you are in another. An individual’s “Reputation Capital [is] the worth of her reputation–intentions, capabilities, and values–across communities and marketplaces.” She envisions that in the not-distant future there will be apps that will allow us to access the earned reputation of individuals across a broad array of categories.

prototype-online-reptuation-app

Image screen capped from http://youtu.be/kTqgiF4HmgQ

There are already startups working on this. Reputation will become the most powerful currency in the 21st century [Tweet this!]. And it will make a number of staples of the 20th century industrial economy obsolete: credit scores, resumes, headhunting services among them.

A Future of Wuffie?

Down and Out in the Magic Kingdom Cover

Image from http://en.wikipedia.org/wiki/File:Downandout.jpg

One of the wilder envisionings of such an economy is in Cory Doctorow’s science fiction novel Down and Out in the Magic Kingdom (free download). In a world some fifty years from now where scarcity and deprivation is a thing of the past and all basic needs of all humans are met, the only thing to strive for is luxuries and the freedom and ability to create. In Doctorow’s future, the basis of earning those privileges is wuffie.

All individuals in the novel have implanted brain chips that are able to transmit and record wuffie. Wuffie is simply the cumulative score of reputation garnered from others who have encountered you. If you do something amazing or beneficial, your wuffie will go up. Be rude to someone or break a promise, and your wuffie may go down. Wuffie can be consciously sent to another, but most transactions take place automatically and unconsciously as the brain chips simply measure and transmit the sentiments of one human being toward another.

Whether or not wuffie is in your (or your grandchildren’s) future, what seems certain is that reputation measurement will drive much–if not all–of the connected economy.

The Future Is Now: Google Search and Authorship

However, we don’t need to wait for Doctorow’s Magic Kingdom to see the new reputation economy at work. In addition to services like AirBNB that trade on the basis of earned and measure reputation, the world’s largest Internet connector, Google, is rapidly moving in that direction.

Since Larry Page and Sergey Brin first came up with the Google “PageRank” algorithm while at Stanford University, web search engines have been about reputation measurement in some form or other. Until fairly recently, that measurement relied almost entirely upon hyperlinks from static web pages that were counted as “votes” toward the potential authority of a page to which they pointed.

With the advent of the social web, Google has increasingly been incorporating a “social signal” into the complex algorithm that controls how pages rank in Google Search in response to a given query entered by a user. This social signal, generated by individual persons interacting with a certain piece of content in various ways–sharing it, commenting on it, liking it, +1′ing it, etc.–is valuable because it gives some indication of what real people think the authority of a page ought to be.

In early 2012 Google introduced “Search + Your World” (S+YW), a new iteration of their search product where users logged in to their Google accounts would have their search engine results significantly affected by their Google network (friends on Google’s social network Google+ as well as other Google contacts, such as one’s Gmail address book).

So now if I search Google for “top real estate agents on Twitter” I get top results like this:

google-personalized-result

The little grey silhouette I’ve circled above indicates that this is a personalized result. In other words, Google has elevated this result above some I might have seen otherwise for my query. Why? Because Bill Gassett, the author of that article, is in my Google+ circles. Because I’ve circled him, and perhaps also because I interact with Bill quite a bit on Google+, Google figures his result might be more meaningful to me than many others from “strangers.” And they are right! Because I know Bill via Google+ I know that he is knowledgable about social media marketing for real estate. And so I really do trust and value his article above any others I might read.

Google Authorship. But there’s more at work in the result shown above than just personalization of search. See the photo of Bill next to the result for his article? Bill’s face is there because he makes use of a Google feature known as Google Authorship. Authorship allows content creators to connect their online content anywhere on the web to their Google+ profile. In return, they can qualify to have the “authorship rich snippet” we saw above appear for their search results.

The value of this ought to be obvious. We are programmed by evolution to be drawn to human faces, and to trust anything associated with that face over anything we deem more impersonal. In the case of Bill’s result, that trust is well-warranted as I explained. But how do we know such trust won’t lead us astray? Sure my eyes may be drawn to a face in my search results, but if I don’t already know that face, why should I trust that person more than any other stranger?

Enter Author Rank. Author Rank (sometimes expressed as “AuthorRank” in homage to Google’s PageRank) is a community-created term for something Google has talked about, in patents and elsewhere, for several years now. The idea of Author Rank is to use Authorship to trace the social signals pointing at a given author’s content on a given topic and score the author in that topic by the amount of social trust signals directed toward it. Most importantly for our reputation credit discussion here, more important than how many people engage with a given piece of content is who does. If a person who also has a high trust ranking for “Google search” often interacts favorably with my Google search-related content, that will count for more for me in that topic than a lot of non-authoritative people doing the same. The resulting score would serve as a boost to the author in the search results when people search for the topic

If and when Google implements Author Rank, it could be a real game-changer in terms of online influence and reputation. And as we’ve discussed above, in the connected economy reputation is a marketable economy. I’ve been predicting for over a year now that we will see the day when the salary market for high-reputation online Google Authors will be as high as it is now for people like talented web developers [Tweet this!]. (If you want to know more about Google Authorship and Author Rank, see my post “Google Authorship and Author Rank.”)

Building Wuffie in a Reputation Economy

To conclude this article, let me refer back to the principle expressed in my first post for New Media Leaders: “The Circle of Giving: Why Make a Gift of Your Expertise?

If reputation is the currency of the new economy, how does one build up such capital. Some of the ways should be obvious from our current experience. Create a high-quality product or service. Provide exceptional customer service. Deliver more than is promised.

179279964_8e0675c135_mBut there is another factor which I think will be many times more powerful in the connected economy than it was in the industrial economy: the power of giving it away. [Tweet this!]

Even in the current economy giving away product or expertise has some ROI. It can be a way of getting people in the store or giving them enough of a taste of your talents that they are willing to pay for more.

But in the connected economy, giving away will be a major way of directly earning capital. Not the old-style capital of money or money-related credit, but the new capital of reputation. By giving in ways meaningful and helpful to others in online communities, they begin to send major wuffie your way as they share your content, rate you favorably on rating services, and recommend you to their friends. And as we saw above in the Google example, the web is maturing in a way that can rapidly expand and spread the capital value of such good reputation.

What are you doing right now to build your reputational capital in the emerging connected economy? [Tweet this!]

Postscript: Fellow NML blogger Marty Smith pointed me to this post by David Amerland: What If We Had a New Value System for Goods and Services? Read it for a (seemingly) radical proposal on how to turn the present scarcity economy upside down and turn it into the giving economy I’ve sketched at here and in my previous post.

Stop Light Photo Credit: atomicshark via Compfight cc
Strangers on a Bench Photo Credit: estherase via Compfight cc
Shadow People Photo Credit: Pink Sherbet Photography via Compfight cc

Here is a HaikuDeck retelling of this post:

Created with Haiku Deck, the free presentation app for iPad

 

Comments

  1. says

    Funny true story. I’ve been writing about a secret million dollar idea for the last day and a half. This secret weapon was sparked by Mark during our Saturday Free Internet Marketing Consulting lunch session. What that moment and reading this great post teach is collaboration RULES. Another friend of ours, David Amerland, said that when we stand on each others shoulders we become giants. What is the web but an easy way to stand on each others shoulders because we are creating the “red light: conventions on how to do that, how to create a new idea of powerful collaboration and support. Great post by my fellow “New Media Leader” and inspirational as always. Thanks to Mark for all he does. Marty

    • says

      Where’s my half million dollars?

      I kid! I kid!

      Seriously, Marty, it’s what makes taking time out on a Saturday to sit by your side and help struggling local business people get their dreams launched: both seeing the lights go on in their eyes, but also the chance to see what will happen when we cross our streams.

      • says

        Mark, following the truth of this post my plan is to give the secret million dollar idea you and Tonia helped me get back in touch with to the world and look for nothing in return other than a contribution to help cure cancer (my usual fee and one I know you relate too LOL). Marty

  2. says

    Mark, what a great piece and what a conversation this is. Great to see two of my favorite thinkers engaged on a subject that’s at the very heart of many of the things we cover in search and the web today. Couldn’t think of a better way to start Monday!

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