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Trust and the Sharing Economy

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What if everyone could be trusted? And everyone became willing to trust?

Unrealistic? Sure, if you insist on all or nothing.

But if we moved directionally toward those goals, it’s not hard to envision significant improvement. Increased trustworthiness, and increased propensity to trust, would most likely lead to:

  • Fewer and simpler contracts
  • Fewer lawyers and lawsuits
  • Less transaction complexity
  • Lower insurance costs

This is not pie in the sky. There is an emerging part of the economy that does precisely this: it’s called the Sharing Economy, or Collaborative Consumption.

The Sharing Economy

The Sharing Economy is composed of assets which were previously owned by single entities (either persons or corporations), but which have been freed up to be used by many. Perhaps the best-known example of the concept is ZipCar.

In principle, the concept can apply to any asset used at less than its full capacity. That includes all manner of goods.  Airbnb has made a business of helping people rent out their homes. Couchsurfing is just what it sounds like.

This can sound like pure 20-something left coast social experimentation, but it’s also gotten the attention of General Motors. It’s not fundamentally different than when McDonalds figured out it could use its under-utilized real estate to serve breakfast.

In fact, the Sharing Economy is resurrecting some 19th century ideas like the Grange Movement that helped stimulate the Great Plains agricultural economy.

For that matter – remember libraries?

Trust: the Backbone of the Sharing Economy

The Sharing Economy is, pure and simple, about trusting strangers. How, in an age of global markets and internet-based communication, can we do that?  Or to make it more personal: what would it take for you to rent your house or apartment for a week to someone from France you met online?  And how, finally, can you make that answer scalable?

That, it turns out, is one of the fascinating aspects of the Sharing Economy.  It doesn’t make sense for each sharing business model to develop its own proprietary database, any more than it makes sense for every mortgage lender to develop its own creditworthiness database.

Hence, the race is on to determine who will develop the FICO score of trustworthiness, the most dependable metric, the database that will provide the underpinnings of a potentially considerable amount of economic activity.

Trust Metrics

I have written a White Paper on this subject: Trust and the Sharing Economy: A New Business Model. [I should add here – full disclosure – I am an advisor to and have a financial interest in one of those players, TrustCloud.]

The Sharing Economy is a microcosm for observing trust concepts I’ve been writing about for years. For example:

  1. Trusting vs. being trusted: If you have an apartment you’d like to rent out, you are the one doing most of the trusting; your question is about potential renters – are they trustworthy? So often missing in general discussions of trust (“trust in banking is down…”), the distinction is obvious and vital here.  What’s needed is trustworthiness ratings of the potential renters.
  2. Reputation vs. trustworthiness: It’s easy to mistake reputation for trustworthiness, and some previous online trust metrics have done so. The result is data that suggest Perez Hilton and Justin Bieber lead the pack in trustworthiness.  Does not compute.
  3. Trust comes in several flavors, and is all about context. Unlike digital recordings, some forms of trust don’t travel well (remember the game of “telephone?”). Or as I’m fond of saying, I trust my dog with my life – but not with my ham sandwich.

In the race to build trust metrics, it’s tempting to over-emphasize the technical aspects of the problem. But in the case of trust (as with knowledge management), the more important problem to solve is to correctly define trust and its indicators.

I’ll be writing more about this in future.

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Many Trusted Advisor programs now offer CPE credits.  Please call Tracey DelCamp for more information at 856-981-5268–or drop us a note @ [email protected].

For continued reading check out: Trust Is Not Reputation

Managing For Trust

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Supposed you asked me the score of the latest Boston Red Sox vs. New York Yankees game, and I told you “12.”

You: Twelve? What kind of score is that?

Me: Twelve points were scored in the game; you asked the score, that’s it.

You: Well, who scored how many?

Me: New York scored 7 and Boston scored 5.

You: Well thanks; you could have led with that!

Silly. But that’s exactly what happens with trust metrics. People say, “Trust in business is down.” Cue the dialogue.

You: Trust is down? What kind of metric is that?

Me: Well, some people trust less, some businesses are less trustworthy; the net is down.

You: Wait: how much of the “down” is made up of people trusting less; and how much of the “down” is made up of business being less trustworthy?

Me: 73% of it is business being less trustworthy; 27% of it is people being less inclined to trust.

You: Well thanks; you could have led with that!

Are you trying to improve trust in your organization? You might want to start with clarifying the problem you’re trying to fix.

Are you trying to create more trustworthy employees and managers, so that customers and other stakeholders will trust you? Then focus on the personal attributes of trustworthy people, and on the kinds of principles and values that are observed in trustworthy companies.

Or are you trying to get your people more willing to trust others? Getting better at trusting means better risk management, delegation, personal growth, people development and innovation, to name a few benefits.

What is it that you are trying to manage?

Never mind, “You can’t tell the players without a scorecard.” Heck, you can’t tell the score without knowing what game you’re playing!

The Perils of Measuring Trust

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The desire to measure trust is busting out all over. Some of it is due to management myths (“you can’t manage it if you can’t measure it”), and some of it is due to natural curiosity.

Do People Trust the Government More Under Republicans?

A great example is last Friday’s op-Ed in the New York Times, Imbalance of Trust, by Charles M. Blow. 

Says Mr. Blow:

…Americans seem to trust the government substantially more after a Republican president is elected than they do after a Democratic one is elected — at least at the outset.

Since 1976, the polls have occasionally included the following question: “How much of the time do you think you can trust the government in Washington to do what is right — just about always, most of the time, or only some of the time?”

The first poll taken in which this question was asked after Ronald Reagan assumed office found that 51 percent trusted the government in Washington to do the right thing just about always or most of the time. For George H.W. Bush, it was 44 percent, and for George W. Bush it was 55 percent.

Now compare that with the Democrats. In Jimmy Carter’s first poll, it was 35 percent. In Bill Clinton’s, it was 24 percent, and for Barack Obama’s, it was only 20 percent. (It should be noted that the first poll conducted during George W. Bush’s presidency came on the heels of 9/11).

The implicit assumption Mr. Blow makes is that trust changes quickly, and that polls reflect it; that the selection of a Democrat quickly results in low trust scores, while the selection of a Republican quickly results in high trust.

Or Do Democrat Administrations Build Trust in Government?

Let’s challenge Blow’s assumption.  Let’s assume that social trust–as many academics suggest–changes much more slowly than Mr. Blow assumes.  That in fact, questions like “do you trust the government” shift over a matter of many years–not a few months.  (See, for example, Professor Eric Uslaner, whose studies suggest that many forms of social trust evolve not only over years, but over generations).

Now let’s rewrite Blow’s paragraph—same facts, different implicit assumption:

…Americans seem to trust the government substantially more after a prolonged period of Democratic leadership than they do after Republicans have held the office—and the effect even carries over into the next administration for a few months.

Since 1976, the polls have occasionally included the following question: “How much of the time do you think you can trust the government in Washington to do what is right — just about always, most of the time, or only some of the time?”

The first poll taken in which this question was asked was when Carter had taken office, after eight years of Nixon and Ford.  In that poll, only 35 percent trusted the government in Washington to do the right thing just about always or most of the time.  Carter restored trust in government; when Reagan took over, that number tested at 51%.

However, after 12 years of Reagan/Bush, when Clinton had moved into the White House, it had been driven down all the way to 24% (Reagan did, after all, preach that government itself was the problem, not the solution).  By the end of Clinton’s two terms, that number had gone back up to 44%, of which George W. Bush was the beneficiary 8 months into his first term.

But with Republican Dubya at the helm for 8 years, trust in government dropped precipitously (Iraq, Katrina, et al); so far that the score early in Obama’s term was only 20%. 

Same facts: different assumptions. Who’s right? It depends. It depends on partly on how people interpreted that question, and even moreso on how long it takes people to shift their viewpoint on that particular question.

Trust is tricky. It’s not like measuring the temperature, or even political polls. The interpretation contains a lot more art and a lot less science than most simple surveys would suggest.

Interpreter beware.