The social currency of trust
Traditional currencies now gain competition from trust-based systems enabled by the internet. According to Rachel Botsman, reputation capital is becoming so important that it will act as a secondary currency. It is shaping up as the cornerstone of the 21st-century economy, giving our online reputation an offline influence. This personal trust asset will allow everyone in the future to access services, knowledge, and markets, while enabling social innovation. Further, it will empower people to make meaningful connections and discover a humanness that was lost, taking us back to old market principles reinvented for our age.
Trust is the foundation of all transactions. Since most collaborative consumption models, including online communities and peer produced and crowd-sourced platforms, require individuals to carry out online transactions with other individuals they have never met in person, trust between strangers is a prerequisite for success. Increased trust implies significant improvements such as simpler social contracts, less transaction complexity and lower insurance costs. According to Craigslist’s Craig Newman, people with large reputations will be the most influential in the future: By the end of this decade, power and influence will shift largely to those people with the best reputations and trust networks, from people with money and nominal power.
Trust based systems are especially important in the Sharing Economy. Airbnb encourages renters to rate guests and guests to rate renters. On Uber, drivers can rate customers and customers rate drivers. And task solvers on Taskrabbit are earning points and levels when solving tasks succesfully. These systems create symmetry of accountability and transparency between parties. You know you’re being rated and that those ratings are being shared. Therefore, accountability and transparency cut both ways. Trust systems on sharing economy platforms are becoming a central part of the platform and business model, and the fastest growing and most successful platforms are those who have been able to build trust in their community.
Moreover, and as Botsman points out, the reputation you build on one platform has value in places other than where the reputation itself was created. For example your rating on eBay will improve the likelihood of finding guests on Airbnb. The web leaves you with a reputation trail – a reflection of trustworthiness. A number of web tools already give individuals the opportunity to take ownership of one’s own reputation and use it to gain information, power, goods or influence: Credport maps your social relationships, Fidbacks summarizes all your ratings in one place (without using social networks at all), Virtrue offers enterprises and P2P marketplaces verifications for their users, and Trustcloud offers a portable reputation system that calculates a user’s reliability, consistency and responsiveness by measuring social presence across other sites, including Twitter, Google+, Facebook, LinkedIn and eBay.
Nevertheless, technology has a hard time protecting the modern trust mechanisms of the web. Trust might be the oldest mechanism in history, but it creates a lot of vulnerability if it gets abused. The trust based systems of the web will prove most effective preventively before a transaction, but will fall short if a transaction goes wrong. Airbnb has now launched a Trust & Safety Center including a $1.000.000 host insurance guarantee after the site experienced a few incidents where hosts got rubbed. In general, the insurance remains a core issue in the sharing economy, and in many cases the insurance industry is reluctant to partner up with P2P platforms, especially P2P car sharing services. The Danish P2P car sharing service MinBilDinBil (MyCarYourCar), however, has found a solution where a private insurance company receives a cut of the price without interfering the renter’s or driver’s current insurances.
What remains is a dilemma between new business models enabling social innovation and trust mechanisms prone to erode. Web based trust systems will get you far and enable social innovation in many cases. Yet, we need new and updated enforcement mechanisms, business models and regulations if we further want to harness this new social currency.