By: Stephen Scott

As we move into an election year, the data is clear: the public has lost trust in the government and, indeed, in a majority of our key social institutions.

The history of the last two centuries is one that features the establishment of institutions which served to create the basis of trust among strangers, at scale, as a presumed norm.

I may not know or trust you, nor you me, but if we have a contract and we both have faith in the courts to keep one another honest, we can do business together. But if either or both of us believe the judge to be corrupt…? Then the fabric of our “trust infrastructure” is rent. And when that happens, we return to a norm of dealing only with those whom we know well. Trust at scale is lost, along with the economics of scale.

As the public’s faith in our shared trust infrastructure has eroded over the last decade, we see everywhere a tendency to place trust only in “a person like me.” However, the technologies of the day have enabled us to identify and connect with peers in new ways. It is, therefore, not an accident of history that we’ve witnessed the birth of the “peer to peer” business model quite recently. More on that here.

New, digital platforms are allowing “peers” to self-identify, self-organize, and collaborate at scale, courtesy of the “digital trust infrastructure” established by companies like Airbnb. Let me say a bit more about all of this and then close with a few thoughts about what it implies going forward.

The Breakdown

Look at how poorly the public trusts our governments, politicians, and corporations. The picture was painted poignantly by the National Journal back in 2012:

“…people have lost faith in their institutions. Government, politics, corporations, the media, organized religion, organized labor, banks, businesses, and other mainstays of a healthy society are failing. It’s not just that the institutions are corrupt or broken; those clichés oversimplify an existential problem: With few notable exceptions, the nation’s onetime social pillars are ill-equipped for the 21st century. Most critically, they are failing to adapt quickly enough for a population buffeted by wrenching economic, technological, and demographic change.”

This corrosion of our traditional “trust infrastructure” is not a new trend. But, today, things have reached crisis levels: in fact, our current trust levels are down to levels seen during the Financial Crisis.

As then, the public today has little faith in the banking sector, and regulators are stepping up efforts aimed at reforming culture and behavior among banks in order to help restore trust to this critical element of our economic fabric.

But, today, we’ve also seen a loss of trust in still more central pillars of social cohesion and order. Consider just these two:

Police: Video-taped shootings of unarmed victims — mostly men of color — and other instances of police misconduct around the US finds that trust in the police, low in 2014, has now dropped to a 22-year low.

The Church: Changing social norms affect people of faith, and as “traditional” beliefs about homosexuality, contraception, and women are challenged, many Catholics have begun questioning their church— and some even their faith in God. Of perhaps broader significance, however, is the broad loss of faith in the clergy itself, with less than 50% of Americans today trusting in the honesty and ethics of church leaders. Once ranked near the top of the trust charts, most recent Gallup polls show the church now ranked far closer to the bottom.

Welcome to the Kinship Economy

If we can no longer rely on our traditional institutions to deal fairly with us, then we cannot rely upon them to help us in dealing fairly with one another. So we’re now creating alternatives.

Research shows that we only give our deepest trust to people with whom we share common moral stakes and a shared social history. It’s called the “homophily” effect — or the “birds of a feather” phenomenon. In the past, kith-and-kin trust networks relied on shared DNA and geography. Today, kith-and-kin is driven by shared values and a shared space in the cloud. This modern version of kin-trust has ushered in what some have come to call the new “kinship economy.”

With increasing awareness regarding the importance of trust and kinship dynamics to business, many companies are beginning to place emphasis on their own ability to create such confidence — internally, among their employees, as well as externally, among their customers (e.g., Zappos).

The CEO of Intercontinental Hotel Group (IHG) refers to this as “trust capital.” And as a traditional hotelier, he is right to focus on trust, given the example of industry “disruptor,” Airbnb. Leading kinship economy businesses, like Airbnb, use digital systems to ensure accountability via sharing networks. These platforms for peer exchange don’t require that we place trust in the person on the other end, per se, but rather with thecompany or community of people “like me” that have self-assembled around shared goals, such as renting one another’s homes so as to facilitate more affordable, and more “authentic” travel experiences.

This is all part of a macro shift from bureaucratic hierarchies to networks. While trust is the de facto currency in our online, peer-driven economy, as sharing economy guru Rachael Botsman argues: “Institutional trust isn’t designed for the digital age.” Rather, reviews and ratings from verified users of such peer-based systems work to make everyone accountable to one another, and to the community as a whole. Failure to keep to community norms leads to being booted out of the community. A reputation for trustworthiness is increasingly the necessary precondition for participation in the kinship economy.

Trouble Ahead

But reputation is malleable and, indeed, subject to counterfeiting. As US State Department Policy Planner Ian Klaus writes, “The qualities that are most necessary for trust in any given era are precisely the qualities a sharp swindler is most likely to fake.”

Security consultant Bruce Schneier agrees:

“If there is value in having a good reputation, then someone who can’t get that reputation naturally has an incentive to try to purchase it. So we have fake positive reputation… Unless we can all trust these reviewer systems, we won’t use them.”

Almost anyone can appear trustworthy by using certain techniques to build artificial credibility. And, the fact is, people can and do game reputation systems. Consider that Amazon recently sued 1,000 fake reviewers who gave 5-star reviews to inflate product ratings. The struggle against sham reviews is only just beginning and promises to be more challenging as peer-driven business model gains steam.

If reviews and ratings aren’t enough to create accountability, trust platforms need another means of creating confidence more reliably. What’s needed is reliable data rather than — or at least in addition to — all the ratings and rankings.

A Digital Trust Infrastructure

Consider the example of Bitcoin.

The key to this “cryptocurrency” is the blockchain upon which it is built. The blockchain is a peer-produced, distributed, decentralized “public ledger” that anyone can audit. It’s the ultimate non-hierarchical peer system, built specifically to remove the need to place trust in a central authority. No participant in the blockchain’s creation has to worry about cultivating a reputation for trustworthiness. No reputation is needed at all. The system itself is self-verified, and that is something that Bitcoin users can trust.

The example of Bitcoin makes clear that trust is more important than reputation. And, indeed, more important than money. As Nobel-laureate Joseph Stiglitz wrote not long ago, “It is trust, more than money, that makes the world go round.” For, as Harvard economic historian Niall Ferguson writes, money is nothing more than “trust inscribed.”

Distributed peer-to-peer networks are shifting the burden of trust from the broken hierarchies of institutions to people like us and to the digital trust infrastructure created by communities of peers. But it is important to note that this experiment is in its infancy, and dystopian danger abounds.

Consider the example of China’s recently announced “Sesame Credit” system. Intended to serve as a “social credit” system, Sesame Credit is touted as not unlike the FICO scoring system used by lenders in the US to determine the creditworthiness of borrowers. But Sesame Credit is, in fact, far more than this.

With Sesame Credit, the Chinese government, known for its long-standing interest in social control, has created a Panopticon by which to rate each citizen’s trustworthiness. Trustworthy to whom? While presented as a tool for peers to judge the trustworthiness of one another, it is the government’s algorithms that will decide whether individual Chinese citizens are deemed desirable members of society and, as some warn, whether their friends and family are to be considered good or guilty by association.

Motivations behind Sesame Credit may or may not be as nefarious as detractors warn. But certainly there were no nefarious plans behind the launch of Peeple, the app that aims to make us aware of how we’re viewed in the world as based upon the company we keep. “Character is destiny,” the site proclaims. What could be controversial in that?

As with Sesame Credit, the algorithms behind Peeple are making assessments of, well … people … whether or not those who are being assessed welcome such scrutiny. Announced last autumn as “Yelp for People,” the app was immediately derided as a tool for cyberbullying and some believed it was so horrible it simply had to be a hoax. Despite efforts on the part of the founders to clear up misconceptions about their intent with the app — taking to the Dr. Phil show, for instance — scorn persists. The app is meant to launch this month.

What we see with Sesame Credit and Peeple alike is that, to be acceptable to people, our shared trust infrastructure — both the decaying analog version and our new efforts at digital versions — must be selected for and opted into. They must emerge in a bottom-up fashion, and ideally enforced from the bottom-up as well, to the fullest extent possible. They must, in short, be of the people, by the people, and for the people, and experienced as such.

As we head into an election year marked by anger, frustration, and disgust, it is perhaps a good time to reflect on what our future, digital trust infrastructure should look like.