The book, written by M. Todd Henderson and Salen Churi – Professor at the University of Chicago Law School, and founder and partner at Trust Ventures, respectively – is about trust, how it has improved the human condition, and how it evolved alongside technological and societal changes. It explains how companies such as Uber are revolutionizing the supply of trust – that is, coming up with better ways to deliver it and how this will transform our society.
The twenty main takeaways I got out of this book are:
- What does Uber sell? It seems obvious: it sells rides, just like taxis. But Uber’s real competition is not the taxi companies, it is the commission. Through the author’s prism, the taxi commission and Uber provide competing visions of how best to supply the trust necessary for you to get into a stranger’s car.
- In the author’s view, the platforms described in this book decentralize regulatory planning. They organize disparate and deep information, but without the need for bureaucrats and experts in a marble building in Washington or the state capital. Another way of looking at this is that we can no longer trust regulators to keep up with the pace of change. Their answer to new technology is typically: “stop until we figure out what’s going on.”
- GoNanny is an ‘Uber service for kids’ – it shuttles little overachievers to their soccer games or piano lessons, providing important driving options for busy parents. The creation of GoNanny filled the trust void from this particular group of customers. Both the government (here, the taxi commission) and Uber (and GoNanny) are ‘social technologies’ – human invented tools to create trust among suppliers and demanders of rides.
- The market for trust – in this market, the government is both a regulator and a supplier. This is not the case in most other markets. Governments do not produce cucumbers or computers.
- The government monopoly of trust is beginning to crack – we are observing new suppliers of trust that have demonstrated they are more efficient at delivering the trust necessary to make transitions happen that, up to this point, have required government action. New suppliers have begun to build platforms for trust that will continue to eat away at traditional institutions, and ultimately replace them.
- Politics is about whether we have too much or too little regulation (Does anyone think we have just the right amount?). By focusing and rethinking the idea of trust, we ask not whether the amount of regulation is too low or too high, but rather who is the most efficient provider of the trust (and the regulations that enable it) that citizens demand.
- Projecting the idea of a market of trust forward, we can argue that a new era of humanity may be upon us. We are seeing a new phase in the relationship between the government and society: a third American governance revolution, namely a third trust revolution – the “Revolution of the Digital Tribe.” In this new phase, citizens-consumers using digital platforms (as one example) can act collectively to create a more effective and efficient form of regulation. With digital platforms tapping into the wisdom of crowds or bringing technological advancements in verification, we can have the best of both worlds: a centralized platform that harnesses disperse information.
- Trust among humans has never been higher than it is today. We are just measuring it incorrectly. Those who say that trust has collapsed are looking for trust in the wrong places. That we do not trust the government or the media as much as our parents or their parents did does not mean that the overall level of social trust has fallen. Trust may exist in other places not captured by the survey data… Trust is now increasingly provided by a diffuse network of individual trust assessments (e.g. five-star ratings of everything from coffee shops to lawnmowers), instead of centralized sources such as governments.
- Today, a host of “Eat With Strangers” apps are enabling people to expand their options and dine safely in the homes of complete strangers. Apps such as Feastly and EatWith provide a platform that connects cooks and dinners. These apps create the trust necessary to make these transactions happen – to eat food cooked by a total stranger beyond the reach of any government inspectors – just AirBnb has expanded our ability to sleep in strangers’ homes and Uber and GoNanny have allowed us to ride with strangers.
- The decentralization and democratization of trust that we are now seeing is a phenomenon with far-reaching implications. It has the potential to disrupt our society in many ways, but also to unlock a better future for humanity… With the click of a mouse we transmit money through fiber-optic cables around the world, trusting that the recipient in Boston or Bangalore will send us what we paid for. Not surprisingly, 2016 was the sixteenth consecutive year that technology was named the most widely trusted industry, with 74% of people trusting in tech.
- “Trust” can mean many things, but the authors define it as the information and reliability that enables two or more parties to coordinate, to cooperate, or to do business while having the confidence in fair dealing. We trust that our parents will not harm us, that strangers will not attack us, that a hamburger at Shake Shack will not be poisonous, and the the shipment of steel will arrive as scheduled. The big question is: “Why?“
- Adam Smith first explained the tremendous gains possible when people can rely on others to do things that they used to do by themselves… Individualism is essential to human progress, but collective action is what enables individual achievement and fulfillment.
- There are three types of trust: government trust, business trust and personal trust. In addition, each of these types operates and provides trust through different mechanisms. Personal trust is biological, but also linked to ethnicity and nationality, and furthered by language and religion. Business trust is based on shared incentives and the profit motive and is disciplined, to some extent, by competitive markets. Government trust is premised on sovereign and violence.
- McDonalds provides most of its trust through the bond created by its advertising and through its own supply-chain regulation. McDonalds invested tremendously in guaranteeing a minimum level of quality and predictability into products bearing its logo and was compensated for this by consumers’ willingness to eat there or pay a premium where they saw the logo.
- When we were kids, if we wanted to know whether to see a movie, we asked our friends on the playground; today, every kid know about Rotten Tomoatoes‘s fresh rating or the significance of three versus five stars on iTunes. Likewise, if we wanted to know whether to buy a Sony or a Philips television, we might have found an issue of Consumer Reports at the library; by contrast, CNet or Amazon rankings are now click away. Would you trust an acquaintance who said to buy or eat there or stay at this resort or that one? Or would you immediately google it, relying on consumer ratings, be they on TripAdvisor, Amazon, Yelp, or countless other sites?
- The market of trust is valuable. We need it to make our lives better. Therefore, trust is something that humans demand. We don’t really care who provides the trust, so long as there is no breakdown in trust. When you walk down a dark street at night, it doesn’t matter whether the security guards are public or private, so long as you can trust that you will not be robbed, or worse.
- Although religion, language, and other ancient forms of trust provision still exist and do important work – just as the family, churches, temples, and mosques, and other associations do – there are two primary suppliers of trust today that make the global economy possible: government and businesses of various kinds. They have not supplanted other trust mechanisms entirely, but they do most of the work today.
- The first modern trust innovation was brand – corporate brands, such as McDonalds, offered trust to customers – one could trust a Big Mac, whether it was in Boston, Bucharest, or Bangalore – as a means of winning business. McDonalds was able to profit and grow, relatively mom-and-pop diners or the like, because of brand built.
- eBay and Amazon are like McDonalds. They have enabled massive scaling of trust through the use of a decentralized process – namely the five-star customer review process and associated customer feedback mechanism. This has enabled voluntary transactions across the globe in ways that were unimaginable just a few years ago. If these platform companies had not developed these technologies, there were two possibilities: either the transactions would not have happened or governments would have had to build additional bureaucracies and mechanisms for supplying the necessary trust.
- Education – given the importance of credentialing in education, the ability of some start ups to offer educational services and attendant credentials will in part determine the degree to which they will be accepted by the market. This has wide-ranging consequences for the economy, and a host of other digital educational companies such as Khan Academy, Udacity, and Coursera are also focusing on digitalizing the educational experience.
We cannot predict the future, but if what’s past is prologue, the authors are confident that humans will demand increasing amounts of trust. There are billions of humans on the sidelines of the modern economy and bringing them into modernity will require that we trust them and they trust us. This could be supplied by governments, by corporations, by NGOs, by microregulators, or by any number of other technologies or institutions. In all likelihood, it will be provided by a mix of these, operating in what the authors call the “market for trust.”
But, for the market for trust to function well, that is, for its to supply given levels of trust at the lowest possible cost, the government, which regulates the market, must not favor itself over other providers of trust. To be sure, the government regulator of the trust market should make decisions. about the potential externalities from trust providers, and should try to protect citizens from fraud. But it is illegitimate for the government to favor itself as a trust provider when there is no reasonable basis for it to do so. Government has never been alone in the trust of business, and the provision of trust is more diverse and flexible than our modern minds might imagine. The return of interpersonal trust offers the best hope for the future of humanity.