Trust is the killer app

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Originally uploaded by ixtlan

A timely extract from Winning by Sharing circa 2004 on the importance of Trust.

Research produced by IBM  concludes; "Individuals in higher-trust societies spend less to protect themselves from being exploited in economic transactions. Trust is an economical substitute for extensive contracts, litigation, and monitoring in transactions and thus economizes on transaction costs."

Organisations (of every size) pay for a lack of trust over and over again and it is the absence of trust that is choking innovation and productivity.  This doesn't mean contracts should not exist between business counter-parties, but the rules and acceptable use policies of networks and the reputation metrics of individual members means they can be lightweight, equitable, and in some cases, redundant.
However crude these reputation metrics are, one team of researchers  states that “reputation systems are performing commercial alchemy (in auctions), where they enable trash to be shuttled across the world and in the process transmuted into personal treasures”.   Breakdown of trust is just about the only thing eBay has to fear, and if it can sustain its largely positive environment of trust, it will likely dominate for many years to come.

William Davies at the Institute for Public Policy Research and recently published another ground breaking paper  that examines the role of the government in the increasingly decentralised social and political activities taking place online.   He states there are three sources of trust: State, Community & Online Community.  Notice the absence of corporations.  He goes on to say that “out of nowhere trust has become the most talked about abstractions of our times” and notes that online communities have an unusual propensity to create environments of trust. 

One of the most comprehensive studies of the open source community was conducted by Yochai Benkler  to understand how Linux, a free operating system, and a slew of other Internet facing software products (e.g. Apache), have come from nowhere to challenge mainstream, paid for products from Microsoft, IBM and others.  Benkler concludes:

“Removing property and contract as the organizing principles of collaboration substantially reduces transaction costs involved in allowing these large clusters of potential contributors to review and select which resources to work on, for which projects, and with which collaborators.”

In 2003, for the first time ever, Microsoft formally stated in its annual report the threat from Linux to its revenues.  It has even started to play this new game by releasing portions of its Windows code ‘open source’ style.  The big question is, does the world trust Microsoft?  If it doesn’t, not even its gigantic fortune can save the company.  Howard Dean, a former US democratic presidential candidate, recently inferred that command and control is all over in the next generation of political activism. "We discovered that the path to power, oddly enough, is to trust others with it."

Trust is the killer app.

Comments

[Bath Smalls]

Why do individuals in higher-trust societies spend less to protect themselves from being exploited in economic transactions? Trust is vital in every situation. The lack of it threatens the success of the organization.

Been reading this post. I learned a lot from this.

[Malizia Mota]

I agree. Trust played a vital role in every situation especially in an organization so that success will take place.

[Roloff Almanza]

I agree. Trust played a vital role in every situation particularly in an organization were there are lots of owners so that success will take place.

[Lamberth Samson]

I appreciate your effort and knowledge doing this very comprehensive piece of work. Informing us with regards of this matter is truly one of the best thing you did.
Just keep on sharing.

[Malizia Mota]

I agree. In every organization trust is really important because without this suspicion and doubt are always in the mind that threatens the success of the organization.

[Malizia Mota]

I agree. Trust is really important in every organization because without this doubt and suspicious are always in the mind of every member that threatens the success of the organization.