Stellar, Uber, And The Rise Of Computational Trust

How do you feel about letting strangers into your home? Our homes act as a kind of sanctuary from the outside world, a highly personal and exclusive refuge. They should be safe. While it is a commonplace in cultures throughout the world to be gracious hosts to guests, such warmth rarely extends to complete strangers at the door.

The notion that we would provide a room to those outside our kin seems remarkably alien, and yet, Airbnb would seem to have successfully changed this social norm. Today, as the company’s valuation can attest, it has found a way to facilitate these sorts of transactions on a global scale, across social classes and cultures.

A closer examination of this dynamic though, shows that there is more complexity here than meets the eye. Airbnb didn’t approach this situation by resolving to make people more trusting, but instead, by making guests more familiar to their hosts, and vice versa. It developed reputation systems with symmetric feedback mechanisms so that guests and hosts can get to know each other before ever meeting, and it offers an insurance policy to limit any failures of its credibility model. Rather than creating a new culture of trust, it simply evaded the issue of trust entirely.

The story of Airbnb is a great parable about the changes happening to trust in our society. Driven by technology change, formerly untrusted transactions are easier to conduct than ever. A Bitcoin transaction doesn’t require any information about the payer at all, unlike credit card transactions, and an Uber driver can be sure that a passenger is going to pay a fare with limited bad behavior. More than almost any other social change driven by startups, the invention of a “non-trusting” infrastructure is one of the most notable in the history of the internet.

Unfortunately, our heady delight at this increasing power for abstract commerce belies a challenge to the very culture that holds together human societies. In using products like Airbnb’s reputation systems and Bitcoin’s blockchain, we are increasingly relying on technology to facilitate trust between humans, rather than developing our own individual capabilities for fidelity. That may have limited short-term influence on the way our economy is structured, but in the medium to long-term, this transition risks undermining not just traditional commerce, but also areas like decision-making, politics, leadership, and normal social interactions.

When a nonprofit asks for donation, are we going to Venmo it so we know that it wasn’t stolen by the solicitor? Will we continue to give our kids allowances in cash, or instead replace it with online currencies that are strictly regulated by parental controls?

Trust is about expected behaviors, an assumption that another party is going to take actions as we would expect. The very concept of agriculture that allowed civilization to flourish was built around trust – trust that food was going to be produced, trust that it would be distributed and not hoarded, and trust that there was some way of procuring that food in a consistent manner.

The history of economics, and really, the history of civilization, is the creation of institutions that allow us to increasingly abstract away that trust and minimize risk. Perhaps the most prominent example is currencies. When someone hands me dollars to pay for something, I only have to trust that this system of payments is going to work, irrespective of the payer’s credit or trustworthiness. Court systems and regulations work similarly to reduce risks of conducting business by (theoretically) making outcomes more predictable.

We have only talked about physical exchanges, but services have even more risk. When a taxi driver takes on a passenger at the curb, that driver is literally taking on a financial risk – will the person who just entered the cab be able to pay at the destination? When a software consultant finishes up a phase of a programming project, will they receive their income?

Through social trust, laws, and regulations, our system has adequately worked to make these services possible. The passenger believes the driver will take him or her to their destination in the shortest way possible, while the driver expects that the passenger will pay and behave. Similarly, the software developer expects to get paid as the terms of their contract dictate.

Unfortunately, our society’s stock of trust has been declining. For Americans, our trust in institutions, measured through long-running polls like those at Gallup, show that we are hitting a nadir in our levels of trust. Such faith in institutions is decreasing elsewhere in the world as well. Perhaps even more ominously, levels of social trust also seem to be decreasing throughout the world, particularly among young adults, who also happen to be the heaviest users of technology.

Startups, often without directly saying so, are entering this fray with their own solutions. Startups like Airbnb and Uber are not just about facilitating a transaction, but rather about facilitating trust to allow for a transaction. They have two-sided reputation systems to remove bad actors, and to provide information to both parties to make a transaction easier to make.

Even more broadly, Bitcoin and the recently launched Stellar are attempting to entirely do away with trust in our existing commerce. By trusting a simple protocol and the blockchain, we no longer need to have faith in a consumer’s ability to pay, or even in the stability of a single fiat currency. If the currency is located in a Bitcoin account, it can be transacted without any knowledge of the account holder, no human trust required.

As I mentioned before, much of the development and flourishing of human civilization has involved the abstraction of elements of our economy. If we think along this line, these new technology systems are not nearly as disruptive as they first appear, but rather merely the next logical phase of abstraction in the economy. If it is possible to take human-based trust out of these transactions and replace it with a computer — which presumably we trust more — isn’t this progress?

Indeed, there are truly incredible advantages to the creation of anonymous trust. Commercial transactions that may never have occurred under our previous economic infrastructure may now have a framework for trade, which is almost certainly a positive for economic growth. Those same improvements also apply to services, where computational trust systems can facilitate more work and a greater volume of wages.

The challenge is that trust isn’t just the bedrock of our economic system, but also the core architecture of our political and social systems. When a country raises tax revenues to pay for institutions like schools, we are trusting that the government is using such funds judiciously and in a way that fosters the development of the country. This compact is based on trust, and it isn’t simple to replace with a computer.

Given the option of having more information about a transaction, most rational agents in an economy would prefer to receive it. We would rather know if the person we are offering our services has the ability to pay or has had serious issues with other professionals. Since computers can increasingly provide us with robust reputation systems, it seems inevitable that such systems will enter into more of our daily transactions.

But if a greater number of our daily transactions are mediated by computational trust systems, we may be withering out ability to handle trusting transactions. When a non-profit asks for donation, are we going to Venmo it so we know that it wasn’t stolen by the solicitor? Will we continue to give our kids allowances in cash, or instead replace it with online currencies that are strictly regulated by parental controls? The more computers provide us with the capability to avoid issues of trust, the less practice we will have in basic human-to-human interactions.

Perhaps this is too cynical a view. Even if Airbnb mediated the transaction, it is still the case that I allowed someone into my home who I have never met. Nonetheless, I think it behooves us to be watchful for how our technology influences our culture. Trust is too important to merely leave to machines to do. We need to make sure that our ability to trust others doesn’t atrophy like our ability to write using a pen.