Thursday, March 26, 2009

Trust and Cyberspace

I originally wrote this entry on September 3, 2004, and published it on


been wanting to write something about trust and cyberspace for some time, and I have avoided it (because it cannot be done in any short format, except in poetry, perhaps?) until last night, when I read Albert White's personal story of blogs and relationships.

I have seen and heard the word "trust" used in such loose manners that I'm afraid this could-have-been-useful word in the English language may be on the way to its own extinction.

Let's not worry about the romantic uses of the word "trust" and focus on its more practical uses.

Person A may say "I trust B will write about the same subjects on his weblog again." This is what I call uni-directional trust. This trust has to do with predictability. ("I trust he will always remain a thief.") This is not a bidirectional, social kind of trust. It is really about the expression of beliefs based on previous experience. It has to do with what some economists have called "reputation effects". (He is been a thief for some time in his dealings with me. Therefore, I trust he will remain one.)

How about the bi-directional, more social aspects of trust? When I trust in X, I trust that X will not take advantage of my vulnerabilities, and I say that "X and I trust each other" as long as neither of us is bound to take advantage of the other's vulnerabilities.

But how is that possible? It can only be possible if both sides have exposed vulnerabilities of relatively equal value, for example, through mutual, relationship-specific investments in each other, exchange of "hostages" or other "credible commitments," to borrow a phrase used by Oliver Williamson, the distinguished Berkeley economist. (See many of his publications, including "Credible Commitments: Using hostages to support exchange", 1983, AER)

Let me finish this long piece with a quote from Hubert Dreyfus' wonderful little book, On the Internet, about which I've written earlier:

. . . investment bankers know that in order to get two CEOs to trust each other enough to merge their companies, it is not sufficient that they have many teleconferences. They must live together for several days interacting in a shared environment, and it is quite likely that they will finally make their deal over dinner.

. . . [It] seems that to trust someone you have to make yourself vulnerable to him or her and they have to be vulnerable to you. Part of trust is based on the experience that the other does not take advantage of one's vulnerability. I have to be in the same room with someone and know they could physically hurt me or publicly humiliate me and observe that they do not do so, in order to feel I can trust them and make myself vulnerable to them in other ways.

. . . If that background trust were missing, as it would necessarily be in cyberspace, we might tend to be suspicious of the trustworthiness of every social interaction and withhold our trust until we could confirm its justification. Such a scepticism would complicate if not poison all human interaction.

In short, real embodied presence is absolutely critical to trust.

Part of it may have to do with the fact that once we are in each other's physical presence, we know much more about each other's vulnerabilities. Another part has to do with the value of knowledge about the other. In fact, business and economic advantage has a great deal to do with information asymmetries. To paraphrase a maxim more accurately, "knowledge has power" because knowledge of the other can be used to their disadvantage!

On the other hand, information-sharing can produce trust as a by-product. By sharing information (of relatively equal strategic value), the parties are exposing vulnerabilities and building trust. (Information sharing is often required in supply chain management in order to alleviate the bullwhip effect, i.e. increasing fluctuations in demand as one moves up the supply chain.)


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