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18TH May 2012

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Guest Post: How Trust Works in the Sharing Economy from Charles Green


Charlie Green, author of Trusted Advisor

(MS) Since there is so much buzz around Sharing, (I’ve written about it recently here, here and here) and it’s key component, Trust, I’ve asked some experts to lend their opinions on my blog to fill out the color commentary. Here’s Charlie Green;

Whether you call it “the sharing economy” or “collaborative consumption,” there’s a fascinating new economic and social phenomenon going on.  While not identical, both terms refer to markets for the sharing of products and services between individuals.

It may seem obvious that the role of trust is pretty critical. But just what that role is turns out to be not so obvious.    

 

Background

The chroniclers of the movement are Rachel Botsman (Botsman & Rogers, What’s Mine is Yours), and Lisa Gansky (The Mesh: Why the Future of Business is Sharing). Botsman characterizes three sub-markets: product-services systems (like ZipCar), redistribution markets (eBay), and collaborative lifestyles (CouchSurfing).

Some of those sub-markets hint at huge scale economies: how many zillions of available-seat-miles go unused on the nation’s streets and highways on driver-only trips? How many available car-hours per day are actually used for driving, as opposed to uselessly hogging valuable real estate? And for nearly every traveler vacationing, there’s an empty house back home going unutilized.

Other sub-markets are more akin to intriguing social experiments: imagine a global foreign exchange student program run for adults, only faster, bigger, and with do-it-yourself vetting, and you’ve got something like CouchSurfing.

In an odd way, “markets” is precisely the wrong way to describe the social experiment part of the phenomenon – it’s anti-market, in a sense, to focus on collaboration and reduced consumption, rather than on increased sales and  intermediating exchanges.

But in more traditional senses, these are very much markets, with loads of interest. Technologies are enabling peer-to-peer interactions; but unlike stock exchanges and book-buying, many of them exist to facilitate real flesh-and-blood interactions. Subletting your house or apartment to someone, or simply hosting an out-of-town visitor, is no trivial social exercise. And lending out your car or tools, while not necessarily social, also involves a social risk.

Which is where trust comes in.

 

Trust in the Sharing Economy

If you’re going to open up your house to someone you’ve never met before, you will make some form of trust calculus about the possible guest.

The reverse is true as well: if you’re going to go spend some time as the house-guest of a perfect stranger, you also will make some assessment along the lines of, “Do I, or do I not, trust these people?”

Might there be a secondary market here for trust. Indeed, there might.  (Disclosure: I have a small relationship with one such venture, TrustCloud). Suddenly, the decision to trust has economic, and possibly very personal, consequences.

 

Trusting and Being Trustworthy.  People often talk about “trust” as if it were a single thing.  It’s not.  “Trust” is the result of a trustor and a trustee arriving at an agreement. Trusting is not the same as being trusted. Trust is, if you’ll pardon the abstract language, an asymmetric relationship.

To be clear, the one doing the trusting (the trustor) is the one taking the risk. If I loan my tools or house to you, you might abuse them. The trustee, by contrast, takes little risk.

The trustor’s decision is based partly on the perception of the trustworthiness of the trustee. Wouldn’t it be great, the thinking goes, if we could come up with the equivalent of a FICO credit score for would-be trustees.

The search for trustworthiness metrics goes in two directions. One is reputation;  the other is behavior. Reputation is relatively easy to assess; unfortunately, it’s also easy to game, and can easily be confused with notoriety. Kim Kardashian may score high on reputation, and even influence – but does that mean you trust her?

Behavior is harder to game: to fake behavioral dependability, I would have to establish a track record of dependable behavior – which is, after all, the point. It can be faked, of course, but such an elaborate con requires a level of effort quite out of proportion to the benefit, not to mention out of character.

Trusting. It’s easy to focus just on measuring trustworthiness, particularly in the product-services and redistribution markets, where the trustor wants information about the trustee to mitigate downside risk.

But in the collaborative lifestyles segments of the movement, it’s not just the trustworthiness of the trustee that is important, but also the trustor’s propensity to trust. In the fascinating sub-movement that is Couchsurfing, the parties aren’t just looking to cut risk: they want upside potential in terms of fascinating people willing to take social risks in order to meet others. They want trustors.

 

The 60s Redux?

The parallel with the 60s is instructive. Some of the era’s social experimentation didn’t make it out of the 70s. But the Beatles, Steve Jobs, and the Grateful Dead were all once-radical types who created models that are mainstream business today.

Even the hard-core economic segments of the sharing economy aren’t as radical as we think. The timeshare industry “shared” underutilized vacation home capacity; so did distributed computing in the 70s-80s. McDonalds’ discovery of breakfast was another capacity utilization play that paid off big.

In any case, we’re all going to be talking more about trust. And that’s likely a good thing for us all.

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