Miles To Go.

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.

Doug Krugman, Greg Matusky, Roo Rogers, (M) and Xin Chung @S2 Learning Even

the woods are lovely, dark and deep
but I have promises to keep
and miles to go before I sleep
miles to go before I sleep

Robert Frost, in a poem of simplicity itself, captures the essence of the foundations of trust: promises kept.

I was at Shared Squared NYC’s monthly learning event last night, where a whole lot of people made good on a whole lot of promises. And there was lots of chatter about trust, as the social networks have spawned so much peer to peer interaction (and the P2P has spawned its share of weird interactions).

In short, the problem that is emerging is that people, for better or worse, form  judgements based upon online information, make promises and commitments, and then are disappointed with the related offline episodes. Happens all the time, across a variety of peer to peer actions. There are a gazillion examples of the difficulties of this toggle, like

• Lady GaGa tickets bought through Craigslist for cash at the last-minute
• A Wimdu rental, where the pics were great, but the pillows just plain smell.
• A RelayRide renter who changes his plans last minute and screws up the rest of your calendar

But the upside of getting trust right in the sharing economy (and in P2P lending, and in dating, etc etc.) is that more trust leads to more and faster transactions and interactions within a community. I think Stephen MR Covey (son of 7 Habits Stephen) had it right quite awhile ago when he wrote The Speed of Trust. You can add his good work to these recent pieces on the subject:

• The Trust Projects recent manifesto…
• Letters and outreach to the community by Scaffold and Legit
• Neal Gorenflo doing everything possible to forward the sharing conversation via shareable (Nice work!)
• Shared Squared finally announcing an event calendar in NYC

But, at some point, in order to truly scale, I really passionately believe the sharing economy must deliver an indicator of trust between the two parties in a transaction increases if not ensures the assets at risk. The only product in the market that is out there, doing it today and in increasing numbers with both communities and users is TrustCloud. (You can claim your TrustCloud here). And yes, I am an investor and have blogged on the topic here, here and here.

Eventually, they will be compelled to ensure trust is sufficient. And just as airbnb has done, others will need to underwrite that risk. People- and perhaps their insurers! – will want better answers to questions like:

• Will my car be returned in good order?
• Will my apartment be sacked while a couchsurfer is there?
• Will my boat he left on the rocks by this drifter that borrowed it?
• Is my daughter safe with this tutor who comes to the house?
• Will I ever see my lawn mower again?
• Will this ride share going to get me to work, or roll me out of the car in Mexico?

And all that attention has forwarded the discussion, but trust is not an absolute from the get go. We as humans observe behavior and actions before trust is earned,  and we frequently reassess trust levels along the way. It can work between online and offline as long as it is observed, recorded and elegantly presented in context.

So, not unlike the man in Frost’s Poem…

The accumulation of recorded behavior, events and affinities that leads to the confidence to exchange something of value, tangible or intangible is IMHO the most accurate and applicable definition of Trust that any P2P marketplace can rely on.  

And this is why, simply, behavior trumps reputation every time.

PS: I’d love to hear what you think of the new TrustCloud. Enter your comments below, or on their site. Mine is above at the top of my blog.

Ride share with this gang?

I’ve been spending some time learning more about the sharing economy and some of its players. As an angel investor accustomed to clearly defined problems, grand solutions and natural revenue models, it seems like the beginning of the story. Kinda like a lot of people showing up in munchkin land- somewhat disoriented, terribly excited, not sure of the path forward.

Dorothy was pioneer when it came to couchsurfing (wimdu perhaps?), but she woke up in a terribly different world. She had to make snap judgments about people, and she had very little context to help (The Good Witch of the North notwithstanding). She was taking very real risks with herself, her dog, and her ruby slippers. But she had to rely on her wits: no help from web 2.0 and social media to help her make big decisions on risk  (one of the great segues of all time folks).

Nowadays, there are more ways to make an assessment about people. People vouch for each other on sites like LinkedIn, Honestly, and Connect.me. People accumulate likes and helpfuls from sites like TripAdvisor, Facebook and Yelp. And some products go further, combining those elements plus offline verification to develop multi-layers scores, like TrustCloud (I’m an investor). Through all these inputs, we have begun to infer things about people based on their actual behavior over time. Here’s how a well-designed trust solution might have helped with her key judgments:

1. The Scarecrow- great domain expertise and happy to assist. Probably a contributor to Yelp or TripAdvisor and frequently tagged helpful.
2. The TinMan- experienced and analytical, probably has people vouching for him like the static inputs of Honestly and Connect me
3. The Lion- I have this guy tagged as a reputation guy. Very proud and looking to clean up what people think of him. Uses Reputation.com a lot.
4. The Wizard- He’s all about influence, which means he spends most of this time on klout.
5. Dorothy- a teambuilder and leader. Probably destined for LinkedIn. But having trouble verifying place of residence!

The point is (and I have taken a veritable yellow brick road to get there) that we no longer live in Oz. There is real, relevant data out there that when properly gathered, weighted, and presented can really help the sharing economy navigate their challenges. (Here’s a great blog from Charles Greene on Trust). But no single point of reference and no rigid formula will serve the Trust needs of every community, let alone every situation.

This is a challenge and a journey that requires multiple layers, great heuristics, and the power of the network effect. (which is one super reason for all these layers to work together). I look forward to watching how this evolves, and who gets to the Emerald City first.

I didn't have a pic for this one, so Baxter is up

Lao Tzu, with that simple phrase, would have been a mover and shaker in digital media. Here’s one reason why…

I had time for a cup of coffee with Charlie Greene, a trust advisor who has carved out a unique niche teaching Trust-Worthiness to all sorts of companies, corporate citizens, and high level advisors. In fact, I would venture to call him The Trust Advisor, not just a trust advisor. Check out his multiple books on the subject here.

I came into the meeting wondering if the processes he had developed would be applicable in the Sharing Economy where TrustCloud functions.  What he told me opened a whole new perspective on the concept. In his words, the basic elements of trustworthiness are contained in the Trust  Equation.

(T+C+R+I) / S

Now let me explain:

1. T stands for trustworthiness—how much the  buyer/client trusts the seller (or vice versa)
2. C stands for credibility—it speaks to words and credentials.
3. R is  reliability—how others perceive the consistency of our actions, and our actions’ connection with our words (integrity).
4. I is intimacy— how secure or safe the client feels sharing with us.

The lone term in the denominator is Self-Orientation, and it has a  double meaning. Partly it’s about selfishness. But Self-orientation is also about our attention, our focus. Are we  listening ? Or are we listening to truly hear.  Are we obsessed by our own desires, by our  insecurities? Or do we truly focus on others needs, paying attention even when it doesn’t necessarily benefit us?  Only the latter builds deep, long-term relationships.

I love exploring the dynamics of Trust (and trust-worthiness), and have written regularly about what I have learned on the subject (here’s the Trust tag in my blog) including such favorites as MadMen, Catfish, and Fool me Once. I have also been speaking on the topic: one fun afternoon was spent with Cam Tonkinwise of Shared Square and his class of students at the New School  studying (you guessed it) the sharing economy. I was hit with a ton of new questions about Trust and its components.  Every time I think I have explored every corner, I get another view that gives me deeper understanding and deeper desire to dig deeper. As the dinosaur product development monster FAKE GRIMLOCK famously said: RIGHT IDEA MAKE BURN INSIDE TO FIX. CAN TAKE DAY OFF FROM IDEA? IT WRONG ONE. Trust has that grip on me.

So I began to think Trust as it applies to our online “social vapor” (a term Xin Chung coined to describe all the low stakes, hi volume events we participate in online that form a picture of our offline personality).

How much better would you feel about sharing a ride, if that someone had done the same with others. (C above) Even better if that share was with someone we knew. How confident might we been lending out our powertools if the borrower had proven reliability in a similar sharing economy circumstance. (R) How important would it be to know someone you were about to give the housekeys was actually connected to others in your network. (I) And, of all these data points, what does the denominator of paying attention to the needs of others affect our trust. (S). The formula works, even when applied in rudimentary terms to the sharing economy.

The sharing economy has some really cool companies that are just starting to get some traction:

• Share a room with airBnb  or wimdu
• Share a ride with getaround or relayrides
• Share a skill with zaarly
• Share a (tool) or thing with neighborgoods or snapgoods
• Share a project ($) with kickstarter
• Share your driveway with Park at my House

Each of them have a unique idea to change the way our planet consumes resources more efficiently. and they have domain expertise in forming and communicating with that specialized market. Now, imagine an eco-system where people are doing more and quicker exchanges with each other because trust had been built within the community. Awesome power. All from a simple equation. But to make a sharing economy-type point to the sharing economy, would it not make perfect sense to use and re-use one common asset to track trust-worthiness across the eco-system?

I think so. How ’bouts you?

~~

Charles Greene’s trust indicator test is here… http://trustsuite.trustedadvisor.com/landing/A/C

My Disclaimer Here:  I have an investment in, and a deep belief for, the benefits of  TrustCloud, mentioned above.

Sharing might be better with TrustCards like this...

It went viral, AirBnB responded pretty well, but it exposed the big issue in the space: the Trust Gap. And the space is getting a lot of buzz and a lot of creative ways to foster “Collaborative Consumption”. Check out the Master list of companies that already are part of the #CollaborativeConsumption Community. And a tip of the hat to Rachel Botsman, the first one (I think) to define Collaborative Consumption and a tireless evangelist for the value of this movement: better utilization of assets/abhorring waste of excess capacity, the green play, being socially responsible, and saving money as well. I have written about the movement before in Catfish, Trust Me Once, and It’s Heuristics, among others.

Craig Newmark says, “Trust is the new Black” , which I infer to mean that, “if The Sharing Economy is the cool thing to do (besides the benefits above), it will need a way to find ways to use all the data online to inform our offline decisions, like what is laid out in this cool infographic from Morgan Clendaniel”.

One potential solution comes from TrustCloud’s beta “Trust Pass” which scrapes and scrubs data from your online behavior and generates badges (and soon scores) on your key Trust Attributes (loosely outlined here). I don’t know all the heuristics behind it, but I do know it is based on key Trust indicators I have blogged about. I jumped on the top secret beta (ok, less than secret already) and typed in a few of my favorite twitter handles and voila: a hint about trust. At this point it shows layers like Connector, Worldly, Longtimer, Influencer and Interactive, which are fancy titles for the heuristics which inform the likelihood of a trust-able soul both online and offline. A humble attempt at Rachel Botsman’s TrustPass is rendered above.

Could this be a small step toward bridging the TrustGap between online and offline behavior? Love to hear your feedback.

Full disclosure: I am an angel investor in TrustCloud mentioned above.

Gimme your keys, I'm a good guy... online.

I recently let a home in France from no-one I had ever met, except online.

When I returned, I realized it’s been awhile since I have wailed away on Trust and the dangers of a Trust gap between online behavior and offline repercussions. My thesis is that, if the Trust gap could be bridged, the Sharing Economy (aka collaborative Consumption) would take off.

Since my first post, Sharing Darling airBnB topped off a $112M raise at $1B valuation, which is a good start!  Full disclosure: I have an investment in, and a deep belief for, the benefits of  TrustCloud, mentioned  frequently in my posts but not here.

When you hand the housekeys  to a couch surfer, leave the kids with the new sitter, or hitch a ride with three total unknowns, it’s not a natural feeling. I’ve written about it in my MadMen post, as well as the downside in my Catfish story.

The antidote?  Trust. After my first post of five mistakes, here are five more  common Trust mistakes we are hardwired to commit in real life, and more evidence we should consider asking for a Hall Pass before exposing ourselves in real life to peeps we met online:

 6. Contamination effects, whereby we allow irrelevant but proximate information to influence a decision;

7. The effect heuristic, whereby preconceived value-judgements interfere with our assessment of costs and benefits;

8. Scope neglect, which prevents us from proportionately adjusting what we should be willing to sacrifice to avoid harms of different orders of magnitude;

9. Overconfidence in calibration, which leads us to underestimate the confidence intervals within which our estimates will be robust (e.g. to conflate the ‘best case’ scenario with the ‘most probable’); and

10. Bystander apathy, which inclines us to abdicate individual responsibility when in a crowd.

How many of these dumb trust mistakes do you recognize? When you layer online activity on top of your offline judgements, does it begin to get scary? It has me thinking there has to be an improvement if Sharing is to get super-scale.

Want to buy a Vespa?

But fool me after that, and it’s time to look for a Trust Badge before we share again!

This is a continuation of several stories on the subject of Trust, including Trust in the Sharing Economy , MadMen, and Catfish and great comments from Rachel Botsman, Kathi Kruse, EcoModo, etc.

Every day seems to bring fresh news of another Trust test in the Sharing Economy:  another scam on Craigslist, Air BnB getting spoofed by “knock-offs” and hiring detectives (private, online, not guys with cameras) to police clones, and way too many fake Lady Gaga tickets. As I wondered what was compelling people to continue taking real world risks based on digital information, I fell upon a great paragraph in Niall Ferguson’s The Ascent of Money (kudos Jack from YEO for the rec.)

The answer is the ”failure of invariance’.

 According to Kurzweil in The Singularity is Near, the machines are gaining on us, and our “gut feel” is getting closer to being reverse-engineered in a mathematical formula. If you doubt the hard-wired fallibility of human beings, ask yourself the following question. A bat and ball, together, cost a total of $1.10 and the bat costs $1 more than the ball. How much is the ball? The wrong answer is the one that roughly one in every two people blurts out: 10 cents. The correct answer is 5 cents, since only with a bat worth $1.05 and a ball worth 5 cents are both conditions satisfied.

In Niall’s words, it’s only one of many heuristic biases (skewed modes of thinking or learning) that distinguish real human beings from the homo economicus of neoclassical economic theory, who is supposed to make his decisions rationally, on the basis of all the available information and his expected utility.

Here are a few of the cognitive traps: see how many you recognize 

1. Availability bias, which causes us to base decisions on information that is more readily available in our memories, rather than the data we really need;
2. Hindsight bias, which causes us to attach higher probabilities to events after they have happened (ex post) than we did before they happened (ex ante);
3. The problem of induction, which leads us to formulate general rules on the basis of insufficient information;
4. The fallacy of conjunction (or disjunction), which means we tend to overestimate the probability that seven events of 90 per cent probability will all occur, while underestimating the probability that at least one of seven events of 10 per cent probability will occur;
5. Confirmation bias, which inclines us to look for confirming evidence of an initial hypothesis, rather than falsifying evidence that would disprove it;

So, when you are taking risks based on your own cognitive powers, you are bound to mistakes as above. Now multiply the possibilities by the volume and velocity of opportunities for trust (and trust violations) online.That’s not a bad thing! It makes a compelling case again for a portable trust layer in the sharing economy.

Now everyone knows...

It’s been a busy few weeks for Trust.

When Fast Company covered the concept recently, they called it “The Sharing Economy”. Now more light and more capital has begun to flow toward companies that are enabling the peer to peer trading that the web promised long ago. (Isn’t it funny how the web delivers, if you can afford to wait long enough)!

Rachel Botsman coined the term  Collaborative Consumption ( or “CollCons”) and has  written about it in “What’s Mine is Yours” . She’s become a bit of an evangelist for the power of sharing and consuming, peer to peer. Besides getting cred for the concept at TED , she’s been right on top of every move in the CollCons space. Like Getaround winning the battle of Tech Crunch. And Ashton Kutcher investing in AirBnB. Full disclosure: I have an investment in, and a deep belief for, the benefits of  TrustCloud, mentioned below.

So what, if anything, is holding this movement back from breakout growth? Why can a neighbor lean over the fence and ask for something, but the online equivalent results in apprehension?  When you hand the housekeys  to a couchsurfer, leave the kids with the new sitter, or hitch a ride with three total unknowns, it’s not a natural feeling. I’ve written about it in my MadMen post, as well as the downside in my Catfish story. CollCons could be sooooo good if we could only enjoy the benefits of peer to peer –without that dollop of angst in the pit of our stomachs.

The antidote?  Trust. It’s kind of the reverse of the behavior I blogged about in Race to the Bottom. And it’s closer to becoming a reality in the CollCons space.  I’ve determined  six qualities that can be measured and portable (to a variety of sites) and will help achieve the comfort levels needed to scale users and usage.

1. I’m Helpful: I contribute online; so I’ll be considerate and prepared as your host.
2. I’m Local: I grew up or lived here for a while, so I know the best places & activities around.
3. I’m a Connector: I’ve got many local friends, so I can introduce you to interesting folks.
4. I’m Worldly: I’ve travelled a lot, so I know what makes a good host in a variety of cultures.
5. I’m Authentic: I’m open about myself online, so the description about my product (self) is also genuine.
6. I’m Consistent: I’ve got an established history with school & work, so I’m a more responsible.

While some companies in the CollCons community are thinking of ways to develop this algorithm themselves, TrustCloud has begun to test its beta “Trust Indicator” integration in three CollCons leaders. The advantage to using the TrustCloud API is that CollCons brands will have a trust indicator with no development costs, the scores leverage the power of the entire CollCons network, and the scores are portable.  [Unlike eBay Power Scores, with TrustCloud, good behavior on a shared room makes for good ratings in a ride share, etc.]

I’m deeply committed to “trust” in the real world, and I’m excited about its prospects to enable more peer to peer sharing online. But I’m also aware of how online behavior can be gamed and trust abused or never created.   So I’m excited about the day when this artificial drag is finally removed from the CollCons market. Meanwhile, I’m jazzed to help all members work more effectively toward this goal.