Trust works well in communities that are self policing – members want to be members, members understand the unwritten rules (which are more about spirit than letter), people who break the rules are thrown out so most people don’t break the rules.

Examples of self policing communities are open source communities and Ebay.

If the community is not self policing – i.e. people can get away with gaming the system then contracts and enforcement regimes are required. The result – as evidenced in the numerous examples ahead of this comment – people follow the letter of the law rather than the spirit of the contract.

The problem we face today is that the old social contract has broken down due to too much movement of people, alienation of much of the work force (not often I get to use Marxist concepts these days …) and a general breakdown of community. The response on many levels from ASBOs to regulation to employee handbooks has been to try and legislate.

A better solution in some areas at least is to find ways to rebuild trust. Open source communities achieve this through a combination of peer review and hierarchy.

I am starting to wonder if there is space for some kind of trust infrastructure on the web driven by standards setters (e.g. RNIB for accessability or ICRA for child safety) or by peer review in some way which can’t be gamed.

With full disclosure, individuals, markets and organisations will naturally behave in a utility-generating way.

Utility can be money, happiness, efficiency etc.

Without such disclosure, such behaviour will not result, and this tends to drive the policy response embedded in regulation and contract. But given that regulation and contract are trying to order behaviour that is based on undisclosed information, they cannot be perfect, and are by definition inefficient. In many cases they are so inefficient that they produce perverse results (potentially able leaders being put off from the CEO role?)

So the conclusion would be : enforce the disclosure of information, not the behaviour response to that information (look at recent debates on FSA/ISDA disclosure of derivative positions for a real world example).

Is this ground-breaking stuff? No – is very basic economic theory, and is the bedrock of undergraduate level work on perfect and efficient markets. Go read Tim Hartford (“Undercover Economist”) and Steve Levvitt (“Freakonomics”) for more real-world illustrations.

http://etrading.wordpress.com/2006/06/14/my-word-is-my-bond-musings-on-trust-and-the-mts-raid/

Did you ever read about CMG group in the UK, who used to internally publish everyone’s salary details? Maybe they were just ahead of their time.

Who would fiddle an expenses claim if they were all just published on the intranet for anyone to see?

Information hoarding isn’t compatible with a loosely coupled, permeable enterprise. A place where people pass through as they focus on excellence in one activity or process across many companies.

“Circles of trust” — this is a group of friends in a pub, not a meaningful social construct within and between enterprises. The moment you delineate trust, you destroy it.

Unfortunately, as the CIO of a bank, your hands are somewhat tied by regulation here — a culture of “verify, then trust”. Expensive.

This metaphor and meme issue affects every big debate we have. The Internet. Identity. Intellectual Property Rights.

We may use terms like Net Neutrality and Internet Governance and liken the internet to places and communities and roads and whatever. We may use terms like trust and privacy and confidentiality and permissioning and authentication and digital rights and wrongs. We may use terms like information security and knowledge management. And intellectual property and copyright and patent.

Terms are where the battles are being fought today.

Let’s see where this goes :-)