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Trust via the Internet

August 2014

Wide eyed enthusiasts often claim that the internet has changed the rules of business.  It hasn’t, and it has even emphasised how important some of those old rules are.  

For example, dealing with the most trustworthy people was always an important part of any transaction, but we now have the extra problem of deciding if we can trust someone we’ve only met through a computer.  Fortunately, the internet can help solve this problem it has created; unexpectedly, it might even be encouraging people to behave better.  I’ll explain.

The web is very good at helping those who need a thing or a service to find people who want to supply them, and the recent big increase in these direct transactions (peer-to-peer, in the jargon) has coincided with (and perhaps hastened) a reduction in the trust many people have for banks, governments and institutions in general.

This internet enabled enthusiasm for peer-to-peer dealings has given us all opportunities to make more from whatever assets or skills we have, and encouraged a new strand of entrepreneurs who are making a living at their own pace, outside the rat-race.  The recent rise in the number of self-employed people is evidence of this modest revolution.  For example, and help you to rent out a room in your house or a parking space by the day, and let you sell your skills by the hour to those who don’t have time or expertise to do the work themselves, and can give you a shop front with no overheads.

But how do you pick the right person to work with?  A key element to the rapid growth of this way of doing business is the ability to record and display online your “trust” rating; that is, how well others think you have conducted yourself in transactions with them.  Trust is an important currency on the internet; as elsewhere, has to be earned and can’t be bought. 

It began, I think, with eBay.  Right from the start, they encouraged both vendor and purchaser to review each transaction as positive, neutral or negative.  Thus, the more you do and the better you behave, the healthier your profile looks.  It felt odd in the early days, but it’s crucial now.  I recently bought a phone from a dealer I don’t know from Adam but I could see that he’s dealt with 55,000 different eBay users in the last year and only 183 of them rated the experience negative.  I felt confident in risking a purchase.

This sort of review system has become central to most trading through the internet.  I can even imagine a time when reputations built up on various sites will be portable, like a credit score.  If it were possible to aggregate the opinions of everyone who has dealt with me into some sort of overall rating, it could become a very powerful tool indeed.

There are companies working on this already; is one such.  I have some reservations about their method, but the theory is sound.

Economists have already begun to talk of something they call “reputation capital”.  If it were measurable, the level of your own reputation capital should allow you to trade confidently with others with the same level worldwide.  The internet is growing so fast that there are many opportunities for scoundrels, but if their reputation capital were low, it would restrict their chances to do us down.  They wouldn’t just lose your reputation in one area; it would be everywhere.

Shakespeare was there first, of course: “he that filches from me my good name…makes me poor indeed”.  Building your worldwide online reputation capital might soon become very important; who would have thought the internet might encourage people to behave well?