Anthropological perspective on Trust

Image by Dave Duarte via Flickr

I ran across this interesting article written for the New York Times in 2007 that discusses social networks from the perspective of anthropology of tribal cultures. I won't go over the whole article, instead I want to highlight an interesting paragraph.

“In tribal cultures, your identity is completely wrapped up in the question of how people know you,” he says. “When you look at Facebook, you can see the same pattern at work: people projecting their identities by demonstrating their relationships to each other. You define yourself in terms of who your friends are.”

In two previous posts, I talked about trust & measures of trust. The identity talked about in the quote, forms you standing within the tribe. It is derived from what the community thinks of you. PeerIndex is building a way to project that identity at a much lower cost.

"As intriguing as these parallels may be, they only stretch so far. There are big differences between real oral cultures and the virtual kind. In tribal societies, forging social bonds is a matter of survival; on the Internet, far less so."

I disagree with this conclusion, for the simple reason as more and more of our life is online in various virtual tribes, the social bonds formed online will become as important to survival as social bonds formed in the flesh. Granted we are not there yet, I foresee that PeerIndex (and similar services) will become fundamental to building the social bonds that allow you to survive in the 21st century.

Building Trust: Measures and Cost

(ed: this is a cross post from the PeerIndex blog)

There is extensive buzz around influence and more recently (examples here and here). As Head of Products at PeerIndex, I've spent a lot of time understanding and learning about these areas in the context of wider society.

What became clear early was that the key to understanding was to understand trust and its role in society and markets. From the perspective of trust, reputation is the trust that builds from interaction within a community. Influence is an outcome of having trust of people within a community.

In this series I'll explore why trust is of fundamental importance to society and markets and the way trust is built and measured.

The first post in this series looks at why trust is so important.

The second post in this series looks at measuring trust, its cost and why the cost is key for determining what connections can exist.

Building Trust: Measures and Cost

In small scale communities and markets trust is built overtime by interaction between the participants. Building trust takes time and resources as we need to continually maintain the trust through grooming [Dunbar, 1993]. At these small scales participants can devote the time and resources to this endeavour as the payoffs out weight the cost. In other words the value of the connections outweighs the cost of building trust (I'll refer to this from now on as the cost of trust). The most poignant example of this was the rise of language and the subsequent jump in size of human groupings [Dunbar, 1993]. Language saw the cost of trust fall allowing larger groupings to arise.

The cost of trust determines what connections are possible. A high cost of trust limits what markets can function as the cost exceeds the value of the connections. Cost of trust forms part of the cost of transactions that determine structure of markets and entities operating within those markets [Coase, 1937]. As the cost of trust rises there is a shift from purely market orientated economy to one that is characterised by firms.

The 2008 Financial Crisis illustrates the power of the cost of trust. Investors relied on ratings as a measure of trust in the securities where a good risk. When investors lost trust in those ratings as the mortgages went sour, those cost of trust needed for a transaction skyrocketted. Now investors would need to do time and resource consuming due dilligence on every security they wish to purchase. The potential value of that would come from owning the security paled in comparison to the cost of trust and the markets froze as investors were no longer willing to purchase the securities.

To reduce the cost of trust, we've developed various measures to indicate trust. These measures include items such as:

• degrees and certificates from accredited training institutions,
• chartered status from professional societies,
• contracts,
• 3rd party ratings for items (such as bond ratings), and
• trademarks.

Many of these measures are indicators of trust in expertise or provenance. Some of these are trust measures for goods and services and others for people. These types of measures reduce the cost of trust by allowing people and products to "inherit" the trust of provider. As this is spread across multiple people and products the marginal cost falls.

These trust measures form part of the most important measure of trust: reputation. Reputation is essentially the sum of all the trust that a community has in someone or an organisation. It arises out of interactions within a community [Bischke, 2011]. Reputation reduces the cost of trust by allowing you to use other's people trust in someone. It essentially amortises the cost of trust across multiple interactions over time. Reputation is rooted in community and cannot exist outside of community. Reputation is provided to someone by the community and can very easily taken away by the community.

Reputation started as word of mouth, "should I trust her?". This works in smaller communities but it has scale problems as it is invariably tied to human limitations. To overcome this reputation has evolved to include other measures of trust such as degrees, chartered status, memberships of organisations etc. Indeed reputation is now a graph of various measures that indicate trust at both a global (overall) and local (by context e.g. is this person a good plumber?) [Bischke, 2011].

What is exciting now is that we are reaching the point where building comprehensive reputation graphs is both scalable and falling in cost. With this comes falling cost of trust enabling new connections and new markets.

Bibliography

• Dunbar, R.I.M. (1993) Coevolution of neocortical size, group size and language in humans, Behavioral and Brain Sciences 16 (4): 681-735.
• Coase, R. (1937) "The Nature of the Firm", Economica 386–405
• Bacharach, M. & Gambetta, D. (2001) “Trust in signs”. In K. Cook (ed.) Trust and Society, New York: Russell Sage Foundation, pp. 148–184
• Bischke, J. (2011) "Reputation Graph: One of the Web’s largest opportunities"
• Bischke, J. (2011) "Reputation Graph vs. PeopleRank"

Importance of Trust

(ed: This is a cross post from the PeerIndex blog)

There is extensive buzz around influence and more recently reputation (examples here and here). As Head of Products at PeerIndex, I've spent a lot of time understanding and learning about these areas in the context of wider society.

What became clear early was that the key to understanding was to understand trust and its role in society and markets. From the perspective of trust, reputation is the trust that builds from interaction within a community. Influence is an outcome of having trust of people within a community.

In this series I'll explore why trust is of fundamental importance to society and markets and the way trust is built and measured.

The first post in this series looks at why trust is so important.

Importance of Trust

As Kenneth Arrow noted "virtually all commercial transactions and social interactions embody some form of trust". How important though is that trust to the interactions and transactions? The 2008 Financial Crisis provides a timely reminder of the importance of trust. As supposedly trust worthy (according to the ratings) investments went sour, investors lost complete trust in the market and were no longer willing to supply their cash to other participants, freezing the market. As soon as participants stopped trusting each other the markets froze overnight.

Why is trust fundamental to society? Trust enables us to rely on someone else. By relying on someone else we are able to do more than we would otherwise be able to. Trust allows us to overcome physical limitations of time and resources [Beckert, 2005]. If I can't trust others, I end up having to do everything required to live myself: food, shelter, tools, clothing. Leaving no time for anything else. No trust condems you to a subsitance life. To live in more complex societies you need trust, this way members of the society can specialize and share or trade to get the things they need [Beckert, 2005].

Trust is the result of human behaviour. It takes time and resources to build trust. On the scale of a hamlet or small village, this is not unreasonable. You will see each other everyday in which you can do the grooming necessary to build trust [Dunbar, 1993]. As the size of communities scale beyond the small village, you don't have the time nor the resources necessary to build trust between all the members. The cost of building and maintaining trust exceeds the value of the connections the trust would otherwise enable.

To overcome this limitation, we've created various measures or signals of trust [Gambetta, 2001]. These measures or signals of trust become proxies to our own efforts. These measures of trust allow us to overcome the physical constraints and create new connections.

The second part of this series will go into more detail about measures of trust, the cost of building trust and the value of reducing the cost of trust.

Bibliography

• Dunbar, R.I.M. (1993) Coevolution of neocortical size, group size and language in humans, Behavioral and Brain Sciences 16 (4): 681-735.
• Bacharach, M. & Gambetta, D. (2001) “Trust in signs”. In K. Cook (ed.) Trust and Society, New York: Russell Sage Foundation, pp. 148–184
• Beckert, J. (2005) "Trust and the Performative Construction of Markets", Max Planck Institute for Study of Societies (PDF)

Twitter Spammers Evolved

I received a spam tweet this morning in response to one about Amazon. Out of curiosity I had a look at the account and found an evolution in the spammer toolbox on Twitter. The account is KalilaHirata152, which I've reported as spam.

What this spammer is doing is that it triggers a tweet with a URL on keyword but to make it look less spammy, also creates tweets that consist solely of quotes from books. These quote tweets are interspaced within the feed with a ratio of about 1 book quote to every 1.5 url tweets.

While obvious to humans the slight variation in tweets is enough to get past many simple spam filters. The ongoing arms race against spammers continues apace.

Notes on Hadoop and Elastic MapReduce

We've been busily integrating Hadoop into our distributed processing architecture at PeerIndex. Here is a list of some items that I've run across that made the whole process easier.

1. Do some training (seriously). Hadoop and MapReduce isn't grandfathers programming and many of the ideas & principles you would otherwise use don't suit MapReduce/Hadoop. Those coming from large-scale scientific data background will have a head start. Cloudera has some great training vids available on their site and also offer a training course which I attended and found good.
2. Use a local version to test. I found Karamsphere to be very useful for testing the scripts written and working out the bugs. The Cloudera has a virtual machine that is very, very useful for doing Pig and Hive testing.
3. Streaming jobs are your friend. Using streaming jobs is a great way to get Hadoop based processing of the ground.
   
4. Follow these pointers from Pete Warden. Increase allocated memory size (particularly if using PHP via ini_set), use the -jobconf stream.recordreader.compression=gzip etc
5. Delete outputs. MapReduce jobs will fail if you don't delete the output directory from a previous run. This one will get you into trouble all the time.

Renewable Energy Target A Negawatts Market

Image via Wikipedia

The failure of Copenhagen along with the sheer complexity of ETS (one which is going probably do more for financial institutions than the real economy) requires stepping back to re-consider how to achieve the aims of reducing CO2 emissions. In the post "The Fallacy of the Carbon Market" I made the point that market-based reduction methods don't have to be carbon based.

Here I want to look at using a negawatt based market to reduce energy demand. Markets consist of supply and demand. The supply of negawatts is easy - it is all the effiecency changes that can be done (insulation, improved appliances etc.). The sticking point is demand. How to create demand for negawatts?

The renewable energy targets provide the mechanism for creating demand, by allowing negawatts to count towards those targets, power companies can choose to use negawatts rather than other forms of renewable energy to meet their obligations.

Negawatts would be created by doing an audit of end user (household, office, factory etc) to benchmark the energy consumption. The purchaser then pays for improvements (adding insulation, triple glazing the windows, more efficient HVAC etc). The difference in energy consumption after the improvements are installed is benchmarked. The amount of negawatts is the difference between the before and after benchmarks. These negawatts would count to the power companies renewable energy target for 1 to 5 years.

The advantages of this approach are:

• Much simpler measurment, audit and verficiation
• Doesn't impose large scale price increases on end-users
  
• Increases productivity of the economy generally
• Frees up end-user cash for other users

Negawatts address the simple physics problem that we can't build enough renewable energy sources in the time required in order to effectively replace enough carbon based energy production. A sustainable negawatt market will drive the development of new efficiency measures and devices leading to situation that energy demand falls as our ability to generate substantial energy from renewable sources increases. We are addressing the problem from both a supply and demand side, achieving a better overall solution.

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iPad - The Freedom Device

Image by Tom Raftery via Flickr

The discussion around the iPad has missed what I see as a vital use case. One that is becoming increasingly relevant in many countries around the world. Previously, I had written about a device that could provide unblocked accessed to the internet and outside world. The iPad is that device.

Coupled with portable satellite broadband basestation and some mesh networking software, a million iPads would make for a very difficult internet access method for oppresive regimes to block.

The Fallacy of the Carbon Market

Image via Wikipedia

The noise surrounding Copenhagen is deafening. Hidden within the noise and light are several elephant sized questions that everyone seems to be ignoring. Firstly, is carbon pricing really an effective market? Secondly, can a market based solution be found that doesn't involve pricing carbon? My answers to those questions are no and yes respectively.

Carbon trading is unlikely to be a very good market. Not only is it hard to monitor, verify and account; the very difficulties in in monitoring, verification and accounting leave the market wide open to gaming and manipulation. It is quite possible that it will cost more to run a carbon market with less improvement in emmissions than to spend the money on direct measures to improve emissions.

So are there other market-based solutions that are as effective if not more effective than carbon trading? Almost certainly. The whole conversation around climate change has become so tunneled vision on carbon trading that other market based solutions are ignored. Lets step back from the particulars of carbon trading to look at what is being trying to accomplish.

The idea is to use price signals to encourage changes in participant behaviour and resource allocation. In the case of climate change it is to reduce greenhouse gas emissions with the price of carbon as the signalling mechanism. Why carbon price was alighted on one can only speculate(special interest groups such as investment banks looking for the next CDO scam comes to mind and green zealots with a messiah complex) but in reality it can be any pricing (or more than one pricing) signal as long as it accomplishes the goal. All that is required is a pricing signal that change the way energy is generated and used.

A fallacy of the debate is that regulatory regimes are inherently, non-market based. That is untrue. If the regulatory regime specifies the mechanisms of reduction then it isn't market-based. But if the regulatory regime specifies the end goal and then leaves it up to the market to produce the most effective solution, that is a market-based solution. Before rushing to say that isn't true bear in mind that is exactly what the carbon trading market is, a regulatory regime that specifies an end goal and leaves it up to market participants to allocate the resources to produce the reduction desired.

A carbon market is one of many possible markets that will produce the goal of changing the way energy is generated and used. Nor is there anything to say it is the most effective regime and I am coming to the conclusion that a carbon market is probably the worst possible market to achieve this goal. The carbon market strays into specifying the mechanism rather than the goal.

An alternative market would be based on a regime that specifies work per unit energy input requirement, or efficiency. A set time points the efficiency requirement would increase contiuning to drive changes in energy production and consumption.

There are several benefits to this market:

1. it is simpler for people to understand - energy and its use is far more concrete than an invisible gas
2. measuring & accounting for efficiency is far, far easier than measuring & accounting for emissions
3. its harder to outsource consumption and generation in an efficiency focus regime
4. the measure efficiency can be tailored to different industry sectors but still tied back to an overall measure
5. it is harder for free-riders to prosper as each industry has their own targets
6. and doesn't fall afoul of the rather significant problem that the physics of converting to a carbon free economy don't stack up

Technically this type of market is viable but is it politically viable? From my persepctive it is. It is easier to explain to sceptical citizens, targets are based on improvements rather than reductions and allows various players to choose the mechanisms that suit them best. Using efficiency targets becomes globally homogeneous avoiding the brutal and almost politically impossible task assigning blame and reductions according to blame. Nor does it require everyone to sign-up initially. As efficiency is measured at point of consumption, if a large proportion of global consumption uses efficiency targets, suppliers and producers will need to adapt to meet those targets in essence becoming part of the solution should those producers and suppliers wish to trade with that market.

There are other possible market-based solutions as well. We would do ourselves and the world a favour to not tunnel vision on carbon markets but to pick the best market-based solution that produces the desired behaviour of changing energy production and consumption.

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What can be done about North Korea and the Bomb?

North Korea undertook their second nuclear explosion and is firing off missiles that is more reminisce of someone trying compensate for a small dick. The UN Security Council will probably pass a resolution that by and large will do nothing. China will keep propping up the regime for both political and strategic reasons, South Korea is limited by what it wants to do and Japan will probably make the strongest moves to "punish" North Korea by beefing up missile defences.

Peter Hatcher puts forward what he thinks will make the regime pay attention to the international community. In effect it is having China, South Korea and Japan cut off cashflow to the regime. Sensible, but I am not convinced that any of those countries will do what is necessary particular as it doesn't meet their strategic aims.

Short of military action is there anything that can be done? It is a question that I've been pondering over the last week or so. Nothing leaps out as a great solution but a remembered article from years back about how information is probably the best weapon against the regime stirs.

The idea (as I remember it) was to air drop self-contained internet access devices that would provide the populace with access to the outside world that wasn't controlled by the regime. As much as the idea seems fanciful, I think a variant on it is something to consider.

In the variant, use OLPC-like laptops with windy handles for powering the device. The devices will need to include a verbal interface so that people who are illiterate can use it. The main issue is how to provide outside access? One potential way is to include a satellite access device that also acts as a wireless access point. Bearing in mind that as OLPC laptops can create mesh networks large numbers of the hubs would not be needed. Indeed, additional access could be provided by wireless connections beamed in from South Korea and naval ships.

The aim of internet access devices is to break the strangle hold on information that the regime has. That opens the door to working around the regime to provide food, water and power. In effect the internet access devices (remembering they can be used to share information and coordinate activity within North Korea as well) allows new centres of power to form and for the people to negate the advantages the regime has.

Would it work? I don't know and I don't think anyone really does. Anthropologists and psychologists can give you an estimate of potential effects it would have but until it is tried we won't know. So should it be done? I think it should be seriously be considered. At the very least it would be another potential noose to tighten around the regime's neck.

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