The Business of Trust

Change is coming

Take a poll of a thousand online business people. Ask them if they think there's change happening in the marketplace, and you'll probably get close to unanimous agreement on the basic question. But you'll also probably get close to a thousand different opinions on the nature of the change. As someone who's been doing business online for more than a decade, working for various types of company, I have one perspective. I have a second perspective for having been a customer to many types of online businesses. I have been a seller of many different things online. I have been a buyer of many different things online. In my mind, the sum of these perspectives creates a rather clear picture of what's happening in 2006 and where we go from here.

Trust and Business

The concept of trust is far older than commerce, perhaps even older than the oldest profession. For thousands of years, business people have sought the trust of their customers, of their partners and of the greater community. As many of you may attest, doing business with someone you trust is wonderful. Doing business without trust, less so. And trust betrayed is very bad. The profit motive and the temptations of wealth often make the combination of trust and business a difficult one. In modern commerce, even when there is a desire to trust, the lessons of the past and a deeper acquaintance with human nature, compel smart business people to protect themselves. We do this with contracts, we hope for the best, and rely that the law will be there to make the right call, if it should come to that.

Even before the advent of the Internet, to judge from the rising number of business litigations and the ever-more-staggering complexity of corporate law, it was obvious that things were broken. Trust and business were hopelessly estranged. And during the last ten years, the explosive growth of online commerce has made matters even worse for business and trust. Companies face new and still very little understood liabilities. Consumers face dangers they never dreamed of.

Conquering the Wilderness

As with the settlement of a new geographical territory, the early migration of business into the Internet was accompanied by a period of lawlessness and confusion. Opportunity seemed to exist everywhere, but nowhere with any clarity or limits. What else but pure, immeasurable adrenaline could have inflated the DOT COM bubble to its mythic size? There also seemed to be a fair amount of raping and pillaging.

But, again as with the "conquest" of any new land territory, it would not have been possible without commercial interest. The scope of technological innovation and rapid development of the Web beyond its early form owe entirely to the investment of enterprise. We could not be where we are today without the profit motive.

In 2006, we are at a tipping point. It's useful to think of this coming change as a "correction", in the same sense that the bubble-burst was a correction. The "dot-com bubble" taught us, among many lessons, that revenue and profit are in fact inseparable from any sane definition of commerce. In 2006, there are thousands of thriving, profitable online businesses. But the whole of online commerce remains limited by (and jeopardized by) a fundamental lack of consumer trust.

Google does Trust

The word "trust" has made a noteworty appearance within a recent trademark registration by Google. The search engine world is all abuzz with "Trustrank", as well it should be. But the signifance of Google's adoption of Trustrank (a choice that will transform the functioning of the search engine to its very core) reaches out to all of electronic commerce. In a low-tech nutshell, Trustrank is simply teaching the search engine right and wrong, before sending it out to do its job. This differs from the prior case, when the operation of the Google search engine was based entirely on math, programming and theoretical circumstances. The difference is human subjectivity, in other words -- OPINION.

By choosing to adopt Trustrank, Google is telling us that it is going to give us its opinion whenever we hit the "Search" button. Further, as regards specific Web sites and domains, Google is telling us that its decision to include a given page in search results will be determined by whether or not Google has given its trust.

For the immediate moment, the factors that Google considers when making up its mind about a given Web site are limited to the list of things the Spider may determine when it crawls. But that list of factors is going to grow, as is the list of companies that are going to adopt "trust assessment" as part of their operations.

How does Trust help?

Google is one pioneering example of a trust-based model in action. But already there are others, and in each case the dynamic is the same:

1.Trust Providers sit between larger Trust Providers and the consumer public.

2. The size of a Trust Provider is determined by the number and size of its "constituents".

3. Constituents are customers, partners, and those who give links to or otherwise support a Trust Provider.

4. One Trust Provider with only a few large constituents may have equal weight with another Trust Provider with many small constituents.

5. In the same way that there are benefits to associating with the well-trusted, there are penalties for association with the dis-trusted.

And, so on...

Trust is Democratic

If all of this is beginning to sound a lot like politics, there's good reason for it. A trust-based scheme for electronic commerce shares many of the principles of democracy:

1. A small number of "representatives" will be "voted" into a position of influence by the many.

2. Everybody who "registers" may "vote".

3. There shall be no representation without taxation.

This familiarity may improve collaboration between industry and government. On many fronts, online commerce is at odds with government. By making both a part of a continuous hierarchy of trust, we should be able to fix some of that. Consumer dis-trust stems from the fact that it's so hard to know who you're dealing with when you press click. Even business-to-business commerce is often transacted now between parties who never meet face to face. The institution of a formal Trustrank system will allow everyone, both consumers and businesses, to evaluate a prospective purchase or partnership in light of public information.

Mend your Ways, Build Trust, Capitalize

It goes without saying that this will not be good news for everyone. There are still many companies and individuals operating within the "trust haze". For them the challenge will be simply, "mend your ways or go away". But for the rest, the breadth of opportunity created by a trust-based scheme for online commerce will be worth billions.

To begin with, there is an immediate need for more "trust infrastructure". Trust providers of all types and sizes are needed. They will have the opportunity to create hundreds of new vertical industries, each joining happy, trusting consumers to myriad goods and services. Existing online businesses, who rapidly adapt to trust-based business principles, will also have the chance to flourish and grow to new heights.

The issues and challenges specific to our industry are also well answered by trust. We need for parents to trust us. We need for our customers to trust us. We need for the credit card companies to trust us. We need for the search engines to trust us. We need for the government to trust us. We need for the global Internet community to trust us. Each of these is a universe of opportunity.

Billions will be made by those who see the light and read the writing on the wall. The prosperity we all dreamed of as entrpreneurs is within our grasp. America and the whole world is poised on the brink of the greatest economic boon in all history. All our worries, both as consumers and business people, may be answered with Trust.

Jack Mardack