By Rachel Botsman
During a recent hotel stay, I carelessly left bathroom towels on the floor. It occurred to me that I would never do so as a guest in an Airbnb lodging. I behave differently there because a reputation system is in place: Not only do I rate hosts but they also rate me. Trust lies intimately between the perceptions of both users.
This comparison illustrates a paradigm shift. A new world of trust is emerging—where trust lies in the hands of individuals, not institutions.
Since the Industrial Revolution, institutional trust—the confidence in the relationship between individuals and corporations or organizations—has been the norm. We have trusted that financial institutions, universities, media companies and other big corporations will create the rules and enforce compliance that keep us safe and make goods and services reliable.
This framework of trust has failed many of us through wrongdoing, scandal or sheer ineffectiveness, and is now crumbling. A June 2015 Gallup survey revealed that public confidence had slumped to a historic low across all major institutions except the military and small business.
This reaction is partly because institutional trust isn’t designed for the digital age. Think of the characteristics of “institutional trust”—big, hierarchal, centralized, gated and standardized. It works if you are Goldman Sachs, AT&T or Pfizer but makes no sense if you are a network- or market-based company like Airbnb, Lyft or Etsy. The DNA of “peer trust” is built on an altogether different set of characteristics—micro, bottom-up, decentralized, flowing and personal. The result of this shift is not only the emergence of disruptive new business models. The conventional wisdom about how trust is built, lost and repaired—in brands, leaders and entire systems—is being turned upside down.
We are inventing a type of trust that can build businesses and facilitate person-to-person relationships in the age of distributed networks and collaborative marketplaces. This type of trust transforms the social nexus for ideas—whether for renting your house, calling for a ride to the airport or building a multibillion-dollar business.
This shift in trust will be messy. New complexities will emerge around risk, discrimination and accountability that will require not just new regulatory and legal frameworks but also a different organizational mind-set. Perhaps, the disruption happening now is not about technology; it is about enabling a shift in trust, from institutions to individuals.
Rachel Botsman is the co-author of What’s Mine Is Yours and a visiting lecturer at University of Oxford, Saïd Business School.