Who Can You Trust?: How Technology Brought Us Together and Why It Might Drive Us Apart

Rachel Botsman, “Who Can You Trust?: How Technology Brought Us Together and Why It Might Drive Us Apart,” Public Affairs, 2017, 258 pp.

This book’s subject is ‘How technology is changing our attitudes toward trust:’ trust is confidence in one’s expectations.  Trust in institutions is rapidly deteriorating, but trust is not gone—it is shifting to individuals, to Artificial Intelligence devices (AI), to decision-making algorithms: Airbnb and Uber, to name two.  We are in the biggest trust revolution in history.  Trust has progressed from local, when we lived within the boundaries of small local communities; then institutional which involved contracts, courts and corporate brands creating the foundation necessary for an organized industrial society.  And presently we are very much in the infancy of the third, which the author has titled distributed trust.  Of course, local and institutional trust has not disappeared.

Even though most people barely know what the blockchain is, the author maintains that a decade from now it will be like the internet: we’ll wonder how society ever functioned without it.  The internet transformed how we share information and connect; the blockchain will transform how we exchange value and whom we trust.  The use of digital tools to build trust with strangers to connect and collaborate is happening on an unprecedented scale. Becoming acquainted with this blockchain technology and its use beyond bitcoins, is critical and is why this book gets my ‘Education’ tag.

My Notes:

Pg. 3f:  Episodes of unethical institutional trust have come thick and fast, from the lurid, even criminal, to the just plain stupid and sadly routine.  The false intelligence about weapons of mass destruction; Tesco’s mixing horsemeat with their product; price gouging by big pharma; the BP Deepwater Horizon oil spill; Volkswagen’s diesel-gate; major data breaches from companies such as Sony, Yahoo! and Target; The Panama Papers’ documentation of widespread tax avoidance; the Libor exchange rate manipulation; and the shocking revelations of widespread abuse by Catholic priests. (Millennials are the most doubting, 86 percent of them distrust financial institutions, 75% ‘sometimes or never’ trust the federal; government to do the right thing and a staggering 88 percent never trust the media. pg. 41)

Significantly, this crisis in confidence is taking place in a landscape of rapid shifting and evolving technologies, from artificial intelligence (AI) to automation of the Internet of Things (IOT).  We are already putting our faith in algorithms over humans in our daily lives: e.g. Amazon’s reading recommendations; Netflix’s recommendations; and, now self-driving cars. But, we are also feeling overwhelmed and many are beating a retreat to media echo chambers that narrow down information and reinforce already held beliefs.  Technology also means fake-news.

Pg. 5:  The Edelman ‘Trust Barometer’ interviews more than 30,000 people across twenty-eight countries about their level of trust in various institutions.  They found that trust in all four major institutions—government, the media, business and non-governmental organizations (NGOs) are at an all-time low.  The media suffered the biggest blow, now distrusted in 82 percent of all countries surveyed.  In the UK, the number of people saying they trusted the media fell from 36 percent in 2016 to 24 percent in 2017.  The Brexit vote to leave the EU and the election of Trump is the first wave of acute symptoms emerging from one of the biggest trust shifts in history.  Trust and influence now lie more with the people – families, friends, classmates, colleagues, even strangers – than with top-down elites, experts and authorities. 

Pg. 15:  Jack Ma became China’s richest man in 2014 ($19.8 Billion). He is the founder of Alibaba in which more than 80 percent of all goods bought and sold online in China go through.  It is like eBay, enabling people to sell virtually anything directly to each other.  The Alibaba Group has 430 million annual active buyers, and one out of every three individuals in China has made a purchase from the marketplaces.

Pg. 26:  Trust is the conduit through which new ideas travel.  Trust drives change.

Pg. 31: The Tuskegee Study:   Between the years of 1932 and 1972, 600 African Americans living in Tuskegee, one of the poorest counties in rural Alabama and with the highest syphilis rates in the nation at the time, had been used as human guinea pigs by the US Public Health Service.  It was one of the most unethical medical research experiments the country had ever seen.  Of the 600, 399 of the subjects were syphilitic, while 201 did not have the disease but were kept as controls.  The study did not involve real treatment, only observation, this observation-only continued even when penicillin became available ten years into the study.  The participants were only told they were being ‘treated and observed for bad blood.’

Pg. 34:  The Panama Papers.  Over the course of 2015, more than 11.5 million documents were taken from Panamanian law firm and corporate service provider Mossack Fonseca and provided to a German investigative journalist from an anonymous source.  These documents contained evidence of corruption, revealing that Mossack Fonseca had created more than 214,000 offshore shell companies in tax havens around the world, for world leaders and their families, including President Putin and Kojo Annan, son of the former UN secretary-general Kofi Amman, celebrities such as footballer Lionel Messi.  (Look this up on Wikipedia for more detail). 

Pg. 39:  In all, 29 of the billionaires featured in Forbes’ list of the world’s richest people, 12 serving or former world leaders and 140 politicians were named in the Panama Papers. 

Note: Putin believes that the CIA or the FBI was behind the release of these documents and Russia’s interference in our election process is for revenge.

Pg. 43:  Over the past couple of decades, the banking industry has exhibited deplorable behavior.  From Enron to Arthur Andersen, Freddie Mac to Fannie Mae, Lehman Brothers to Bear Stearns, AIG to Northern Rock, Nick Leeson to Bernie Madoff, and the Libor scandal, the list goes on.  Yet, few lost their jobs and most notably Ken Lewis of Bank of America and Dick Fuld, the former CEO of Lehman, walked out the door with multimillion-dollar golden parachutes.  People working in banks are operating in a toxic culture with a perverse incentive structure that permits and fosters unethical behavior because of misaligned interests.

Pg. 58f:  BlaBlaCar is an android app that connects car owners and co-travelers to share city-to-city journeys through the largest carpooling service in the world and now transports more than 12 million people per quarter as of 2017.  Riders only pay the driver agreed upon cost for the travel.

Pg. 87:  Uber, the world’s largest taxi company, owns no vehicles.  Similarly, Facebook creates no content; Alibaba, the most valuable retailer, has no inventory.  And Airbnb, the world’s largest accommodation provider, owns no real estate.

Pg. 104:  A recent study by BuzzFeed found that 38 percent of all posts from three of the largest hyper-partisan right-wing Facebook pages such as Eagle Rising, contained a mixture of true and false, mostly false, information, compared to 19 percent of posts from three hyper-partisan left-wing pages, such as Occupy Democrats.   Cumulatively, the audiences of these pages are in the tens of millions.  The top five fake news items in the last weeks of the election were all negatives for the Clinton campaign.  And the spread of fake news is far more common on the right than it is on the left.  These findings suggest that the best way to attract and grow an audience for political content is to eschew factual reporting and instead play to partisan biases using false or misleading information that simply tells people what they want to hear.

Pg. 116:  In the 1950s, fewer than 5 percent of American workers needed a license to do their job.  Today, more than 1,000 professions – approximately a third of all occupations – in the US require a license. 

Pg. 150:  China is developing a system to rate the trustworthiness of its 1.3 billion citizens, so far it is voluntary.  (Kind of what FICO does in the US but for much more than financial trustworthiness).  The inputs involve credit history, fulfillment of contract obligations, personal information (driver’s license, etc…), behavior and preferences (plays 10 hrs. of video a day, for instance), interpersonal relationships (online friends and others behavior).  Scores can run from 350 to 950 and the more trustworthy are rewarded by fast-tracking for visas, VIP check-in at hotels and airports, Deposit free car rentals.  Lower scores will have slower internet connectivity, higher insurance premiums, restriction on schooling children, ineligibility for certain jobs, etc.

Pg. 166:  China’s trust system might be voluntary as yet, but in February 2017, China’s Supreme People’s Court announced that 6.15 million people had been banned from taking flights over the past four years for social misdeeds.  Another 1.65 million people cannot take trains because they are on the social credit blacklist for misdemeanors.

Pg. 179:  A significant shift is underway as evidenced by self-driving cars.  We are no longer trusting machines just to do something but to decide what to do and when to do it.

Pg. 190:  Two economists from the University of Oxford, Carl Benedikt Frey and Michael Osborne, in a paper called ‘The Future of Employment: How Susceptible are Jobs to Computerisation?’ came to the sober conclusion that 47 percent of jobs now performed by Americans are at risk of being lost to computers, as soon as the 2030s. 

Pg. 205:  The total amount of all money in the world, in terms of value, was estimated in 2006 to be around $473 trillion.  That works out to be around $60,000 per head for 7 billion people on the planet.  But less than 10 percent of it is physical money – banknotes and coins in vaults and wallets.  The remaining 90 percent is simply electronic.  There is also value in assets such as air miles and supermarket reward points. 

BITCOIN & BLOCKCHAIN:  first I cover the bitcoin itself, which I believe will eventually blow up like the long-ago tulip sensation in Holland.  However, it is the Blockchain technology itself that powers bitcoins that is the important story and may be every bit as important as the internet itself has been in its effect on technology. (Bitcoin lost 23% in late Dec. 2017 in four days).

Pg. 206ff:  In 2008 someone calling himself Satoshi published a 500-word paper on an obscure cryptography mailing list.  The paper was called ‘Bitcoin: A Peer-to-Peer Electronic Cash System’ and it outlined the current pitfalls with traditional fiat currencies emphasizing that the root problem with conventional currency is all the trust that’s required to make it work.  The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.  Banks tend to lend out our money in waves of credit bubbles with barely a fraction in reserve.  We have to trust them with our privacy and not let identity thieves drain our accounts.  The paper presented an alternative solution – the design of a new digital currency called bitcoin.

Pg. 207:  On January 3, 2009, Satoshi released the first fifty bitcoins.  No physical coins or notes were produced – just 31,000 lines of code.  Bitcoins do not physically move around when they are being exchanged.  The coins themselves are simply a digital token that can move from one user’s address to another, thereby transferring ownership of the coin.  The senders and receivers of the bitcoin do not need to know or trust one another.  They are identified only by wallet IDs (known as public keys) that are not tied to real-world identities.  Every transaction is recorded but it is encrypted into a random string of numbers and digits (like 1206TSU4Tq3p4xzziKzL5BrJKLXFTX), making it very difficult to trace back to its owners. 

Pg. 209:  The blockchain is an enormous shared digital ledger, open for anyone with internet access.  To see it for yourself, just go to https://blockchain.info.  Every single bitcoin transaction that has ever happened since it began in 2009 is publicly recorded and time-stamped on the blockchain.  It tracks every time an asset moves from one place in the register to somewhere else.  The distributed ledger is replicated on more than 5,500 computers around the world – known as bitcoin nodes – creating an immutable record.  A record on the ledger cannot be changed, falsified or erased. 

Pg. 210:  The blockchain is extremely significant.  For the first time in history, there is the potential to create a permanent public record of who owns what, which no single person or third party controls or underwrites, and where we call reliably agree on the correctness of what is written. 

Pg. 211:  Satoshi, who vanished in 2011, had decided that to distribute bitcoins was to award bitcoins as an incentive to the people who do the work communally to maintain the ledger around the world.  These people are known as miners.  Without the miners, the blockchain engine stops.  When one of the miners computers has proof that a transaction is legit, the payment information – the amount, time and wallet address – is added to the blockchain in ten-minute bundles of transactions, known as blocks. (For instance, the last block added to the blockchain on 2017-04-12 06:19:53 contained 1,322 different transactions totaling 7,583 bitcoin sent.)  Each block contains the hash of the prior block, linking the blocks together.  Hence the name: blockchain.  All the miners are in a race to have the privilege of being the canonical record of each transaction.  If they win, they are rewarded with bitcoins.  Bitcoin places trust in mathematics: In proof we trust. 

Supplemental Information on Bitcoins:

Mining is like a cryptographic game or lottery, where the winner is the first computer to find the key to open a digital padlock that solves the puzzle.  To process new transactions in bitcoin, miners with powerful computers solve complex problems that add the transactions in a block to the blockchain. This is called “proof of work” and is one of the core features of most cryptocurrencies. Multiple miners verify the work, which prevents fraud. The difficulty of winning increases the more miners play it.  There is no collateral behind bitcoins.  However, Satoshi inserted into the software a finite ceiling of 21 million as the number of bitcoins that will ever be released (currently 16.7 million are released).  The rewards given to miners for solving problems were also predetermined to halve roughly every four years, to slow down the coin circulation.  The last halving took place 9 July 2016, taking the reward down to the current 12.5 bitcoins (it had started at 50 in 2009).  The hunger for those limited bitcoins has turned mining into a giant, highly competitive enterprise.  Now, bitcoin miners don’t just need hardcore processing power.  They need cheap electricity, lots of it.  By 2014, China with its cheap electricity and labor has come to dominate mining; 70 percent of the transactions on the bitcoin network now go through just four Chinese companies.  Miners aren’t expected to generate the last bitcoin until around 2140, 123 years from now. By then, computing power will be exponentially higher

How do you buy a bitcoin?  There are a number of easy-to-use exchanges now where you can buy bitcoin using money transferred from a bank account, and in some cases by charging a credit card. The most popular mainstream option is Coinbase, which now has more than 13 million customers. Kraken is another one. Link for a detailed explanation.  So what are you buying?  You’re buying a digital “key,” which is a string of numbers and letters that give you a unique claim on the blockchain supporting bitcoin. You can transfer this asset to others for whatever the market price of bitcoin is, minus transaction fees.

Yahoo Finance now offers full, free tracking tools for more than 100 cryptocurrencies, with a ticker symbol for each. Most people aren’t even aware there are that many cryptocurrencies.

BLOCKCHAIN

Pg. 220:  It is important to realize that there is not just one blockchain technology – but many other distributed database platforms.  When it comes to trust, however, the principle behind them all is the same: a digitally decentralized shared ledger that relies on users to power the network by confirming transactions. It’s why the blockchain is likely to disrupt industries like law, banking, real estate, media and intellectual property – industries that typically involve layers of complex processes and lots of middlemen to handle matters of trust.

Pg. 224:  The blockchain Satoshi created to facilitate bitcoin has a built-in hard cap of one megabyte, or about 1,400 transactions per block, that is processed and added to the blockchain every ten minutes.  Therefore, the bitcoin blockchain is not fast or big enough to handle large volumes of transactions.

Someone to watch: Vitalik Buterin (Born January 31, 1994, in Russia.  He is hailed by some as the next Steve Jobs.  He has set up a non-profit company, Ethereum, based in Switzerland.  His goal is to build the Lego of cryptographic finance.  An example is Transactive Grid, a distributed energy market that enables people to buy and sell energy directly from each other.

Blockchain technology and the peer-to-peer trust could bring the 5 billion of 7 billion people in the world now excluded from capitalist legal systems into the capitalist system.  Capitalism will only thrive in the Third World when people feel that the law is firmly on their side, or even simply applies to them. 

Pg. 237:  It looks like banking middlemen are going to use the blockchain technology to make the exchange of money faster and cheaper.  The blockchain will be to banking, law, and accountancy as the internet was to media, commerce and advertising, says Joi Ito, the respected entrepreneur professor and director of the MIT Media Lab.  It will be like Email for money.

Pg. 242:  Consider traditional accounting, largely dominated by the big four audit firms.  The distributed ledger could transparently report the financial transactions of an organization in real time, reducing the need for traditional accounting practices.  And that is why most major players in the financial industry are busy investing significant resources into blockchain solutions.  They have to embrace this new paradigm to ensure it works for, not against them.