From interpersonal belief to the main feature of Trust Economy

Author: Ana Gagoshvili

Nowadays we can stay at the places of complete strangers, get into the cars with people we have never met before, even lend money to people the credit history of whom we have no idea about – this is the way new currency is emerging into the economy- Trust, in other words the glue that has been holding society together for centuries, today becomes the driving force of shared economy.

In her Ted Talk, Rachel Botsman, author of “Who can you trust?” defines trust as the most important currency in the new economy. Our ability to offer our own spare capacity and be rated for our services - and the overall experience we offer - underscores the power of collaborative consumption as a means to make a living and become more integrated societally. [1]

If trust is really defined as the main force of Trust Economy, what creates, influences and demonstrates the trust itself?  Below, several factors will be discussed, which might have a significant effect on trust.  

Trust and Economic development

One of the easiest ways to see how the trust is linked into economic development is to estimate correlations between trust and GDP. Based on the data from World Value Survey the visualisation bellow shows the correlation.

Further studies investigate the correlation of trust with the probability of becoming an entrepreneur. Guiso et al. (2006), reports that trust has a positive and statistically significant correlation with the probability of becoming an entrepreneur, even after controlling for education, age and individual income. The results also hold if religious affiliation of the respondents' ancestors is used as a proxy for trust – thus it is argued that, since ancestor's religion correlates with respondent's trust attitudes, this instrumental variable approach can be taken as evidence that the estimated relationship goes in the suggested direction.  [2]

Algan and Cahuc (2010) used instrumental variable method and came to an interesting conclusion that African countries would have five-fold increase in GDP per capita if they inherited the same social customs and attitudes as for example Scandinavian countries.

The most common source for measurement of trust is conducting the survey within different societal groups. “Most people can be trusted” that’s the statement from the recent World Value survey which was conducted in several countries, as the measurement of interpersonal trust. The chart below shows the percentage of respondents agreeing with the statement. As it can be seen for example in Sweden the number of people who trust others is higher compared to Brazil, which might be because of cultural differences.

For further analysis, the map below shows the situation worldwide. Where the leaders of interpersonal trust are Nordic countries, China, followed by Australia while the lowest level of trust is in Ecuador and Peru (less than 10%).

How the trust is built, measured and demonstrated in the world of technological advances? Each of us might have an unique answer but the majority claims that while thinking whether should we trust or not any particular company, in most cases we rely on reviews. According to the World value survey, 35% of consumers reported that they need to read 4-6 online reviews to decide whether they should trust the company or not, while for 29% of respondents  2-3 reviews are enough and only 7% of them need to read more than 11 reviews.

Correlation with religious beliefs

Number of studies have investigated the correlation between religious beliefs and trust attitudes. Luigi Guiso (2006) analyses the data by World Values Survey and represents the effect of religion on trust. The bars represent the effect of religious affiliation on trust in percent of the sample mean of trust relative to “no religious affiliation.” Effects are obtained from a regression where the dependent variable is “trust in others,” which equals 1 if participants report that most people can be trusted. Besides religious affiliation dummies, the regression also includes demographic controls (health, male, age, education, social class, income), a dummy variable equal to 1 if a person does not believe in God, country fixed effects, and survey-year dummies. [3]   

Overall it is concluded that being raised religiously raises the level of trust by 2.6% and regular attendance of religious services leads to an increase of trust by 20%.

Major players in this new economy of trust

The main feature of Trust economy is that individuals view themselves as businesses says Scott Annan, author and founder of AIMbitious.  

Shared economy-it’s the marketplace that takes the space capacity and causes an enormous demand for it by online reviews, ratings and any source of feedback.

Does the star next to an item catch our eye? In case of yes we are there, maybe unintentionally, but still the participants of Trust Economy.

Perhaps one of the most important company of Trust Economy is the world’s largest hotel without rooms-Airbnb. The concept of which relies on the belief that people trust each other. Which is proved by the success of the company, the hosted nights of which is accounted for 123 million.

Another representative at this market is well-known Uber, which goes further and aims at getting more people into fewer cars.  

Inventure - that’s the loan for people using their mobile data instead of credit history. The CEO of the company, Shivani Siroya claimed during her ted talk: “ We are giving people the power to build their own future.”

Another version of new ownership and entrepreneurship is presented by the world’s largest car-sharing company Zipcar, letting people rent their own cars to others.  

Apparently, all above mentioned companies are founded and developed in tandem with technological advances, which together with trust brings the humanity to the new path of economy, which should be taken right. As Botsman told at the Nordic Business Forum: “The real challenge is how to use technology not to accelerate trust, but to make better decisions-not to give our trust away. “

To conclude, as its becoming the global and most valued currency of the world. if we don’t demonstrate trust the future may leave us behind.

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References

 [1] http://www.businessinsider.com/the-share-economy-will-change-business-2013-2

 [2] https://ourworldindata.org/trust#note-14
 [3] https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.20.2.23

 Algan, Y., & Cahuc, P. (2010). Inherited trust and growth. The American Economic Review, 100(5), 2060-2092. (prosta africaze ro iyo)
 https://www.statista.com/statistics/315738/business-trust-number-online-reviews/
 https://www.ted.com/playlists/366/the_economy_of_trust