Can I Trust You Really?: The Reputation Currency

During the Age of Separation we shielded ourselves from strangers by reducing all access to goods and services to money. No personal economic relationships are important because we can always "pay someone else to do it"  wrote Charles Eisenstein in the book Sacred Economics.

In contrast, the Age of Reunion that we are entering is all about sharing: sharing with friends, sharing with coworkers, sharing with neighbors, sharing with complete strangers, sharing for free, sharing with a payment, etc. but sharing is not without its risks as the Airbnb incidents exposed. Can I trust you?

“For pretty much anything related to sharing resources, thinking through trust and reputation is a critical first step —particularly as it relates to user acquisition. If these companies don’t make their communities feel safe, they won’t have communities anymore.”  - 
Craig Shapiro, Collaborative Lab

"Reputation capital is becoming so important that it will act as a secondary currency, one that claims "you can trust me". It is shaping up as the cornerstone of the 21st-century economy […] It's the ancient power of word-of-mouth meeting the modern forces of the networked world."  – Rachel Botsman

First level of trust: closed networks

Not everybody is ready to share with complete strangers. A number of projects address this issue by allowing users to create closed networks where matching their needs and building trust are easier to manage. For example:

  • For sharing a ride (Amovens in Spain, Zimride in US, etc.) allow companies, universities, and even events to create local closed groups.
  • NeighborGoods allow individuals to start a closed sharing group for as little as $6 a month.

Second level of trust: The social networks component

A lot of people are already building digital profiles on social networks like Facebook and Twitter. An additional reputation mechanism implemented by various projects is to connect users’ profiles with their profiles on social networks, so you can know more about who it is exactly you’re about to rent your house to.

MovoMovo (P2P car rental in Spain) has introduced their own "Social Trust Rank", an algorithm of initial social reputation. It works based on your Facebook account and you can add your Twitter or blog too. For example, newly created or very low activity accounts will be penalized with a low “Social Trust Rank.”

Feedback systems and peer-police

eBay has proved how the trust we typically form face-to-face can be built and assigned online by creating the grandfather of reputation systems, the Feedback Forum. After any transaction, buyers and sellers can rate each other using a simple points system (1,0,-1). Once users reach a certain number of points, they receive a star attached to their screen name, indicating their trustworthiness. The "silver shooting star" indicates the highest rating.

With around 98 to 99 percent of trades receiving positive rating the eBay approach seems to work and has been copied and adapted to a lot of other projects. One of the most common complaints with eBay is the use of nicknames instead of real names, and this is where the use of social network profiles can be a handy extra in the reputation system.


CouchSurfing, with more than 3 million users from all over the world, mainly works with a reference system. People can vouch for each other (under certain strict conditions) and even become verified (after you make a financial contribution to support CouchSurfing). In addition, the more complete the profile, the more likely it is the user will be able to get a couch. For those who offer a couch there is no obligation to accept couching requests, but it is expected that the user will answer (yes/no/maybe) the received requests. Your profile shows the percentage of requests you have answered.

Similar approaches and measures has been adopted by many other projects as, for example: Airbnb, TaskRabbits or Communitae (P2P lending site in Spain).

"Who is the person coming to stay in your home? Who is the person you are renting from, for that matter? When you have a good peer-to-peer policing system, a system of trust, you see things like eBay … I have never gotten into a dirty or damaged Zipcar. If it did not work that way, collaborative consumption would never work. … Peer-to-peer policing works actually very, very well" – Roo Rogers

Being able to create a sense of community among the users of the system also provides

an extra degree of trust in the system and among peers. People who rent a car from Hertz neither have any sense of community, nor any expectations on other users’ behavior. On the other hand, people using ZipCar call themselves Zipsters and that alone makes an important psychological difference when using the car rental service.

Typical characteristics of reputation system

One of keys to success for collaborative consumption and sharing initiatives is that the hassle factor of engaging in such activities has been reduced to a minimum through the use of technology. Therefore, the reputation system needs to be complete, but simple enough for regular use.

Highlight five of the Rachel Botsman list of issues to consider when designing a peer-to-peer reputation system:  

  • Competition: We love being at the top of the heap. Publish your user rankings to create healthy competition among peers.
  • Quality: Celebrate and reward users who take the time to contribute quality feedback; they should become the benchmark for others.
  • Sticky ratings: Pick a primary scoring system (stars, ticks, tiers, thumbs, badges, numerical ratings) and give the ratings sticky names, such as “Power Seller”.
  • People like me: We like to know, and tend to value, what our friends and people
  • like us think of other people. Integrate “inner-circle” vouching mechanisms (for example, went to the same school, work in the same office) into your reputation system.
  • Peer-police: An open reputation system must be peer-policed but if things do go wrong, your organization needs to be on hand quickly to offer support, resolve disputes and weed out the vandals and abusers.
"Reputation is a summary of one's past actions within ... a specific community, presented in a manner that can help other community members to make decisions... whether and how to relate to the individual" – Chrysanthos Dellarocas
One can not forget that business practices, trust and reputation do not work the same way for different people from different cultures. Qifang, the Chinese peer-to-peer lending platform, which caters to students, has lowered default rates by cleverly leveraging cultural norms by requesting borrowers to provide family details, so they'll feel pressure not to shame the family name.

Reputation banks

What's missing in collaborative consumption today? Roo Rogers answer was clear:

"We still need great, centralized databases of reputation. If we’re good Zipsters, and good eBay tradesman, our rep should follow us. People should be able to see our record, tied to a fixed identity, and do business with us more confidently."
Startups like TrustCloud would like to become the portable reputation system for the web. The company is building an algorithm to collect (if you choose to opt in) your online "data exhaust" -- the trail you leave as you engage with others on Facebook, LinkedIn, Twitter, commentary-filled sites like TripAdvisor, and beyond -- and calculate your reliability, consistency, and responsiveness. The result would be a contextual badge you'd carry to any website, a trust rating similar to the credit rating you have in the offline world.

Facebook also has the potential to become the arbiter of online trust. "The incentive to be a good player in that ecosystem goes up dramatically when it's associated with my real identity," says Carl Sjogreen, manager of Facebook's platform product team., "because if someone leaves a bad review of me on AirBnB, that will carry with me to the rest of the web.”

These are new territories and there are still a lot of unanswered questions: How to balance different sources of activity? Does all “sharing history” count the same? Should your offline citizen behavior be part of it? Should governments be involved at all?

Prepare for the worst, so users can trust

Of course, renting out one's home or car to a stranger comes with risks. "My sense is that the enthusiasm in some spaces may be outstripping logic," Eric Clemons says, and also warns that the security measures associated with some of these sites may not be keeping pace. 

Case in point: Airbnb recently received negative press when a few consumers went public with stories of their homes being robbed or damaged by renters found through the site.

Airbnb responded with a new policy where it will cover loss or damage from guests up to $50,000 among a renewed set of safety measures. The case created a ripple effect in many other projects (specially the ones focused on P2P lending) that reviewed their own policies, but sometimes unrealistic expectations are put on companies.

"As with any peer to peer marketplace, it's impossible to remove risk completely. It's our job as sharing platforms to make sure our members are aware of the risks and have the information needed in order to manage the risk effectively." -- NeighborGoods.net
Car rental such as Zipcar or Connect has also been subject to scrutiny by the press with a focus on insurance issues. Legislation and habits on this topic differ from country to country, for instance, SocialCar (Spanish P2P rental) has a tailor-made insurance policy with a leading insurance company. Car owners have to cancel their existing insurance policy and sign with the one proposed by SocialCar, there is simply no other way to operate according to Spanish regulation. 

The biggest challenge remains, and it’s to present all legal requirements in a way clear and simple enough for the average user to understand. 


So, do you think you can trust me?
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