AI and Blockchain are contributing to a revolution of trust that has been in the making for a long time…
There is a common goal, an elevated status pursued by an enormous number of professions.
Legal practitioners, accountants, financial consultants, private bankers, politicians, estate agents, management consultants, stock brokers, car salesmen, life coaches and headhunters (amongst others) all strive for the ultimate compliment: the title of “Trusted Advisor”.
This is a noble pursuit as it implies consistent and correct behaviour over a period of time. If considered carefully, you would find that it is a status that one can apply to any position in work and indeed life.
Why we need trust
Trust is a scarce and critical commodity. The bigger the interpersonal network that depends on it, the bigger the chance of it being broken.
Once there were telephone operators who patched in calls. Consider for a moment the complex job of this person – let’s call her Tant Toekie – connecting telephones in the community in 1939: “Two phones was easy”, she’d recall. “Only one patch possible. Five phones, ten patches, no problem. Twelve phones… O jinne! Even I couldn’t keep up some days, 66 patches and so much information.”
Robert Metcalfe, originator of the Ethernet protocol and founder of 3COM, captured Tant Toekie’s tribulations through Metcalfe’s Law: the value of a network is proportional to the square of the number of nodes. As a network grows, the value of being connected to it grows exponentially while the cost per user remains the same or even reduces. For every single new node, one doubles the value – expressed as connections – in the system.
This exponential ‘network effect’ places a huge amount of stress on any system. Middle men are the historic remedy for such stress. Such intermediaries act in the best interest of the end user and connecting that client to the best possible sources.
That’s the theory. But it’s imperfect. We have all been in that dreadful position when trust is broken. This is normally due to two factors: the withholding of relevant information and inconsistent behaviour that is not in line with the requisite best interest.
Trust then suffers when the truth is revealed. Maybe your financial advisor advised you on only the portfolio of investments where his commission was above a certain percentage, or maybe the car dealership did not really mean it when they said that they would always be there for you with the best possible service. Trust is built when we speak the truth and then consistently back it up through our actions.
The new trust
In the past ten years, we have seen the most violent change in the global business landscape yet. The global financial crisis generated a huge amount of broken trust. Accordingly, the market voted against the bankers, the ultimate form of intermediary. As Governments propped up the financial sector, taxpayers lost more and more trust and voted with their investments and spending. The impact has been profound, seeding mistrust around governments, globalisation and the free market.
And yet, the network is tranqualising Tant Toekie’s tongue through technological trust mechanisms. These include unbreakable security protocols, modern systems design with access control and authentication, encrypted data storage and so on. Recently, there was added a new poster child to this list, i.e. BlockChain or Distributed Ledger Technology. And there will be further development as exponential growth demands more innovation.
The impact of this effect is already very visible. Consider the following graph showing the change in the top ten companies in the world, shown in USD-denominated Market Capitalisation:
What distinguished the first column of companies? Most are disintermediating the middle man in different ways. They gun directly for the consumer and we trust them enough to connect to their ecosystems, which scale easily and across borders. Through the use of Artificial Intelligence, they learn about our behaviour and give contextual advice, directly.
This is a profound shift in business culture – and we’ve not yet truly experienced what new technologies such as blockchain can really do. It leads to the question: what industry will be spared the wrath of disintermediation? Read though my list of trusted advisor status seekers again. I can’t think of many…
Hope springs: Be sure to look out for the next installment of this five part series where I consider, in the true Christmas spirit, the three wise men and a revolutionary saviour that might just have a gift for all of us. If we are good, that is.