What is my reputation worth? The new gold in the sharing economy

Leaving aside that I hate the term “sharing economy” (we’re not sharing, we’re collaborating!), I have been struck recently by the rise of a new form of currency, a new measure of value. I’m not talking about Bitcoin or similar, interesting as they may be. I’m talking about reputation.

by Maja Petric for Unsplash

by Maja Petric for Unsplash

The main barrier to the sharing economy is human nature.  New technologies make transactions easy, and they will become more frictionless as payments and processes get faster and smoother. The problem is trust. I don’t know you, so why am I going to send you my money before I receive the product or service? Or, why am I going to show up to do some work for you if there’s a strong possibility that I won’t get paid?

Since the beginning of human interaction, trust has been our most valued commodity. It enables us to form communities, the backbone of civilization. It allows for specialization, provides opportunity for commerce and growth, and opens the doors to innovation. Yes, it generally requires a leap of faith, but one that, done wisely, brings huge rewards.

All commerce is based on trust, to a certain extent. In a restaurant, take-out place or coffee shop, they don’t ask you to pay before they start cooking the food or preparing your beverage. They trust that you’ll pay afterwards. In a taxi, you don’t know the driver. You trust that he’ll take you to where you need to go.

Online, the trust gets diluted by distance. There is no personal connection, no physical presence, no “skin in the game”, no eye contact or handshake. The fraud issues suffered by e-commerce sites at the dawn of the internet revealed our vulnerability online, with no real contact between buyer and seller. Payment methods and registration filters evolved to reduce the fraud incidence, and they worked, in an expensive, cumbersome way. The rise of the sharing economy is making us re-think how we approach the issue. It’s making us realize that that trust is based on connections.

by André Freitas for Unsplash

by André Freitas for Unsplash

In the sharing economy, there is a physical exchange. People show up to pick up the keys to your house or your car. You leave your pet or your electric drill at someone’s house. You meet the other party to the transaction, or at least you have some communication with him or her. Maybe you check each other out on Facebook or LinkedIn. It’s much easier now to get a “feel” for someone from their profile, which, while in no way a full measure of their personality and values, can at least give some idea of what kind of person they are.

And, of course, there’s the ratings. Obviously we’re going to first check out providers with five-star ratings, and we’re going to read the reviewers’ comments. We’re going to pore over any negative feedback with a magnifying glass. We’re going to look at how many times this provider has worked with this platform, we’re going to count how many reviews he or she has received, and we’re going to base our level of trust of this person on his or her online “score”.

This is very comforting for the customer, as in, not only do we have an idea of the quality of the service that we’re going to get, but we can also be pretty sure that the provider will do their best to get an excellent rating from us, to boost their rankings and to get more work. With this much transparency, they have a very big incentive to avoid a bad review. They’re going to work hard for us.

Now, let’s take a look at things from the provider’s point of view. They work hard, they provide a good service, and slowly they build up a good rating. Things are going well, no? But they soon realize that that rating locks them into that service. If they wanted to sign up with another collaborative economy platform, either in the same field or a completely different one (a freelance designer could also dog-sit, or an apartment renter also has a car she doesn’t use very much), they have to start all over again. They worked hard for that reputation. Why can’t they export it?

For several reasons, to do with technology, data, and business philosophy. Let’s look at the business philosophy first. A collaborative economy platform’s main assets are, what? It’s data. The data on the providers, and their reputations. That’s what the customers want, right? A quick answer to “who will provide this service for me?”. The platform’s data is what offers the answer. And if one platform has better data than another, it has a competitive advantage. So, why would a business give up its main asset, its competitive advantage? In other words, why would the “sharing economy” share?

Taking this further, legally the data belongs to the platform, since you no doubt checked the right boxes when you signed up. But, we’re talking about your reputation, which you earned through hard work. Does your reputation belong to the business, or to you? I mean, it’s yours, right? Or is it? What about when your reputation is based on others’ opinions of you? Do you own those opinions, or do the people who expressed them? If you owned them, what would stop you from changing them?

Can your reputation be reduced to mere data? Isn’t it a bit more complex than that?

Here’s where technology steps in. Yes, your online reputation can be reduced to mere data, but the management of that data is becoming increasingly sophisticated. In reality, our online persona is no more than bits and bytes and pixels, and our reputation is an extension of that. It can be argued that a reputation is more personal and more valuable than a Facebook profile or an Instagram account. But it is data, and it belongs to the platforms on which this data is entered. (Data may want to be free, but it can’t and it shouldn’t, think of privacy protection and fraud prevention.)

screenshot from traity.com

screenshot from traity.com

That is changing. Several start-ups want to help you to create an online reputation that you own, that you can use to get work on a wide range of collaborative platforms. The idea of exporting and sharing trust ratings is not new, and not simple. Many have tried and failed (such as Legit, Briiefly, WhyTrusted, Scaffold, Webcred, Credport, Virtrue, Peertru.st, Fidbacks, Tru.ly, ConnectMe, SettleBox). TrustTribe, TrustCloud, eRated and Traity are working on new ways to objectify and package ratings and recommendations. The task is worthwhile, but tough, given the complex nature of trust issues, platform requirements and data sensitivity.

Among the many obstacles these services need to overcome are:

Resistance from the users (= the providers of services and/or goods on the P2P platforms). Right now they need to create reputations on the individual platforms and on a range of trust aggregators? With so many to choose from, it’s probably easier to wait for the dust to settle and see who wins. But without users, it will be harder to determine a winner. That sounds like an unproductive cycle.

Resistance from the platforms. Why install a third-party API when their individual systems seem to be working pretty well? Why complicate things? The new trust aggregators will probably be able to sign up new P2P platforms (of which there are, and will be, many), since installing a ready-to-go system is faster than building one. But the established players don’t have much of an incentive to give up control of the data and the user experience.

Potential competition from Facebook should it move into this space (possible/likely, since it knows more about individual participants than possibly their own mothers, and since it recently hired the founders of now-closed trust platform Legit).

It does seem that too much competition in this space will not solve the problem of having to re-create reputations from scratch. However, a certain level of compatibility and collaboration amongst the winners of the race to mass adoption, along with cooperation from the platforms, could change the collaborative economy as we know it. Even more providers would be motivated to invest in their personal brands, effectively setting up micro-businesses and changing the character of today’s workforce. A significant increase in the number of people working from home would have an impact on transport, real estate, ecommerce and home services, and the ripple effects would be fascinating.

But we’re getting a bit ahead of ourselves, there are still so many technological, legal and even philosophical issues to work out. Trust is not generally a relationship with only two parts, especially online. By two parts, I mean we hardly ever see (again, especially online) the case where A trusts B. What we see is that A trusts B to do X. A three-part relationship. So, if I trust Raquel to provide a good, clean bed for me to sleep in, does that mean I trust her to babysit my children? When we talk about the exportability of reputations, isn’t that what we’re implying?

When it comes to work contracted online, the cross-sector application is more simple, depending on the type of task required. Knowing that Alex keeps a tidy house and is a pleasant host probably means that he is also a punctual and companionable driver. Knowing that Celia has a special connection with dogs probably means that she’d also be a good babysitter. But it does not mean that she is a good graphic designer or a good PHP programmer. So, how exportable should a reputation be?

Some platforms allow the providers to rate the clients. But this is not yet as extended as it should be. In many cases, it’s a safety issue. Are you really going to let a complete stranger into your car or your home? If they have a good rating, yes. Many companies already use this practice to protect their drivers and renters, and in my opinion it should extend to other sections of the collaborative economy. Clients could be rated according to their pleasantness, to their fairness, to whether or not they bother to review. We could well end up with a tiered collaborative economy, with “favoured” clients getting better prices or additional service. Clients should be given an incentive to behave impeccably, too. How long before we see the emergence of platforms that allow customers to manage and export their reputations?

Trust and reputation are both complex issues that will need to be simplified if the collaborative sector is going to become the economic force for good that its proponents promise. It is still a very small part of the business world, but as it continues to scale, efficiencies and transparency will become ever more important. With so many smart brains working on the problem, a winning solution will emerge, although it could take some time. Meanwhile, we shall continue to make individual leaps of faith that support transactions, produce connections and generate value, based on fragmented information, packaged data, and the most traditional indicator of all: our instinct. As unquantifiable as it may be, it’s served us for centuries. Until it gets its data-enhanced makeover, it’ll do.

Leave a Reply

Your email address will not be published. Required fields are marked *