Trust is a scaling solution (pt. 2)

In civilized society he stands at all times in need of the cooperation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons. - Adam Smith, Wealth of Nations

Trust enables modern economies. Long, fragile supply chains held together with shoestrings and interpersonal relationships.

Mahatma Gandhi promoted the idea of “self-contained villages” as alternative to the “exploitation” of a factory civilization:

You cannot build non-violence on a factory civilization, but it can be built on self-contained villages…Rural economy as I have conceived it, eschews exploitation altogether, and exploitation is the essence of violence.

And Socrates in Plato’s Republic — before pitching his idea of Philosopher Kings ruling over brainwashed underclasses — says the best city would just simply live within its means and therefore wouldn’t need to make war on its neighbors to get more stuff.

Trust authoritarian tyrants, or trust hardly anyone at all. Naivety or cynicism.

It’s common knowledge in modern economics that trade and specialization are what make us rich. But how do we avoid the violence and conflict that Socrates and Gandhi warn of?

In a more sophisticated and larger economy, the opportunity arises for individuals to specialize in the production of more goods and to exchange them with many more people—people with whom they have no personal relationships, strangers with whom it is utterly impractical to keep a running tally of goods, services, and favors.

In his explanation of money in The Bitcoin Standard, Saifedean Ammous explains the “double coincidence of wants” problem, which goes beyond just a coincidence of “what” the two parties want, there are three more dimensions:

1. Coincidence in scales (how much)
2. Coincidence in time frames (when)
3. Coincidence of locations (where)

Naturally, money helps solve all of these via indirect exchange. A good money, the most “salable good,” is high quality in all three departments: salability across scales, salability across space, and salability across time.

But isn’t it interesting how trust can also help with these dimensions? Think of times when you’re settling a bill at a restaurant and you don’t have the right change to pay your portion in cash. You could ask your server to break your hundo, or perhaps your friend can just cover your portion. “You can get me back later,” he might say, trusting you will.

Even in the famous Rai stone example, you could give some a “fraction of a Rai stone,” not by breaking up a stone into smaller pieces, but by virtue of your word.

“Coincidence in time frames” is probably the most common trust relationship when it comes to money: loans. Give me some money now, I’ll pay you back in installments. Trust me! The widespread use of debt in our society even turns into a sort of price system for trust: interest rates are a price of trustability.

Trust even can involve itself in “coincidence of locations.” Trust can’t teleport a house you want to buy to a new more ideal location, but gold reserves were built on trust: it’s hard to move this gold around, why don’t you trust us to hold on to it? This misplaced locational trust is how we’ve ended up in this whole fiat mess to begin with.

In fact, I think I can argue effectively that trust has the potential to improve and streamline every aspect of money. Here’s Bitcoin.org on the properties of money:

Bitcoin has the characteristics of money (durability, portability, fungibility, scarcity, divisibility, and recognizability) based on the properties of mathematics rather than relying on physical properties (like gold and silver) or trust in central authorities (like fiat currencies).

Can trust pass the test?