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Facebook, Trust, and Referee Strategies

Beyond tech, trust in all institutions, in particular in businesses, is at historical lows. All business leaders therefore need to ask ourselves the question: what is our referee strategy?

This week, Mark Zuckerberg described the alleged misuse of Facebook data by Cambridge Analytica as a “major trust issue”. It provides a powerful reminder of a universal truth: every business is predicated on trust.

We trust that what we ‘buy’ will do what it is supposed to and won’t be harmful: that drugs will help us get well, banks will keep our savings safe and so on. AirBnb founder Joe Gebbia described his entire company as “designed for trust” — the trust (which once seemed a highly improbable basis for a business) to host a complete stranger in one’s home.

Consumers often lack the knowledge or information to judge the product directly and even if they could the transaction costs would be incalculable. Unless we are an analytical chemist we can’t know directly that even a simple bottle of water is free of harmful contaminants. Trust therefore often requires some kind of referee. There are many ways in which trust can be enhanced by refereeing — by expert endorsement, fair process, transparent consumer feedback or even market place rivalry. Most commonly however we boil the referee question down to “regulate or not”. Businesses are, with some justification, more likely to be concerned about excess rather than deficiency of regulation, especially in North America — but we sometimes take its benefits for granted. Good regulation can set reasonable standards for product safety and efficacy, discourage infringement of those standards, thereby providing confidence in products and companies, allowing markets to flourish and creating clarity, stability and predictability for companies.

In its early days, the tech industry enjoyed some measure of immunity from these considerations, thanks to our collective excitement at technological progress, its helpful and enchanting new products, and the charisma of its idealistic founders. This freedom created the flexibility that reinforced innovation and growth. Furthermore, we couldn’t readily referee it, because we didn’t know what the rules should be: we could not easily foresee the unintended risks and issues associated with technologies which were immature or even unknown.

Every industry eventually grows up. As the tech industry comes of age, it now faces multiple and significant issues, including data privacy, fake news, antitrust concerns and fear of unemployment driven by AI. It is no longer the enchanted and enchanting standard bearer for our civilization; like every industry, it has acquired a messy history, and the ability to break as well as make things, in ways that are no longer so charming. Ironically, though, tech innovation might be a key part of the solution to trust issues too– think about blockchain as an opportunity to build powerful decentralized trust mechanisms.

In many situations the ‘referee’ of the game is implicit, built upon strata of past decisions and accidents of history, rather than deliberate strategic choices. The tech industry now has some deliberate choices ahead. It has a historic opportunity to shape the right kind of regulation and other referee mechanisms and rebuild trust.

Beyond tech, trust in all institutions, in particular in businesses, is at historical lows. All business leaders therefore need to ask ourselves the question: what is our referee strategy?

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