Trust Building Economics and the Darknet

[Applause]

what type

of environments push human beings to

their limit

where we get to experience human

greatness to the utmost

extent where human limitations are

questioned

and conquered the olympics are one such

environment they enable and incentivize

human athletes to compete at the most

excellent level

through athletic competition as an

economist

i study incentives and what kind of

outcomes

result from certain types of incentives

and i was thinking about different

mechanisms that are essential to human

beings and

how we exchange and i would like to

or i was thinking about pushing one of

these human mechanisms

to its upmost limit and that mechanism

is trust what does trust have to do with

an economy

well it is a really important component

of social capital that’s essential

and central to almost every single human

action

that we engage in from personal to

global

trust is what allows us and an economy

to grow it enables human beings

to adapt adopt and invent

new technologies trust

is what allows us to walk down to a taco

shop grab a burrito and be confident

that the ingredients in the burrito are

healthy

well maybe not that healthy but they’re

at least

safe to eat research shows

us that trust when it is high

economic growth and prosperity are high

and when trust is is or excuse me

when trust is high we have prosperity

being high

and crime and corruption are low

yet there are a lot of economies in the

world that suffer from a lack of trust

only 19 of millennials here in the

united states

believe that most people can be trusted

and this is down from 31 percent of the

previous

generation only three percent of

filipinos and four percent of colombians

think that most people can be trusted

research on trust

generation shows that it’s extremely

difficult to

generate trust

and social solutions and policy

solutions for trust generation

have mixed results at best

therefore i as a researcher was on a

quest

a mission if you will an intellectual

mission

to find an environment that not only

fosters but potentially

generates trust now

the reason i wanted to do this was to

overcome human disconnectedness

and trust is easy in an environment that

has a lot of rules and regulations so i

had to look

outside of that into a community without

a lot of rules and regulations

and what i stumbled upon was an

environment in the most

unlikely place this environment

challenges humans conceptions of

autonomy and governance

this environment probably more than any

other in the world relies on trust

the most and i to look no further

than drug dealers well not my drug

dealer of course absolutely not heavens

no

but drug dealers you see

the world of drug dealing has become

technologically sophisticated

in the past decade and most of it has

moved online

now this is because of technology like

blockchain

and cryptocurrency and proxy networks

millions if not

billions of dollars worth of

cryptocurrency has been exchanged for

illicit goods and services in these type

of marketplaces

you can kind of think of it as amazon’s

evil twin

here is a screenshot from a darknet site

called

empire market and there are various

listings among them

are cannabis cocaine and adderall

here is another snapshot of that same

marketplace

enterprise market that looks at listings

of credit card information

you may have got a notification from

your bank that they are combing the dark

net to make sure that your credit card

information

has not been stolen and is not being

sold this is exactly

what they’re talking about now the dark

net is a place that is completely

unregulated

and untaxed it is a place a perfect

natural experiment for me as an

economist to observe

human interaction and exchange without

intervention it’s a place that allows me

to really dive deep into what really

makes people tick without

third party enforcement and the dark net

does not have access

to traditional mechanisms of

communication

and exchange enforcement so it has to

come up with its own

two of the main components it lacks are

third party enforcement from a legal

source and also

face-to-face reputation building let’s

take the first

which is lack of third-party enforcement

traditional black markets also do not

have access to third-party enforcement

and this is why drug dealing is

typically associated with violence

if your drug deal goes bad you cannot

just call up the cops and have them come

settle the dispute

you have to bring your own muscle

similarly

the dark net does not have this third

party enforcement mechanism to turn

to if something goes awry therefore they

have to settle

everything themselves and they do this

in a variety of different ways

one way they do it is that the platform

provides the platforms provide

codified rules and regulations to

monitor

both buyer and seller behavior with

regards to the exchanges

that they are engaged in oftentimes

platforms

will no longer sell or promote any type

of good or service that they deem to be

too dangerous or harmful like firearms

or other weapons

they also settle disputes all in-house

there are monitors

looking at all the exchanges between

buyers and sellers

and they settle disputes and oftentimes

require a party to compensate the

damaged party

with cryptocurrency you can also be

kicked off a platform if you’re found to

have violated too many rules

or regulations this second mechanism

that the dark net does not have access

to with regards to moderating behavior

is face to face reputation building

i want you to think back to that taco

shop you go in you buy tacos and

burritos they see you

you see them you build a rapport and

presumably that taco shop would like to

continue doing business with you and

your friends so it’s incumbent upon them

to give you a good experience

you may leave the taco shop tell your

friends and family about it

write a yelp review about it and this is

how the shop builds their reputation

and you as a customer want to be invited

back you don’t want to

act too crazy not to be invited back so

both of you

are building a reputation that together

solidifies the exchange that you are

making

on the dark net people don’t have access

to a face-to-face interaction that’s

kind of the whole point they’re

anonymous to each other

and it’s very difficult to build trust

with people you don’t

know therefore these platforms have to

come

up with different mechanisms for their

users to get to know each other

and they do this in a variety of

different ways one of the ways that they

do it

is they allow usernames to be linked to

reputation for both buyers

and sellers buyers can write

reviews and leave a star rating on

vendors that sell them different

products

either good or bad much like uber

many of these sites are referral only so

you have to have a certain level of

reputation

to be able to even exchange at all and

you have to be verified

that you are a trustworthy participant

in this type of marketplace many

platforms provide

forums for you to communicate on and say

hey this is a really good experience

this wasn’t a good experience

many buyers go so far as to chemically

test

the products that they buy on the

darknet and post the results

on the forums to either verify or call

somebody out for selling them that they

selling them something that they didn’t

particularly order

so there are these different mechanisms

where it seems that people are kind of

looking out for each other

another way that these groups of people

differentiate themselves the vendors in

particular

is that you’ll come across products that

boast that they are fair trade certified

conflict-free or organic i came across

this vendor

that said that if you buy opium from

them you are supporting

local guatemalan farmers and not violent

drug cartels

interesting advertising mechanism that

apparently works

another way that these vendors

differentiate themselves is by offering

free samples

they also engage in what’s called

operational security and they can do

this in a variety of different ways

one of them is through technological

encryption and in other ways as basic

as packaging your specific product in

something that is relatively stealthy

an innocuous item like a book for

example i was talking to a buyer

recently and he was telling me about all

this different

stealth that he had seen and he said you

know what the most crazy stealth that

i’ve ever seen when i bought some

products off the dark net

was a pair of snowshoes he was like wow

this vendor went above

and beyond to really make this stealthy

product here and so

he’s all excited he proceeds to

completely tear these snowshoes apart

in search of the products that he

purchased turns out his aunt just sent

him snowshoes

which were now completely destroyed

unfortunately

so what does this all mean for us

the dark net is a crazy marketplace and

by no means it’s perfect i mean for

goodness sakes they’re selling

extremely harmful dangerous and illegal

goods and services

on this marketplace not only that

they’re subject to hacking from within

and also being shut down from law

enforcement from without

but what’s important is to look at the

relationship

and the transaction between both buyers

and sellers and what can we learn from

it in this otherwise hostile

environment the dark net could be a very

important key to the puzzle of trust

generation i mean

they’ve come up with solutions to the

craziest things

these people live in completely

different countries speak completely

different languages

they come from different cultures and

creeds they’re anonymous to one another

they don’t even have access to third

party enforcement and yet

they have been able to create an

environment

of trust enough to buy these extremely

dangerous products from someone you

don’t even know across

the world the black market

the dark net in particular tells us that

trust

can be generated in some of the most

challenging

places and me as a researcher

i would like to utilize that knowledge

to build

more trust in communities and do good

with it

so imagine what we could do with this

knowledge if we harnessed it to build

trusting

and committed communities relationships

and businesses if we harness the power

and the mechanisms

of private governance in-house

monitoring

and community accountability to build an

economy

that promotes human flourishing to the

utmost

extent now the olympics

push individuals to their physical best

and i would like to use this knowledge

that we’ve gleaned from the dark net

to push individuals to their best on

margins of intellectual capacity

cooperative capacity and community

building capacity

and then perhaps we might not feel so

disconnected

after all thank you

you