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