Trust: a scarce commodity

January 30, 2011

We evolved in small societies. This has been the human condition for the vast majority of our existence. We have inherited the psychology of the great apes, and in particular of the human hunter-gatherers that succeeded them. In these times the dominant emotion was suspicion – it was not a good idea to place your trust in strangers. When we lived on the savannah, if another tribe came along, you’d have to have been very trusting to see it as an opportunity for trading. The competition for a fixed pool of animals meant that inter-group violence was prevalent. Yet since this beginning humans have somehow managed to construct an edifice based on trusting people who we don’t know. Trust allows us to become much wealthier as a society. But there is a fundamental paradox here. While it may be good for society, it can be very dangerous for individuals. Those who invested in Madoff know this lesson all too well. His company website sought to inspire trust:

In an era of faceless organisations owned by other equally faceless organisations Bernard L Madoff Investment Securities LLC harks back to an earlier era in the financial world: the owner’s name is on the door.

If you can get people to trust you, you have a very powerful tool. To this end the company Verolabs has a product called Liquid Trust, a spray which contains oxytocin, a mammalian hormone that plays an important role in orgasms, social recognition, pair bonding, anxiety, and maternal behaviour. You spray it on in the morning or just before an important meeting. Liquid Trust will work its magic – people around you will automatically trust you. The company website is full of glowing testimonials. Joe says:

I just wanted to say thank you……I was stuck in the same old job, barely making ends meet…I tried Liquid Trust and I finally got a very nice corporate job…While I was using Liquid Trust my relationship with my girlfriend wasn’t going well. Without really knowing what was going on it went from bad to wonderful. Best of all, she asked me to marry her! I would highly recommend this product. It can and will change lives for the better.” And all this for just $49.95 for two months’ supply. 

The word trust can be used in so many different contexts. Here are just a few examples of trust and its derivatives:

Trust me — I would never lie to you.

Shelia’s not the sort of person who you can trust with a secret.

He took it on trust.

You betrayed my trust.

I trust you slept well?

Trust Bill to be caught with his pants down.

I had my trust weapon with me.

He was a member of the museum’s board of trustees.

Microsoft is embroiled in a protracted anti-trust lawsuit.

Trust law was undoubtedly a vital innovation to the English common law legal system.  It could be described as a historical accident, but it was to have far-reaching implications that go way beyond the legal system. Its origins were in a feudal England around the time of the Crusades during the 12th and 13th centuries. It was designed to solve problems related to land. When a wealthy man died, the heirs to the estate had to pay a heavy death duty or his lands would revert back to the monarch.  One ingenious solution was to transfer this wealth to somebody else before he died, thus invalidating the attempts of the crown to seize the land. Those lawyers thought of a brilliant ruse –choose a group of friends of the property owner. They would hold it in trust for the use of another. The trust became a separate entity, technically it was a corporation. It did not belong to the state, but it had real powers, which caused resentment among rulers. Indeed Henry VIII tried to ban them in England. And they were outlawed after the revolutions in France, Russia and China. This simple tax-dodging device would take on a life of its own and would be exported to many other fields. The East India Trading Company, Lloyds of London and the London Stock Exchange would all follow this model. Nowadays organisations such as the Scouts, the RSA and Oxfam are governed in this way. Britain would get a thriving civil society that had nothing to do with the government. They formed a buffer between the state and the private citizen. Ultimately it was applied to democracy by such thinkers as Edmund Burke. In Burke’s model of representative democracy voters elect their representatives as ‘trustees’ for their constituency. These trustees are not automatons; they can act in what they believe to be the common good even if that goes against the short-term interests of their constituents. It later migrated to the USA and was behind the mighty trusts and corporations that now dominate economic life.

Economists have a lot to say about trust, which they see as essential for the creation of a well-functioning system and the cultural key to prosperity. All of economic life involves exchanges between people – buying, selling, borrowing, lending, investing and so forth.  All of these transactions depend on trust. All societies exhibit trust but if that trust is maintained within small groups only, then this is a serious impediment to wealth creation, because your transactions are going to be limited. One of the ways we have learned to trust other people is that we trust the institutions within which they work. Even the most basic goods such as a pencil or a shirt, depend on complex links between suppliers from across the globe. Without the glue of trust the system would come unstuck. You need to be sure that the suppliers will deliver the right goods on time and payments have to go on down through the supply chain

How is trust enforced? There are two key mechanisms: the rule of law and social norms. Laws need to be made and enforced so that contracts and agreements will be respected. But law does not exist in a vacuum and by itself it is not enough. You need citizens who are engaged with the system. Social norms mean that if somebody fails to fulfil his side of the bargain, you will not do business with them in the future. The trick is to find ways to make it worth your while not to break trust. In stable societies, transactions between strangers are often self-policing.

And what about the financial system? For all its mathematical models, finance is not physics. In fact, it runs on faith. Trust is crucial in financial exchanges. The system worked well for many years but there is always a certain fragility. We forgot about what happened in 1929. We thought that the good times would continue for ever. There was a transformation in the sector from traditional relationship banking, where lenders knew the people who were borrowing from them, to a new system of arms-length finance, where investors bought bundles of anonymous securitised loans. Banks can be bailed out, but faith in the financial system may prove harder to repair.

Am I optimistic? No. It’s far easier to destroy a society than to build it. Trust is an elusive, fragile element. Social norms stop working and laws break down. Building trust from scratch is a daunting task. This is a pessimistic view if we consider countries like Somalia. You can’t bomb countries into a trusting state. Maybe the Pentagon should have got in touch with Verolabs. They could have sprayed Afghanistan or Iraq with Liquid Trust. I don’t think the results could have been much worse than they actually turned out.


Quotes about trust

January 30, 2011

Love all, trust a few, do wrong to noneWilliam Shakespeare

To be trusted is a greater compliment than to be loved.   George MacDonald

Trust no one unless you have eaten much salt with him. Cicero

The truth is that all men having power ought to be mistrusted. James Madison

The glue that holds all relationships together – including the relationship between; the leader and the led is trust, and trust is based on integrity. Brian Tracy

It is better to suffer wrong than to do it, and happier to be sometimes cheated than not to trust. Samuel Johnson

Trust everybody, but cut the cards. Finley Peter Dunne

Do not trust the cheering, for those persons would shout as much if you or I were going to be hanged. Oliver Cromwell

The fact is there is nothing that you can trust; and that is a terrible fact, whether you like it or not. Psychologically there is nothing in the world, that you can put your faith, your trust, or your belief in. Neither your gods, nor your science can save you, can bring you psychological certainty; and you have to accept that you can trust in absolutely nothing. Jiddu Krishnamurti

Never trust the advice of a man in difficulties. Aesop

Put your trust in God, but keep your powder dry. Oliver Cromwell

You may be deceived if you trust too much, but you will live in torment if you do not trust enough. Frank Crane

It is impossible to go through life without trust: That is to be imprisoned in the worst cell of all, oneself. Graham Greene, The Ministry of Fear


My media week 30/01/11

January 30, 2011

On the Interview author Ursula Le Guin, talks about science fiction and the influence of anthropology on her work.

The Observer’s Nick Cohen attacks the prose of academics in the arts, humanities and social sciences: Academia plays into the hands of the right

In Newsweek Sharon Begley argues Why Almost Everything You Hear About Medicine Is Wrong.

In Start the Week Andrew Marr talks to John Gray about our delusional quest for immortality, anthropologist Kathleen Richardson assesses how far robots could take over the earth, science fiction writer Paul McAuley imagines a utopian world in the hostile environs of Jupiter and Saturn, and cultural historian Dai Smith offers up an alternative history of his native South Wales


Ballet: intimate touching, gay danseurs and some tractors

January 23, 2011

A dancer, more than any other human being, dies two deaths: the first, the physical when the powerfully trained body will no longer respond as you would wish. After all, I choreographed for myself. I never choreographed what I could not do. I changed steps in Medea and other ballets to accommodate the change. But I knew. And it haunted me. I only wanted to dance. Martha Graham

Ballet is not technique but a way of expression that comes more closely to the inner language of man than any other. George Borodin

There are likewise three kinds of dancers: first, those who consider dancing as a sort of gymnastic drill, made up of impersonal and graceful arabesques; second, those who, by concentrating their minds, lead the body into the rhythm of a desired emotion, expressing a remembered feeling or experience. And finally, there are those who convert the body into a luminous fluidity, surrendering it to the inspiration of the soul. Isadora Duncan

 

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Ballet is a blend of movement, music, athleticism, colours and emotions. It is humans stretching their bodies to the limit and defying the law of gravity. It is rich in fascinating contrasts. It tells a story but there are no words. It engages the intellect and the emotions. It combines athleticism with the cerebral. It is both classical and modern. It began as a courtly discipline but it would become a mainstay of the USSR, where ballet dancers were driven to achieve international fame for the glory of the state. Ballet is sexual, it is a celebration of the beauty of the human body and the performers engage in a lot of intimate touching. Yet it is not really sexual, as for those who dance, it is an extremely demanding job that requires the utmost concentration.

To become a great dancer requires great sacrifice and rigorous perfectionism: most professionals began their training when they were just a few years old. This sacrifice has been a theme of a number of films about ballet. The most recent example is Black Swan, a psychological thriller about a ballerina (Natalie Portman) preparing for her leading role in Swan Lake. The haunting final image of a white tutu oozing blood reflects the contrast between the beauty of the art and its darker side. It is not the first film to look at this theme. In The Red Shoes a ballerina becomes a star but falls in love with a young composer, and she is stuck between her love for the composer and her desire to triumph in the world of ballet. Recently I have been reading Apollo’s Angels: A History of Ballet, by Jennifer Homans, a former professional ballet dancer and now dance critic for The New Republic. The book’s title is a reflection of how Apollo’s perfectly proportioned body inspired ballet dancers through the ages. The book begins with ballet’s origins and ends with her rather pessimistic view of what the future holds for the art. The story of ballet is much more than mere dancing. It encompasses history, politics, revolutions gender roles and much, much more.

The origins of ballet may have been in renaissance Italy but it was in France where it would find its feet. It had come first to the court of Catherine de Medici. But it was during the reign of Louis XIV where it was codified; the five positions were given their names and written down for the first time by Pierre Beauchamp. These positions became the grammar of classical ballet. Ever since French has been the language of ballet.  

Ballet was performed in the presence of kings. This was a very hierarchical society; posture, nobility and character were seen as inextricably linked. Louis XIV, the Sun King, was an accomplished dancer, who worked very hard at his technique, especially in his earlier years, practising on a daily basis and performing regularly in his own spectacles and productions until he “retired” in 1670. At the beginning ballet was for men. The relationship between men and women was a chivalric one – the man had to show his technical prowess while women were expected to exercise restraint.

Gradually the aristocrats were eased out as the dancers became professional. The French Revolution, whose raison d’etre was a hatred of all things aristocratic, was to have dramatic consequences for ballet, with all its aristocratic associations. A new kind of ballet was born. By the 1830’s male dancers were reviled and scorned. This is the age of Romanticism and the Romantic critic Jules Janin was categorical: “.I know nothing more abominable in the world than a danseur. Under no circumstances do I recognize a man’s right to dance in public” And since the nineteenth century Western society has adopted a negative view of male ballet dancers, who are seen as weak, feminine and homosexual.  I found a nice riposte to this in this article called Don’t Judge Me By My Tights:

My business attire is a pair of tights. All right, there it is. I wear makeup onstage, and some of my colleagues are gay. Can we move on now? Can we leave behind the tired male-ballet-dancer stigma—that ballet is not a masculine pursuit—in order to move toward an appreciation of the athleticism and artistry involved in this line of work?

On an average day at the job, I handle lithe, lovely women, engage in duels and delight in the experience of an exotic locale. I move like a gymnast or martial artist and embody the vilest of pimps or the most chivalrous and passionate of lovers. I constantly expand the borders of my physical capabilities, and I hone my mind to a quick-learning, focused edge. Come 8 p.m., I’ll fuse dynamic movement and storytelling with the grandeur of a full live orchestra.

With the demise of the danseur, ballerinas were able to step into the void. At the centre of the Romantic vision was the ballerina; the danseur was demoted to the position of carrier for the star ballerina. His role now was as a foil to her beauty and talent. What audiences wanted to see was the grace and beauty of the ballerina.

Let’s fast forward to another revolution. It’s 1917 and the Bolsheviks have come to power. The future of ballet must have seemed bleak. An art form born in aristocracy is not what you would imagine in a proletarian state. But it was preserved and ended up as one of the pillars of Soviet culture. Classical ballets remained but the aristocratic air and was toned down a bit of muscle was added. The Soviets also gave us something new – the tractor ballet. These spectacles were infused with socialist realism reworked to glorify the image of the Soviet state. Socialist realism. Now there’s an oxymoron. The tractor ballets, with their smiling faces and gleaming new agricultural equipment, would reflect he creation of a socialist nirvana. In the cold war ballet would provide the state with prestige, with the presence of the Bolshoi Ballet, a cultural icon, causing furore on their tours of the West. Russian dancers became household names, though many would defect.

From its birth ballet, with its emphasis on convention and hierarchy, has been very much a question of state, reinforcing the authority of such disparate figures as Louis XIV and Josef Stalin. I have never been especially interested in ballet but reading Ms. Holman’s book has allowed me to see ballet in a new way. I hope you share my enthusiasm.


Cheapuccino and other new words

January 23, 2011

Here is another selection of new words I found on the Wordspy website

appraisal mill

An unscrupulous company that provides misleading or erroneous appraisals, particularly for real estate.

BIY

Purchasing the materials required for a repair or renovation that one has hired a tradesperson or other professional to perform. [From the phrase buy-it-yourself.]

cheapuccino

An inexpensive, low-quality cappuccino, particularly one from a vending machine; a cappuccino made from brewed or instant coffee.

competitive commuting

Racing another cyclist while commuting to or from work.

copyfighter

A person who opposes copyright laws and practices that he or she perceives to be unfair.

cougar

A middle-aged woman who seeks sexual or romantic relationships with younger men. See also: cougar lift Cosmetic surgery performed on a middle-aged woman to enhance her prospects of dating younger men.

locapour

n. A person who drinks only locally produced wine or beer.

robo-signer

A person who signs a legal document without reading it or understanding the document’s contents.

slow cinema

A movie genre that features slow pacing, minimalist scenes, long takes, and a focus on details and mood rather than narrative.

workweek creep

The gradual extension of the workweek caused by performing work-related activities during non-work hours.


My media week 23/01/11

January 23, 2011

Live free or die” is the slogan found on the license plates of vehicles throughout New Hampshire, America’s most libertarian state. The BBC podcast Americana included a feature on American libertarianism

Reason.tv criticises the reaction to the recent Arizona  shooting: The Week in Stupid – Cable Pundits on the Giffords Shooting

The LSE has a number of interesting podcasts including: Evgeny Morozov on The Net Delusion: Does free information mean free people?

Business week looks at how Apple might fare without its charismatic CEO: .Apple, With or Without Steve Jobs

And The Onion has these videos: Morbid Curiosity Leading Many Voters To Support Palin and  FactZone Viewer Has Sad, Pathetic Life


Planned obsolescence

January 16, 2011

I accost an American sailor, and I inquire why the ships of his country are built so as to last but for a short time; he answers without hesitation that the art of navigation is every day making such rapid progress, that the finest vessel would become almost useless if it lasted beyond a certain number of years. Alexis de Tocqueville, Democracy in America, 1840.

Planned obsolescence is not really a new concept. God used it with people. Robert Orben

The article that refuses to wear out is a tragedy of business. Advertising manual, 1928

 Much so-called planned obsolescence is the working of the competitive and technological forces in a free society—forces that lead to ever-improving goods and services. Philip Kotler, marketing guru.

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The other day TVE showed a documentary Comprar, Tirar, Comprar (Pyramids of Waste) about planned obsolescence. The tone of the programme was anti-capitalist but I suppose that is par for the course. The subject is definitely worth further consideration.

Planned obsolescence is a policy of deliberately designing a product with a limited useful life, so it will become obsolete or non-functional after a certain period. The idea behind the strategy is to generate long-term sales volume by reducing the time between repeat purchases. The notion that it takes place has gained widespread credence but how real is it?

The programme made some interesting points but I think they failed to look at the benefits of the process. There was one French professor, Serge Latouche, who suggested that we could somehow stop in the 1960s. that seems absurd to me. We humans have many flaws, but we are fantastic innovators. What we should be doing is looking at more sustainable designs.

The term planned obsolescence is associated with Brooke Stevens, an American industrial designer, who used it at a talk given in 1954. However, it probably goes back two or three decades more. In 1932 Bernard London published a paper called Ending the Depression Through Planned Obsolescence. His solutions to the crisis echo Aldous Huxley’s Brave New World:

“I maintain that taxes should be levied on the people who are retarding progress and preventing business from functioning normally, rather than as at present on those who are cooperating and promoting progress. Therefore I propose that when a person continues to posses and use old clothing, automobiles and buildings, after they have passed their obsolescence date, as determined at the time they were created, he should be taxed for such continued use of what is legally “dead.” He could not deny that he does not posses such goods, as he might hide his income to avoid paying an income tax, because they are material things, with their date of manufacture known. Today we penalize by taxation persons who spend their money to purchase commodities, which are necessary to create business. Would it not be far more desirable to tax instead the man who is hoarding his money and keeping old and useless things? We should tax the man who holds old things for a longer time than originally allotted.”

There are important kinds of planned obsolescence:

Functional obsolescence is a type of technical obsolescence in which companies replace old technology with a newer one with more capabilities. How evil of them! Of course sometimes they try to speed up the process by making repairs to an old model nearly as expensive as buying a new model. 

Systemic obsolescence is the deliberate attempt to make a product obsolete by altering the system in which it is used in such a way as to make its continued use difficult. For example, technical support may be withdrawn.

Style obsolescence occurs when marketers change the aesthetic elements of its products so customers will purchase products more frequently. The style changes are designed to make owners want to purchase the latest version even if their one is working perfectly well.

One of the examples in the documentary is the light bulb The idea of a conspiracy to prevent the manufacture of a permanent light bulb is a perennial topic for discussion. There is a famous light bulb, the Centennial Light, which has been lighting a fire station for 104 years (911,020 hours). The documentary refers to the Phoebus cartel, which included Osram, Philips and General Electric, and whose goal was to banish ever long-lasting light bulbs from the face of the earth.

This is the stuff of great conspiracy theories but according to John Kay it is all a myth. He describes the following scenario: Imagine there are several competing producers of light bulbs. An inventor approaches one of them with his everlasting light bulb. While sales will fall when all the world’s bulbs have been replaced, until then it will enjoy a 100% market share. It would be its competitors who would be losing sales. Innovation is a fundamental part of a competitive market. What firm would be willing to let such a business opportunity escape? Kay argues that it was always possible to manufacture light bulbs that would last for many years. The problem was that the higher cost and lower efficiency made them unattractive to consumers. It is just recently that new technology has emerged that enables low energy bulbs to be manufactured at a cost close enough to that of a conventional bulb.

In what situations can companies get away with planned obsolescence? Economists tend to be very sceptical. In many cases we are the ones who demand it. The planned obsolescence isn’t necessarily because manufacturers are purposely building cheap crap that has to be replaced in a few years. I would also argue that not everything should last forever. Manufacturers suppose that you will  buy a newer model in a few years, so there isn’t any reason to spend a fortune making the product last longer than you plan to keep it – it would be absurd to have materials that lasted 15 to 20 years in a mobile phone.  We all love to nostalgically remember how things used to last much longer in the good old days but the reality is that we probably won’t be using them long enough to care. We may say we want our products to last, but our actual behaviour tells another story.

We may well need to look at the negative externalities of disposing of so much stuff. These costs may well not be reflected in the prices of many goods. Ultimately we have the power. Capitalism is very good at giving us what we want. If we hear that a company has installed a chip in a printer that will automatically stop it working after a certain number of uses, then we should boycott that product. Thomas Sowell has argued that capitalism is a misnomer:

“What is called “capitalism” might more accurately be called consumerism. It is the consumers who call the tune, and those capitalists who want to remain capitalists have to learn to dance to it.”

If we want longer-lasting products, we will get them; we have that sovereignty. Let’s make sure we use it.