Tuesday, April 02, 2013

The Untrustworthy and the Trustful

Aaron Jasinski
[This is an excerpt from The Five Stages of Collapse which seems quite topical given the new banking rules being set down in Europe and the US, according to which your bank deposits will no longer be guaranteed. With the precedent being set in Cyprus, bank deposits are being turned into unsecured loans, and when the bank folds you might get some bank stock, which you may or may not be able to sell, or you might get nothing at all. Now that large cash transactions and stockpiles are illegal, bank deposits liable to evaporate without notice, and gold likely to be re-regulated and re-confiscated before too long, what's your plan for opposing financial tyranny? I believe that before you can hatch any such plan, you must first decide: Who do you trust?]

Within a modern, highly financialized economy, most interactions are impersonal, based on purchase and sale within a market system. If you are the loser in any one transaction, it is your fault, because you chose to deal with people you had no particular reason to trust, and therefore it is your mistake. If the swindle is not illegal, you have no legal recourse. You can, of course, complain to a few friends, perhaps even blog or tweet about it, but then, in a market economy, more of a stigma attaches to being swindled than to swindling, and most people are reticent when it comes to telling the whole world that they let someone take advantage of them.

Once the financial sector goes through its inevitable deflationary collapse followed by a bout of hyperinflation, financial arrangements unravel precisely due to mistrust: nobody, from the largest banks to the humblest private individuals, knows who to trust—who is still “good for it.” Whatever transactions are still possible tend to be conducted in a furtive, suspicious, streetwise manner:“Show me the goods!”—“Show me the money!” Whatever business reputations people had in the financialized economy are either ruined or simply fade away. New reputations are established based on readiness to resort to violence or ability to oppose violence. For an individual who is not backed by a criminal organization, the chances of getting robbed go up appreciably. Instead of advertising, businessmen hide, afraid to expose either their product inventory or their wealth. For many, dealing with strangers becomes simply too dangerous.

A cultural flip is needed to change from impersonal, commercial relationships to personal relationships based on trust, and the first hurdle, for many people, is in understanding what trust actually is, because there is no innate human quality called trustworthiness, possessed by some people, lacking in others. Rather, it is more along the lines of a generalization concerning a given individual’s behavior over time, within a given relationship. Trust is transactional: a person needs a reason to trust you, and you need a reason to trust that person. There is, however, such a quality as trustfulness: this is the property of small children, tame animals and, most unfortunately for them, many regular, salt-of-the-earth, mainstream Americans. It is of negative survival value in the context of financial collapse. It is being exhibited for all to see by some of the people who recently lost money when MF Global stole it to cover some private bets it had made. They licked their wounds, complained bitterly, and then...went looking for another financial company—to be taken advantage of again. Since the head of MF Global wasn’t punished, why wouldn’t another company do the same to them, knowing that it can do so with impunity?

There also seems to be a certain set of traits possessed in abundance by a category of highly effective American financial operators that makes it easy for them to prey on trustful people. It may be the suits they wear, or the English they speak or their general demeanor—let us call it “trustiness,” to go along with the “truthiness” of their financial disclosures. Deep down, trustful people feel privileged to be robbed by such superior specimens. The predator-prey relationship has been honed to the fine point of a pen: told to sign their life away on the dotted line, the besotted, trustful American gulps quietly—and signs.

Clearly, whenever there is an asymmetry between trustfulness and trustworthiness, the trustful party loses. Trust is not the property of one individual but the property of the relationship between individuals, and it must be balanced. There are roughly three types of trust. The first and best kind is trust borne of friendship, sympathy and love. People simply do not want to lose the trust of those they care about, and will do anything they can to make good on their promises. The second type of trust is based on reputation. It is not quite as solid, because someone’s reputation can be ruined without you knowing it. People who realize that their reputation has been ruined tend to stop being trustworthy rather suddenly, because they see that they have nothing left to lose in the trust game. Rather, they try to salvage whatever residual value their formerly trustworthy reputation still holds by taking full advantage of anyone who is still trustful through force of habit, lack of up-to-date information, inattention or sheer inertia. The last category of trust, the worst kind, is coerced: it is a matter of making it too expensive or too unpleasant for someone to break your trust. If you are forced to do business with someone you don’t trust at all, trade hostages for the duration of the transaction or come to some other arrangement that compels good behavior from both sides.

The people most deserving of trust are usually one’s own relatives— provided the family is a close-knit one and that it has an internal reputation for being trustworthy, which it values. This is especially the case in societies where putting a stain on the family honor is considered to be a cardinal sin. The next tier of trust is generally reserved for one’s close neighbors, if the neighborhood is a relatively static, close-knit and mutually supportive one; if it is not, then neighbors can make the worst sorts of strangers—ones you can’t avoid dealing with even though you don’t trust them. The last tier of trust consists of complete and total strangers. Here, trust has to be tested before it can be established, by taking small risks: offering small but thoughtful gifts and seeing whether there is reciprocation; putting oneself temporarily in a weakened position (perhaps even on purpose) and seeing whether the other person offers help freely, refuses to come to your aid or attempts to take advantage. At the end of the process, either the stranger ceases to be a stranger, or he is excluded.

Obviously, it is never smart to signal your lack of trust, except in confidence. But for social interactions based on trust to work well, society as a whole must have a way of excluding those who are found to be untrustworthy. In a healthy community in which people normally cooperate or trust each other, there may be a few episodes where someone breaks the trust and is expelled or shunned. In a sick community where neighbors are alienated, combative and mistrustful of each other, you are better off shunning the entire community—by relocating. Sick communities of this sort—and I have seen a few—become sick quickly and take a long time to heal, if they ever do. A certain network effect makes a degenerate condition far more durable than a healthy one. In a friendly, cooperative community, the trust is between each individual and the community as a whole: n individuals—n relationships of trust. In a broken, mistrustful community, each individual mistrusts every other individual: that’s n(n-1). A healthy community of ten individuals has ten healthy, trustful relationships. A sick community of ten individuals has 90 broken, mistrustful relationships. It seems like a better idea to try to establish and maintain the former rather than attempting to fix the latter.

It may be helpful to put the concept of normal, cooperative human relationships based on trust into a wider context. Humans are a social species, and thrive through cooperation. Opposing groups of humans often fight: the bigger the group, the bigger the war, all the way to world war and, if we ever achieve a unified world government, perhaps to spontaneous self-annihilation. But within smaller groups—small enough to avoid the pitfall of self-annihilation through major conflict— cooperation prevails. The great Russian scientist and anarchist revolutionary Peter Kropotkin, in his 1902 book Mutual Aid: A Factor in Evolution, argued that it was cooperation rather than competition that made advanced species, including humans, successful. An emphasis on competition, on setting people against each other, on forcing them to struggle against each other economically, may benefit the community if it is viewed as a machine of expansion and domination, but only for short periods of time, and to the detriment of most of its members. An inevitable holdover from this bout of over-competitiveness is that the mindset of social Darwinism and a Hobbesian “war of all against all” remains prevalent, with people deriving their sense of self-worth from their individual, personal achievements and superiority rather than from their often unstated and informal membership in various groups without which they would have surely failed. This mindset is diseased and contagious, and there may not be time to cure it. When time is short and resources scarce, a better response to those who favor competition over cooperation is to give them more of their own medicine: no cooperation at all.



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13 comments:

HeyZeus said...

more and more it seems to me that you are writing to describe the ills that plague Pakistan...

Also, I can't order the book from Pakistan because Paypal doesn't recognize our credit cards... is there going to be a kindle version?

Wolfgang Brinck said...

I spent three years in the US Army back around 1970 and remember that much of the psychological training we underwent had to do with building trust within the training unit. Given that no one in the training unit knew anyone else when they arrived at the training unit, no one had any reason to trust anyone else.
Surprisingly, the way that the training staff created trust within the unit was to keep up a constant psychological assault on the members of the unit and also isolated us from any outside relationships. By necessity, we came to rely on each other and learned to trust each other and learned to distrust everyone else. Once the training period was over our network of relationships was allowed to extend beyond the training unit and the broader unit of trust was any enlisted man in the Army. The rest of the world, including American civilians made up the untrusted population.
Likewise, officers and anyone else of higher rank than yourself was regarded as untrustworthy since they were in a position to abuse their rank.
One quickly learned what type of people would abuse their rank and this was a useful skill to carry over into civilian life, that is, the skill to recognize people you couldn't trust regardless of how charming or friendly they were.
Much of this military training, of making recruits partition the world into people they could trust and people they couldn't trust seemed contrary to the norms of civilian society, but it had its advantages. By being part of the military, you became part of a large tribe whose members you could trust at a higher level than the general population. For the most part, the trust carried no benefits other than a sense of belonging which for instance allowed you to strike up a conversation with anyone else who was in uniform. Likewise, you could ask any other uniformed individual at an airport for a cigarette or some change without needing to feel like a panhandler.
Once I became a civilian again, I missed the feeling of trust I had with the members of whatever unit I was a part of and life devolved once again into something less tribal where one had no obligations to anyone else, but also had no opportunity to test the trustworthiness of relationships since all relationships could be mediated by the exchange of money rather than by trust that a debt incurred could be expected to be repaid in some way in the future.

Spaz Galore said...


In IT and in particular the big corporate hierarchies for me there has been far far less cooperative behavior than 10 years ago.

At Wells Fargo the tellers are supposed to create an emotional bond with clients so I indulge them with my emotional problems. Works for me.

subgenius said...

Kollapsnik - any views on alternative currencies (local, especially timebanking)...

It appears that they are a good way of developing trust relationships in a community, especially timebanking - as by signing up to a timebank an hour of your time becomes equal to an hour of somebody else's (irrespective of your skills). Admittedly the system is somewhat poor once material goods come into play (as an owner of material assets can sell for others time, without any demands on their own). Even in this case, though, it at least gives those without hard currency a way to acquire goods.

I have long thought (spurred by Lietaer's "Future of Money" back in the early/mid 90s) that the future of currency could revert to a pure individual trust mechanism. By allowing individuals to create their own currency and have a "trust-register" that allows for differing values - if you default, or break trust, your currency loses value, but you can work it back up by being a good counterparty in future.

This would all rely on technology to implement, admittedly, and thus is probably already an idea too late...

Atao said...

There is only one form of cooperation that can work on the long term, which is universal cooperation. What is universal cooperation? It is cooperation based on a universal mindset, universal awareness, universal consciousness (which does not mean at all, that you know everything, but makes you aware that you are a being with physical, social and spiritual needs and ego-enctric, ethno-centric and world-centric subframes of awareness which kick in according to situations and challenges).
So what is NOT universal consciousness?
1. World-centric consciousness (the mental framework of the probable eco-fascism ahead of us)
2. Ethno-centric consciousness (good old our nation against your nation, our tribe against yours, our religion against your religion)
3. Ego-centric consciousness ( I collaborate with myself. With others I may have some alliances based on my interests)
In all consciousness levels besides universal consciousness the "divide et impera game" is possible thus cooperation will inevitably be used to create competetion between groups or individuals from which a third party benefits. (a recent example is creating conflict between muslims and christians in France)
Thus collaboration in itself doesn't mean anything beneficial. Only universal collaboration with plants, animals and all other human beings can be the answer.
The central question is therefore: how can the few in which universal consciousness arises establish and protect a functional cristalization germ for the rest?

Black said...

I wrote this email recommending bitcoins to Dmitry on June 18th, 2011, I hope he is rich now, since Bitcoins are up 4000% since then...

---Good Evening Dmitry,

Your fondness for spreading a message of solidarity and cooperation among the planet's nervous system, or "us", compelled me to drop you another line. You once gave me some starting advice on ship building and I just left your site after overjoyedly viewing your pictures of your vessel's accommodations I recently stumbled on this newish digital currency while looking into lulzsec, the hacker group that's been publicly exposing the lack of security in what seems to be all stored databases of users and their personal info.

To get right to it, the thing I'm speaking of is a currency that has caught on in the digital realm called "Bitcoins". They are decentralized and already used by most world renowned "rejects" of the system. More encouragingly, they are used by the most cooperative and intelligent internet and computer users as a means of online trade, independent of all centrally planned banks and governments. It's open source, peer to peer, and has all of the stuff you might expect would grow out of this beautiful organism called the internet.

I expect that you had heard of this coinage, but if not, you can easily benefit from it's almost certain ten-fold increase in the coming years (by buying bitcoins through an exchange site like Mt Gox.com, not to mention accessing its unmatched network of "super-users" on the internets).---

Stanislav Datskovskiy said...

Bitcoin is quite nice: while there's power in your mains socket, the Internet functions smoothly, and the fiat exchange operators have not yet been shipped off to Gitmo on "financial terrorism" charges.

Who can say for how long these conditions will hold?

St. Roy said...

Hi Dmitry:

Mentioning Peter Kropotkin reminded be of E.O. Wilson's recent book "The Social Conquest of Earth", a treatise on the evolution of eusociality that began with the social insects (ants, wasps, bees, etc.). Homo Sapiens evolved that dimension but seem to be losing it with the end result being extinction. Fossil fuels seem also to have a role in this end game. Rapidly declining net energy and biosphere pollution will provide much added synergy to the consequences of lost eusociality.

vera said...

Right on the money, Dmitry. Couldn't possibly agree more. :-)

The Universe said...

@Atao

"how can the few in which universal consciousness arises establish and protect a functional cristalization germ for the rest?"

You are a bit of living universe. If you are conscious, you represent a tiny bit of the conscious universe.

If you are also aware that you are a bit of conscious universe, the universe then becomes self-conscious.

Having read the last statement, you are now aware that you are a bit of the conscious universe.

The universe now has self-conscious awareness.

The universe is now self-aware.

That is monumental.

Some self-aware beings have a very good sense of self-preservation.

Hell, even the unconscious among us are skilled at self-preservation.

Now that the universe has a self it will do what it takes to preserve it.

Personally I believe that this eco-fascism you're describing is part of the universal self-preservation mechanism.

The aware universe requires a biosphere if it wants to continue existing.

It will protect the biosphere even if that means doing away with industrial civilization.

Theodore Wirth said...

Quote from the film YOUNG EINSTEIN (AU 1988): "If you can't trust the governments of the world, who can you trust?" Seriously Dmitry, when will a Kindle version of your latest tome become available? I have little space left for the stockpiling of dead trees and carbon black.

rapier said...

One way to think about money losing its moneyness, for want of a better term, is to consider that corporations, their assets and debt are becoming the new store of value.

I know it's tricky since they have to be valued in something, dollars or whatever but I like to think of it in terms of not how many dollars does it take to buy GS but how many dollars does a share of GS buy. Everything we see now is that corporate assets are maintaining their 'value' relative to currencies.

This has been my idea for a dozen years. I have no idea how long it will work but I have always believed that is the goal. Corporations are becoming the new sovereigns. Partly by controlling and partly by co opting sovereign governments.

Corporations one might say are now, through the EU are now destroying whole countries. Well not sure if Cyprus qualifies as that. Which makes it all the better for test case. Pick the weakest and set the precedents.

Butch said...

Kropotkin is refering to what biologists now call "multilevel selection theory," which basically argues that some genes, while "selfish," coexist with other genes which encourage collaboration.

In computer simulations of evolutionary programs-- where simple algorithms (think the old game of "Life") "evolve" by getting stuff, which they can do by fighting other algorithms, or by collaborating, or by a judicious mixture of both-- the algorithms that do both are MUCH more successful than the selfish ones.

In real-life biology, we see this everywhere: almost every species collaborates-- to a certain extent-- with members of other, even antagonistic, species, and with members of its own species (think group rearing of the young, which we see in all more advanced organisms such as dolphins, corvids, primates, parrots, etc). The classic obvious example of this is animals fleeing a forest fire, where all predatory behaviour ceases. In humans, the stablest societies-- so-called "primitive" hunter-gatherer societies-- collectively child-rear as well as actively avoiding conflict with ozther groups.