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Comment by i_am_proteus | Hacker News Reader

I appreciate the author's framing of "transaction costs." These costs are often hidden.

It seems that as systems scale (in size) they tend to become inherently lower-trust. Consider a physician who makes house calls (not uncommon as recently as a few generations ago, and certainly not incompatible with modern medicine) and a large medical system such as Kaiser Permanente or NHS.

The economic benefits of the larger-scale system are obvious, and are directly measured, but the economic detriment due to increased transaction costs (derived from decreased trust) are neither obvious nor readily measurable.

Upsides of systems at scale can still outweigh downsides, and often do, but I suspect many industrial systems have a maximum scale above which efficiency gains lose out to, in this author's framing, transaction costs.

This abuts certain natural "borders" for system growth, such as national (or in the case of EU, common market) boundaries.

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One thing I took away from the beginning of Matt Ridley's book Rational Optimism is that with trust, commerce is unlimited.

And here we are stuck in this world where the computer in your pocket is untrustworthy, and you can't tell a useful benign app from an app trying to upload your life.

and it's a shame.

> you can't tell a useful benign app from an app trying to upload your life.

This is going to be an unpopular opinion, but it appears only 32% [0] of people care enough about privacy to switch to a service that preserves it.

I suspect an even lower percentage know that apps on their phones might even be trying to upload their lives.

This is not the source of "mistrust".

[0]: https://hbr.org/2020/01/do-you-care-about-privacy-as-much-as...

I strongly disagree with your take on that survey. For one, it only mentions switching, not removing something (like social media) from your life. I have not switched providers because I found one that was more private. I have deleted facebook.

To be fair on those 68% who "don't care" they can't tell if they are using something that cares about their privacy or not.

Imagine two options of (1) an organisation who claims to do the right things and (2) an organisation who makes no claims. Picking either option could be a rational response for someone who cares about privacy. Any strategy has to account for the existence of liers/incompetents who claim to do something then don't.

To make privacy conscious decisions requires monitoring many information channels and having a nuanced understanding of the history and motivations of the people involved. That is too hard to do for most rational people. They need clearer support outlining what they are meant to be doing than what they get.

32% of a sample size of 2601.

Your is probably an unpopular one, but I'd guess because of questions like "Who are these people that cared about privacy, were willing to switch and did actually switch, but don't realize that their phones might even be trying to upload their lives?" Unless you meant that the results of that survey showing 32% of people cared enough that they actually did something about it, in which case, that's not really an opinion. Just a fact that a very small survey (out of the people who use services/companies that can be switched from, if they cared enough to do so) includes a segment that seems to represent "people [that] care enough about privacy to switch to a service that preserves it."

What this survey does not try to establish is what percent of people "cared" and are "willing", but found it not worthwhile to switch, for reasons such as "this is how I communicate with my friends and I cannot convince them to switch" or decided it just wasn't worth it due to other costs.

For me, WhatsApp comes to mind, but I'm guessing it's a somewhat common problem. I personally do NOT want to use WhatsApp, but I have a group of friends that will not switch and especially with Covid, I do not want to lose those connections. Replace "group of friends" with <community> and WhatsApp with <whatever app>.

Not sure what you even meant by "This is not the source of mistrust". m463 pointed out a couple of things, neither of which was a _source_ of mistrust.

> only 32% [0] of people care enough about privacy to switch to a service that preserves it

This statistic reflects my unscientific view also.

I am very privacy conscious (I still have a gmail account but that's for job hunting only!) but I know few others that are, however, if these others experienced something detrimental as a result of giving away their privacy then I suspect that 32% figure would increase... but until that happens, people won't care.

Protecting your privacy online these days is time-consuming and, if I'm honest, exhausting: it's a constant arms race between stopping evermore intrusive code from data mining the hell out of me and just being able to use things without constantly analysing them to ensure they're legit.

In fact, yesterday I went to the eff site [0] to see how much data my browser was giving away and even though I have it locked down (I still have js) I was unique anyway...

I've asked myself in the days when I feel like just giving in "what is the danger from <shady company> knowing all this stuff about me?"... And, in all honesty, I haven't come up with an answer that would satisfy that 68%.

[0] - https://coveryourtracks.eff.org/

> It seems that as systems scale (in size) they tend to become inherently lower-trust.

I think the commodity markets (grains, coal, oil, steel, etc) are a significant counterexample: they do use spot checks but by and large run pretty lean on mechanism and rely on trust.

Another one is customs enforcement.

I'll agree, but also note that commodities are fungible.

Sorry, that was precisely my point. Commodities depend on their fungibility: that wheat is all durum and has an impurity level below X; the sulphur level of that crude oil is between Y and Z, and so on. Plus that the seller will deliver per the contract

There's a game theory argument that the system is somewhat self-managing; though you could defect in any single transaction your reputation would suffer and it wouldn't be worth it.

Perhaps it's a good counterexample because of its size: everybody purchasing directly in the commodities market (i.e. people who take delivery) can afford to have one bad batch because their volume is so high. But still, that depends on some degree of gatekeeping on the input side.

Indeed, and good food for thought. The fungibility is a feature both of these products being commodities in general, and of their quality being measurable. When measuring quality is cheap and easy, the risks for a defector are high.

When measuring quality is expensive and/or difficult, the risks for a defector are lower, and the defector's incentives may therefore be comparably greater.

I've spent a few years in a couple of bulk commodities, and I'm sorry, but your thought about commodity markets is simply not true in my experience. There are entire webs of institutions and mechanisms that make sure people do not defraud each other.

Some keywords - look into Letters of Credit, Bills of Lading, Certificates of Origin, INCOTERMS, and the requirements to make these work (such as inspection certificates from independent third-party organisations like SGS or CIQ). Bulk commodities can be sampled, tested and certified as many as 4-8 times in between buyer and seller, on a dozen different criteria.

Bulk commodity trading happens in an intrinsically low trust environment - it is frequently arms-length, cross-border, multiparty, for millions of dollars per transaction, and with a crazy number of different risks that have to be mitigated. The incentives to defect and come away millions richer are huge. And much of the system was developed for a time before the Internet.

While this is a noble sentiment, the structure and transaction costs are absolutely essential for the whole thing to work.

Thanks for the info based on actual experience!

This is why I've never much loved blockchain on a conceptual level.

Even if you can make existing transactions trustless, you need more and more new transactions to negotiate the boundary between the physical world and the data on the blockchain.

Large systems aren’t inherently low-trust though. For example dealing with the same point of contact. Like your local GP in the NHS. I definitely remember home visits from our GP as a kid. So within a generation. Or with our kids family nurse that did all the pre and post checkups for both children.

AKA the "Algerian Resistance" model.

Everyone works with the same or slowly changing set of subordinates below them (patients in the case of an NHS physician) and same handler above them so despite the organization being big and faceless everyone has a long term high trust relationship with the people directly above and below them.

This sounds interesting and Google is not coming up with useful leads - would you be able to point me to more information on the "Algerian Resistance" model you describe?

Read up on the ANLF. The ANLF structured their organization such that nobody had good knowledge of the organization except the portion of the org chart immediately above and below them. This annoyed the French because they would capture the grunts and it was a hell of a lot of work to work their way up to knowing who the leaders were since you'd need an unbroken chain of N people willing to narc on their boss. This is made harder because people are more likely to narc on their boss's boss who they don't really know vs their boss who they have a hack of a working relationship with but that depends on knowing who your boss's boss is. Be advised that I glossed over some details in my original comment.

One thing of note is that communities that can rely on trust and thus have lower transactional cost overhead should be able to out-compete those that can't rely on trust. An example of this is with the Hasidic jews in NY's diamond district. This is something that Thomas Sowell touches on in a few of his books.

EDIT: Found my note

> What economist William Easterly has called “the radius of trust” varies greatly from group to group and from country to country. Within groups like the Marwaris of India, the Chinese in Southeast Asia, or Hasidic Jews in New York’s diamond industry, transactions involving substantial sums of money can take place without written agreements or recourse to the legal system, giving these groups competitive advantage over other members of their respective societies who cannot safely engage in similar low-cost ways of doing business. Whole nations likewise differ in the levels of honesty. Bicycles can be left parked without locks in Tokyo but doing so in many other countries would be a virtual guarantee that they would be stolen. [1]

[1] "Economic Facts and Fallacies" Thomas Sowell

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