I've been thinking a lot about Trust these days, for obvious reasons, and about what is good and bad about capitalism ... at least I think it is capitalism that I speak of, at least how it is manifested through corporations big and small, public and private.

It is now Spring 2009 and the world's economy remains on the brink of complete collapse, new and innovative answers are required if that is to be avoided but there are darn few new and innovative answers being seen. Most so-called stimulus packages are little more than a life-line thrown to a man-overboard from the sinking ship he jumped from; even if they work, they are intended to preserve the status-quo, but it was the status-quo that got us to this point.

So, the status-quo is not what we want. The problem we have today is that the system is corrupt and as a result, corrupt people have emerged to take advantage of the corruption … as they always have and always will. The 'system' here is, I suppose, capitalism in a sense, it is certainly more than simply Wall Street, though that is without a doubt the center of corruption. We have collectively allowed ourselves to believe that not only is a corporation a legal entity with the same rights as a real person or group of people, but that as they are clearly not human they are allowed to not have morals and do things that are decidedly not in human kinds' best interests! Thus, unscrupulous people take advantage of such things (mostly in secrecy of course) and ensure that the system is gamed for their good above all others.

We see this manifested best in the gross salaries and bonuses awarded to the C-Levels of failing and failed corporations. All have contracts that reward risky, some might say reckless behaviour and few if any that reward the long-term survivability and longevity of the corporation and employees. At that level the corporation are these officers and directors, and yet they shield themselves from actual ownership of the grossness by pointing to the market conditions for their ilk (market conditions they very much manipulate with their actions). It is all a shell game and good honest people know that truth without having to see the nitty-gritty details about how the shell game is perpetrated.

It is much deeper than just executive compensation levels and incentives, however, it permeates virtually all about how big-business works. Public companies are punished severely at the stock market with major declines of the supposed share value if they do not grow, grow significantly and grow continually. Doing well, making profits, being a success counts for almost nothing at all, if it isn't going to get bigger it ain't of value. Ridiculous!

Companies are supposed to be able to make that growth happen, meet the expectations of "The Analysts" -- the supposedly reasonable consensus of the "Thompson's First Call" -- or suffer the consequences. Oh, and there are a lot of people who will bet you can't meet those expectations (short-selling) and then actively try to make you fail for their benefit. The biggest, nastiest example of this is the derivatives market on those Asset Backed Commercial Paper (the mortgage fraud perpetrated on the world)...this supposed market brought absolutely zero value to the world, all it did was allow a few greedy interests to make a lot of money and a larger group of greedy interests lose even more money. No new knowledge, no fewer hungry people, no productivity, no good at all -- financial fraud is really the only way to describe it.

Secrecy is the enemy, we all know this so well but we continually allow secrecy to rule our lives. Non-Disclosure Agreements binding the dealings of corporations and people are everywhere; dangerous conditions continue to exist because people sign out-of-court settlements binding them to silence of issues so that they can accept money for the help they need. Golden parachute packages for failed executives leaving corporations, with strict "no talky" contracts...why? well not just so they can pad their own pockets when they leave, but also to ensure their practices are not learned about in the real world. The thinking, strategy, and real actions of virtually all public and private corporations in the Western world (and likely beyond) are hidden from view.

There is a long-standing psychiatric lab test called the Trust Game which is designed to see just how trustworthy we human beings really are. An example of the Trust Game is found here: http://neuroeconomics.typepad.com/neuroeconomics/2003/09/trust_games.html There is an entire discipline looking into Trust and Risk and I'm not about to enter it here. What the salient points is that the vast majority of humans are not totally honest; the numbers are remarkable actually, Some studies have shown as much as a 90% deceit rate if we think we won't get caught and we believe we won't be responsible for pain to others. It is astonishingly easy to convince ourselves that we are not responsible, as other famous psychological experiments involving torture of fellow humans have proven. All we need is the structure to allow us to pass on responsibility and virtually all of us will do deplorable things.

This is a truth of the human condition, it does no good to deny it or pretend it is something else. Few of us believe ourselves to be bad people, that we would never participate in brutality or in corporate deceit but the fact is that given the right circumstances very few of us fail to succumb. There are people who understand this dynamic and use it to their advantage, those are very bad people indeed -- people we would call sociopaths, people who lack a sense of empathy and they thrive within an environment of secrecy and manipulation. Another way to look at that truth, however, is that while we may all be scum at heart, we DO know how to control that scuminess; to keep that part of us few are proud of at bay. Openness!

We know that the more likely dishonesty will be revealed the less likely dishonesty will happen. The severity of the punishment has much less effect than simply having to admit to others that you have been dishonest. The closer to you the people are that you have to reveal your dishonesty, the more you work to not be dishonest -- we VALUE honesty and we want others to think us honest, especially those close to us. Secrecy promotes dishonesty, openness promotes honesty -- it also promotes fairness for similar reasons.

There is little reason for most secrecy except deception; sure there are needs for preserving intellectual property (thieves are also a reality of life) however it isn't at all clear that business strategies and general goings on should be. Whatever the motivation of such secrecy, the results are inevitably an increase in dishonest behaviour.

The GATE Trust System includes openness, in fact it requires openness to function properly. The vast majority of people really do want to act honourably, honestly, and behave trustworthy. The Prisoners Dilema before us all is that dishonesty (when we don't get caught) is rewarded more than honesty -- some people undoubtedly feel they must be dishonest just to survive (and survivability of onself and one's family is paramount for us all). They crave something different but don't want to suffer the consequence of the only honest person.

That is why GATE Ratings are not anonymous; while it might be somewhat uncomfortable saying that somebody is less trustworthy than you'd like or less trustworthy than other people, and such an open policy will tend to skew the general trust scores higher than a normal curve might suggest they be, people who know their reputation is on the line will be more honest in their appraisals of other people.